Mid-Morning Look: August 31, 2023

Mid-Morning Look

Thursday, August 31, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks starting strong, with the S&P 500 looking to make it a 5th straight day of gains as PCE inflation data came in-line with expectations and markets await tomorrow’s monthly jobs report for more guidance on interest rates. Investors weighed a reading from the Federal Reserve’s preferred inflation gauge as well as a government report on jobless claims on Thursday as July PCE inflation rises to 3.3%, in-line with expectations of 3.3% and core PCE inflation rises to 4.2%, in-line with expectations as well. The data helps support expectations the Fed is likely done with rate hikes. NYSE breadth favoring advancers by nearly 2:1 margin over decliners – with the 2023 biggest winners, technology, communications, and consumer discretionary again market leaders. Dow Transports underperformed, down -0.5% to 15,850, falling back below its 50-day MA of 15,900 with weakness in truckers (CHRW JBHT LSTR). Retail a mixed bag after earnings results in space (see below), though discounters lagging weaker DG, FIVE guidance). Treasury yields are down slightly but 10-yr holding around 4.1%, oil prices a standout to upside again, with WTI crude topping $83 per barrel. Volumes drying up heading into the 3-day holiday weekend, with today being the last trading day in August.


Economic Data

·     July personal income rose +0.2% vs. est. +0.3% and June +0.3% while Personal Spending rises +0.8% above consensus +0.7% as the July personal saving rate 3.5% and July real consumer spending +0.6% vs June +0.4%.

·     Inflation readings show: July overall PCE price index +0.2% vs June +0.2% (prev +0.2%) and July core PCE price index +0.2% (in-line w consensus +0.2%) and vs. June +0.2%. July y/y PCE price index +3.3% vs June +3.0% (prev +3.0%); core +4.2% (consensus +4.2%) vs June +4.1%.

·     Private worker wages and salaries 4.6%, down from 5.9% and govt worker wages and salaries 6.0%, down from 6.1%.

·     Weekly Jobless Claims fell to 228,000 from 232,000 in prior week and below consensus 235,000; the 4-week moving average rose to 237,500 from 237,250 prior; continued claims rose to 1.725M from 1.697M prior and vs. est. 1.703M; insured unemployment rose to 1.2% from 1.1%.

·     Chicago PMI report business index at 48.7 tops est. 44.2.







WTI Crude















10-Year Note





Sector Movers Today

·     In Discount stores: DG shares tumble after Q2 miss and lower guidance (follows weaker DLTR results prior week) as Q2 EPS $2.13/$9.8B revs miss $2.47/$9.93B est. and sees FY EPS $7.10-$8.30, below est. $10.03 citing slowing traffic, softer sales trends and an increase in inventory shrink. FIVE Q2 EPS and sales were in-line while guides Q3 EPS and sales below views while sees FY24 EPS $5.27-$5.55 down from prior $5.31-$5.71. OLLI Q2 EPS (67c vs. 62c), comps (7.9% vs. +3%) and sales ($514.5M vs. $498M) top views and raised year revs and comp sales view.

·     Other retail movers on earnings today included: SIG earnings beat amid engagement ring increases, DLTH slumps after lowering results and CFO steps down; FLWS EPS of -$0.28 beats by $0.04, revenue of $398.8M misses by $14.51M; GCO EPS of -$0.85 beats by $0.38, revenue of $523M beats by $25.75M; LE tumbles after Q2 loss widens amid drop in sales and lowers guidance; BKE Aug comparable store net sales decreased -5%.

·     In Insurance: Hurricane Idalia knocked out power for hundreds of thousands in Florida, and caused flooding in many areas, but the toll was not as devastating as initially expected by analysts, easing fears for the likes of ALL, TRV, CB, RNR upgraded to Outperform at BMO Capital and target to $126 saying after a string of disappointing quarters (’22A and ’23E RoEs of 7% and 4%, respectively, relative to guidance in the low teens), BMO estimate too much bad news is priced into THG’s valuation (near record lows vs peers).



·     ANET +2%; upgraded to Buy from Neutral at Citigroup and raised tgt to $220 and raises ests as expects 400G cloud spend to recover into next year as hyperscaler spending on traditional data center infrastructure rebounds and a top customer’s CAPEX recovers.

·     ASO +13%; raises FY EPS to $6.65-$7.35 from prior $6.50-$7.20 after reporting EPS beat, in-line Q2 sales of $1.58B on better margins 35.6% vs. 35.3% y/y.

·     CIEN +13%; posted top and bottom line Q3 beat ($0.59/$1.07B vs. est. $0.51/$1.04B) amid strong +20% y/y rev growth for Networking platforms, Converged Packet Optical, Routing and switching and Platform software and service segments.

·     CRM +5%; posts top and bottom-line beat/raise as margin surprises to upside again with 32% OM in 2Q (400 bps seq expansion) vs. 28% consensus and raised FY guide from 28% to 30%.

·     GTBIF +13%; Cannabis stocks extend yesterday gains after reports the Drug Enforcement Agency is looking at whether to reclassify marijuana into a less hazardous category, boosting the industry: GTBIF, TCNNF, CURLF, CRLBF among those jumping a second day.

·     OKTA +15%; strong quarter, beating on all metrics helped by OKTA’s 18% cRPO growth, strong margins, and FCF and raised full-year guidance above views.

·     SHOP +7%; after AMZN announced that its Buy with Prime app would work with Shopify’s Checkout resource and allow Prime members the option to use the app before completing the transaction in the Checkout.

·     UBS +4%; said it will cut 3,000 jobs in Switzerland in the coming years as it integrates Credit Suisse, with further staff to go of their own accord, and reported $28.875B in net profit attributable to shareholders for Q2, in its first earnings results since it took over Credit Suisse.

·     UGI +8%; said its board is reviewing strategic alternatives to unlock shareholder value.



·     CHWY -12%; as Q2 sales growth was similar to recent quarters with flattish net customer adds, saw margins decline y/y, and guided Q3 revs below at $2.74B-$2.76B, consensus $2.79B.

·     DG -16%; Q2 EPS $2.13/$9.8B revs miss $2.47/$9.93B est. and sees FY EPS $7.10-$8.30, below est. $10.03 citing slowing traffic, softer sales trends and an increase in inventory shrink.

·     HRL -2%; falls on results/guide as Q3 adj EPS $0.40 vs. est. $0.41; Q3 revs fell -2.3% y/y to $2.96B vs. est. $3.05B; cuts FY adj EPS view to $1.61-$1.67 from prior $1.70-$1.82.

·     PLTR -7%; downgraded to Underweight at Morgan Stanley while raise tgt to $9 from $8 saying near-term optimism in AI product cycle and valuation premium create an unfavorable risk-reward in shares, as visibility on AIP monetization remains low.


Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.