Mid-Morning Look: June 20, 2023

Mid-Morning Look

Tuesday, June 20, 2023

Index

Up/Down

%

Last

 

DJ Industrials

-361.67

1.05%

33,937

S&P 500

-39.50

0.90%

4,370

Nasdaq

-119.11

0.87%

13,570

Russell 2000

-15.85

0.85%

1,859

 

 

After snapping its 6-day win streak on Friday, the S&P 500 (SPX) slides for a second straight session, pulling back below the 4,400 level as investors look to take some profits after a monstrous rally in 2023 thus far. The S&P 500 is up 4.6% MTD (up nearly 15% YTD), while the Nasdaq +5% MTD (over 30% YTD), led by a massive surge in chip stocks (SOX +45% YTD) on hopes of AI related growth. Caution warranted perhaps ahead of Fed Chairman Powell testimony on the economy and monetary policy this week in Washington. The major stock indexes are entering the holiday-shortened trading week coming off winning streaks. The S&P 500 rose for five consecutive weeks, its longest stretch since 2021. Buying in bonds early as Treasury yields slide to lows, while commodity prices/stocks fall (oil, gold, silver, metals) after Chinese banks trimmed benchmark interest rates on loans to households and businesses, but by a smaller-than-expected margin. China cut two benchmark lending rates by 10 bps each. The cuts, the first in 10 months, were less aggressive than some forecasts (investors looking for 15-bps cut to 5Y rate). Lastly, housing related stocks surge after bullish housing starts/permits data (see below).

 

Economic Data

·     May housing starts surge +21.7% to 1.631M unit rate, far surpassing the expected decline of -1.4% to 1.42M and compared to April (-2.9%); May single-family starts +18.5% to 997,000-unit rate; multifamily +27.1% to 634,000-unit rate. Building Permits rose +5.2% to 1.491M rate vs April -1.4% (ests were for permits to rise 2.2% to 1.4M).

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.91

69.87

Brent

-1.47

74.62

Gold

-28.20

1,943.00

EUR/USD

-0.0023

1.0899

JPY/USD

-0.29

141.69

10-Year Note

-0.048

3.721%

 

 

Sector Movers Today

·     Homebuilders extend to fresh 52-week highs as Housing Starts and Building Permits data for May crush economist expectations, surging well above prior month as continued upward momentum in housing space continues; shares of BZH, CCS, DHI, LEN, FOR, TOL, PHM, KBH, MTH and other homebuilders remain strong.

·     Dow Transports hit highest levels since March, topping 14,800 earlier ahead of FDX earnings, which are expected to report earnings after the close (watch UPS). CAR upgraded from Equal Weight to Overweight at Morgan Stanley and raised tgt to $230 from $182 saying with the backdrop of normalization in the rental industry, the firm looks for operational execution to preserve what could now be a higher floor for the industry.

·     In Utilities: NI said that asset manager Blackstone’s (BX) infrastructure unit has agreed to acquire a 19.9% equity interest in its unit NIPSCO for $2.15 billion. PNM and Avangrid have mutually agreed to an amendment and extension of their merger agreement through December 31, 2023. POR downgraded to Neutral from Buy at Guggenheim on a lighter catalyst pathway in 2H23; SRE files for two-part, notes offering.

 

Stock GAINERS

·     CANO +16%; announces leadership change as Mark Kent appointed Interim Chief Executive Officer after Dr. Marlow Hernandez has agreed to step down immediately.

·     CAR +6%; upgraded from Equal Weight to Overweight at Morgan Stanley and raised tgt to $230 from $182.

·     DICE +38%; to be acquired by LLY for about $2.4B, or $48 per share https://tinyurl.com/2sansm5z

·     GNRC +6%; top gainer in the S&P 500 hitting its best levels since February.

·     PM +2%; upgraded to Buy and open a Positive Catalyst Watch at Citigroup.

·     PYPL +1%; announced that KKR will purchase up to €40 billion of eligible current and future PayPal Pay Later loans originated in Europe. The company is pointing to an incremental $1B in repurchases for the year ($5B total vs. $4B prior).

·     TSLA +1%; as RIVN said it has agreed to adopt TSLA’s charging standard, giving customers access to the biggest U.S. charging network.

·     USFD +2%; Morgan Stanley upgraded USFD to Overweight with perhaps more optionality today while they downgraded PFGC to EW, but still solid fundamentals.

 

Stock LAGGARDS

·     ACLX -8%; after saying regulators put a clinical hold on its investigational new drug for the treatment of relapsed or refractory multiple myeloma following a patient death.

·     APA -3%; energy stocks (BKR, HAL, EOG) among worst performers in S&P on sliding oil.

·     LMND -10%; as Morgan Stanley initiates at Underweight rating and $14 tgt noting shares have rose ~47% YTD on the back of strong 1Q23 results, but the company’s path to profitability remains long.

·     OLN -5%; lowered its Q2 adj. EBITDA forecast to $350M-$360M range from prior expectation of slightly lower than Q1 levels of $710.9M.

·     SEDG -6%; weakness in solar stocks as TD Cowen said they came away incrementally cautious on residential solar demand in Europe and have lowered estimates and tgts for ENPH, SEDG.

·     T -1%; CFO said this morning sees about 300k new phone customers in 2Q (which is below Street consensus est. of 476k).

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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.