Mid-Morning Look: May 19, 2023

Mid-Morning Look

Friday, May 19, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks start Friday to the upside, adding to weekly gains as the S&P 500 and Nasdaq are both coming off their highest levels since August 2022. The Nasdaq is on track for 4th straight weekly advance (+3.2% WTD coming into the day) and oil on track to snap its 4-week losing streak. After Technology and Discretionary led gains all week, those sectors are taking a breather today, as investors rotate into the weekly laggards (Healthcare, Utilities, REITs, and Staples). Energy among the standouts to the upside early. Treasury yields popping here a bit with the 10-yr +6 bps at 3.708% and 2-yr +6.5 bps to 4.334%; shorter term 2-month yields up about 20-bps at 5.21% and 6-month at 5.38% (highest since January 2001). Odds of another 25 bps Fed hike (to 5.25-5.50%) at the June FOMC meeting have moved up to 35% today from close to 0% last week, lifting shorter-term yields and the dollar. Stock market gains continue globally as well as the German DAX Index headed for first record since January 2022, and Japan’s Nikkei 225 closed at a 33-year peak. Speculative buying into option expiration leading markets this week on expectations a debt ceiling deal will come together in Washington before June, avoiding the U.S. defaulting on its obligations. The two sides remain far apart according to House leader McCarthy heading into meetings this weekend. Consumer retail broadly weaker after Foot Locker misses and slashes forecast while Industrials get a boost from Deere after its beat and raised. Markets await commentary from current Fed Chair Powell and former Chair Bernanke set to speak at 11:00 AM for a question-and-answer session at the Thomas Laubach Research Conference later this morning.







WTI Crude















10-Year Note





Sector Movers Today

·     Retail: sector pressured early following a broad miss and slashed guidance by FL in the apparel and footwear sector. FL shares tumble after reported Q1 EPS $0.70, below $0.85 estimate, and revs of $1.93B missed the $2.00 est.; slashes FY23 EPS outlook to $2.00-$2.25 from $3.35-$3.65 (est. $3.46) and cuts FY23 comp sales change view to down 7.5%-9.0% from down 3.5%-5.5% citing challenging near-term trends (UAA, NKE moved lower in reaction in sportswear, while general apparel names tumbled as well ANF, AEO, LULU, URBN, VFC).

·     In restaurants: for TXRH, a day after hitting 52-week highs, announced that it has appointed Chris Monroe as the company’s next chief financial officer, effective June 28; WEN was upgraded to Buy from Hold at Argus with $26 tgt as expects Wendy’s to benefit from unit expansion, strong international growth, and investments in its digital business. CMG tgt raised to $2,350 from $2,200 at TD Cowen, confident in its multi-pronged strategy will drive share gains, while Project Square One is in early innings & it estimate can ultimately unlock ~500 bps of traffic growth; SHAK upgraded to EW from UW at Morgan Stanley based on the prospect for margin and other tactical catalysts and improved accountability to the board for these. NDLS downgraded by Stephens saying they await greater visibility into traffic rebound.

·     Semiconductors: AMAT reported F2Q23 EPS of $2.00, which beat consensus of $1.84 by 9% on revenue of $6,630M, which beat consensus by 4% and guided midpoint revenue and EPS 2% and 6% above consensus, respectively, and given bottom-of-cycle conditions. ADI announced that Mr. Prashanth Mahendra-Rajah (CFO) will step down to explore other opportunities. In semi-equipment research Citigroup maintains its offense mode on the group and prefers equipment stocks to wafer starts in the cyclical recovery Phase 2. CITI’s #1 pick AMAT reported “beat & raise” Apr-Q results on continued strength in the ICAPS biz on trailing edge logic demand in both China and outside. CITI maintains LRCX #2 pick and lower tgt for bottom pick WOLF.



·     CTLT +15%; sharply lowered outlook for year EPS, EBITDA, revs, but said it continues to win significant new business, including expansion of supply agreements with NVO.

·     DE +1%; raised its full-year profit forecast amid strong demand for farm equipment and the easing of supply chain woes; raised its 2023 net income range to $9.25B-$9.5B, above its prior $8.75B-$9.25B forecast.

·     EOG +3%; as energy stocks among leaders in the S&P as WTI crude on track to post its first winning week in the last five (PXD, OXY, COP higher).

·     FTCH +25%; posted stronger 1Q revenue results, adj. EBITDA largely in line with expectations, and reaffirmed FY23 guidance. Macro headwinds weighed.

·     GOOGL +1%; WSJ reports Samsung, the world’s largest smartphone maker, has suspended an internal review that had explored replacing Google with Bing on its mobile devices, the people said. The headlines helped lift GOOGL to fresh 52-week highs.



·     FL -25%; after reported Q1 EPS $0.70, below $0.85 estimate, and revs of $1.93B missed the $2.00 est.; slashes FY23 EPS outlook to $2.00-$2.25 from $3.35-$3.65 (est. $3.46) and cuts FY23 comp sales outlook view.

·     FLO -7%; reports in-line Q1 EPS of $0.38 and slight miss to sales consensus and EBITDA at $151.1M vs consensus $154.9M on lower margins and lowered FY sales, revenue and Ebitda outlooks due to softer category demand

·     MS -1%; as CEO James Gorman told shareholders Friday that the company will likely appoint its next CEO in the next 12 months.

·     VFC -5%; among worst laggards in the S&P as retailers tumble following results and guidance from FL – weighs on shares of NKE, ULTA, TPR, RL, etc.


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.