Mid-Morning Look: May 23, 2023

Mid-Morning Look

Tuesday, May 23, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks open lower as debt-ceiling negotiations continue. President Joe Biden and House Speaker Kevin McCarthy remained without a deal on the debt limit Monday night after another round of talks, though they called their discussions productive and vowed to keep negotiating to avert a catastrophic US default. This morning, still no closer as @JakeSherman tweeted “I told the President three things: No clean debt limit, no raising taxes, spend less money. “Remember where we were – they refused to negotiate. “We owe Garret Graves and Patrick McHenry a round of applause. “They made a mistake to not negotiate. Let’s stay strong together.” Investors have been closely eyeing debt-limit negotiations in Washington, hoping for more certainty as the so-called X-date of June 1 draws closer. Banks and financials strong early, led by regional banks, while consumer discretionary slips as AZO, BJ, CTRN, DKS do not react well to earnings (URBN, VFC report tonight). LOW falls initially after cutting forecasts for the year like rival HD last week, but quickly rebounds. Smallcaps (IWM, RTY) leading for a second straight day over large cap peers. Treasury yields and the dollar edge higher, but off their best levels of the day. Economic data mixed as housing data comes in strong.


Economic Data

·     Philadelphia Fed non-manufacturing regional business activity index -16.0 in May vs -22.8 in April; non-manufacturing new orders index 2.7 in May vs -23.9 in April; full-time employment index 14.9 in May vs 11.5 in April; wage and benefit cost index 35.3 in May vs 39.7 in April.

·     S&P global May flash services PMI at 55.1 (vs 53.6 in April); S&P global may flash composite PMI at 54.5 (vs 53.4 in April) and S&P global may flash manufacturing PMI at 48.5 (vs 50.2 in April).

·     Richmond Fed composite manufacturing index -15 in May vs -10 in April; Richmond Fed manufacturing shipments index -13 in May vs -7 in April; and services revenues index -10 in may vs -23 in April.

·     April New Home Sales rose +4.1% M/M to 683K topping the 663K consensus and 656K in March (revised from 683K). April home sales northeast -58.6%, Midwest +11.8%, South +17.8%, West -9.1%; new home supply 7.6 months’ worth at current pace vs March 7.9 months and the April median sale price $420,800, -8.2% from April 2022 ($458,200).







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10-Year Note





Sector Movers Today

·     In Internet: YELP rises after activist investor TCS Capital Management has built a stake in Yelp and is calling for the company to explore strategic alternatives including a sale, WSJ reports; SSTK to buy GIPHY, the world’s largest GIF library, for $53M; JMIA Q1 revs fell -2.8% y/y to $46.3M, below the $50.5M est. as Q1 operating losses was -$30.9M (better than expected) and said Q1 active consumers, orders and GMV all fell more than -22% y/y.

·     In sporting goods stores: DKS beats Q1 estimates for revenue and profit, with sales of $2.84B topping ests $2.8B and EPS of $3.40 above est. of $3.18 and comp sales 3.4% vs. est. 3.65%; reaffirms FY comp sales outlook to grow flat-2% and EPS of $12.90-$13.80. MODG said between May 15 & May 18, the company repurchased 1 mln shares of common stock, at an average purchase price of $17.83 per share as part of an existing $100M share repurchase plan.

·     In Steel stocks: NUE was initiated with an Underweight rating and $130 tgt and STLD at underweight and $82 tgt at JP Morgan saying rating reflects a view of lower steel prices and squeezed metal margins coinciding with weakness in non-res construction (55% exposure for NUE and 49% for STLD).



·     AVGO +1%; after AAPL said it has entered a multi-billion-dollar deal with chipmaker AVGO in a multi-year deal.

·     COF +2%; rising for the 6th time in 7-days – continues momentum after 13F filing last week showed Buffett’s Berkshire took a stake.

·     CVX +3%; rebounds with broader energy strength as Saudi Arabia’s top energy official delivered another warning to oil short sellers, just over a week before the OPEC+ alliance is due to meet.

·     LOW +1%; cut its sales outlook for the year a week after rival HD citing a slowdown in consumer spending; Q1 comp sales decreased (-4.3%) and cuts FY23 EPS view to $13.20-$13.60 from 13.60-$14.00 & cuts FY23 rev view to $87B-$89B from $88B-$89B.

·     MYGN +12%; double upgraded from Sell to Buy at Goldman Sachs and raised its price target to $25 from $18.

·     WSM +4%; reported Q1 EPS $2.64 vs. est. $2.37 on revs $1.76B vs. est. $1.79B, while gross margins fell to 38.5% from 43.8% y/y and said expect net rev growth in the range of -3% to +3%.

·     YELP +9%; after activist investor TCS Capital Management has built a stake in Yelp and is calling for the company to explore strategic alternatives including a sale, WSJ reports.

·     ZION +4%; as regional banks adding to recent gains (CMA, KEY, PACZ, CFG).



·     AZO -4%; Q3 EPS $34.12 tops consensus $31.42 and revs rose 4.9% y/y to $4.1B but was slightly below the est. $4.12B; Q3 comp store sales rose 1.9% missed est. 4%.

·     BJ -5%; Q1 adj EPS $0.85 in-line with consensus while revs $4.72B missed consensus $4.81B; Q1 comparable club sales, excluding gasoline sales, increased by 5.7% y/y vs. est. +6.0%; reaffirmed its FY23 guidance outlook.

·     IART -13%; lowers Q2 EPS view to $0.55-$0.59 from prior $0.75-$0.79 and revs $372M-$376M from prior $396M-$400M.

·     MVST -22%; following the US Energy Department’s cancellation of a planned $200 million grant to the lithium-ion battery maker amid criticism over ties to China.

·     PERI 2%; mentioned as a Strong Sell from short seller SprucePoint Capital saying there are too many red flags to ignore w/ unusual sales/employees, minimal CAPEX/R&D, low audit fees.


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.