Mid-Morning Look: May 31, 2023

Mid-Morning Look

Wednesday, May 31, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks opened negative, quickly rebounded in another buy the dip moment, but has since bled lower following disappointing economic data. Futures initially tracked widespread losses in Europe and Asia overnight as weaker PMI manufacturing and services data in China weighed on commodity related stocks/prices, and softer inflation data out of Europe sparked a rally in the dollar vs. the euro (more than 2-month highs) while rising interest rate fears still weigh on sentiment after Fed commentary. Federal Reserve Bank of Cleveland President Loretta Mester said she sees no “compelling” reason to wait to implement another interest rate hike, according to an interview with the Financial Times and said, “I don’t really see a compelling reason to pause.” The debt-limit deal is heading toward a vote Wednesday in the House of Representatives after clearing a crucial procedural hurdle with just days remaining to avoid a US default. Weaker US data failed to push markets lower (Chicago PMI slowest since April 2020 – higher JOLTs). The S&P 500 has shown resilience, climbing despite various concerns and risks, including bank failures, weak China data, and debt ceiling worries. Important indicators such as the strengthening dollar, bear flattening yield curve, rising long-end real yields, and increased rate volatility potential threats to the S&P500’s trading range. Canaccord noted this morning “the SPX may be up 9% YTD, but with the top 8 performing stocks accounting for 107% of the gain and 8 of the 11 SPX sectors down for the year, Canaccord is hard-pressed to suggest “the market” has been strong. Oil prices tumble on China data, ahead of OPEC+. Treasury yields little pop on the better JOLTS data (10-yr 3.67%), but stocks again unphased thus far despite signs of resilient jobs mkt (another data point that can raise case for additional rate hikes in June/July meeting). US rate futures price in 71% chance of June rate hike after JOLTS data vs roughly more than 60% late Tuesday.


Economic Data

·     US JOLTS Job Openings Actual for April reported at 10.103M (second best number of 2023), above forecast 9.4M and the previous month of 9.590M.

·     Chicago Fed PMI for May reported at 40.4, well below consensus est. 47.3 and below last month 48.6 reading; posts biggest drop in US economy since April 2020 Covid shutdown.







WTI Crude















10-Year Note





Sector Movers Today

·     Industrial metal weakness continues as copper prices dip back near 6-month lows (FCX, SCCO, TECK); prices of the metal are set to close May down ~6% after losing 4.4% in April; weakness in industrial metals comes after China PMI data showed manufacturing contracted in May and the service sector expanding at its slowest pace in four months. Data also showed factory output declining in Japan and South Korea.

·     In Metals: EGO falls after the company announces strategic investment and concurrent bought deal financing; TECK shares volatile after Bloomberg reported that GLNCY is working on a potential improvement to its bid for Teck and could announce it as soon as the coming weeks. Notes TECK has rebuffed Glencore’s $22.5 billion offer to combine the two companies and is instead pursuing plans to separate its copper and coal business. https://tinyurl.com/5cam6dvy

·     In Energy: Oil prices tumbled again ahead of OPEC+ meeting this week, as China’s economic recovery weakened in May, raising fresh fears about the growth outlook. Berkshire Hathaway (BRKA) increased its stake in OXY to about 25% over the past week as an SEC filing showed the company bought 4.66 million shares of OXY between May 25-30, at prices ranging from $58.30-$58.85 a share, roughly $275M in all. In research: CVX was upgraded from Underweight to Neutral at JPMorgan and raised tgt to $170 from $161 saying the co has shown solid execution in recent years, maintaining a stable production profile on lower levels of CAPEX than the past, leading to healthy FCF generation.



·     AAL +2%; boosted its Q2 adj EPS outlook to $1.45-$1.65, from prior $1.20-$1.40 and said Revenue per available seat mile is now expected to fall 1% to 3% from the same quarter last year, compared with prior guidance for a drop of 2% to 4%.

·     CAR +3%; upgraded from Hold to Buy at Deutsche Bank and raised tgt to $263 from $239 saying while primarily valuation-centric remains its central call, it also sees a potential catalyst in the form of a likely return to share repurchases in the back half of the year.

·     LL +21%; after confirmed late yesterday that it has received an unsolicited, non-binding proposal from Cabinets to Go, LLC., a subsidiary of F9 Brands, Inc., to acquire all the outstanding shares of the Company for $5.76 per share in cash.

·     TWLO +2%; after the Information reported that activist investor Legion Partners had met with the company’s board of directors and managers to suggest changes to the board.

·     XYL +2%; among leaders in the S&P 500 after analyst upgrade.



·     AAP -31%; following wide quarterly EPS miss and cut forecasts for year EPS profit, sales, comp sales, operating margins, and free cash flow estimates and cut its quarterly dividend– shares weigh on rivals AZO, ORLY.

·     AMBA -14%; reported In-line Apr Q1 revs of $62.1M, roughly in-line with the midpoint of the company’s previously issued guidance range, while guides Q3 revs $60M-$64M below est. $67.2M; sees Q2 gross margin 62.5%-64.5%; sees Q2 operating expenses $48M-$50M.

·     BMBL -6%; said that President Tariq Shaukat is stepping down.

·     CPRI -8%; top and bottom-line beat as Q4 adj EPS $0.97 vs. est. $0.94; Q1 revs $1.335B vs. est. $1.28B; but sees Q1 revs about $1.2B vs. est. $1.31B, operating margin about 8.5% and maintains 2024 op margin about 16.5%; sees 1q Michael Kors revs about $775M vs. est.; cuts year views.

·     HPE -7%; Q2 results disappointed on the top line as North American Enterprise customers pulled back on data center spend; lowered its constant-currency FY23 growth guide to +4%-6% (from +5%-7%), reflecting weaker Compute demand.

·     HPQ -4%; mixed Q2 results as missed rev forecast but beat EPS by 2c on record gross margins; Personal Systems revs declined 29% y/y (25% y/y in CC) on weakness in both consumer and commercial segments. Total units declined 28% but gained share in the commercial market.

·     SPWH -15%; posts wider Q1 loss and a miss on revs while comp sales fell (-17.8%); guides 2Q net sales $310-340Mm vs est. $344.79Mm, comps -17% to -9%, and adj EPS $0.02-0.15 below the consensus estimate of $0.20.

·     VERI -10%; after withdraws Q2 and full-year forecast after AMZN said it will reduce consumption of VERI’s human resources products and services, effective mid-May through at least July; co said the decision will reduce Q2 revenue by $4M-$5M.


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.