Mid-Morning Look: September 20, 2023

Mid-Morning Look

Wednesday, September 20, 2023





DJ Industrials




S&P 500








Russell 2000






Waiting game begins for the FOMC policy meeting and rate headlines at 2pm and Fed Chairman Powell press conference at 2:30pm. Bonds rising early as yields broadly lower today into FOMC – 10y last 4.33% from a high of 4.371% yesterday – 30y last 4.396% from a hi of 4.437% yesterday. All eleven S&P sectors opened higher initially led by REITs, Industrials, and Energy but markets slowly fading off best levels, led by drop in tech and communications. As a quarter end meeting, the FOMC delivers not only the updated monetary policy statement (which is expected to be no change to rates) and Chair Powell’s press briefing, but also officials update economic projections. The next FOMC meeting is October 31-November 1. On the CME’s FedWatch tool, the odds of a November hike declined to 29% from 41% a week ago. The FOMC is expected to repeat that future decisions will depend on upcoming data. In stock news, KVYO marks the 3rd big IPO in last few days, pricing 19.2M shares at $30 last night in software. Overseas data saw a drop in UK inflation, following softer inflation from Canada the day prior.

Fed Outlook: Wells Fargo continues to believe that the Fed is done with rate hikes and will hold policy at current levels into early 2024, when they expect the first rate cut to occur in March as economic activity contracts and inflation is close enough for most Fed officials to consider easing monetary policy to help support the U.S. economy. Morgan Stanley said for today, they expect the Fed to hold the policy rate at 5.375%, which they see as the peak rate in this cycle, and to soften its forward guidance. They expect little change in the Fed’s assessments of current conditions.





WTI Crude















10-Year Note





Sector Movers Today

·     In REITs: HPP was upgraded to outperform from market perform at BMO Capital Markets; in Retail REITs, Wells Fargo said new net store opening analysis points to strongest potential occupancy gains though 24 for SITC and weakest for KRG, and firm upgraded SITC to overweight, KIM to Equal weight and downgrade ROIC to EW and PECO to Underweight. In Residential REITs, Wells Fargo said preference for SFR within residential given elevated blended lease rate growth operating updates, prefer INVH over AMH on valuation. Shopping REIT REG upgraded to Buy with target of $70 based on valuation at Argus. Raymond James top large cap pick within its healthcare REIT coverage is now Outperform-rated WELL (replacing VTR) due to its operational strength and unparalleled access to and cost of capital, while its top mid/small cap pick is Strong Buy-rated CTRE.

·     Software/Hardware: KVYO 19.2M share IPO priced at $30, above its expected range of $27-$29. The first real SMID cap IPO (closest comp BRZE as per Oppenheimer). IBM was initiated with an OP rating, and Street high $188 tgt saying they are impressed with the depth of the company’s software platform, particularly its capabilities around enablement. NCNO was downgraded to Underweight at Morgan Stanley saying FY25 estimates look too high when accounting for recent bookings performance and potential revenue headwinds from recent bank closures. ZBRA downgraded to Underweight at Morgan Stanley given view that duration of demand turndown would be longer than expected due to overbuild during COVID and ongoing constraints to consumer spending.

·     In Retail: DG was downgraded to Underweight in dollar stores at JPMorgan and cut tgt to $116 after CFO recently cited continued uncertainty clouding the FY24 picture today with first half macro headwinds sequentially worsening for DG’s low to middle income consumer. CHWY downgraded from Outperform to Perform at Oppenheimer as expects a more challenging backdrop to persist for at least a few more quarters, amid recent signs of weakness in the historically resilient pet food category. BBW initiated Buy and $42 tgt at DA Davidson as sees it as an underappreciated small cap growth idea that is a vertically integrated, omnichannel retailer; LULU named a new Buy and $40 tgt at Needham as expects double-digit top line growth as accelerating technical innovation drives demand across both core franchises.



·     BHC +6%; upgraded to Buy from Hold at Jefferies given positive Xifaxan catalysts slated to include probability of the spin making it appropriate to value shares at $16.

·     COTY +5%; guides 2024 adjusted EBITDA $1.08B-$1.09B above prior $1.07B-$1.08B view; now expecting core LFL sales growth in first half FY24 of +10-12%, an increase from its earlier outlook of +8-10%; raised FY24 core LFL sales growth outlook.

·     IFF +5%; rises after backs FY23 revenue view $11.3B-$11.6B and FY23 adjusted EBITDA view $1.85B-$2B and said continues to pursue the sale of its Cosmetic Ingredients business.

·     PINS +4%; upgraded to Buy from Hold at Citigroup as it emerges from its analyst day incrementally confident that engagement can continue to ramp.

·     SCS +25%; reported Q2 revs $854.6Mm vs est. $828.83Mm and adj EPS $0.31 vs est. $0.20; guides Q3 revs $780-805Mm vs est. $820.68Mm and adj EPS $0.23-0.27 vs est. $0.19.

·     TXT +5%; fresh 52-week highs after announce fleet agreement with NetJets for option for NetJets to purchase up to 1,500 additional Cessna Citation business jets over the next 15 years.

·     WDC +6%; on reports that Kioxia Holdings’ lenders are planning to refinance 2 trillion yen ($13.5 billion) in loans to support its potential merger with Western Digital’s flash memory business, Bloomberg reported. https://tinyurl.com/yxc5fdt8



·     ARM -4%; falls below $53 – IPO priced at $51 last Thursday (traded as high as $69 on Friday 9/14)

·     CHWY -3%; falls to fresh 52-week lows after Oppenheimer downgraded to Perform as expects a more challenging backdrop to persist for at least a few more quarters.

·     INTC -3%; as Innovation Day headlines fails to impress Wall Street.

·     SEEL -75%; after experimental treatment for suicidal behavior fails in mid-stage study.

·     SPRY -58%; after saying the FDA issued a Complete Response Letter regarding the New Drug Application for its epinephrine nasal spray Neffy. In the CRL, the FDA requested completion of a study assessing repeat doses of Neffy.

·     TSHA -5%; said it will discontinue development of its TSHA-120 program to treat giant axonal neuropathy after receiving feedback from the U.S. FDA; said it will pursue external strategic options for TSHA-120.

·     ZBRA -4%; downgraded to Underweight at Morgan Stanley given view that duration of demand turndown would be longer than expected due to overbuild during COVID.


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.