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The Low Vol Environment Continues

The S&P 500 closed for the 100th straight session without a drop of at least 1.5% as the low-volatility nature of 2023 continues. Let’s see what else you missed. ๐Ÿ‘€

Today’s issue covers a growing divergence in homebuilders, investors spitting up Chewy’s shares, and more from the day.ย ๐Ÿ“ฐ

Here’s today’s heat map:

2 of 11 sectors closed green. Technology (+0.27%) led, and real estate (-1.66%) lagged. ๐Ÿ’š

British chip designer Arm Holdings fell to new lows on its third day of trading after one analyst downgraded the stock. Meanwhile, marketing automation company Klaviyo is the latest initial public offering (IPO) to raise its price range, seeking a $9 billion valuation. ๐Ÿ”บ

Cannabis company Canopy Growth is using the industry’s recent rally to improve its liquidity, announcing a private placement of up to $50 million, sending its stock falling 16%. ๐Ÿค‘

Video game software development company Unity Software’s shares fell another 8% as backlash from developers forced it to revert its recently updated pricing program. โช

Anxiety about China’s property market continues, with Evergrande Group shares plunging 25% after staff from its wealth unit were detained by authorities. ๐Ÿ˜ฐ

France’s third-largest listed bank, Societe Generale, plummeted 11% today after its new CEO lowered his profit forecast and revenue growth of just 0-2% until 2026. ๐Ÿฆ

And DoorDash announced new grocery partners ahead of Instacart’s IPO tomorrow. Still, $CART shares priced at the top of their $28 to $30 price range, valuing the company at $10 billion. ๐Ÿ›’

Other symbols active on the streams:ย $SQ (-4.85%), $LCID (-3.40%), $SEDG (-2.58%), $AVXL (-5.53%), $DTOC (+168.89%), and $CCG (+581.82%). ๐Ÿ”ฅ

Here are the closing prices:ย 

S&P 500 4,454 +0.07%
Nasdaq 13,710 +0.01%
Russell 2000 1,834 -0.69%
Dow Jones 34,624 +0.02%

A Divergence In Homebuilders Featured Image

Today’s National Association of Home Builders/Wells Fargo Housing Market Index experienced its first negative reading in seven months. ๐Ÿ”ป

The index dropped 5 points to 45 in September, with all three components declining. Current sales conditions slipped to 51, sales expectations in the next six months fell to 49, and buyer traffic dropped to 30.

Driving the weakness is primarily higher mortgage rates, which have been over 7% since June. The fact that prices have not come down much also hurts demand, causing builders to begin offering more incentives. This month, 32% of builders cut prices by an average of 6% in an attempt to spur demand. โœ‚๏ธ

As for who is left in the market? Roughly 42% of single-family home buyers this year were first-time buyers. Historically, that figure averages 27%, suggesting less investment activity as price growth slows and borrowing costs soar. ๐Ÿ˜๏ธ

While low existing home inventory remains a significant tailwind for homebuilders, they’re struggling with the supply side. Shortages of land (buildable lots), construction workers, and certain materials continue to drive up costs for the industry.

With the U.S. home construction ETF $ITB recently hitting all-time highs, many investors are considering whether it’s due to reverse course. As we can see by the chart below, the sector ETF and the homebuilder sentiment tend to track each other pretty closely. ๐Ÿค

With September’s decline in homebuilder sentiment marking its second consecutive lower “peak” in the last few years, many are asking whether its downtrend is set to continue. And if that is the case, does that mean homebuilding stocks will follow?

Time will tell. But today’s readings definitely had people trying to square homebuilder pessimism with investor optimism about the sector. ๐Ÿค”

Investors Spit Up Chewy Shares Featured Image

Shares of online pet retailer Chewy are working on their tenth-straight down week, with shares falling to fresh all-time lows today. ๐Ÿ“‰

Although the company has been expanding into higher-margin businesses like medications, insurance, and advertising, investors are worried about declining margins and activity in its core business. And in the current environment, investors are not looking to buy the dip in growth stocks that are no longer growing (at an “acceptable” rate).

Instead, they’re looking for other opportunities to play catch up as we head into year-end with the major stock market indices all up big in 2023โ€”nothing like a little career risk to force short-term portfolio decisions. We’re not saying it’s right, but explaining why you own a stock that’s down 50% YTD is challenging in this environment if you’re a portfolio manager or analyst. ๐Ÿคท

Shares of $CHWY were up nearly 250% from their IPO price at their 2021 peak but hit a new low return of -45% today. What will be the catalyst for this stock’s turnaround remains unclear, but for now, another private market unicorn is being vomited up by the public markets. ๐Ÿคฎ


Bullets From The Day:

๐Ÿค• Cyber attacks continue to hobble companies’ operations. Cleaning products maker Clorox said the cyberattack it disclosed last month will have a material impact on its quarterly results, as it caused significant product delays. Although the company will begin bringing systems back next week, it has no estimates of when it will be fully operational. Despite billions being poured into the cybersecurity industry annually, the constant game of whack-a-mole continues. CNBC has more.

๐Ÿญ Foxconn is the latest manufacturer to extend its push into India. The Apple supplier will double its workforce and investment in the country by next year as it continues rapid diversification efforts away from China. This is in addition to plans made earlier this year to invest $600 million for two projects in the state of Tamil Nadu, where it will make casing components for iPhones and chip-making equipment. More from Reuters.

๐Ÿš€ Quest to build a fully reusable rocket takes an exciting turn. The space startup Stoke Space is taking an unconventional approach to rocket design but just successfully completed a critical test of its second-stage prototype. It executed a 15-second test flight, with the vehicle flying around 30 feet high and vertically landing. That concludes the prototype’s development cycle, meaning the vehicle’s architecture is essentially complete. TechCrunch has more.

โšก Turkey is the latest country to court Tesla and EV production. Turkish President Erdogan invited Elon Musk to build Tesla’s next factory in the country, which has long been a manufacturing powerhouse for international companies. He reportedly also offered collaboration opportunities with Musk’s aerospace company, SpaceX, and Turkey’s space program, as it joins the list of countries looking to attract domestic investment in future high-tech industries. More from CNBC.

๐Ÿ“ DirecTV and Nexstar sign multi-year carriage renewal. The nearly three-month impasse has ended with the two restoring the signals of dozens of stations as they finalize new distribution terms. Nextstar is the number one local station owner in the U.S., and DirecTV is the country’s third-largest pay-TV provider. The mid-summer timing of the feud caused it to play out slowly, but the return of college and NFL football created the pressure necessary to get a deal done. Deadline has more.