Closing Recap

Monday, April 29, 2024

After last week’s big move higher, and potentially huge market moving catalysts later this week, major U.S. averages posted modest advances, trading in a narrow range all day with a brief blip lower late day before recovering. Note the FOMC meeting results are at 2:00 PM on Wednesday 5/1 (no rate changes expected), AMZN earnings (4/30) and AAPL (5/2) headline a busy week of earnings results (MCD, AMD, QCOM, LLY, KO, MA, PFE among others), and key jobs data comes Wednesday 5/1 with private ADP payrolls and the nonfarm payrolls Friday 5/3. Markets looked the other way when it came to hotter inflation data last week, as the PCE/core PCE data Thursday (for Q1) and Friday (for March) was stronger than markets hoped, further lessening chances of an FOMC rate cut this year but had no impact on broader markets. Stocks appeared to be in a waiting period most of the day until stocks crossed to negative territory around 3:00 PM, and yields bounced off the lows following the Treasury’s higher-than-expected borrowing estimate ahead of their quarterly refunding announcement on Wednesday. Their projection for April-June borrowing was boosted to $243b from $202b, more than most dealers had anticipated. Britain’s FTSE 100 extended its rally a fifth straight session (up 8 of last 9), rising 1.3%, after touching highest levels in over thirteen months (the Pound reached 2-week highs vs. the Buck at 1.2569). Quiet day of news in general before potential fireworks in days to come.

• Gold prices rose +$10.50/oz, or +0.45%, to settle at $2,357.70, helped by a weaker dollar, as focus turns to the Federal Reserve’s policy meeting and U.S. non-farm payrolls data due this week for cues on the central bank’s interest-rate trajectory. The Fed’s two-day policy meeting starts on April 30. The U.S. central bank is expected to hold its benchmark interest rate steady at 5.25% to 5.5%. Gold fell by 2.2% last week, amid cooling Middle East tensions and fading expectations for early U.S. rate cuts this year.
• There was a massive move in the dollar/yen overnight, as the yen briefly tumbled past 160 per dollar for the first time since 1990, before rebounding sharply back below to the 155-handle amid mounting intervention speculation. The yen surged after touching its weakest level against the dollar in 34 years. Amid holiday-thinned market conditions in Japan, the yen swung wildly, rallying more than 2% on Monday. The U.S. dollar dipped slightly against its rivals, making gold more attractive to holders of other currencies. Treasury yields dipped all day with the 10-yr yield ending around 4.61% (off highs 4.65%).

• In Apparel Retail: LULU was downgraded to EW from Overweight at Barclay’s based on the Americas, while still solidly positive but decelerating, offset by China, athleisure normalization with potential marginal spends shifting back to apparel, more competitive landscape in aggregate; and more limited margin expansion drivers.
• In Retail: SHOP was upgraded to Buy at Citigroup with $105 tgt following a recent round of conference visits/channel checks which highlight a more resilient e-commerce backdrop and accelerated share gains up market. DLTR shares fell after Truist noted earlier financial hit due to rebuild efforts for the retailer’s distribution center in Marietta, Oklahoma after it was hit by a tornado over the weekend.
• In Restaurants: DPZ shares jumped after Q1 results beat with EPS $3.58 above est. $3.39 and Q1 revs $1.08B in-line with consensus while Q1 comp sales rose +5.6% vs. est. 4.04%; said beat comes consumers in U.S. tap into its loyalty program and other promotions; domestic comps +8.5% and international comps rose +0.9% both topping the consensus.

• In Cruise lines: Viking Holdings (VIK) upsizes IPO to 53M shares from 44M shares, as the number of shares being sold by selling shareholders increased by 27%, to 42 million shares from 33 million. The company is still offering 11 million shares and the pricing of the IPO is still expected to be between $21 and $25 this week.
• In Casino: MLCO, WYNN, LVS shares rise early after Chinese authorities introduced new travel permits to boost tourism. Starting May 6, mainland Chinese citizens will be able to apply for a permit that allows them to enter the world’s biggest gambling hub multiple times in a year.

• In Asset managers: BEN shares slide after Q1 EPS of $0.56 missed estimates while revs rose 12% y/y to $2.15B mostly in-line with estimates; Q1 Investment management fees rose 9% to $1.71 billion, while sales and distribution fees jumped 19% to $358.3 million, while Operating expense $2.02B, +21% y/y, well above est. $1.84B.
• In Insurance: GL board authorizes buyback of up to $1.3B for two-year period ending Dec 2005 under its existing program; comes a week after the insurer a week ago raised its FY 2024 net operating income forecast.
• In Lending/Services: SOFI shares fell early as posted a modest EPS beat on higher revs ($645M vs. est. $556M), while guided Q2 revs $55M-$565M (below est. $580M) and adj EBITDA of $115M-$125M and Net Income of $5M-$10M.

• ALT was downgraded to Neutral from Buy at Guggenheim saying as time passes with no partnership secured, they believe the opportunity to successfully fund Pemvidutide’s future in either obesity or MASH/NASH is growing increasingly tenuous.
• ANVS shares tumbled after saying its experimental Alzheimer’s treatment fails to show statistical significance in meeting the goals of a mid-stage trial.
• AXSM was upgraded to Overweight heading into ADVANCE-2 noting Axsome is developing a pipeline of CNS therapies, and lead therapy Auvelity (AXS-05) is currently commercialized for major depressive disorder (MDD); says the street appears comfortable assigning ~$1B in peak sales to Auvelity in MDD.
• AZN said had positive high-level results from the DESTINY-Breast06 Phase III trial showed that ENHERTU(R) demonstrated a statistically significant and clinically meaningful improvement in progression-free survival (PFS) compared to standard-of-care chemotherapy in the primary trial population of patients with HR-positive.
• DCPH shares surged after saying Japan’s Ono Pharmaceutical Co will acquire the cancer drug developer for $2.4 billion in cash, with Ono Pharma offering $25.60 per share, a premium of 74.7% to Friday’s close. https://tinyurl.com/3hkmrtpx
• MNKD announces IND Clearance from U.S. FDA to Start Phase 3 Study of Clofazimine Inhalation suspension for nontuberculous mycobacterial lung disease.
• MOR said its takeover by NVS is still expected to close in the first half of this year, after a news report on a possible drug safety risk knocked the German biotechnology company’s stock price on Monday. MorphoSys’ statement came after a report by specialist website STAT News, citing a safety issue with its experimental drug pelabresib.
• XFOR announces FDA Approval of XOLREMDI™ (Mavorixafor) capsules, first drug indicated in patients with WHIM syndrome.

• In Pet Services: PAHC shares jumped after striking a deal to buy ZTS medicated feed additive portfolio for $350M; the agreement reached also involves some of ZTS’s water soluble products and six manufacturing sites.
• In Lab Companies: LH announced the U.S. FDA has approved its nAbCyte Anti-AAVRh74var HB-FE Assay, a companion diagnostic to determine patient eligibility for treatment with BEQVEZ, PFE’s recently FDA-approved hemophilia B gene therapy.
• In Life Sciences/Tools: TECH reaches a distribution agreement with TMO; says partnership marks an important collaboration between two industry leaders in the fields of scientific research, diagnostics, and biotechnology.
• In Insulin/Diabetes: TNDM upgraded to Overweight from Equal Weight at Wells Fargo and raise tgt to $45 from $21 as the firm is increasingly optimistic that Tandem’s share of new pump starts will least stabilize in 2024 after surveying 50 endocrinologists. The survey suggests Mobi is likely to cannibalize Tandem share but perhaps expand the overall market, the analyst tells investors in a research note. Survey implies PODD will expand its leadership in new starts, while TNDM will see stable growth in new starts – implying potential upside in 2024/2025. DXCM remains #1 CGM provider.

• Industrial metals strong; FCX nears 52-week highs above $52 per share as copper prices rise amid driven concerns highlighted by BHP’s recent bid for Anglo American (NGLOY); shares of RIO, SCCO, VALE also higher.
• In Aerospace & Defense: BA was downgraded to "negative" from "stable" by Fitch and reaffirmed its "BBB-" long-term issuer default rating; EH unveiled a partnership with Guangzhou Greater Bay Technology Co. to develop "ultra-fast" charging/extreme fast charging battery products for EHang’s electric vertical takeoff and landing aircraft; GD was upgraded to Buy from Hold at Jefferies and raised tgt to $335 from $305 citing top/bottom line inflection at Gulfstream (+40% and 53% respective in ’24) on G700 cert and less R&D; and upside to Defense w/ rev guidance implying flat vs its +3% est.
• In Chemicals: ALB mentioned in Barron’s over weekend noting shares were crushed by electrical vehicle slowing growth woes, while lithium prices are down more than 80% since peaking in 2022. But now, lithium prices show signs of stabilizing (note shares of other lithium producers like SQM saw strength). EMN was upgraded from Hold to Buy w/ $125 PT at Jefferies saying Eastman should generate above-trend EPS growth, higher margins and better ROIC over the next three years and the 2024 outlook appears conservative, particularly on volumes.

• In Internet: The Financial Times reporters META’s Facebook and Instagram are set to be probed by the EU over concerns the social media giant is failing to do enough to counter disinformation from Russia. BIDU shares rose after reports they reached an agreement with TSLA, opens new tab to grant the car company access to its mapping license for data collection on China’s public roads, two people familiar with the matter said. https://tinyurl.com/yx947tpa
• In Telecom: AT&T (T) upgraded to Overweight at Barclays saying combined with their expectations of relatively strong performance this year, provides a unique window of opportunity with real catalysts. AMX upgraded to Buy at Goldman Sachs citing improving competitive trends after revisiting main debates of competition, capital allocation, regulation, and valuation.
• In Media: Variety reported CMCSA, beginning in mid-July, will raise the price for Peacock Premium (with ads) by $2 to $7.99 per month and Peacock Premium Plus (mostly ad-free) is also going up by $2 to $13.99 per month; Seaport Research upgraded ROKU to Buy from Neutral with a $74 price target following last week’s Q1 report saying the risk/reward is attractive for a company central to the connected TV advertising market, which should grow advertising in the low-double-digits this year.