Closing Recap

Tuesday, August 20, 2024

The S&P 500 and Nasdaq Composite posted modest losses in another very quiet day of news/trading, but it was enough to snap the 8-day winning streaks for both, while the Smallcap Russell 2000 underperformed falling over 1%. Not exactly the market melt-up like Monday as U.S. averages slipped, but held up well overall, with the S&P 500 (SPX) staying around the 5,600, less than 1% from all-time highs following a massive 9% bounce off August lows and ahead of the Jackson Hole Fed Symposium later this week. It appears investors/markets remain comfortable up near the highs heading into the commentary by Fed Chairman Powell Friday afternoon (12:00 PM), with hopes high for guidance of aggressive interest rate cuts and sings the economy is not in a recession. Today’s market leaders were defensive sectors as Healthcare (behind LLY strength), Consumer Staples, and Utilities saw the biggest gains while Energy lagged. The dollar extended losses, gold hit record closing highs and Treasury yields dipped along with Bitcoin and oil prices. Tomorrow morning, we get earnings from retailers Target (TGT) and TJ Maxx (TJX).

Is there something to be concerned about heading into tomorrow? The BLS is set to report on Wednesday its preliminary estimate of the upcoming benchmark revisions to payroll figures covering the 12-month period ending in March. Bloomberg reported that US job growth in the year through March was likely far less robust than initially estimated, which risks fueling concerns that the Federal Reserve is falling further behind the curve to lower interest rates. Goldman Sachs Group Inc. and Wells Fargo & Co. economists expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated — about 50,000 a month. https://tinyurl.com/3jmtf58c

• U.S. WTI crude oil futures settle at $74.04/bbl, down -$0.33 or 0.44%, pulling back from earlier gains and adding to recent declines as Israel accepting a proposal to tackle disagreements blocking a ceasefire deal in Gaza eased supply concerns, while China’s economic weakness continued to weigh on demand outlook. Brent Crude futures settle at $77.20/bbl, down 46 cents, or 0.59%
• The U.S. dollar extended its slump sending the euro and British pound to fresh 2024 highs, as the dollar index hits 7-month lows. Japanese indexes lead Asian stock gains overnight after yen weakens back near 147-handle, but then strengthened this afternoon, moving to lows around 145.40. Aussie dollar turns marginally softer even as RBA minutes reiterate board’s intention for extended pause. Mexican peso fell over -1.85%, as neared 19 per dollar.

• In Sporting Goods: AS raised its 2024 EPS view to $0.40-$0.44 from prior view high end of $0.30-$0.40 (after guides Q3 EPS below views) and said still sees 2024 revenue growth 15%-17% from 2023 revenue $4.39B.
• In Food sector: companies (KR, ACI, MDLZ, CPB, GIS, etc.) are rebutting against claims it is ripping off U.S. consumers after Democratic presidential nominee Vice President Kamala Harris called for a federal ban on "price gouging," the WSJ reported. MNST board authorizes a new $500M share repurchase program.
• In Home Improvement Retail: LOW cuts its full-year guidance to $11.70-$11.90 from $12.00-$12.30 (est. $12.14) and lowers its FY24 revenue view to $82.7B-$83.2B from $84B-$85B (est. $84.15B) and FY24 comparable sales view to down 3.5%-4% from down 2%-3% saying the frozen housing market keeps consumers on the sidelines; reported Q2 adjusted EPS $4.10 vs. consensus $3.97 and revs $23.59B vs. est. $23.9B; Q2 comp sales decreased (-5.1%).

• In Autos: TSLA shares rallied early after the European Commission cut its planned tariff on imports of the company’s electric vehicles from China. In a statement, the European Commission said it plans to grant an individual duty rate of 9% to Tesla as an exporter from China. Last month the Commission said that Tesla, along with several other EV manufacturers in China, would be subject to a 20.8% average duty. Bloomberg reported late day that RIVN senior VP of manufacturing operations, Tim Fallon, plans to leave the company, the latest in a wave of executive departures in recent months.
• In Travel/Airlines: HA shares rallied after ALK said its proposed merger with the company has cleared a regulatory obstacle with the U.S. Department of Justice, just days after it agreed to extend a review period of the $1.9 billion deal.

• In Metals & Mining: Gold miners (AEM, GOLD, NEM) rallied early as gold prices hit all-time highs; industrial metals (copper, steel, aluminum) saw profit taking after outperformance on Monday.

• In FinTech/payments: PYPL said it expanded its strategic partnership with ADYEY to offer Fastlane in the U.S.; ALIT and AVDX both downgraded to Neutral from Overweight at JP Morgan as they shift their preferences somewhat and lean more cautious on upside drivers, preferring names with more visible, defensible growth and higher earnings quality; says see the least upside to PAYX, WU, and LSPD, respectively; said see the fastest CY24-26 revenue growth at TOST (25%), RELY (+24%), and MQ (23% gross profit); said names they see the most upside to new 2025 targets include RELY, SQ and BILL.
• In Crypto: Bitcoin was higher initially just shy of $61,000 before fading intraday below $59K (finished above), pushing crypto names (COIN, CLSK, HUT, MARA, MSTR, RIOT); BTBT shares rallied after Q2 revs soared 220% to $29M topping consensus, driven by its high-performance computing (HPC) services business and higher bitcoin price; also signs deal for cloud gaming provider Boosteroid to buy GPU servers with a five-year service duration. COIN shares fell as low below $193 (off morning highs of $209.80) as Bitcoin prices reversed lower (touched 200dma of $192.60).
• In REITs: VNO was double upgraded from Underperform to Outperform at Evercore/ISI and raise tgt to $38 from $32 noting while the stock is up 17% YTD and has outpaced the REIT index (+9%) since the start of the year, there are several additional catalysts over the next 6 to 12 months. The firm downgraded CUZ from Outperform to In Line w/ $29 PT saying while they still like the stock and believe mgmt is well positioned to keep on moving forward on the leasing and development front, the stock has outperformed the REIT index by over 900bp this year.

• BMRN was upgraded to Outperform from Market Perform at Bernstein and raised tgt to $110 from $94, ahead of the September 4 investor day.
• GOVX shares fell after saying it entered agreement to sell 1.7M shares to a certain institutional investor in registered direct offering for $8.5M gross proceeds to fund working capital, general purposes; the sale price of $5 represents 30% discount to stock’s last close of $7.15.
• ITOS announces late-breaking oral presentation of phase 2 GALAXIES lung-201 interim data at the European Society for Medical Oncology Congress 2024.
• JNJ said it would buy medical device maker V-Wave in a deal potentially worth up to $1.1 billion, paying $600 million upfront, with the rest of the payments contingent on regulatory and commercial milestones.
• JNJ said the FDA approved its chemotherapy-free combination therapy for patients with a type of non-small cell lung cancer.
• KYMR sold 5.5M shares, or $225M Spot Secondary (boosted from $200M) re-offered at $40.75.
• LLY said its weight loss drug reduced the risk of developing Type 2 diabetes by 94% in obese or overweight adults with pre-diabetes compared to a placebo, according to initial results from a long-term study.

• In Medical Equipment: MDT Q1 profit and sales topped forecasts, and the full-year outlook was nudged up; said Q1 sales rose 2.8% to $7.915B vs. est. $7.9B as its cardiovascular, diabetes and neuroscience businesses beat sales expectations while medical surgical sales fell a bit short and raised Fy25 EPS to $5.42-$5.50 from $5.40-$5.50 and for revenue growth to 4.5% to 5% from 4% to 5%. PINC Q2 results topped views but guided FY25 well below consensus as sees FY25 adjusted EPS $1.16-$1.28 vs. consensus $2.22 and sees FY25 revenue $930M-$1.02B vs. consensus $1.26B.

• In Optical/Comm Equipment: FN shares jumped following strong Q2 earnings results, which followed recently better results from LITE and talked about positive 800G AI driving the beat and raised guidance with telecom still lagging but getting more stable ahead.
• In Software: WDAY was upgraded to Positive from Mixed view at OTR Global citing checks that showed partners met or exceeded their deal-closure expectations during Q2. TTWO shares jumped after the earlier announcement with Gearbox Software that Borderlands 4 is coming 2025.
• In Media: Edgar Bronfman Jr. submitted a roughly $4.3B rival bid to take over PARA through the acquisition of National Amusements, the family holding company that owns a controlling stake in the media company. Bronfman’s offer includes $2.4 bln in debt and equity for National Amusements. NFLX shares strong as a report in Variety noted 2024 upfront ad commitments more than doubled. SIRI signs new multi-year agreement with Alex Cooper, the world’s leading female podcaster with extensive exclusive content to debut on SiriusXM in 2025 per Reuters.