Closing Recap

Friday, February 16, 2024

Index	Up/Down	%	Last
DJ Industrials	-145.13	0.37%	38,627
S&P 500	-24.17	0.48%	5,005
Nasdaq	-130.52	0.82%	15,775
Russell 2000	-28.74	1.39%	2,032

 

 

 

 

 

 

 

 

 

Despite a second “hotter”-than-expected inflation report this week, U.S. stocks showed resilience early, with the S&P 500 (SPX) flattish most of the afternoon, (not far off all-time closing highs) despite an early support test of the 5,000 level before bouncing, as momentum remains firmly to the upside. However, stocks pulled lower into the close (testing the morning lows) heading into the three-day weekend and into historically the worst 2-week stretch of the year! Healthcare, Industrials, and Financial sectors hit 52-week highs this week, joining the continued strength in Technology and Consumer Discretionary. Even a spike in the dollar (3-month highs) and Treasury yields (another pop to multi-month highs) following the CPI and PPI data points failed to put any persistent pressure on interest rate sensitive stocks this week.

 

Federal Reserve Bank of Atlanta President Raphael Bostic said today that while he needs more data to convince him inflation pressures are truly falling, he’s open to lowering rates at some point in the next few months. Fed’s Daly said that none of the recent data was surprising, all within bounds of recent volatility and that three interest rate cuts is a reasonable baseline for the year (still in line with what Fed has said while market to start year was baking in 6 25-bps cuts – now down to between 4-5 cuts expected). Overall, Fed speakers have been more open to rate cuts, and that is what stocks markets have been focused on in recent weeks, erasing recession fears that were prevalent in the middle of 2023.

 

Outside of hopes for aggressive rate cuts, earnings season is beginning to wind down, though roughly 20% of the S&P 500 still to report, with a jam-packed holiday shortened week (mkts closed Monday for President’s Day) before retailers (LOW, TGT, WMT, HD) begin to report. Oil finished the day and week higher, Treasury yields stayed strong, gold rebounded a bit and Bitcoin held big gains (now up 24% YTD). In summary, the market remains resilient; it couldn’t sustain a sell off after the FOMC last week, the CPI on Tuesday, and reclaimed the dip quickly after PPI today. Next week all eyes on semiconductor giant, and now 3^rd most valuable company and “AI” poster child NVDA earnings mid-week.

 

• U.S. housing starts for January fell nearly- 15% vs. Dec +3.3% at 1.331M unit rate (below consensus 1.460M) and vs Dec 1.562M units as single-family starts -4.7% to 1.004M unit rate; multifamily -35.6% to 327,000-unit rate. January housing permits fell -1.5% to 1.47M (vs. consensus 1.509M) vs Dec +1.8% at 1.493M unit rate. January single-family permits +1.6% to 1.015M unit rate; multifamily -7.9% to 455,000-unit rate.
• University of Michigan surveys of consumers sentiment prelim Feb 79.6 vs. consensus 80.0 and vs final Jan 79.0; current conditions index prelim Feb 81.5 (consensus 82.0) vs final Jan 81.9 and expectations index prelim Feb 78.4 (consensus 76.5) vs final Jan 77.1.

• Gold prices settle at $2,024.10, rising $9.2 but still down on the week amid a dollar and treasury yield bounce after hot inflation data cooled prospects of early rate cuts by the Federal Reserve. The US dollar index (DXY) was little changed around 104.25 on Friday, having eased around 0.6% the two previous days. But managed a small gain for the week, its fifth in a row. Remarks by Federal Reserve Chair Jerome Powell early this month and strong U.S. data have quashed expectations of early and deep rate cuts from the Fed, helping boost the greenback and Treasury yields. Speaking of, the 10-yr yield was up over 5bps on the day to 4.294% (rising 10.8 bps on the week), up 4 of last 5-weeks, and up 43 bps from Feb 1^st low of 3.862% after the FOMC meeting and CPI reports. The 2-yr yield rose 16.8 bps on the week to 4.654%, up 3-straight weeks (up 28.9 bps during that stretch) and up 51.8bps from January 12^th low of 4.136%).

 

Macro	Up/Down	Last
WTI Crude	1.16	79.19
Brent	0.61	83.47
Gold	9.20	2,024.10
EUR/USD	0.0007	1.0778
JPY/USD	0.25	150.16
10-Year Note	0.054	4.294%

 

• In Food: THS shares slumped on mixed Q4 as EPS beat/sales missed and guided FY sales $3.43B-43.5B, missing the consensus of $3.56B citing waning demand and supply chain problems (followed weak results/guide from KHC earlier in the week that sunk the food industry stocks). Bloomberg reported that Ozempic users cut grocery spending by up to 9%, survey finds, cites Numerator data from across 90,000 households http://tinyurl.com/3zahxt9u (shares of names impacted could include KO, PEP, KR, KHC, GIS, other food related names).

• In Autos: CVNA was downgraded from Market Perform to Underperform at Raymond James saying it was not a call on upcoming Q423 results (industry trends suggest stable market conditions) but on the recent stock performance (valuation concerns). Shares of Chinese EV names XPEV, LI, NIO saw gains as US listed China stocks were strong.

• In Solar: SPWR downgraded to Sell from Neutral at Guggenheim with price tgt of $1 following the company’s announcement of a rescue financing package saying with operating expenses being cut and cash preservation a focus, the firm doesn’t see how SunPower avoids losing market share in 2024.
• In Energy E&P/Equipment: BE shares fell as reported CFO departure, Q4 results below expectations, while FY24 operating margin guidance aligned expectations, the revenue outlook was well below consensus. TELL won a three-year permit extension to complete construction of its Driftwood LNG facility near Lake Charles, Louisiana. The Federal Energy Regulatory Commission (FERC) permit requires construction to be completed by April 18, 2029.

• In Tech Services: TOST headline EPS/rev results were solid, with better-than-expected GPV; announces restructuring plan, with layoffs impacting ~550 employees; announces share repurchase program of up to $250M.
• Mortgage Services: OPEN delivered both top- and bottom-line numbers finishing above consensus, and contribution profit also coming in ahead of the Street; but guidance for 1Q24 was softer than expected across the board.
• In REITs: Data Center DLR shares tumbled after saying sees 2024 core FFO per share $6.60-$6.75, below avg analysts’ estimate of $6.83 after Q4 adj FFO missed, prompting downgrade at Scotia.

• KNTE to be acquired by XOMA for a base cash price of $2.3352 a share as well as an additional cash amount of up to 25.27 cents a share, which could bring the price as high as $2.5879 a share. http://tinyurl.com/4tczswks
• LLY price tgt raised to $950 at Morgan Stanley as the firm expects LLY’s 2030 rev to grow from $41 bln in 2024 to $96 bln, incl $51 bln from diabetes and weight loss drugs.
• SRPT said the FDA accepted its follow-on application seeking full approval and expanded use of Elevidys, a gene therapy for Duchenne muscular dystrophy. The agency’s decision date is June 21. Said the FDA will not hold a meeting of its outside panel of experts to review the gene therapy to treat Duchenne muscular dystrophy (DMD).

• GEHC 13M share Spot Secondary priced at $82.25 after GE’s stake reduced from 13.5% to 10.2%, or 46.6M shares.
• SWAV reported Q4 revenue of $203.0M that was ~$4M above Street ($199.4M), while EPS of $1.16 was well-ahead of consensus ($0.89). Coronary was again the bright spot in the quarter.

• The Baltic Exchange’s dry bulk sea freight index hit a one-month high, posting a 4% gain for the week. The overall index, which factors in rates for Capesize, Panamax, and Supramax shipping vessels, was up 29 points, or 1.8%, at 1,610 points, its highest since Jan 10.

• In Digital Advertising: TTD shares rise on stronger than expected Q4 results and Q124 guide, with strength driven by CTV given its rapid adoption in the US and Int’l, fueled by growing inventory from ad-supported streaming services, augmented by Retail Media budgets moving to the platform and political & Olympics ad spend coming in 2H24.

• PCOR delivered strong 4Q23 results, with non-GAAP EPS of $0.17 (consensus $0.07); revenue of $260.0M (consensus $248.3M), up 29% y/y, down from 33% last quarter; calculated billings of $338.2M (consensus $309.4M), up 25% y/y, a deceleration from 29% growth last quarter; cRPO growth of 24% y/y (and guidance was better)

• NVDA was initiated at a new Buy and $1,200 tgt at Loop Capital as believes not only is there material upside to Street estimates in CY2024/FY2025 & CY2025/FY2026 but that it is at the front end of a 3–5-year GPU compute & Gen AI foundational build across Hyperscale.
• SMCI shares finally snapped their 9-day win streak, and in a big way, falling as much as 19%, down more than $250 off intraday record highs of $1,077.87.

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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.