Closing Recap

Wednesday, January 08, 2025

U.S. stocks were volatile on Wednesday, bouncing between gains and losses before ending mixed ahead of a mid-week stock market closure on Thursday in observance of former President Jimmy Carter’s passing, as the funeral will be held tomorrow. Stocks declined early amid concerns over President-elect Trump’s tariff plans after CNN reported that he is considering declaring a national economic emergency to push through his tariffs. The declaration would allow Trump to construct a new tariff program by using the International Economic Emergency Powers Act, known as “IEEPA,” which unilaterally authorizes a president to manage imports during a national emergency. In addition to the market volatility on tariff/inflation concerns and sharp declines in momentum sectors (quantum computer names IONQ, QBTS, RGTI, nuclear names CEG, VST, OKLO, and crypto names MSTR, MARA, RIOT), investors digested another round of payroll data ahead of Friday’s highly anticipated Nonfarm jobs report. Treasury yields touched 8-month highs, the dollar advanced along with gold prices, while gold and Bitcoin prices slumped. December ADP employment change rose less than expected, but weekly initial unemployment claims unexpectedly fell to a 10-1/2 month low. Fed Governor Waller tried to issue dovish comments saying, “the extent of further easing will depend on what the data tell us about progress toward 2% inflation, but my bottom-line message is that I believe more cuts will be appropriate.” The other story was the horrific wildfires in California that have destroyed homes, buildings and land in Los Angeles.

• Weekly Jobless Claims fell to 201,000 (11-month lows) from 211,00 the prior week (and vs. consensus 218,000); the 4-week moving average fell to 213,000 from 223,250 prior week; continued claims climbed to 1.867M from 1.834M prior week (vs. est. 1.867M) and the US insured unemployment rate unchanged at 1.2%.
• November wholesale sales +0.6% (consensus unchanged) vs Oct -0.3% (prev -0.1%); Nov wholesale inventories unrevised at -0.2% (consensus -0.2%); Nov stock/sales ratio 1.33 months’ worth vs Oct 1.34 months.
• US MBA weekly mortgage market index fell -3.7% in latest week, the mortgage purchase index falls -6.6% and the mortgage refinance index climbs 1.5% as the average 30-year mortgage rate climbs 2 bps to 6.99% in Jan 3 week, highest since July 2024.

• "Participants expected that inflation would continue to move toward 2%, although they noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated," the minutes said. "Several observed that the disinflationary process may have stalled temporarily or noted the risk that it could."
• The minutes described the December rate cut by the policy-setting Federal Open Market Committee as "finely balanced," with some participants noting the "merits" of not reducing borrowing costs considering what some see as stalled progress in lowering inflation.
• "Most participants remarked that … the Committee could take a careful approach in considering" further cuts. The minutes showed policymakers facing a suddenly messy set of new influences on an economy that starts the year with relatively low unemployment, strong growth, and inflation that remains above the Fed’s 2% target but is expected to decline.

• Bitcoin prices declined with stocks, down as much as -3.7% to below $93,000 after hitting $102,000 earlier this week and pressuring Bitcoin miners WULF, IREN, CLSK, HUT, MARA, RIOT etc. February gold prices rose $7.00 to settle at $2,672.40 an ounce, hitting 4-week highs following economic data.
• U.S. WTI crude oil fell -$0.93 or 1.25% to settle at $73.32 per barrel, losing ground late day while Brent Crude futures settle at $76.16/bbl, down 89 cents, 1.16%. Nymex natural gas rises 5.9% at $3.651/mmBtu as prices jump back from the previous day’s losses, with the market taking in stride the below-average storage draw reported for last week.

• In Food Sector: KLG was downgraded from Hold to Sell at TD Cowen and cut its FY25 EBITDA to $289M vs consensus of $290M saying the co’s significant market share losses in Q4 and its uninspiring new product pipeline suggests that the spin-off has yet to improve the company’s competitiveness; MKC was upgraded from Hold to Buy at TD Cowen saying its portfolio is well positioned to capitalize on growing consumer demand for fresher, healthier foods and bolder flavor. KO was upgraded to Buy at TD Cowen as views the stock’s recent pullback as an overreaction to transitory volume deceleration in Q3. Citigroup sector comments saying top picks are SJM, HRL, BRBR, while notes sentiment towards the broader group continues to skew negative, for good reason, in our view, when considering mounting price and margin pressure as they remain cautious on HSY and CPB.

• Wolfe Research with several changes in Housing industry as well: as they downgraded LEN to Peer Perform from Outperform saying while applauds Lennar’s asset light transition, it believes the recent spike in rates reinforces homebuyer affordability challenges and weighs on gross margins. The firm upgraded TMHC to Outperform from Peer Perform as sees value in the company’s improved margin and returns profile.
• In Building Products: FERG double upgraded to Buy from Underperform at Bank America and raise PT to $225 from $185 saying sees an attractive entry point into a long term growth compounder, potential for higher US inflation that could support pricing and margin from H2-25, a realistic consensus that has been reset quickly post Q1, now consistent with the low end of the FY-25 guidance. Separately, UBS downgraded FERG to Neutral from Buy. Wolfe with a few changes in building products as the upgraded both MHK and MLM to Outperform. Barclays upgraded FND to Equal Weight from Underweight as still sees modest downside to earnings estimates in fiscal 2025 but says "we are close to the bottom." The firm also upgraded RH to Overweight from Equal Weight, raising its tgt to $515 from $383 saying they have increased its exposure to the improving home furnishing’s theme.

• In Leisure/Towable/RVs: WGO was upgraded to Overweight from Sector Weight at Keybanc and downgraded PII to SW from Overweight in 2025 outlook for Leisure sector saying looking into 2025, they remain broadly cautious across end markets. Keybanc says affordability continues to be a concern, further pressured by more limited expectations for rate cuts in 2025 vs six months ago.
• In Autos: CVNA was upgraded to Buy from Neutral at Citigroup and raised tgt to $277 from $195 saying believes Carvana is ramping inventory to meet growing demand and is doing so more efficiently. Citi cites improving new-vehicle supply unlocking used demand and says Carvana inventory is expanding to meet demand. LYFT shares declined after UBER announced it would become DAL exclusive rideshare and delivery partner in the U.S. this spring, bringing a partnership with rival Lyft to an end.

• In Solar, Alternative Energy sector: Citigroup downgrade SEDG to Sell due to its tight liquidity, challenging earnings outlook, upgraded HASI to Buy as it is more insulated from potential policy changes and is out GNRC on negative catalyst watch in 2025 outlook call. Citi noted last year proved tumultuous for the sector as commodity, regulatory and political changes weighed on the stocks. To make things worse, several guidance cuts led to heightened volatility and lower investor confidence. Citi said they remain cautious on residential solar largely due to dependence of companies on incentives and relatively weaker financial flexibility. Shares in Vestas Wind Systems and Orsted were pressured after U.S. President-elect Trump made negative comments on wind turbines and threatened punitive tariffs on Danish goods if Denmark is not compliant with regards to Greenland.
• In Energy: natural gas producer AR, CRK, CTRA, RRC outperform in energy complex on cold weather temps; XOM said that sharply lower oil refining profits and weakness across all its businesses would reduce its Q4 earnings by about $1.75 billion from the prior quarter; also said that upstream asset sales would benefit results by about $400 million, but overall impairments would cost about $600 million. MUR said its subsidiary has drilled an oil Discovery at the Hai Su Vang-1X exploration well in Block 15-2/17 in the Cuu Long Basin, located 40 miles offshore Vietnam. The well was drilled to a total depth of 13,124 feet in 149 feet of water. Hai Su Vang-1X encountered approximately 370 feet of net oil pay from two reservoirs.

• In Multi-line Insurers: Evercore ISI upgraded WTW to Outperform from In Line saying they believe the re-rating story will continue in 2025 after a 14% increase in 2024 as its free cash flow improves and the mix shift towards the Risk and Broking segment continues. The firm also upgraded AON to Outperform from In Line saying following two years of relative underperformance, sees upside to organic growth driving positive earnings revisions. Lastly, GL was upgraded to Outperform from In Line as the stock has materially recovered from its 2024 lows following short seller reports, but the stock still underperformed the sector by over 30% in 2024.
• In Consumer Finance/Servies: ALLY shares bounced after saying they would cut less than 5% of its workforce, looks to exit mortgage origination business and is seeking alternatives for credit card business.

• ALT was initiated with a Buy and $18 price tgt at Stifel noting the company is developing next-generation peptide-based therapeutics with a novel GLP-1/glucagon dual agonist targeting the nexus of metabolic disease, obesity and dyslipidemia.
• CPRX shares jumped after reaching a settlement agreement with TEVA related to Teva’s plans for a generic version of Firdapse 10 mg tablets.
• JSPR shares tumbled after saying says its skin disease drug, briquilimab, met the main goal in the early-stage trial for treating chronic spontaneous urticaria (CSU); one firm, William Blair, says patients treated with the 180-milligram dose every 8 weeks showed a weaker reduction in disease activity compared with other dose levels.
• MRK was downgraded to Hold from buy at Truist citing massive upcoming LOE for Keytruda in ’28 (US)/’31 (EU) and uncertainty around significant Gardasil revenues in China.
• QURE prices 4.4M shares at $17.00 in public offering.
• RCEL shares fall as lowers 4Q revenue guidance due to slower-than-anticipated purchasing activity; lowers Q4 revenue view to $18.4M, reflecting growth of about 30% y/y from prior view $22.3M-$24.3M (est. $35.85M); now expects full-year 2024 commercial revenue to be approximately $64.3M, below the prior range of $68M-$70M.
• SANA shares soared over 200% overnight after they released what it assessed as positive data from a study of its in-development treatment for type 1 diabetes. The company said it transplanted its treatment, UP421, into a patient with type 1 diabetes without the use of any immunosuppression.
• Cannabis stocks tumbled again (MSOS, GTBIF, TCNNF, CGC) after a company set to testify in the Drug Enforcement Administration’s rescheduling hearings accused the agency of obstructing the rulemaking process.
• Sleep apnea stocks (INSP, RMD) active late day after Medicare drug plans can now cover LLY’s blockbuster obesity drug Zepbound for obstructive sleep apnea, the Centers for Medicare & Medicaid Services confirmed to CNBC.
• Vaccine stocks MRNA, NVAX, CVAC among others tumbling, just a day after rising on increases in seasonal influenza cases and bird flu concerns.

• In MedTech: BSX announces agreement to acquire Bolt Medical, Inc. to further Co’s strategy to address coronary and peripheral disease; deal includes upfront payment of about $443M for 74% stake not yet owned. BSX also rallied after JNJ paused U.S. external evaluation and all U.S. varipulse cases (which competes with BSX). ANGO shares jumped after earnings results top consensus and slightly improves FY adj EPS loss view while maintains FY gross margin and revenue outlooks.
• Healthcare Services/Facilities: GEHC upgraded to Buy from Hold at Jefferies and raise tgt to $103 after the stock has pulled back and now trades at "just" 17-18 times estimated 2025 earnings, below GE HealthCare average, peers, and well-off recent highs of 20 times. ACCD agreed to be acquired by Transcarent for $7.03 a share in cash, bringing the equity value of the deal to around $621M. PHR was upgraded to Outperform at RBC Capital and raised the price target to $32 (from $24) based on greater conviction in its longer-range EBITDA outlook.

• LDOS downgraded to Hold from Buy at TD Cowen saying the company faces a transition (low growth) C25 following C24’s explosive growth, which limits its upward re-rating prospects.
• LHX was upgraded to Outperform from Market Perform at Bernstein citing valuation following the stock’s post-election pullback, which it notes hit defense stocks across the board. President Trump will still support "strong capabilities, as he did in his first term, even though there remains uncertainty on budget limits."
• NOC was upgraded to Overweight from Equal Weight at Wells Fargo and raised tgt to $595 from $505, where the firm sees the most attractive portfolio in defense, with B-21/Sentinel driving growth above peers into the ’30s, likely protected by the new administration.
• RKLB announced that it was selected to be a member of a team of subcontractors, led by KTOS to be part of a 5-year OTA contract for the MACH-TB 2.0 under Task Area 1. This award has a total contract value of $1.45B split amongst the various services including: systems engineering, assembly, integration and test (AI&T), mission planning and execution, and launch services.
• SAIC was downgrade to Hold from Buy at TD Cowen and cut tgt to $120 saying the company is a turnaround with peer-lagging organic growth, in a sector beset by negative sentiment that is unlikely to change anytime soon, as the Trump Administration hasn’t taken office yet.
• Canaccord raised price tgts in aircraft/in energy investment as raises tgt on ACHR to $14 from $11, JOBY to $11.50 from $9.75, LUNR to $26 from $17.50 saying they believe we are witnessing the dawn of a transformative era in energy investment; the beginnings of a supercycle reminiscent of the communications revolution that occurred decades ago. The strong demand for green sources of energy to power AI is unlikely to falter making clean energy investments into our grid essential.

• Software sector: PANW was downgraded to Hold from Buy at Deutsche Bank as expect Security to underperform broader Software this year after last year’s strong performance with our Cyber coverage +22%. ADBE downgraded to Hold from Buy at Deutsche Bank as expects the stock to remain range-bound until the company displays more tangible evidence of AI monetization. WDAY upgraded to Buy from Hold at Deutsche Bank and downgraded DAY to Hold from Buy saying they remain constructive on the secular growth opportunity in Back Office applications and expect Cloud HCM/ERP to grow mid-teens over the next couple of years. TWLO was upgraded to Outperform with a $140 PT at Mizuho ahead of its January 23rd Investor Day.
• In Online Services: EBAY shares rallied after META said it would test showing the firm’s listings on Facebook Marketplace in Germany, France and the U.S. that will enable buyers to browse eBay listings and then complete their transactions on eBay.

• Samsung Electronics’ (SSNLF) prelim Q4 operating profit of 6.5 trillion won ($4.5 billion) was well below an LSEG estimate of 7.7 trillion won, saying the company was hit hard by extra costs while slowing demand for conventional memory chips used in PCs and mobile phones also weighed on earnings, it added; preliminary revenue came in at 75 trillion won, slightly lower than analysts’ estimates.