Closing Recap

Thursday, January 18, 2024

Stocks surged into the bell heading into the final trading day of this holiday shortened week! U.S. stocks were led by strength in mega-cap technology stocks (AAPL, META) and semiconductors (+3.3% for SOX) again pacing the upbeat market enthusiasm, though market breadth turned negative midday (ended near slightly better) and stocks moved towards the lows following more “less dovish” Fed commentary than markets have been hoping for. Stocks pulled back after the Fed’s Bostic urged caution on rate cuts amid global uncertainty; repeats he projects first rate cut in third quarter 2024 (vs. market expectations of first cut in March); says Fed should allow events to ‘continue to unfold’ (stocks rolling on headlines). Stocks rolled to intraday lows following Bostic comments while Treasury yields hit new highs, as the 10-yr topped 4.15%. Bostic is just the latest of Fed speakers (Waller the other day), downplaying the need to cut rates as early as March as equity markets remain hooked on lower rates. Several names that tend to benefit from lower rates such as homebuilders, lenders, and those needing easier financing such as biotech, solar, saw sharp pullbacks on the comments. Outside of the macro news (which included better jobless claims and housing data/weaker Philly Fed business index), there were a few outlier sectors to the downside including healthcare after HUM lowered guidance, consumer finance as DFS tumbled on results and defensive sectors such as Utilities and REITs (which tend to rally on low rate env’t) leading lower. Still, by days end, markets resumed their upward momentum into option expiration tomorrow, making new highs for the S&P and Dow as the path of least resistance remains higher. AAPL posted its best day in about 8-months after an analyst upgrade earlier boosted shares (now strong bounce off yesterday lows of $180.30 which also marked its 200-day support). Late day headlines that the Senate passes government funding bill to avert shutdown until March, sending bill to House also helped. Same names continue to push the market to highs while Smallcaps and other sectors continue to lag.

• Housing starts for December little better -4.3% at 1.46M unit rate vs est. 1.426M and Nov +10.8% (1.525M units); Dec single-family starts -8.6% to 1.027M unit rate; multifamily +8.0% to 433,000-unit rate. Housing permits +1.9% to 1.495M unit rate vs. est. 1.48M and vs Nov -2.1%.
• The Philadelphia Fed factory index for January with a negative -10.6 reading vs. estimate -7.0 (now 12 of last 13 readings have been negative).

• Oil prices rise along with broader markets as WTI Nymex crude settled at $74.08 a barrel, up $1.52, or 2.09% after bullish weekly inventory data. U.S. crude-oil inventories fell more than expected last week, while stocks of gasoline and diesel continued to rise, according to data released by the Energy Information Administration. Commercial crude-oil stocks excluding the SPR fell by 2.5 million barrels to 429.9 million barrels in the week ended Jan. 12, and were about 3% below the five-year average for the time of year. Oil stored at Cushing, Okla., the Nymex delivery hub, fell by 2.1 million barrels to 32.1 million barrels. Nymex Natural Gas fell 6.03% to Settle at $2.6970.

• Luxury retail: After weak results/guidance last week from Burberry, Richemont (CFRUY) shares rose after saying its sales rose to 5.59 billion euros ($6.09 billion) in the quarter, ahead of market expectations as the luxury retailer enjoyed a surge in sales in China in its latest quarter; Richemont’s sales increased by 8% in three months Dec. 31, better than the 5% rise in the previous three months. (shares of TPR, RL, PVH moved in reaction).
• In Mattress Retail: TPX was upgraded from Neutral to Overweight at Piper and raise tgt to $61 from $41 saying its 2024 EPS bridge suggests EPS of $3.00+ this year, industry demand is trending toward stabilization/improvement and TPX is entering 2024 with its strongest product line-up in years.
• TD Cowen with several price target changes: HD $415 (Prior $350) LOW $225 (Prior $215) ORLY $1,160 (Prior $1,150) OSW $16 (Prior $15) PLNT $75 (Prior $65) WSM $240 (Prior $200) into earnings. At an industry level, they estimate in 2024 the Auto Aftermarket to grow +2.7%, Home Improvement to decline (0.8%), and furniture to decline (4.0%) in our base cases. From a stock perspective, ORLY is their top pick as we lean more defensive in the near-term, followed by HD to own an improved rates backdrop, and third pick is OSW.

• MDC shares jumped as announced an agreement to be bought by Japan-based Sekisui House Ltd. in a deal valued at $4.9 billion as shareholders will receive $63 in cash for each M.D.C. share they own. http://tinyurl.com/557rah5s

• PLTK was downgraded from Neutral to Underperform at Bank America and cut tgt to $8 from $11 based on its view that PLTK’s long term growth trajectory and the prospects for re-rating will remain muted through 2024, and that an upside catalyst, such as an aggressive FY24 guidance seems unlikely.

• BTU +6%; set to join S&P SmallCap 600 index, replacing ELF effective Jan. 23; ELF to replace SRC to join S&P MidCap 400 index from Jan. 23.
• KMI Q4 adj EPS $0.28 vs est. $0.30 on revs $4.038B vs est. $4.409B, project backlog at end Q4 was $3B vs $3.8B end Q3, says finished year slightly behind budget primarily due to lower commodity prices.
• OKE authorizes a $2B share repurchase program; increased its quarterly dividend by 3.7% to $0.99.
• PLUG files $1B stock securities shelf.

• KEY Q4 EPS $0.03 vs. est. $0.23 and revs $1.54B vs. est. $1.53B; included in the fourth quarter are $209M, or 22c per diluted common share, of charges related to a FDIC special assessment; qtrly average deposits totaled $145.1B for Q4, down -$590M y/y; net interest income (NII) fell 24.4% from last year to $928M and see NII -2%-5% in 2024.
• MTB Q4 net income fell 37% to $482M, or $2.74 vs. est. $3.10; said the special fees it would have to pay to the FDIC totaled $197M; Net interest income fell 3% to $1.74B, surpassing the $1.72B est.; said average commercial and consumer loans and average deposits increased in the period.
• NTRS Q4 net interest income (NII) declined almost 10% to $483.1M from $534.5M y/y; Revenue climbed to $1.55B from $1.52B but below ests $1.71B; ending allowance for credit losses was $220.4M vs. $200.9M y/y.
• SNV Q4 EPS of $80 misses the $090 estimate, but KBW notes 4Q23 came mostly better than expected on a lower provision, higher fees, and lower expenses.
• TFC Q4 adj EPS $0.81 vs. est. $0.89; Q4 revs $5.76B vs. est. $5.69B; Q4 tangible book value per share $21.83; Q4 CET1 capital ratio 10.1% and Q4 net charge-offs .57%; Q4 Total deposits $395.33B, vs. est. $399.6B; took a $507 million charge to replenish a FDIC fund used to make uninsured depositors whole.
• WTFC Q4 adjusted EPS of $1.87 was shy $2.49 est. on lighter revs $570.8M vs. est. $579M; Q4 net interest margin 3.62% vs. 3.71% last year, but KBW noted an NII beat and guidance for additional NII growth.

• In Payments: Mizuho raised price targets on: COIN to $60 from $54, FLT to $265 from $235, FIS to $73 from $62, FI to $156 from $150, GPN to $129 from $110, MA to $462 from $420, HOOD to $15 from $14, FOUR to $82 from $75, UPST to $23 from $19, V to $265 from $243, WEX to $225 from $200 and cut SOFI tgt to $12 from $15 saying their top picks include: AFRM, FIS, HOOD, & SQ and most cautious on the near-term earnings outlook for COIN & TOST.
• In Crypto: Reuters reported Spot bitcoin ETFs draw nearly $2B in first three days of trading. Investors have poured $1.9B into nine new ETFs tracking the spot price of bitcoin in their first three days of trading, data from issuers and analysts showed, with fund giants BlackRock, opening new tab and Fidelity pulling in the bulk share of the flows.

• Drugmakers LLY, NVO raise Prices of Ozempic, Mounjaro and hundreds of other drugs as companies hiked prices of 775 brand-name drugs at start of new year http://tinyurl.com/4x2rxenv
• EHTH shares tumbled; downgraded to Hold from Buy at Craig Hallum and cut tgt cut to $7 from $11 saying checks suggested that this year’s AEP enrollment growth was below plan for the industry.
• NVCR said the FDA has accepted its application for premarket approval for its device Tumor Treating Fields, for a type of lung cancer, in combination with either chemotherapy or cancer immunotherapy.

• In the Waste Sector: Citigroup raised their price tgts on RSG to $190 from $178 (remains Buy), WCN to $163 from $136 (remains Neutral) and WM to $215 from $203 (remains Buy) as updated estimates and rolled forward valuations to 2025 estimated free cash flow as part of the firm’s 2024 waste services outlook noting the group enters 2024 with a bullish net price setup as cooling costs are met with lagging contracts.
• In Transports: HTZ was upgraded to OW at Morgan Stanley as believes the actions announced last week, while driving a sharp negative revision to FY24 and driving a sell-off in the stock, help mitigate longer-term risk to the stock. SAVE shares fall for a 5th day and extends losses after M&A deal fell thru this week with JBLU; Citigroup downgraded to Sell saying although JetBlue and Spirit can still appeal Tuesday’s court ruling, which blocked the carriers’ proposed merger, it is unclear why JetBlue wouldn’t cut its losses here and recognize that it avoided a risky bid on a highly levered carrier with steep losses. Spirit’s net debt jumped from $3.3B to $5.5B over the past two years. SAVE tumbled further by around -30% midday after the WSJ reported the co is exploring restructuring options after JetBlue.

• In Industrial metals: AA Q4 adj EPS ($0.56) vs est. ($0.86), adj EBITDA $89Mm vs est. $102.32Mm on revs $2.595B vs est. $2.601B; guides FY24 alumina production 9.8-10.0Mm metric tons and alumina shipments 12.7-12.9Mm metric tons; BHP reported a 2.2% drop in Q2 iron ore production due to impact of the ongoing ramp up of the Central Pilbara hub; said iron ore production from Western Australia on a 100% basis was 72.7 million tonnes (Mt) in the three months to Dec. 31, down from 74.3 Mt reported a year ago.

• PINS was upgraded from Hold to Buy at Argus with $45 PT saying Pinterest users see the site as a place to shop, with more than half of them intending to purchase prior to visiting the company’s platform and the firm expects more of these users, higher engagement, increased ad prices and higher ad loads to drive growth.
• RAMP after the company announced the acquisition of Habu, a data clean room software provider, and announced preliminary fiscal Q3 revenue and non-GAAP operating income that came in above guidance; expects to report F3Q revenue of ~$174m, up 10% y/y, 5% above consensus, and the midpoint of the guide.
• VECO issues Q4 revenue guidance to $165-$175M & EPS between $0.40 to $0.45 cents (above views); provides initial 2024 revenue outlook of $680-$740M & EPS between $1.60 to $1.90.

• The Philly semi-index (SOX) gets off to a strong start after TSM beat analyst estimates for earnings in the fourth quarter and guided higher than views for the year ahead; posted a 19% drop in net profit for the October-December quarter to T$238.7 billion but said for advanced packaging, demand was very strong and TSMC can’t offer enough capacity to support customers. TSM said it sees more than 20% growth in 2024 revenue on booming demand for high-end chips used in artificial intelligence applications.
• Wolfe Research also a positive update on semis, upgrading shares of ADI, MCHP, NXPI, to Outperform from Peer Perform saying they stayed neutral on analog for too long this cycle, since stocks bottomed an unprecedented full year before fundamentals began to deteriorate. While they missed the first move, they say they know they can’t remain neutral through the next cycle.