Closing Recap

Monday, July 29, 2024

U.S. stocks chopped between gains and losses for the S&P and Nasdaq, while the Russell 2000 index pulled back after early gains, ending around 1% lower after rising 10% this month in some profit taking ahead of a very busy week of potential market moving catalysts. Today saw negative overall market breadth, led by weakness in Energy (XLE) while Consumer Discretionary (XLY) outperformed thanks to strong gains in TSLA. As for the busy week, tomorrow we get the June JOLTS job report as well as tech earnings from MSFT and AMD. On Wednesday 7/31, the FOMC interest rate meeting and Chairman Powell press conference as well as Bank of Japan/Bank of Canada central bank meetings, ADP private payrolls at 8:15 AM and Q3 Quarterly Refunding announcement follow up at 8:30 AM; followed by earnings that night from META, ARM and QCOM. On Thursday 8/1, the Bank of England rate policy meeting as well as heavy data dose with U.S. Nonfarm Productivity and Unit Labor Costs, ISM Manufacturing PMI; in China the Caixin Manufacturing PMI, and that night earnings from AAPL, AMZN, COIN and INTC. Lastly on Friday, the monthly nonfarm payroll report and earnings from mega energy companies CVX and XOM. Today was more of a chop day with no major data, and Fed speakers still in “blackout” ahead of FOMC meeting. Bitcoin prices erased earlier gains while the dollar edged higher, and gold was up slightly.

• Oil prices extended the recent decline, falling -$1.35 or 1.75% to settle at $75.81 per barrel (roughly 2-month lows) while Brent Crude futures settled at $79.78/bbl, down $1.35, or 1.66%. While no change in policy is expected at this week’s OPEC+ monitoring committee meeting, the meeting will be closely watched for signs of the group relenting or delaying a return of barrels.
• Natural gas Aug contract expires at $1.907/mmBtu, down 4.9% on the day, and gas for September delivery slips 0.7% to $2.036/mmBtu – Futures fell for a fifth straight session.
• Treasury yields sipped late day after the U.S. cuts the July-september borrowing estimate to $740B from $847B. the 10-yr yield dipped to 4.17% late in the day. The U.S. forecasts the end-’24 cash balance of $700B, ahead of the debt-limit return. The US Treasury cites the Fed’s slower asset runoff on borrowing estimate and expects to borrow $565B in the October-December quarter.

• In Autos: TSLA was named new “Top Pick” in U.S. Autos at Morgan Stanley, replacing Ford (F), citing 40% upside to the firm’s $310 price target, more managed expectations on autos and powerful emerging drivers of firm value. Morgan warns that near-term expectations around FSD and robotaxi may be too high.

• In Solar, utilities, Coal: ARLP cut its coal sales volume forecast for the full year; said Q2 revs declined -7.6% to $593.4M from $641.8M (below consensus $629.5M). Solar space NOVA, ARRY, CSIQ, RUN, ENPH, FSLR, SEDG noticeably lower all afternoon.
• In Materials/Chemicals: fertilizer stocks retreat as high crop supplies, low prices seen, with shares of MOS, NTR, CF, IPI weak at a time when rising crop supplies have led to jumps in short interest in the underlying commodities, Bloomberg Intelligence noted. Supply is rising rapidly on the back of the price spikes to 2022’s peaks.

• In Banks: BMRC shares tumbled earlier after reporting Q2 EPS loss (-$1.36) vs. $0.28 profit y/y as provision for credit losses on loans surges to $5.2M in Q2 vs $350,000 in Q1, largely due to increased individual reserve for one non-owner occupied commercial real estate (CRE) loan totaling $16.7M.
• In Insurance: CNA shares rise early after posting q2 profit rise y/y to $317M as investment income rises 7.5% to $618, on a pre-tax basis, while Loew’s (L) shares slip following its results.
• In Crypto: strength in the crypto mining sector early, with Bitcoin rising back near $70,000, not far off its all-time highs around $73,500, boosting shares of miners, investors, blockchain names. Republican presidential candidate Donald Trump talked up bitcoin this weekend and promised friendlier regulation for the industry, lifting shares of miners, exchanges, investors, etc. including COIN, BITF, CLSK, IREN, MARA, RIOT, MSTR and others initially. However, prices reversed lower, falling below $67K Bitcoin retreated from $70K after the government prepped the sale of about $2B worth of its seized tokens. The move came less than 48 hours after Donald Trump pledged to have the government begin accumulating bitcoin.

• BMY was downgraded to Underweight from Equal Weight at Barclays saying shares have climbed 25% over the past 11 days, supported by multiple drivers: macro rotation lifting lower-multiple Pharma names, a slew of positive Pharma prints, BMY’s own Q2 beat and raise, and "favorable" IRA Eliquis messaging.
• GSK and Flagship Pioneering Inc. entered a partnership to develop as many as 10 new drugs in a deal that could pay more than $7 billion to firms supported by the venture capital biotech
• IOVA was downgraded to Neutral at Piper and cut tgt to $10 from $19 citing an apparent slow launch of the firm’s recently approved treatment for patients with advanced melanoma, Amtagvi.
• SNDX said the FDA extended the review of its drug to treat patients with leukemia by three months, to Dec. 26.
• SRPT demanded a prominent patient advocacy organization censor a video that contained pointed criticism of the company’s recently approved gene therapy for Duchenne muscular dystrophy, STAT has learned. Separately, SRPT was upgraded to Outperform from Sector Perform at RBC Capital with an unchanged tgt of $182.
• VTYX shares slide after saying they are ending internal development of its VTX958 pipeline candidate following the drug’s failure in a mid-stage study in the inflammatory bowel disorder Crohn’s disease.

• In MedTech: INSP guides prelim Q2 revs $195.9M tops consensus $186.4M; raises FY revenue forecast to $788M-$798M, vs. prior forecast $783M to $793M; IART reported slightly better Q2 results but cuts FY24 adj EPS view to $2.41-$3.57 from $3.01-$3.11 (est. $3.04) and lowers FY24 rev view to $1.609 to $1.629 from $1.672B-$1.687B.
• In Medical Devices: ABT shares drop after the co was ordered by a jury to pay almost $500 million over allegations that it hid the risk that its premature-infant formula could cause a potentially fatal bowel disease, according to reports. Shares of rival Reckitt Benckiser (RBGPF) down in sympathy amid fears of a similar outcome for their litigation. RVTY reported Q2 revenue in line, FY24 EPS guidance raised, revenue guidance tightened due to FX; Q2 adj EPS of $1.22 beat consensus of $1.12, and updated FY24 revenue guidance to $2.77-$2.79B from $2.76-$2.82B to reflect updated foreign exchange rates and raised adjusted EPS guidance to $4.70-$4.80 from previous of $4.55-$4.75.

• In Cable & Telecom: CHTR was downgraded to Underperform from Market Perform after Q2 results at Raymond James (shares rose 16% Friday on results) saying competitive pressures are expected to get worse in the near term and they see broadband sub pressure from ACP and potential Spectrum One promotion roll off and significant opex impact taken to minimize ACP, with potentially larger ACP loss in 3Q and 4Q. COMM positively preannounced Q2 sales & EBITDA and said it would engage w/ creditors to address upcoming maturities and explore ways to deleverage the balance sheet.
• In Media: DIS studio said "Deadpool & Wolverine" posted weekend sales of $205M in U.S. and Canadian ticket sales, the biggest domestic opening of the year, and the returns set a record for an R-rated film and topped the $154.2M collected by another Disney film, the animated Pixar movie "Inside Out 2," when it debuted in June. The movie opened in international markets on Wednesday and has brought in $233.3M outside of the U.S. and Canada, Disney said. AMC said it set new 2024 records for weekend attendance, between last Thursday and Sunday, and admissions revenue at its AMC Theatres in the U.S. and globally – welcomed more than 6M moviegoers from Thursday through Sunday.
• In Security Software: CRWD was removed as a top pick at Morgan Stanley, though remains Overweight rated as lower PT to $360 from $396 saying latest checks indicate -20% reduction in 2H Net New ARR (NNARR) post the outage, implying low-single digit % headwind to total ARR this year. FTNT was downgraded to Neutral from Buy at Guggenheim without a price target as the firm looks for a more opportune time to enter the shares, saying its upgrade on August 6, 2023, was "obviously too early."

• ARM was downgraded to Reduce from Hold at HSBC ahead of earnings this week saying more than a great narrative is needed to drive further re-rating as believes Arm has one of the best narratives among its tech coverage given expectations of significant content growth from rising royalties for its smartphones and future AI markets.
• Strength early as ON, LSCC, SWKS, AMD, QRVO, QCOM, ARM, MCHP, INTC, and MPWR among top chip companies expected to report earnings this week after mixed results from NXPI, TXN, SLAB last week. KeyBanc noted after results last week, analog appears to continue to bottom, as sub-sectors within industrials continue to show signs of recovery. Auto destocking continues and appears to still have room to go, with OEMs (STM, TSLA, GM, F) and tier-1s (GNTX) showing disappointing Q2 performance and outlook. Signs of a sustained cyclical recovery and improving demand trends in China. IoT inventory destocking continues to see progress, as observed by SLAB’s print.