Closing Recap

Monday, May 20, 2024

U.S. stocks stayed strong on Monday, taking a little dip mid-day from all-time highs following a few Fed speaker comments on rate outlooks, but overall extended gains after major averages came into Monday with a 4-week winning streak. Today’s market leader was Technology (XLK +1.2%), while Financials (XLF -1.3%), Discretionary (XLY -0.74%), and Energy (XLE -0.6%) fell the most. Commodity prices have also been rolling higher, with precious metal miners and industrial metal producers surging behind record highs for gold and copper prices. The drag in financials was led by Dow industrial component JPM, falling over 4% after good guidance, but CEO Jamie Dimon suggested he may retire early. Technology was led by semiconductors with the Philly semi-index (SOX +2%) leading ahead of “AI” poster child NVDA earnings this Wednesday, while MSFT revealed highlights at its product event. The S&P 500, and Nasdaq posted fresh intraday record highs (Dow did as well but sunk midday to close back below 40K) with no economic data today and news flow generally quiet. Crypto and Bitcoin was another asset class on the rise, with Bitcoin topping $69K in a late day spike/push. So, can the market continue to have legs higher given this last push taking the S&P 500, Dow, and Nasdaq to new all-time highs? Well, @RyanDetrick tweeted earlier “The Dow has been higher 1-, 3-, 6-, and 12-months later every single time after previous 10k milestones. One year after 10k? Up 10.2%. One year after 20k? Up 31.5%. One year after 30k? Up 19.1%.”

One of the more interesting stories this morning is Mike Wilson, one of Wall Street’s most prominent bears throwing in the towel, turning positive on the outlook for US stocks. Morgan Stanley’s Michael Wilson now sees the S&P 500 rising 2% by June 2025, a major about turn from his view that the benchmark will tumble 15% by December. Wilson finally gave in and boosted his target for the S&P 500 to 5,400 points from 4,500. That catapults his forecast from among the lowest on Wall Street to one that projects a fresh record for the index. Also, Deutsche Bank raised its 2024 year-end S&P 500 target to 5,500 from 5,100 points earlier, the highest among major brokerages. Lots of FOMO, and little to no market fear has major averages at or near all-time highs for most major indexes.

• Federal Reserve Vice Chair Philip Jefferson said today in a speech given before the Mortgage Bankers Association conference in New York that "it is too early to tell whether the recent slowdown in the disinflationary process will be long lasting." "The better reading for April is encouraging."
• Federal Reserve Bank of Cleveland President Loretta Mester said: can raise rates if appropriate, but not base case; said there are reasons to believe neutral rate higher than used to be; she said doesn’t think inflation will come down quickly and noted the latest CPI report was welcome but still too high; wouldn’t think three rate cuts in ’24 still appropriate.

• Copper prices jump again as benchmark three-month copper on the London Metal Exchange rose 2% at $10,897 a metric ton, after peaking at $11,104.5, a gain of 30% since the start of the year.
• Bitcoin prices moved higher this afternoon by 2.5%, topping $68,650, boosting other crypto prices and stocks that tend to move on prices such as COIN, MSTR, MARA, CLSK, RIOT and others.
• Brent Crude futures settle at $83.71/bbl, down 27 cents, 0.32%, while U.S. WTI crude oil futures settle at $79.80/bbl, down 26 cents, 0.32%, reversing earlier gains in oil prices. Natural gas futures settle +4.8% at $2.751/mmBtu (4-month highs), extend their three-weeklong rally with early season heat in Texas driving demand.

• In Retail: TGT reduced prices on about 1,500 items, with thousands more price cuts planned to take effect over the course of the summer (ahead of earnings Wednesday); for GIL, Glass Lewis opposes Gildan Activewear board. ULTA shares slipped early after Piper lowers price tgt saying they remain cautious on ULTA’s near term results given intensified competitive pressures and broader category normalization (but still views as attractive Buy); LULU 52-week lows.

• In Autos and Delivery: LI reported weaker-than-expected Q1 EPS and guided low on the current quarter, as the China electric vehicle maker struggles with increased competition; CART shares dropped after the co CFO Reuter said is not looking to exceed its forecast range for gross transaction value (GTV), a key metric showing value of products sold based on prices shown on Instacart.

• In Materials and Industrials: JCI shares rose after Bloomberg reported Activist investor Elliott Investment Management has built a position worth over $1 billion in Johnson Controls International Plc. https://tinyurl.com/4sfr3ucv ; copper prices FCX, SCCO, and others pushed higher as copper hits record highs.
• In Paper Products (PKG, WRK, GPK, GEF) RBC Capital noted according to Random Lengths, the Framing Lumber Composite increased $4 w/w to $378 (RBC Elements estimate: $379) and the OSB Composite increased $12 w/w to $464 (RBC Elements estimate: $449). Truist noted on Friday, Fastmarkets RISI released its weekly Pulp & Paper Week (PPW) publication that included May containerboard and boxboard pricing and relevant commentary. Pricing for all grades of domestic linerboard remained flat, while URB increased $30/ ton and SBS folding carton declined $20/ton.
• In Transports: in transport services, OSG to be acquired by privately held Saltchuk Resources for $950M, with an equity value of $653M as Saltchuk will acquire all outstanding shares of OSG it does not already own for $8.50 per share in cash, a 23.9% premium to OSG stock’s last close; in airlines, RYAAY said ticket prices in the peak European travel season may be flat to modestly higher, with the carrier having to discount fares in the three months through June to spur bookings.

• DYN reported clinical updates on two drugs being developed to treat myotonic dystrophy type 1 and Duchenne muscular dystrophy, respectively.
• ESPR and Otsuka Pharmaceuticals said the primary endpoint was achieved in the Phase 3 trial in Japan for bempedoic acid as a potential treatment for patients with hypercholesterolemia.
• GSK is facing a whistleblower lawsuit according to a Bloomberg report that could potentially cost it billions of dollars from the laboratory that revealed the presence of a probable carcinogen in Zantac.
• JAGX announced a 1-for-60 reverse stock split on Friday.
• MNOV said it receives notice of allowance for new patent covering mn-166 (Ibudilast) for the prevention of metastasis of eye cancer.
• MRNA shares rose as much as +7% topping $142 today to best levels since April 2023 – recall Moderna said Friday that the European Patent Office has upheld the validity of one of its key patents, a victory in a continuing dispute with Pfizer and BioNTech over rival COVID-19 vaccines (shares up 8 of last 9 days).
• PTCT announces European Commission has decided not to adopt the CHMP’s negative opinion on the annual renewal of the conditional marketing authorization of Translarna and has returned the opinion to the CHMP for re-evaluation; PTCT paused its 2024 revenue guidance after the EC decided against adopting a committee’s negative opinion.

• HIMS shares jumped after the telehealth company said to offer compounded GLP-1 weight loss injections, in addition to weight management oral medication kits. Pricing starts at $79 per month for oral medication kits and at $199 per month for compounded GLP-1 injections, which includes unlimited medical consultations with a licensed provider.
• UHS upgraded to a Buy and raise PT to $226 at UBS in hospitals saying they believe UHS’ acute and behavioral segments are both well positioned to deliver favorable growth.

• MSFT kicked off its product event today: plans to announce several pieces of hardware and software related to consumer devices on Monday at an event at its Redmond, Washington, campus. MSFT is expected to reveal a new version of its Surface Pro tablet and Surface Laptop that feature QCOM chips based on ARM architecture. – Reuters
• CYBR said it will acquire cybersecurity firm Venafi from equity firm Thoma Bravo in a deal valued at around $1.54B, paying in a combination of $1 billion in cash and around $540 million in stock as expects the deal to close in 2H’24.
• DELL tgt raised from $125 to $155 at JP Morgan and maintains Overweight and raising ests primarily on expectations of stronger AI revenues through the year helped by improved GPU availability, and expect the company to raise the full-year guide following a FQ1 beat, but the premium trading multiple even on its raised EPS est.
• JBL said Kenneth Wilson will no longer serve as CEO or on the company’s board of directors and said Gregory Hebard has been appointed Chief Financial Officer; reiterates FY 2024 guidance; shares opened lower but quickly reversed and traded higher on day.
• PI shares jumped after Goldman Sachs downgraded from Buy to Neutral saying while their long-term constructive view of the RAIN RFID market as well as Impinj’s competitive position remain unchanged, it downgrades the stock from Buy to Neutral given recent outperformance vis-a-vis its coverage universe and marginal downside potential.
• Thoma Bravo is exploring a sale of Instructure (INST), Reuters reported, citing people familiar with the matter. Thoma Bravo, which holds an 83% stake in the company, has tapped JPM to gauge the interest of potential buyers that include other buyout firms – Reuters. https://tinyurl.com/224x6m45
• In Internet/Online Services: WIX shares rose after raises FY24 revenue view to $1.74B-$1.76B from $1.73B-$1.76B (est. $1.75B); now expect non-GAAP operating expenses to be 50-51% of revenue for the full year, down slightly from our previous expectation of 51-52% of revenue. GLBE shares jumped on results after better Q1 results and raises FY24 revenue view to $733M-$773M from $731M-$771M (vs. consensus $749.71M).

• MU upgraded to Equal Weight from Underweight at Morgan Stanley and raise tgt to $130 from $98 saying they overestimated how much significant 2023 losses would weigh on the stock’s valuation and underestimated both the economic and narrative elements of artificial intelligence memory.
• NVDA shares approaching back near all-time highs ahead of earnings this week (5/22), with many Wall Street analysts staying positive ahead of numbers.