Closing Recap

Tuesday, November 26, 2024

U.S. stocks were mixed on Tuesday, as the S&P 500 and Nasdaq outperformed, grinding slightly higher all afternoon as large cap mega tech stocks helped support them. The Russell 2000 snapped its 6-day win streak, while the Dow advanced for a 5^th straight day. Still, despite nine of eleven S&P sectors trading in positive territory, NYSE market breadth was a little less than 2:1 decliners leading advancers showing only a handful of large cap names kept markets higher. Among the biggest stories today was President-elect Donald Trump pledged to issue big tariffs on the country’s biggest trading partners. Trump said he would impose a 25% tariff on imports from Canada and Mexico and outlined “an additional 10% tariff, above any additional tariffs” on imports from China. The comments weighed on the Mexican peso which dropped to 2-year lows while the greenback hit over 4-year highs vs. the Canadian dollar. The headlines also impacted currencies and specific sectors such as auto stocks are falling, and steel makers are also active.  Retailers were active on earnings (BBY, DKS, ANF, KSS) along with obesity stocks (LLY, NVO on AMGN news) while markets braced for a busy night of earnings in the tech sector (DELL, ADSK, CRWD, HPQ, NTNX, PD, WDAY). Lastly late day, President Biden said Israel and Hezbollah agreed to cease-fire deal effective Wednesday 4AM local time.

Next up a glut of economic data reports tomorrow morning (crammed in ahead of Thanksgiving Day holiday Thursday) highlighted by PCE and GDP data. At 8:30 AM tomorrow, Q3 2nd estimate GDP data expected with est. +2.8% along with personal consumption, GDP price deflator, weekly jobless claims and trade balance for October. Then at 10:00 AM, the October PCE and Core PCE inflation data as well as Pending home sales. For headline Oct PCE est. for +0.2% m/m and +2.3% y/y with the core PCE ests for +0.3% m/m and +2.8% y/y

According to November FOMC meeting, minutes showed Federal Reserve officials appeared divided at their meeting earlier this month over how much farther they may need to cut interest rates, but as a group agreed this was a moment to avoid giving much concrete guidance about how U.S. monetary policy is likely to evolve in the weeks ahead. “Participants noted that monetary policy decisions were not on a pre-set course and were conditional on the evolution of the economy and the implications for the economic outlook … They stressed that it would be important for the Committee to make this clear as it adjusted its policy stance,” said minutes of the Nov. 6-7 meeting. The Fed cut its benchmark policy rate by a quarter of a percentage point to the 4.50%-4.75% range at the meeting three weeks ago, a session that followed Republican candidate Donald Trump’s victory in the Nov. 5 U.S. presidential election.

• U.S. S&P CoreLogic 20-City house price index dipped -0.4% to 333.6 in September after falling -0.3% to 334.8 (was 334.7) in August. It is the weakest since May. Also, these are the first back-to-back monthly declines since December 2023 – January 2024. July’s 335.8 is the record peak. The 12-month clip slowed to 4.6% y/y from 5.2% y/y and was as high as 7.5% y/y early in February and March and a record 21.3% y/y from April 2022.
• Richmond Fed composite manufacturing index -14 in Nov vs -14 in October and Richmond Fed manufacturing shipments index -12 in Nov vs -8 in October.
• US Oct single-family home sales -17.3% vs Sept +7.0% (prev +4.1%); Oct home sales in the Northeast jumped +53.3%, Midwest +1.4%, South fell -27.7%, and West -9.0%. Oct new home supply 9.5 months’ worth at current pace vs Sept 7.7 months; homes for sale at end of Oct 0.481M unit’s vs Sept 0.471M units.
• November consumer confidence index 111.7 (consensus 111.3) vs October revised 2.1 (previous 108.7); The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased by 4.8 points to 140.9. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— ticked up 0.4 points to 92.3.

• Treasury yields rebounded after tumbling Monday on Donald Trump Treasury Secretary selection, as the 10-yr rose over 3bps to 4.31% after U.S. President-elect Donald Trump said he would impose tariffs on products from Canada, Mexico and China, sparking volatility as investors braced for trade disputes. The announcement came after a sharp rally in bonds triggered by Trump’s pick of hedge fund manager Scott Bessent as U.S. Treasury Secretary. Also, the U.S. Treasury sold $70B in 5-year notes at high yield 4.197%, with a bid-to-cover ratio 2.43 as primary dealers take 11.3% of U.S. 5-year notes sale, direct 24.58% and indirect 64.12%.

• Apparel retailer ANF reported Q3 results that were better than expected (EPS $2.50/$1.2B sales vs. est. $2.22/$1.18B) and raised FY24 revenue growth view to 14%-15% from 12%-13% (note stock +75% YTD).
• Electronic retailer BBY posted a Q4 top and bottom line miss and cut its annual comparable sales to decline between 2.5% and 3.5%, vs. prior view for a decline between 1.5% and 3%; lowered the top end of year EPS view and cut its FY24 revenue view to $41.1B-$41.5B from $41.3B-$41.9B.
• In Sporting Goods: DKS beat Q3 sales and profit estimates while also raised its FY24 EPS view to $13.65-$13.95 from $13.55-$13.90 (est. $13.88) as well as rev boost to $13.2B-$13.3B from $13.1B-$13.2B (est. $13.25B) and comp sales boost to range of 3.6% to 4.2%, up from 2.5% to 3.5% previously.
• In Luxury retail: CPRI was upgraded from Neutral to Buy at Guggenheim w $30 tgt given its depressed valuation (versus its historical earnings) and its belief this management team can take steps to increase shareholder value.
• In Department Stores: KSS shares tumbled as CEO Tom Kingsbury said to step down on January 15, 2025, and the department store trimmed its full-year sales outlook (for 3^rd time this year) to range of 7% to 8%, compared to its prior forecast of a drop between 4% and 6% citing weakness in its apparel and footwear businesses. Former WMT executive Ashley Buchanan will become CEO, as the retailer looks for a turnaround
• In Off-price retail: BURL shares slipped after n-line Q3 EPS of $1.55 on light revs ($2.53B vs. est. $2.56B) and guided FY24 adjusted EPS $7.76-$7.96, vs. consensus $7.92 saying warm weather hurt its coat sales and it said it will fall short Wall Street analyst estimates for the coming quarter (guided Q4 EPS $3.55-$3.75 vs est. $3.78).
• In Food: SJM raises annual profit forecast and beats Q2 results estimates on resilient demand for their packaged and frozen foods as well as price hikes on their coffee products; now sees FY25 EPS $9.70-$10.10, up from $9.60 to $10.00 saying price hikes helped overall quarterly margins rise to 39% from 37.4% a year earlier.

• In Boating/RV: BC was downgraded from Buy to Neutral at B Riley and cut PT to $88 from $95 saying while they remain positive on the company’s market share leading positioning within the recreational marine industry, powerful role as the “arms dealer” to both OEMs and consumers, they believe this demand pivot may take longer to materialize—especially among the lower-income, payment buyers.
• In Lodging/Time Share: VAC PT to $112 from $102, WH to $107 from $92, TNL to $66 from $59 and GLPI to $57.50 from $53.25 and Reiterate Buy in lodging/time share at Stifel and lowering estimates due to higher share price resulting in a higher share post share repurchases.

• In Energy: Sector was weak on Monday on cease fire reports in Middle East, but not doing much early today. In research, CVX was put on a "90-day positive catalyst watch" at Citigroup after the firm upgraded shares to Buy with a $185 price target saying major oil companies do not usually offer much operational leverage to exploration, but Chevron’s upcoming Namibia drilling could be different.
• In Utilities: CEG is asking U.S. regulators to make new rules for connecting customers directly to power plants, saying insufficient guidance has let electric utilities unfairly thwart attempts to site, or Co-locate, data centers at its nuclear facilities. In a complaint filed against grid operator PJM Interconnection with FERC on Friday, Constellation asked for a fast-tracked review to set rules that would govern connecting fully isolated Co-located customers. NRG was upgraded to Buy at Jefferies with more confidence in the cross-selling thesis with upside to ests & valuation.
• In Chemicals: EMN was upgraded to Overweight at Wells Fargo and PT raised to $125 from $110 saying EMN can continue to generate steady EPS growth in this difficult macro, with attractive mid-cycle EBITDA in a recovery. SMG said their CFO is departing at the end of the year amid a broader shakeup in leadership, including the addition of the CEO’s son to the executive team.
• In Metals & Mining (AA, CENX, FCX, TECK): The WSJ reported that tariffs would likely drive up the price of steel and aluminum in the U.S., because Canada and Mexico are major suppliers of those metals to the country. Canada is the largest source of imported aluminum to the U.S., due to its proximity to manufacturers and an abundance of low-cost electricity needed to operate aluminum smelters.
• In Transports/Industrials: US Senate panel criticizes rising airline seat fees, will call execs to testify (airlines were volatile DAL, UAL, AAL, JBLU). In Industrials: school bus manufacturer BLBD shares fall as Q4 revenue of $350M was 7% ahead of expectations (+17% volume, flat price) and EBITDA of $41.3M (11.8% margin) was well ahead of consensus ($36M).

• In Crypto: shares of cryptocurrency and blockchain-related companies slipped as Bitcoin prices declined to levels below $91,6000 after hovering close to the $100,000 mark for about a week. Prices have soared since the election with investors hoping for an easier regulatory environment under Donald Trump. Cryptocurrency exchange COIN fell as well as miners MARA, RIOT, CLSK, HUT and others along with Bitcoin investor MSTR. BTC achieved another new all-time high of $99,850 on Friday 11/22) before retracing back to the low-$90k range today.
• In Insurance: EG was downgraded to Hold from Buy on valuation at Jefferies noting mgmt pointed to possible Q4 reserve strengthening related to US Casualty in the Insurance segment. Less informative reserve disclosures limit ability to quantify potential strengthening, so the firm looks to other constraints to inform its view.

• ALEC shares tumbled after saying its experimental drug did not meet the main goal of slowing Alzheimer’s progression in a mid-stage trial and that the co will stop the long-term extension study of the drug. ALEC also plans to cut 17% of the workforce. ALEC partner was ABBV on the drug. Shares of VIGL shares fell in reaction from ALEC as VIGL too is working on TREM2-based approaches for treating neurodegenerative/NDG diseases (including AD).
• ARWR announced a global license and collaboration agreement with SRPT for multiple clinical and preclinical programs. Upon closing, Arrowhead will receive $825M immediately, including an upfront payment and an equity investment at a 35% premium, and will receive an additional $250M paid over five years. ARWR has potential to receive an additional $300M in near-term clinical trial enrollment-related milestone payments.
• AXSM announces AXS-12 achieves primary endpoint in ENCORE Long-Term Phase 3 Trial in Narcolepsy; AXS-12 statistically significantly reduced the frequency of cataplexy attacks compared to placebo.
• PSTX said Roche (RHHBY) will acquire them in a cash deal worth up to $1.5B, with Roche paying $9 per share in cash and shareholders will also receive a non-tradeable contingent value right for up to $4 per share based on achievements.
• SLNO said the FDA has extended review of its experimental drug to treat Prader–Willi syndrome; FDA will now give its decision by March 27, 2025, compared with its previous action date of Dec. 27 this year.

• EXAS shares rose after the company’s colon cancer screening test, Cologuard Plus, receives 16% higher pricing for government-backed Medicare plans for those aged 65 years and older, compared with its original version.

• INTC said the Biden administration announced the Commerce Department has awarded $7.865 billion to the semiconductor company via direct funding from the Chips and Science Act. The funds will be used by Intel to help fund new chip plants in four states.
• SMTC shares jumped as reported a beat and strong guide on data center strength which was primarily driven by Fiber products; FQ325 (Oct) beat (+1.6% revs) and strong FQ425 (Jan) outlook, with a $250.0M revenue guidance midpoint (+5.6% q/q) coming in +8.7% higher.