Closing Recap

Monday, September 23, 2024

A very slow trading day on Wall Street, almost summer like as markets remain content at pushing higher without any pullback for two weeks, as the stock market rally remains broad based amid big gains this month for Consumer Discretionary (XLY), Utilities (XLU) both up over 5%, while Healthcare (XLV) and Energy (XLE) are the only sectors down for September. The SmallCap Russell 2000 snapped its 7-day win streak on Friday falling -1.07% (was the longest winning streak since March 2021) and there hasn’t been an 8-day winning streak since February 2019. No rebound today for Smallcaps today Now that the FOMC rate cut is behind us (to the tune of 50-bps), more rate cuts are widely expected this year and next, pushing interest rate sensitive sectors higher. The S&P 500 Index and Dow Jones Industrials posted another record all-time closing high on Monday, with little to no news weighing sentiment down. We do get Q2 GDP data on Thursday and PCE inflation data on Friday which could be market needle movers. Geopolitical news not impacting US stock markets as Hezbollah on Sunday intensified its attacks on Israel, launching around 115 rockets, missiles, and drones toward northern Israel, in response to Israel’s earlier attacks on Friday and Saturday. In Fed news, Federal Reserve Bank of Minneapolis President Neel Kashkari said he backs another half percentage point of interest-rate reductions this year. Other Fed officials including Raphael Bostic, and Austan Goolsbee also said they supported the central bank’s last rate cut and voiced support for more cuts in the rest of the year. With earnings season still three weeks away, and Fed members dovish, it is tough to see what can lead to a pullback in shares outside of economic data.

• Overnight, China cut its 14-day Repo Rate by 10bps, while the PBOC announced plans for a press briefing on the economy tomorrow by three top financial regulators (leading to more stimulus speculation.

• U.S. yields on the long end of the curve, those from seven-year notes to 30-year bonds, climbed to three-week highs this morning before reversing this afternoon. The 10-yr yield hit highs of 3.795% after the market opened but ended the day near lows below 3.74%. U.S. 30-year yields increased 4.4 bps to 4.116%, also hitting a three-week peak of 4.134% (ended around 4.08%), while two-year yields were up 3.4 bps at 3.605% (ended lower).

• In Beauty: ULTA was downgraded to hold from Buy at TD Cowen saying they see a lack of upside to Street estimates as comps likely remain negative in the near-term and the industry undergoes further normalization. Promo intensity, increased distribution points at Sephora & AMZN, and category normalization are likely to persist for the next year.
• In Footwear: ONON was upgraded from Underperform to Neutral at Bank America and raised tgt to $55 from $21 noting the company reported Q2 revenue +29% cFX, with retail growth accelerating at the start of Q3. This makes it one of the fastest growing brands across European sporting goods and consumer discretionary overall. NKE was placed on Negative Catalyst Watch at JP Morgan ahead of Nike’s Q125 (June-Aug) print and lowers estimates driven by a 10% gross profit dollar decline (below-Consensus 9.3%) with 10.3% top-line contraction (& GPM +10bps < Street at +25bps).
• In Autos: GM was downgraded to Market Perform from Outperform at Bernstein with a $53 price target noting shares have appreciated 85% since last November, but the firm’s data now signals rising earnings headwinds. TSLA extends recent gains (shares +15% this month) ahead of its Robotaxi event on 10/10. STLA CFO said today the company is seeking to decrease its North American inventories by 100,000 vehicles by the start of next year and has already cut about 45,000 units in July and August.

• In Refiners, TD Cowen said they remain cautious and reduce 2H24 EBITDA to 25% below consensus and maintain FY25 EBITDA 20% below as the firm sees risk cracks continue to fall into YE24 with US product inventories trending above historicals. The group looks overvalued on 24-25 multiples, and TDCowen sees the largest near-term downside to beta levered names including VLO, PBF, and DK could hold up best near-term, while MPC remains top pick on peer-leading distribution. Lowered tgt prices on CLMT, DINO, DK, MPC, PARR, PBF, PSX, and VLO.

• In Financial Services: SPGI downgraded to Market Perform from Outperform and MCO downgraded to Underperform from Market Perform at Raymond James in credit rating agencies saying see risks to their estimates and valuation multiples.
• Bitcoin prices +1.25% to $63,600, hitting one-month highs and sustaining its rally after the Federal Reserve’s super-sized rate cut last week, while the Yen extended its decline in markets thinned by a Japanese holiday. Bitcoin miners: CORZ was initiated at Buy and $16 tgt by Canaccord noting the Coreweave deal is a long-term revenue, attractive margins, low capex requirements: a formula for multiple expansion. Bitcoin miner BITF said it had entered into a settlement agreement with rival and top shareholder RIOT, under which Amy Freedman was appointed to its board. The two companies have been locked in a dispute since April, when Riot made an unsolicited $950M to buy them.

• AZN said its experimental precision drug developed with Japan’s Daiichi Sankyo did not significantly improve overall survival for patients with a type of breast cancer in a late-stage trial; the overall survival in the TROPION-Breast01 Phase III trial of datopotamab deruxtecan (Dato-DXd), did not achieve statistical significance.
• BDTX announces initial phase 2 data demonstrating robust antitumor activity of BDTX-1535 in Pts with recurrent EGFRm NSCLC who present with a broad spectrum of classical, non-classical & c797s resistance mutations.
• BHVN said it saw positive topline results from a study demonstrating the efficacy of troriluzole in patients with spinocerebellar ataxia; said the study achieved its primary endpoint, showing statistically significant improvements at years 1 and 2.
• IDYA reported positive interim Phase 2 clinical trial data for darovasertib in neoadjuvant uveal melanoma, or UM, as well as a successful Type C meeting with the FDA on registrational trial design for regulatory approval in neoadjuvant uveal melanoma.
• MRNS was upgraded from Perform to Outperform at Oppenheimer saying now views the risk/reward for shares as attractive ahead of Ph3 TrustTSC topline results expected in early-Q424.
• REGN falls after judge denies motion for injunction in a patent case with AMGN.
• RVNC shares fell after saying a dispute with a key customer is delaying its deal to be acquired by Crown Laboratories.
• VTYX said it would receive a $27 million from SNY; said it agreed to grant Sanofi an exclusive right of first negotiation related to the company’s VTX3232 drug candidate for neuroinflammatory and neurodegenerative conditions.

• GE and MSFT have partnered to bring artificial-intelligence tools to some 52,000 workers at the maker of aircraft engines. It’s an early example of how the latest AI technology has been transforming the workplace.
• PLTR was downgraded to Market Perform from Outperform saying while they remain enthusiastic about Palantir’s longer term positioning in AI, the stock’s recent strong performance and rich valuation leave little room for error.

• In Uranium/Metals: UEC said it agreed to the $175 million acquisition of RIO’s assets in Wyoming, U.S., which include its fully licensed Sweetwater Plant and a portfolio of uranium mining projects
• In Heavy Machinery: Citigroup said TEX is starting to look cheap after guidance cut, while continues to favor OSK, though the firm lowered its estimates for both for 2024-2026, primarily due to lower assumptions for access equipment sales and margins. Citi said it continues to favor OSK (Buy) over TEX (Neutral) as it sees a robust outlook for OSK’s Vocational and Defense segments more than offsetting Access choppiness over the next few years.

• WIX upgraded to Overweight from Neutral with a price target of $200, up from $184.
• PINS initiated with a Buy Rating and a $43 Target Price at Deutsche Bank saying views Pinterest as an under-monetized, scaled, increasingly personalized "digital catalog" that attracts an affluent, high purchase-intent user base.

• MSFT was downgraded to Neutral from Buy at DA Davidson but maintain $475 PT saying believes competition has largely caught up with Microsoft on the AI front, which reduces the justification for the current premium valuation. Also notes, shares have increased 92% since DADA’s January 2023 initiation, compared to 49% for the S&P500.

• Samsung (SSNLF) and TSM have visited the United Arab Emirates to explore building huge factory complexes, according to people familiar with the matter, The Wall Street Journal reported on Sunday saying the projects could mean several factories costing over $100 billion in total, according to the report.
• Truist downgraded the semiconductor industry to Neutral from Constructive saying industry revenue growth has peaked and is entering a slow fade, while stock investment returns have been robust cycle-to-date, making significant additional returns from here more challenging. The firm downgraded shares of ADI, MCHP in conjunction with call saying they recognize fundamentals for both appear to have recently bottomed, and it expects a significant recovery in 2025, but says the stock is also trading at 26-times estimates 2025 earnings. This represents a historical peak for the company.