Mid-Morning Look

Monday, December 02, 2024

U.S. stocks are mixed as the S&P 500 made another intraday record highs while the Nasdaq topped its November 11^th all-time high (of 19,366.07) as mega cap tech names (AAPL, AMZN, GOOGL, META, MSFT, NVDA, NFLX, TSLA) and semis doing the heavy lifting, though only three of the eleven S&P sectors are in the green (all tech related) while the other eight sectors are all negative, led by weakness in energy, utilities and REITs. Retailers are mixed following Black Friday retail figures and ahead of Cyber Monday today. Consumers spent $10.8B on Black Friday, a 10.2% jump from the previous year, according to data from Adobe. In total, $107.3B was spent in November and the 2024 holiday season is on track to be a record. Economic data strong this morning with ISM Manufacturing beating estimates ahead of a busy week of jobs data (JOLTs, ADP and Nonfarm payroll). Donald Trump threatened 100% tariff on the BRIC bloc of nations if they act to undermine U.S. dollar this weekend while in France, the far-right National Rally party of Marine Le Pen will back a motion to topple the French government in a vote of no confidence. The U.S. dollar extends gains vs yen after S&P Global Manufacturing data, last up 0.2% at 150.01 yen while the euro fell further, dropping to around lows of 1.0475 vs. the greenback. Treasury yields also edge higher as gold prices fall and Bitcoin is pulling back to around $86,500. Semiconductors up nearly 2% with the SOX back above 5,000 and Consumer Discretionary (XLY) hitting all-time highs.

• ISM U.S. manufacturing activity index 48.4 in November above consensus 47.5 and vs 46.5 in October; the prices paid index 50.3 in November vs 54.8 in October; new orders index 50.4 in November vs 47.1 in October and the employment index 48.1 in November vs 44.4 in October.
• Oct construction spending +0.4% above consensus +0.2% to $2.174 trln, vs Sept +0.1% (prev +0.1%); Us Oct private construction spending +0.7%, public spending -0.5%.

• In Security Software: NET and OKTA both upgraded at Morgan Stanley and downgraded TENB and SentinelOne (S) saying they are slightly more cautious on upside in security stocks given near-term pricing pressure, risk to U.S. public sector budgets and valuation premium vs broader software Network Security and Data Protection rising in priority level over NTM, while Endpoint Security downticked in MSCO’s latest VAR survey. Still favor premier consolidators, PANW and CRWDlonger term. ZS reports earnings tonight.
• In Containerboard/Paper sector: Truist noted Fastmarkets RISI reported that Pratt Industries (private) announced price increases of $70/ton for linerboard and $90/ton for medium effective January 6, 2025. Meanwhile, Cascades announced $30/ton linerboard and $30/ton medium price increases effective January 1, 2025. Truist said believes these announcements to be positive for PKG, IP and GEF.

• INTC +2%; as announces CEO Pat Gelsinger’s retirement; David Zinsner and Michelle Johnston Holthaus named interim Co-CEOs, Frank Yeary appointed Interim Executive Chair, Board Launches search Permanent Successor.
• NBIS +16%; shares jumped after raising $700M in private placement from investors including NVDA; Nebius to issue 33.33M Class A shares at a price per share of $21.00/share.
• NVCR +30%; after saying its cancer therapy helped extend the lives of patients with a form of advanced pancreatic cancer when combined with chemotherapy in a late-stage study. Treatment and chemotherapy helped patients live for an average of 16.20 months, compared to 14.16 months for those treated with only chemo.
• PTCT +14%; entered a licensing deal with a unit of NVS for up to $2.9 billion for its experimental drug PTC518 being developed for Huntington’s Disease Program; PTCT to receive $1B in cash at closing, eligible to receive up to $1.9B in milestone payments.
• SMCI +14%; after saying no restatement of reported financials expected; said special committee didn’t find evidence of pattern or practice of co shipping incomplete products at or near qtr ends to recognize revs.
• TNDM +6%; upgraded to Overweight from EW at Morgan Stanley (PT at $45), as thinks valuation has compressed too far (sub-2x sales) and it sees upside risk from type-2 expansion in 2025 (TAM roughly grows +100%).
• TSLA +2%; Stifel reiterates Buy and raises target price to $411 from $287 at Stifel as believes buying shares requires vision and patience, and the willingness to accept volatility and notes TSLA is clearly not just an automaker. Separately, TSLA was upgraded to Buy at Roth MKM and raised tgt to $380 saying catalysts should drive valuation.

• NU -5%; downgraded to Sell from Neutral at Citigroup noting NU has shown an impressive capacity to expand its operations in Brazil rapidly, while maintaining even faster net income growth. While acknowledging NU’s strong execution, sees its strong YTD share price performance as a good opportunity to take profits.
• PCG -5%; launches $1.2B common stock and $1.2B preferred stock offerings.
• STLA -8%; after saying CEO Carlos Tavares resigned Sunday, after nearly four years of leading the company saying the board had accepted the resignation, effective immediately.
• UPST -11%; was downgraded to Underweight from Neutral at JP Morgan; is generally cautious on fintech lenders at current levels and think investors will find a more attractive entry point following the CQ4 earnings cycle.