Mid-Morning Look: December 21, 2023
Mid-Morning Look
Thursday, December 21, 2023
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
226.58 |
0.61% |
37,307 |
|||
S&P 500 |
34.11 |
0.73% |
4,731 |
|||
Nasdaq |
121.19 |
0.82% |
14,900, |
|||
Russell 2000 |
21.96 |
1.11% |
2,004 |
|||
U.S. stocks open higher as all eleven S&P sectors start in positive territory following the unusual late day swoon for major averages Wednesday, the biggest one-day decline since late September for the S&P. Complacency, options related action was among explanations provided for the sharp pullback, but stocks open higher today in another “buy the dip” moment. Data this morning U.S. third-quarter GDP growth trimmed to 4.9% (from 5.2%), with consumer spending not quite as strong, helping keep the “soft landing” narrative for the economy in place, as PCE data points showed improved inflation results. The US dollar index (DXY) extended losses to hit a 3-day low after the data, falling below 102, while Treasury yields steady with 10-yr at 3.86%. WTI crude prices slid after Angola said it has decided to leave OPEC, saying its membership was not serving the country’s interests. Semiconductors strong out of the gate behind MU earnings/guidance last night boosted the group, while NKE active ahead of earnings tonight after the close in retail.
Economic Data
· Jobless Claims climbed to 205K from 203k the prior week and vs. consensus 215; the 4-week moving average fell to 212,000 from 213,500 prior week; continued claims fell to 1.865M from 1.866M prior week; the US insured unemployment rate unchanged at 1.3%.
· The Philadelphia Fed factory index for December fell -10.5 vs. consensus est. -3.0 and prior (-5.9); Business Conditions rise +12.1 vs. -2.1 prior, Employment dips -1.70 vs. 0.8 prior, New Orders drops -25.6 vs. 1.3 prior and Prices paid rises +25.10 vs. 14.8 prior.
Macro |
Up/Down |
Last |
|
||
WTI Crude |
-0.55 |
73.55 |
|||
Brent |
-0.70 |
79.00 |
|||
Gold |
4.80 |
2,052.50 |
|||
EUR/USD |
0.0046 |
1.0985 |
|||
JPY/USD |
-1.20 |
142.37 |
|||
10-Year Note |
-0.008 |
3.87% |
|||
Sector Movers Today
· In Restaurants: CAKE and CAVA upgraded to Outperform at Wedbush while the firm downgraded CMG and WEN to Neutral, add BROS to Wedbush Best Ideas List (BIL) and maintain DPZ saying small cap restaurant valuation discounts relative to historical multiples attractive in a declining interest rate environment. As the average check’s contribution to SSS growth declines, the fight for transactions could become increasingly intense, particularly within QSR. Expect continued margin normalization in ’24, but QSR leverage seems optimistic.
· In Materials: UUUU said it will begin uranium production at three new sites in Arizona and prepare others for near-term production in response to strengthening uranium market conditions; said it expects to sell 200,000 pounds of uranium into its existing long-term contracts in 2024, mostly seen occurring in the first quarter. Rare earth names MP, UUUU rise after China bans export of rare earth processing tech over national security.
· In MedTech: GKOS was upgraded to Overweight from Neutral at JP Morgan and raise tgt to $91 from $66 noting in 2023, anticipation for iDose and a string of positive reimbursement wins helped shares stay incredibly resilient against GLP-1 fears that negatively impacted the rest of the sector. MMSI upgraded to Buy from Hold at Canaccord and raise tgt to $100 from $76 as believes that Merit is entering 2024 in a strong position and has potential upside to both revenue and EPS estimates. NVRO was downgraded to Hold from Buy at Canaccord as part of 2024 kick-off piece and cut tgt to $23 from $30 citing increased competition and weaker macro. In short, Canaccord had upgraded NVRO in its 2023 kick-off note, and, frankly, it was wrong as the core SCS market did not recover as expected.
Stock GAINERS
· CCL +3%; after results beat expectations and outlook was upbeat, as demand keeps strengthening.
· KMX +7%; mixed Q3 results as EPS of $0.52 tops the $0.44 estimate while revs $6.1B missed the $6.33B estimate; Used vehicle sales fell -7.2% y/y to $4.83B vs. est. $4.97B; (shares of CVNA jumped early in sympathy with the report).
· MGTX +31%; announces asset purchase agreement involving its AAV-RPGR Collaboration for up to $415M; to receive $130 million in upfront and near-term milestone payments as part of the agreement.
· SPOT +2%; was upgraded to Buy from Hold at Pivotal and raise tgt to $265 from $170 as forecasts higher medium- to long-term EBITDA and free cash flow given the company’s renewed focus on financial discipline and sees continued strong results.
Stock LAGGARDS
· PAYX -5%; reported mostly in-line Q2 results ($1.08/$1.26B vs. est. $1.07/$1.25B) while boosted the low end of its prior growth outlook for earnings to 10%-11% from prior 9%-11% (ADP -1% in sympathy).
· WBD -4%; Axios reported late Wednesday that WBD CEO David Zaslav met with PARA CEO Bob Bakish in New York City to discuss a possible merger; multiple sources told Axios. Zaslav also has spoken to Shari Redstone, who owns National Amusements, Paramount’s parent company, about a deal, according to the report http://tinyurl.com/27463yvd
Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.