Mid-Morning Look

Friday, January 03, 2025

U.S. stocks are strong out of the gate as the S&P 500 and Nasdaq look to snap their 5-day losing streaks, as market breadth shows advancers leading decliners by more than 2:1 margin, with all 11 S&P sectors higher, boosted again by Technology (XLK), as well as Utilities (XLU) and Energy (XLE). Consumer Staples (XLP) lagged amid weakness in alcoholic beverage makers (BUD, TAP, STZ, SAM) after the U.S. Surgeon General said alcoholic drinks should carry a label warning consumers about their cancer risks. The U.S. dollar pares recent gains, pulling back from 2-yea highs but Treasury yields bounced following a better ISM Manufacturing reading that was highest in 9-months (along with a bounce in prices paid inflation). With the start of earnings season two weeks away, attention next week focuses on the FOMC Minutes from the December meeting as well as the Consumer Electronics Show (CES) next week in Vegas with several semis, autos, AI, phone names center stage. Investors also keep a close eye on upcoming economic data and gear up for potential policy shifts under the incoming Trump administration in a few weeks.

• In Autos: RIVN said it delivered 14,183 vehicles in Q4, beating estimates of 13,472, and produced 12,727 vehicles in Q4, compared with estimates of 11,398 vehicles. STLA and Volkswagen (VWAGY) shares fell as some EV models that had previously received US tax credits for electric vehicles were excluded under tougher rules. TSLA said its China sales rose 8.8% to a record high of more than 657,000 cars in 2024; Tesla’s sales in China also increased 12.8% in December from a month earlier to a record high of 83,000 units.
• In Casino/Gaming: Barclays out with iGaming December tracking data saying growth in app activity remained strong y/y in December as BetMGM/DKNG saw share gains m/m, seemingly at the expense of CZR/FanDuel while solid content slate growth across operators, led by PENN. LVS (tgt to $69 from $60), BYD (tgt to $92 from $73) were both upgraded to Buy from Hold at Jefferies as believes growth from capital projects and b/s strength will drive outperformance. Across markets, thinks Las Vegas offers solid top line growth, expect Macau GGR to return to near 2019 levels by FY26 and believe there are pockets of oppty in certain regional markets. For BYD, highlights that the company is benefiting from easy comps and the growing value of its stake in FanDuel.
• In Internet 2025 playbook preview, Wolfe Research said AMZN, META, UBER, CHWY were top picks for the year and upgraded CHWY to Outperform while overall for the industry, see opportunities of estimates upside driven by product catalysts, a relatively healthy macro backdrop, successful capital allocation, and pockets of re-rating potential. BMBL downgraded to peer perform from OP given expectations for another product reset year in 2025, coupled with a broader stagnating industry backdrop which MTCH reaffirmed with its ’25 guide.
• In Brokers, Asset Managers and Exchanges: Wolfe Research with 2025 outlook saying they are most positive on names with secular growth stories / exposure to Trump tailwinds. The firm upgraded JPM, CG to Outperform; said BAC, WFC, LPLA, HOOD, KKR, ARES top picks and downgraded BK, LAZ to Peer Perform. In Pair Trades the firm is long Money Centers vs Universal Brokers as the former is more exposed to potential Trump tailwinds at much more discounted valuations and long Alts. vs M&A Brokers as preferred way to play the capital markets recovery.

• CF +2%; as China’s Customs Tariff Commission January 1 adjusted its tariff code for small-packaged fertilizers is expected to further curb shipments of urea, ammonium phosphate, potassium chloride, potassium sulphate and other ingredients.
• CRNC +62%; said expands collaboration with NVDA to advance its CaLLM family of language models as the company will leverage the NVIDIA AI Enterprise software platform, including the NVIDIA TensorRT-LLM open-source library and the NVIDIA NeMo framework, to optimize performance.
• NVDA +3%; as outperforms in semis ahead of CES presentation next week.
• RIVN +15%; said it delivered 14,183 vehicles in Q4, beating estimates of 13,472, and produced 12,727 vehicles in Q4, compared with estimates of 11,398 vehicles.
• SQ +4%; was upgraded from Market Perform to Outperform at Raymond James with $115 PT saying in their view, seller GPV is the most important metric for the stock and believes growth can accelerate back into the double-digits in ’25 (from ~8% in ’24).

• DAL -2%; early weakness in airlines and cruise lines
• SAM -4%; along with weakness in other brewers and spirts stocks (BUD, BF) after alcoholic drinks should carry a label warning consumers about their cancer risks, the U.S. Surgeon General said on Friday.
• X -7%; as President Biden followed through on his pledge to block Nippon Steel’s 14.9 billion bid for U.S. Steel, citing concerns the deal could hurt national security.