Mid-Morning Look

Monday, July 01, 2024

U.S. stocks mixed early in what is expected to be a very choppy week given the mid-week July 4^th holiday, lack of earnings and Fed speakers, and crammed in economic data. A recent advance in Treasury yields is weighing on high growth stocks/sectors (10-yr yield +12bps to start week at 4.46%), as technology (XLK) falls -1% (before paring losses) while Smallcaps are flat.  AMD -5% for the worst performer in the S&P and leading SOX index lower -1.5% below 5,400 in early chip pullback. Strength early in Healthcare (XLV), Financials (XLF) and buyback/dividend news in several banks late Friday and Energy (XLE) as oil bounces. Few economic data points today were modestly weaker than expected. Treasury yields rise along with oil and Bitcoin, while the dollar and gold are lower in mixed outlook for commodity and currency prices.

• May construction spending slips (-0.1%) vs. consensus +0.2%; May construction spending -0.1% (consensus +0.2%) to $2.140 trln, vs April +0.3% (prev -0.1%) and May private construction spending -0.3%, public spending +0.5%.
• ISM U.S. manufacturing activity index 48.5 in June (vs. consensus 49.1) and vs 48.7 in May; prices paid index 52.1 in June vs 57.0 in May; new orders index 49.3 in June vs 45.4 in May and employment index 49.3 in June vs 51.1 in May.

• Chinese autos with monthly June data lifting some stocks early as NIO said it delivered 21,209 vehicles in June 2024, representing an increase of 98.1% y/y and delivered 57,373 vehicles in the second quarter of 2024, representing an increase of 143.9% y/y; LI said it delivered 47,774 vehicles in June 2024, up 46.7% y/y; this brought the Company’s second-quarter deliveries to 108,581, increasing 25.5% y/y; XPEV delivered 10,668 Smart EVs in June, representing a 24% increase y/y and up 5% over the prior month.
• In Utilities: NEP was downgraded to Sector Perform from Outperform at RBC Capital saying they see a challenging road ahead for NEP, with insufficient growth from wind repowering’s and the looming ~$3.7B CEPF liabilities post-2026. Ultimately, believes the model will not be able to sustain a long-term 5-8% dividend growth, forcing a dividend cut. CEG, AEP, CCJ and others strength early after the WSJ reported Tech companies scouring the country for electricity supplies have zeroed in on a key target: America’s nuclear-power plants. The owners of roughly a third of U.S. nuclear-power plants are in talks with tech companies to provide electricity to new data centers needed to meet the demands of an artificial-intelligence boom. https://tinyurl.com/46b8uea5

• BW +24%; as sells its Denmark-based renewable parts and services unit to Hitachi Zosen Inova AG for $87M.
• CEG, AEP, CCJ strong after the WSJ reported tech companies scouring the country for electricity supplies have zeroed in on a key target: America’s nuclear-power plants.
• COIN +2%; along with gains other crypto stocks MARA, CLSK, HUT, MSTR on Bitcoin rebound up 4% to $62,700.
• NIO +3%; said it delivered 21,209 vehicles in June 2024, representing an increase of 98.1% y/y.
• ROKU +6%; as shares extend recent gains; rising an 8th straight day.
• SPR +4%; after BA agreed to buy them for $37.25 per share in an all-stock deal that values the company at $4.7B.
• TFX +3%; upgraded to Overweight at Piper as believes that UL sales in the physician’s office are starting to find a bottom (probably Q3) and that the franchise will be less of a revenue headwind starting in ’25.
• TSLA +6%; extends last week’s gains, moving back above the $200 level.

• CCL, RCL, NCLH early weakness in cruise lines on discretionary spending fears given latest upward move in yields.
• CMG -2%; extends recent declines following 50 for 1 stock split.
• FND -4%; following a short report call from SprucePoint Capital early saying FND is struggling, and its challenges are intensifying in part due to “ballooning” capex from new store openings.
• MASI -6%; after COO Muhsin says he will resign if activist investor Politan takes control.
• NEP -4%; was downgraded to Sector Perform from Outperform at RBC Capital saying they see a challenging road ahead for NEP, with insufficient growth from wind repowering’s and the looming ~$3.7B CEPF liabilities post-2026. Ultimately, believes the model will not be able to sustain a long-term 5-8% dividend growth, forcing a dividend cut.
• SAVA -8%; shares drop after saying its board is forming a committee to direct an investigation into two of its senior employees, amid probes by U.S. regulators for allegedly submitting false data to get millions of dollars in public funds for research into a drug to treat Alzheimer’s disease.
• TEVA -2%; as the FTC has opened an investigation into Teva Pharmaceuticals, citing the company’s refusal to take down about two dozen patents for its asthma and COPD inhalers – Washington Post.