Mid-Morning Look: March 08, 2024

Mid-Morning Look

Friday, March 08, 2024

Index

Up/Down

%

Last

DJ Industrials

93.04

0.24%

38,886

S&P 500

26.35

0.51%

5,183

Nasdaq

147.19

0.91%

16,420

Russell 2000

27.84

1.35%

2,112

 

 

U.S. stocks extending their weekly advance (on track for 17 out of last 19 weeks higher), as the February jobs report had some good/some bad data points, but as remains the case, response to economic data continues to lead to more Wall Street stock gains. Headline jobs for February rose more than expected, but revisions the last two months were sharply lower, while unemployment rises and wages rose less than expected in a mixed report. Treasury yields are little changed since the report with the 10-yr holding lower at 4.08% while the dollar extends its weekly losses as fed fund futures raise prospect of a Fed rate cut in June now. What a week (and year) its been so far for stock markets: this week alone we have seen the S&P hit a new record high (new one today), the Nasdaq jumps to new record highs today), gold prices hit new highs for a 6th straight day, Bitcoin top all-time bests above $69K (about there now ) and new record highs for sectors including Industrials (XLI) and of course the poster child sector for “AI” growth Semiconductors (SOX). For Smallcaps, yesterday the IWM (Russell 2000) closed at a new high for 2024 and its highest close since April 2022, however as SPX and QQQ are hitting all-time highs, IWM is still 17% below it’s all time high from November 2021. Absolutely zero stock market fear, with major averages soaring out of the gate on another “melt-up” Friday. Semiconductors AVGO and MRVL shares slip after results overnight, as guidance for both disappointed.

Economic Data

  • U.S. economy adds 275,000 jobs in February, above 198,000 forecasts while Jan payrolls revised lower to 290K from 353K and Dec to 229K from 333K. February private sector jobs +223,000 above consensus +160,000 (while January was revised down to 177,000 jobs from initial 317,000). Feb unemployment rate at 3.9% vs. 3.7% est. & 3.7% in prior month (boosting interest rate cut views); U.S. hourly wages rise 0.1% in February M/M vs. est. +0.3% and increase in hourly wages in past year slows to 4.3% from 4.4%. February average workweek all private workers 34.3 hours (cons 34.3 hours).

 

 

Macro

Up/Down

Last

WTI Crude

-0.53

78.39

Brent

-0.36

82.60

Gold

11.00

2,176.20

EUR/USD

-0.0001

1.0945

JPY/USD

-0.90

147.12

10-Year Note

-0.011

4.081%

 

Sector Movers Today

  • In Industrials: GE upgraded to Overweight at JP Morgan noting it is the premier large cap name in Comm’l Aero regarding the business, where that business is in the cycle, the balance sheet, and the mgmt team. Also said Vernova looks promising as well based on rebounding margins and cash flow, as well as diversified exposure to the l-t energy transition. TXT upgraded to Buy from Neutral at Bank America saying concerns around Industrials, falling business jet demand and poor defense sentiment have peaked. BBCP reported FY 1Q24 revenues and adjusted EBITDA below expectations as weather weighed on results. Revenues increased 4.4% y/y due to strength in the UK and Eco-Pan, while US Pumping was down 1% y/y.
  • In MLPs/Pipelines: JP Morgan upgraded KNTK to Overweight and downgraded KGS, HESM to neutral saying they favor mid-streamers with leverage to oily basins and/or tighter infrastructure backdrops (namely Permian G&P) as well as those possessing full value chain integration, dominant franchises/footprints, and financial flexibility. In this analysis, GEI CN and KNTK rank at the top as JPMC sees each’s high quality business profiles and cash flows underappreciated at current trading levels.

 

Stock GAINERS

  • CVNA +11%; upgraded from Underperform to Sector Perform at RBC Capital and raise tgt to $90 from $45 saying while the firm’s negative thesis had played out soon after July of ’23, it believes CVNA’s recent run has the potential to trade even higher before reasonable valuations may matter again.
  • DOCU +8%; reported strong Q4 results w/ billings of $833.1mn (+13% y/y) well ahead of consensus from renewal strength & new customer growth; provided strong margin guidance.
  • GE +5%; upgraded to Overweight at JP Morgan noting it is the premier large cap name in Comm’l Aero regarding the business, where that business is in the cycle, the balance sheet, and the mgmt team. Also said Vernova looks promising as well based on rebounding margins and cash flow.
  • GPS +4%; posted a strong bottom-line beat, with sales coming slightly ahead (ON YoY sales inflect positive, Gap, BR, Athleta declines lessen) and gross margin much stronger than expected, driven by Merch Margin
  • GRFS +22%; shares bounced off record lows after its auditor KPMG signed off on its accounts saying it believes Grifols’ accounts for the year ending on 31 December 2023 give a “true and fair view, in all material respects, of the consolidated equity and consolidated financial position of the Group.”
  • IOT +11%; posted a stronger-than-expected quarter with accelerating net new ACV growth driven by ongoing momentum in enterprise as the company highlighted strength in the core with both telematics and vehicle safety ARR growth accelerating.
  • SWBI +23%; as Q3 EPS profit fell but topped consensus while revs rose 6.5% to $137.5M vs. est. $133.6M; higher costs and expenses offset 6.5% revenue growth.
  • TXT +3%; upgraded to Buy from Neutral at Bank America saying concerns around Industrials, falling business jet demand and poor defense sentiment have peaked.

 

Stock LAGGARDS

  • AMLX -82%; after saying its ALS Phoenix drug study did not meet prespecified primary or secondary endpoints while data from 664-participant study reinforce that amx0035 is generally safe and well-tolerated.
  • ASLE -20%; shares slid after reported 4Q sales and adj-EBITDA of $94.4m and $6.0m, respectively, during 4Q, which was meaningfully below guidance as the timing of asset sales again was delayed. Overall Asset Management sales, which include the company’s whole asset sales business, declined 5% y/y.
  • AVGO -3%; AVGO reported a strong JanQ though only reiterated its F24E guide of $50B, though now includes ~$10B+ contribution from AI vs prior ~$8B; Cantor also highlights greater weakness in Enterprise Storage and Broadband industry-wide, which Broadcom is handling much better than peers.
  • COST -5%; after quarterly sales fell short of consensus (revs rose 5.7% y/y to $58.44B vs. est. $59.04B), but comp sales topped expectations, trending slightly positive, positive traffic drove most of the comp. E-comm sales expanded.
  • GCO -4%; as expects FY sales to fall 2%-3% and is targeting adjusted EPS from continuing operations of 60 cents a share to $1.00 a share, below the $1.87 a share that analysts expected after posting quarterly results shy of consensus views.
  • LLY -1%; after saying the FDA delayed a decision on whether to approve its experimental treatment donanemab for patients with early Alzheimer’s disease and will hold a meeting of outside experts to discuss its safety and efficacy.
  • MDB -3%; as reported a strong quarter, delivering revenue and operating margins ahead of consensus expectations driven by solid Atlas growth (+34% Y/Y) and continued outperformance in EA, but mgmt guided to FY25 growth of 14% (vs Consensus expecting 23%).
  • MRVL -6%; mixed results with tailwinds in data center and AI and headwinds elsewhere both accelerating; guided Q1 revenues down a substantial ~-19% q/q as DC/AI tailwinds (up slightly q/q) were insufficient to offset expectations for steep drops in Carrier (-50% q/q), Enterprise Networking (-40% q/q) and Consumer (-70% q/q).
  • PBR -12%; shares tumbled as Bank America downgraded to Neutral noting the company decision overnight not to announce extraordinary dividends heightens the risk perception at PBR and suggests that PBR could be pivoting to an agenda more focused on growth (leading to higher CAPEX and M&A).

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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.