Mid-Morning Look: March 12, 2024

Mid-Morning Look

Tuesday, March 12, 2024

Index

Up/Down

%

Last

DJ Industrials

131.19

0.34%

38,900

S&P 500

30.75

0.60%

5,148

Nasdaq

117.09

0.73%

16,137

Russell 2000

-2.49

0.12%

2,063

 

 

U.S. stock market resiliency remains astounding as core CPI inflation data topped forecasts for a second straight month, but major averages shake off the disappointing data pushing stocks higher. Tech is leading the early market rally with XLK +0.75% and Communications (XLC) +0.6%, helped by better earnings and cloud numbers for ORCL overnight. There are a few pockets on weakness with airlines lower following updates from several of the carriers, led by declines in LUV after lowering its outlook and Dow component Boeing (BA) falling after poor FAA audit results. The market to this point remains steadfast in its belief that the Fed will indeed cut interest rates this year despite higher inflation data for 2-straight months (CPI/PCE), which keeps the underlying bid in for major averages so far.

 

So, the question remains, when will data matter again? Recall the stock market shrugged off the “hot” January CPI data last month with sentiment being the print was seen as an anomaly. But markets have so far shaken off the “hotter” February CPI reading as well today, showing that inflation appears “sticky” with gasoline and shelter leading the charge this month. Still, markets are unphased, with unrelenting upside market action as every pullback (no matter how slight) continues to be seen as a buying opportunity. So far good news is seen as good news, but bad news also seen as good news; how long will that last remains to be seen but given the rise in speculation assets like Bitcoin (new all-time highs) and the relentless rally in Ai related stocks (NVDA, AMD, ARM, etc.) tough to see what dents this market in the near-term other than a much needed pullback. Reminder the S&P came into the day with a 2-day losing streak – it hasn’t posted a strong of 3-day losses since early January. Treasury yields a small (10-yr at 4.15) bounce along with the dollar (DXY back above 103), but stocks are holding at highs.

Economic Data

  • The February consumer price index (CPI) headline readings showed CPI rose +0.4% M/M, in-line with ests and above prior month +0.3% while on a Y/Y basis, CPI rose +3.2% vs. est. +3.1% and vs. 3.1% last month. The core CPI reading (ex-food & energy) also hotter headline rising +0.4% M/M vs. est. +0.3% (in-line with prior month +0.4%) and on a Y/Y basis rose +3.8% vs. est. +3.7%, but down from the +3.9% reading last month. Feb CPI energy +2.3%, gasoline +3.8%, new vehicles -0.1% while CPI food 0.0%, housing +0.4%, owners’ equivalent rent of primary residence +0.4%.

 

 

Macro

Up/Down

Last

WTI Crude

0.33

78.28

Brent

0.14

82.35

Gold

-22.60

2,166.

EUR/USD

-0.0014

1.0913

JPY/USD

0.87

147.80

10-Year Note

0.037

4.141%

 

Sector Movers Today

  • In Aerospace & Defense: BA shares were pressured amid several stories: 1) Boeing whistleblower found dead from ‘self-inflicted’ wound, the BBC reported last night. John Barnett, a former Boeing worker who raised concerns about the company’s production standards, has been found dead in the U.S. – BBC. 2) FAA 6-week audit of Boeing resulted in findings that Boeing failed 33 of 89 product audits conducted by the FAA, was published by the New York Times Monday, while SPR, which makes the fuselage for the MAX, passed six of 13 audits, and failed the rest. The audit comes after the Jan. 5 midair 737 MAX 9 emergency door plug blowout on a flight operated by Alaska Air. 3) LUV issued soft guidance today saying Boeing reportedly informed the airline it could deliver 48 of the 58 737 MAX 8 aircraft previously promised during 2024 (had initially contracted for a total of 79 737 MAX aircraft to be delivered during the year).
  • Crypto momentum remains clearly to upside after Bitcoin took out its November 2021 all-time highs above $69K, not trading above $72,000 and boosting stocks/names that invest, mine, etc. in Bitcoin (MSTR, COIN, MARA, RIOT). COIN was upgraded from Underperform to Market Perform at Raymond James saying its long-term bias on Coinbase remains negative, but it no longer believes an Underperform is the appropriate near-term investment rating.
  • In Autos:  Retail: AAP nears settlement with activist, the WSJ reported late Monday saying activist hedge fund Third Point has a stake in Advance Auto Parts and is close to a settlement with the company that will add three new directors to its board, people familiar with the matter told – https://tinyurl.com/yc6m2u6r  . In Used cars: CVNA upgraded from Underperform to Hold at Jefferies and raised tgt to $85 from $30 saying recent expansion in Retail GPU suggests CVNA’s operational adjustments May have driven sustainable improvements to unit economics. Progress toward achieving positive cash flow also reduces downside risk. TSLA shares hit fresh 2024 lows, now down over -30% YTD.

 

Stock GAINERS

  • AAP +4%; adds to late Monday gains after reports activist hedge fund Third Point has a stake and is close to a settlement with the company that will add three new directors to board – WSJ https://tinyurl.com/yc6m2u6r  
  • ADM +5%; recorded lower quarterly earnings and sales but said results won’t be affected by an internal probe into its accounting practices; Q4 sales fell to $22.98B below ests $23.79B and profit fell to $565M from $1.02B y/y while earnings sank 42% to $1.06 a share, including a 30-cent hit from impairments and restructuring.
  • GLNG +7%; after Stifel noted Argentina energy independent YPF updated investors on their LNG aspirations for using gas from the Vaca Muerta gas field for LNG exports, and it looks very much like Golar’s Hilli is the plan. The firm said as the market gets wind of this, they expect GLNG shares to trade higher.
  • MMM +4%; shares jumped after saying that William Brown will be appointed as CEO, effective May 1, 2024, replacing Michael Roman, who is appointed to the role of executive chairman of the 3M Board of Directors.
  • ORCL +10%; delivered a good quarter, coming in line with expectations for total revenue, driven by a beat in cloud and software and delivered operating margin improvement. ORCL Oracle provided a solid revenue outlook — healthy Q4 guidance (though modestly below consensus), growth acceleration for FY25, and reiterated FY26 targets.
  • RGLS +60%; after saying that its therapy for autosomal dominant polycystic kidney disease (ADPKD) in an early-stage trial showed a response in patients based on levels of polycystins in urine.
  • VTYX +3%; shares were upgraded at Wells Fargo and Oppenheimer after management provided an in-depth overview of the company’s clinical stage pipeline during its investor day. Wells said narrowed focus on NLRP3 portfolio sets up a fresh timelines story moving forward.

 

Stock LAGGARDS

  • ACAD -17%; after saying it will stop further clinical trials of antipsychotic drug pimavanserin after it failed to improve negative symptoms of schizophrenia in a late-stage study.
  • ASAN -8%; reported better than expected 4QFY24 results behind steady operational execution and stabilization in new business and with non-tech customers; Initial FY25 guidance was slightly below prior consensus estimates.
  • BA -4%; on audit/delivery headlines: NY Times reports BA failed 33 of 89 audits during an FAA examination and SPR, which makes the fuselage for the MAX, passed six of 13 audits, and failed the rest.
  • LUV -12%; after saying it plans to cut 2024 capacity citing Boeing (BA) challenges; now expects Q1 2024 rasm to be in range of flat to up 2%; sees Q1 2024 capacity to increase about 11%, compared with its previous estimate of about 10%; says reevaluating all prior full year 2024 guidance.
  • ONON -16%; after Q4 revs miss and guidance disappoints; Q4 net sales CHF 447.1M vs. est. CHF 450.6M; qtrly gross profit margin increased to 60.4% from 58.5%; guides 2024 net sales of at least CHF 2.25B below est. CHF 2.33B.

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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.