Mid-Morning Look

Friday, November 22, 2024

U.S. stock averages are mixed with eight of the eleven S&P Sectors in the “green” as the Nasdaq slips given weakness in technology and communications (lagging for a second day). U.S. stocks saw early gains as the Dow Jones Industrial Average moved back above 44,000 and the Nasdaq moved back above 19,000 before failing. Smallcaps outperform for a second day as the Russell 2000 index remains on track for a 5th straight day (up all 5-days this week). Bitcoin prices touched new all-time highs above $99,400 overnight but have since pulled back. Major averages are on track for weekly gains ahead of next week’s abbreviated Thanksgiving Day holiday week. Economic data was mixed in the U.S. today as PMI manufacturing came in better, but confidence data a little weaker. Overseas, the euro tumbled to 2-year lows after their PMI manufacturing data points came in below consensus leading to expectations of aggressive rate cuts. Gold is on track for a weekly advance of 5% despite a jump in the dollar. Markets are quiet heading into the weekend, where geopolitical concerns remain after ramped up tensions between Ukraine/Russia this week.

• University of Michigan surveys of consumers 1-year inflation outlook final Nov 2.6% vs prelim 2.6% and final Oct 2.7% and University of Michigan surveys of consumers 5-year inflation outlook final Nov 3.2% vs prelim 3.1% and final Oct 3.0%.
• University of Michigan surveys of consumers sentiment final Nov 71.8 (consensus 73.7) vs preliminary Nov 73.0 and final Oct 70.5, the current conditions index final Nov 63.9 vs prelim Nov 64.4 and final Oct 64.9 and the expectations index final Nov 76.9 vs prelim Nov 78.5 and final Oct 74.1.

• Hospital Operators: Raymond James downgraded several names, cutting CYH to Underperform from Market Perform without a price target, HCA to Market Perform from Outperform and THC to Outperform from Strong Buy as the firm expects a reduction in the Affordable Care Act exchange population in 2026 “due to the sunsetting of enhanced subsidies.” There are growing investor concerns about several other risks, including the explosive growth in state-directed payments, risks to Medicaid and the potential re-emergence of the site neutral debate.
• In Asian markets, The Nikkei Index gained 257 points to 38,283, the Shanghai Index tumbled -3% or 103 points to 3,267, and the Hang Seng Index dropped -371 points to 19,229. China shares posted their worst daily return since early October. Note the Governor of Texas, Greg Abbott, ordered state agencies to stop investing in China and sell assets there as soon as possible, citing financial and security risks, a sign of rising U.S.-China tensions starting to impact global capital flows. Shares of US listed China stocks BIDU, BABA, KWEB, PDD were generally weak.

• ESTC +16%; reported Q2 results that were above revenue estimates at 18% Y/Y growth (17% in CC), with Elastic Cloud growing at 25% Y/Y, including some larger customers that grew consumption better than plan; also increased its Q3 and FY25 revenue growth outlook by ~1% and sees FY25 op margins 14% (was 12.5%).
• GAP +5%; shares outperformed behind strong Q3 results as EPS of $0.72 topped est. $0.58 on sales $3.8B vs est. $3.812B, comps +1%, gross margin 42.7%; guides FY sales +1.5-2.0% vs prior up slightly and est. +0.45%, gr mgn approx +220bps, op exp approx $5.1B.
• JTAI +40%; after announced deal to purchase three Cessna Citation CJ4 Gen2 aircraft from Textron Aviation with deliveries scheduled for Q2, Q3 and Q4 of 2026.
• ROST +3%; delivered EPS ahead of consensus despite a modest shortfall on comps due to weather, some execution headwinds; Q3 EPS $1.48 vs est. $1.40 on sales $5.071B vs est. $5.146B, comps +1%; sees Q4 comps +2-3%, EPS $1.57-1.64 vs est. $1.67; sees FY EPS $6.10-6.17 vs est. $6.13; Q3 operating margin 11.9%, est. 11.2%.
• SMCI +10%; extends weekly bounce after getting auditor earlier in the week.

• CATO -26%; after suspends regular quarterly dividend
• EVO -17%; and shares of HALO jumped after saying it has withdrawn its non-binding proposal to acquire Evotec SE for €11.00 per share in cash, implying a fully diluted equity value of €2.0B.
• GOOGL -1%; after the Information reported that OpenAI is considering developing a web browser and recently struck deals to power search features for retail, travel and other websites.
• GRAB -9%; double downgraded from Buy to Underperform at Bank America with $4.90 PT noting since Sept 1, Grab stock price is up 70% (vs Nasdaq up 5%), mainly on the back of good Q3 numbers, street’s improving comfort on Grab’s improving FCF profile and Fed rate cuts.
• INTU -4%; as reported a strong FQ1, outperforming across all key KPIs and while full-year guidance was reiterated, and customary post an FQ1, FQ2 was guided light of expectations on both the top and bottom line.
• RDDT -7%; shares dropped after Advance Magazine Publishers Inc., the arm of the Newhouse family publishing empire that owns Conde Nast, is offering 7.8 million shares for $145.38 to $148.54 each, which would be valued at as much as $1.2 billion. https://tinyurl.com/4xz55fxf