Mid-Morning Look

Monday, November 25, 2024

U.S. stocks open the week with very strong gains, new all-time highs for all major averages as Wall Street applauded Donald Trump’s pick of Scott Bessent for Treasury Secretary, seen as a person who would inject more stability into the U.S. economy and financial markets while the WSJ noted Bessent said delivering on Trump tax plans is top priority. The S&P 500 index (SPX) hit a fresh all-time intraday record high of 6,020.25, taking out its prior 6,017.31 on 11/11 while the all-time closing high was 6,001.35 on November 11^th as nearly all eleven S&P sectors are positive today, including 52-week highs for Financials (XLF), communications (XLC), Utilities (XLU), industrials (XLI), and Consumer Discretionary (XLY). The Dow is up another 450 points or 1% to 44,750, up a 4th straight day (1,700-point gain off 11/20 low) while the Nasdaq holds above 19,000 and Smallcap Russell 2000 surges a 6^th straight day. There are a few earnings results this week in retail and tech, and a busy day of economic data on Wednesday ahead of Thanksgiving Day holiday market closure on Thursday (and early mkt close Friday at 1:00 PM). Bitcoin prices nearly tapped $100K on Friday, but have pulled back a bit, down over 3% under $96K this morning as crypto related stocks fall in sympathy. No major data today or earnings results, but market momentum to the upside continues as Wall Street exhibits more FOMO into year end. Oil prices dipped over -2% after rising about 6% last week with reports OPEC+ will hold its Dec. 1 oil policy meeting online. Treasury yields tumble with the 10-year below 4.3%, the dollar -0.6% after posting its 8^th straight weekly win Friday and gold plummets.

• Hospital operators weak for a second day, as Wells Fargo downgraded shares of CYH to EW from OW and both THC and HCA to Underweight from Equal Weight and cut out-year estimates for the hospitals to reflect its assumption that enhanced exchange subsidies will expire. Current policy and fiscal uncertainty warrant lower multiples in the group, they said. Last Friday, Raymond James cut ratings on CYH, HCA and THC saying they expect a reduction in the Affordable Care Act exchange population in 2026 due to the sunsetting of enhanced subsidies.
• In Software: SNOW ($190 PT) and ESTC ($135 PT) were both upgraded to Outperform at Wedbush saying now is the time for the broader software space to get in on the AI Party as believes the use cases are exploding, enterprise consumption phase is ahead of US beginning in 2025, launch of LLM models across the board, and the true adoption of generative AI will be a major catalyst for the software sector and key players to benefit from this once in a generation 4th Industrial Revolution set to benefit the tech space.

• BBWI +17%; after Q3 results topped consensus and raised guidance for the year; the company is now expecting a smaller decline in annual sales to be down 2.5% to down 1.7%, compared with prior guidance for a decline of 4% to 2% and raises EPS range to $3.15-$3.28, compared with prior guidance of $3.06-$3.26
• BCOV +35%; agreed to be acquired and taken private by the Italian technology company Bending Spoons for $233M in cash. Under the terms of the deal, shareholders would receive $4.45 for each share they own.
• DHI +5%; Homebuilders surged (BZH, KBH, PHM, TOL others) following a roll in Treasury yields and news of Donald Trump’s pick of Scott Bessent for Treasury Secretary.
• LSCC +5%; on reports the co is considering making an offer for all INTC’s Altera unit, Bloomberg News reported on Friday citing people familiar with the matter. https://tinyurl.com/5n8xx55d  
• QUBT +8%; Quantum computing names RGTI, QBTS, QUBT shares advanced after Amazon Web Services announced a program to help customers get ready for quantum computing late Friday
• RKLB +9%; continued strength in space sector as RKLB shares surge to a new record after launching two missions within 24 hours from two pads in different hemispheres
• SMCI +15%; adds to big gains prior week after announced had new auditor.
• SNOW +4%; upgraded along with ESTC in software space at Wedbush.

• BTU -2%; as Anglo American (NGLOY) signed a deal to sell its remaining steelmaking coal assets to U.S. coal miner BTU for up to $3.775 billion.
• DSX -13%; following earnings results this morning falling short on a y/y basis.
• M -4%; missed Wall Street expectations for Q3 sales in its preliminary results, falling -2.4% y/y to $4.74B vs. est. $4.77B citing steep promotions failed to drive customers; reported Q3 comp store sales fell (-2.4%) on owned basis, and down (-1.3%) on owned-plus licensed basis; delays Q3 report on identifying accounting issue.
• MSTR -4%; after massive run-in shares; price tgt raised by several on Wall Street (tgt to $600 at Bernstein, $650 at Benchmark) and the company bought another $5.4 billion in Bitcoin, marking its third acquisition this month as per SEC filing – It now owns 386,700 bitcoins worth $21.9 billion that were purchased at an average price of $56,761.
• NEM -2%; as gold prices tumble nearly 3% as investors flee haven assets for riskier stocks making new highs.
• OKE -2%; and ENLC entered a definitive merger agreement where Oneok will acquire all the outstanding publicly held common units of EnLink for $4.3B in Oneok common stock.
• SAVA -85%; after saying a study of its Alzheimer’s treatment simufilam didn’t meet co-primary, secondary and exploratory biomarker endpoints. The Phase 3 trial sought to evaluate the company’s novel treatment called simufilam as a treatment for cognitive or functional decline vs. placebo