Mid-Morning Look

Thursday, October 03, 2024

U.S. stocks bouncing off lows following strong economic data as ISM Services (non-manufacturing) jumps to 54.9, its highest level since February of 2023 (when was 55) and above consensus of 51.7, though inflationary prices paid component jumped to 59.4 vs 57.3 in August (highest since beginning of year when was 64), and employment declined. Still, stocks like the overall data points as major averages rebounding as the tech heavy Nasdaq rises more than 150 points off morning lows around 17,840, moved back above 18,000. But markets remain choppy, with another pullback following commentary out of the Middle East. Up to this point, stock markets have been unphased by the increased was tensions in the Middle East after Israel stepped up the offensive against Hezbollah, bombarding its strongholds in southern Beirut, while Israeli Defense Forces engaged Hezbollah in various locations along the border. Meanwhile, the US and G7 warned Israel against strikes on Iranian nuclear facilities. Oil prices popped this morning after news reports saying that President Biden says they are discussing Israel striking Iran oil facilities. No fears of impact on economy thus far following the 45K union worker strike by East Coast dockworkers moving into its 3^rd day. Meanwhile parts of the South (North Carolina, South Carolina, Georgia, Tennessee) still reeling from the devastation of Hurricane Helene. Equity markets remain firmly focused on the Fed and the outlook for more aggressive cuts as we head into the November Presidential election and end of year, which is the main driver the last few weeks. Treasury yields bounced on data today, and the dollar rises for a 4^th day, big gains vs. ye and Pound last 2-days.

• ISM Non-manufacturing sector shows PMI rises to 54.9 in September vs. consensus 51.7 and vs 51.5 in August, as the non-manufacturing business activity index 59.9 in september vs 53.3 in August, prices paid index 59.4 vs 57.3 in August, new orders index 59.4 vs 53.0 prior and employment index 48.1 vs 50.2 in August.
• U.S. Aug factory orders declined -0.2% vs. consensus unchanged and vs July +4.9%; Factory orders ex-transportation -0.1% vs July +0.3% (prev +0.4%), U.S. Aug factory orders ex-defense -0.4% vs July +4.9% and U.S. Aug Durables orders unrevised at unchanged. Aug nondurables orders -0.5% vs July +0.6%.
• S&P Global September final composite PMI at 54.0 (vs flash 54.4) and U.S. S&P Global September final services PMI at 55.2 (vs flash 55.4).

• In Food/Grocery: Tesco (TSCDY) raised its FY25 profit guidance to around 2.9 billion pounds ($3.85 billion) compared with the previous target of at least 2.8 billion pounds saying price cuts boosted sales volumes in the first half; Revenue rose to 34.77 billion pounds from 33.80 billion pounds, which compares with expectations of 34.74 billion pounds. In beverages, spirits maker STZ reported Q2 EPS $4.32 vs. est. $4.08 on mostly in-line revs $2.92B saying in quarter beer business achieved solid 6% net sales increase primarily driven by 4.6% climb in shipment volumes; beer business continues to expect net sales growth of 6-8% & operating income growth outlook of 11-12% for fiscal 2025.

• FANG +2%; as energy related stocks (APA, MRO, COP, HAL) rising amid spike in oil prices.
• NVDA +3%; after CNBC interview last night as Jensen Huang, Nvidia CEO, says that “Blackwell is in full production” and that “everything is on track.” – CNBC (semis rising AMD, AVGO, ARM, etc.)
• PCAR +2%; after Class 8 preliminary truck September orders were 37,100 — up 126% month-over-month and relatively flat year-over-year on a preliminary basis.
• VST +2%; along with gains in VST and other nuclear names after a report in the Nikkei said GOOGL is considering how to bring electricity from nuclear power plants to its data centers, following comments from CEO Sundar Pichai.

• BLBD -6%; was downgraded to Neutral from Buy at Roth MKM with $48 PT, saying they are incrementally cautious after channel checks that indicate continued inefficiencies at the EPA in dispersing EVSB funding.
• HIMS 11%; after the FDA said LLY’s obesity and diabetes drugs are no longer in shortage. HIMS had taken advantage of shortages in Lilly and rival NVO drugs to develop copycat treatments, as sanctioned by the FDA.
• LEVI -7%; posted mixed Q3 (EPS beat but sales a little light $1.52B vs. $1.55B est.) and cut its yearly sales outlook as now expects FY24 revenue to rise about 1%, down from a prior outlook of 1% to 3% though backed its adjusted profit outlook of $1.17-1.27 vs est. $1.25.
• NGVT -14%; shares dropped after President and CEO, John Fortson, has left the maker of specialty chemicals and carbon materials, and that it has appointed Luis Fernandez-Moreno as interim President and CEO.
• SAP -1%; shares weak as Bloomberg reported U.S. prosecutors are broadening probe into potential price-fixing in government contracts by SAP and tech reseller Carahsoft
• WOLF -5%; after Mizuho downgraded to underperform as it sees slower Global EV sales in 2H24E and 2025E, with IHS now estimating EVs up ~6% y/y in 2024E (down from up ~33% y/y in January), and it sees 2025E up only ~10% y/y.