Mid-Morning Look: October 21, 2024

Mid-Morning Look

Monday, October 21, 2024

Index

Up/Down

%

Last

DJ Industrials

-156.25

0.36%

43,120

S&P 500

-11.50

0.19%

5,853

Nasdaq

-5.68

0.03%

18,483

Russell 2000

-15.12

0.66%

2,260

 

 

U.S. stocks rebounding from overnight weakness initially, but the bounce quickly fading as the S&P 500 dips with Treasury yields hitting their highest levels since July. The U.S. 10-year Treasury yield rose above 4.15% as investors awaited a flurry of speeches from Federal Reserve policymakers today (no economic data). The U.S. dollar (DXY) also adding to recent gains but having no impact on gold prices which touch new record highs again today above $2,750 an ounce. U.S. stock markets come into the week riding a 6-week winning streak heading into the heart of earnings season the next 2-weeks, though relatively quiet today. More dovish Fed speak continues to help market sentiment as Federal Reserve Bank of Dallas President Lorie Logan said Monday, she sees more rate cuts ahead for the Central bank and suggested she sees no reasons why the Fed can’t also press forward with shrinking its balance sheet. Several defense stocks (GD, LHX, LDOS, LMT) made 52-week highs today as well as a handful of utilities (ED, DUK, ETR, EE, NI, SO). Early weakness in REITs (XLRE) was down over -1% while large cap tech helped broader averages, but NYSE breadth negative by more than 3:1 margin early.

 

 

Macro

Up/Down

Last

WTI Crude

0.98

70.20

Brent

0.84

73.90

Gold

16.60

2,746.6

EUR/USD

-0.0028

1.0837

JPY/USD

0.72

150.23

10-Year Note

0.081

4.156%

 

Sector Movers Today

  • In Airlines/Online Travel: LUV shares active after both Bloomberg News and CNBC reported Sunday that activist investor Elliott Investment Management and Southwest Airlines are in talks to settle their months-long battle, with a potential deal that would give Elliott representation on the budget airline’s board. In discount airlines, SAVE shares jump after the low-cost carrier said it received added months to refinance its 2025 debt. The deadline for the airline to refinance about $1.1 billion in debt has been pushed back from Monday to late December, Spirit said in an 8-K filing (shares if discount airlines JBLU, ULCC down in reaction). ALK said expects Q3 results at higher end of previous eps guidance, including 13 days of Hawaiian’s results: strong revenue trends and advanced bookings continuing into Q4.
  • In Bank News: AUB to acquire smaller rival SASR in an all-stock deal worth $1.6 billion, the companies said; Sandy Spring shareholders will receive 0.900 shares of Atlantic Union for each held, valuing the lender at $34.93 apiece based on Atlantic’s last close. U.S. banks are considering more aggressive cuts to interest payments for corporate depositors as they seek to protect profit margins after the Federal Market cut lending rate, the Financial Times reported. In Research, INDB double upgraded to Strong Buy from Market Perform at Raymond James with a $74 price target as profitability set to improve and upgraded HBCP to Outperform with a $50 price target following the better-than-expected Q3 report. SFNC upgraded to Overweight from Equal Weight at Stephens after reported an EPS beat driven by stronger net interest income and margin trends as deposit pricing pressure continues to ease.
  • In REITs: Raymond James with several changes as downgraded CSR to Market Perform from Outperform without a price target, cut ESS to Market Perform citing the uncertainty surrounding the success of Proposition 33 hitting California ballots in November, which aims to repeal rent control limits set forth in the Costa Hawkins Act; upgraded MAA to Strong Buy from Market Perform with a $175 price target citing record demand for apartments in the Sun Belt for the upgrade. And upgraded NXRT to Outperform from Market Perform with a $50 price target citing the resurgent institutional demand for well-maintained workforce-housing assets in 2024 for the upgrade. Separately, REXR was downgraded to Neutral from Buy at Bank America and cut tgt to $49 from $66 citing a slower-than-expected demand recovery in its Los Angeles markets.
  • In Transports: ODFL were both downgraded to Hold from Buy at Stifel saying LTL stock valuations have risen back to near historical peaks despite the ongoing freight trough, more challenging volume comps and little momentum from Q324 intra-quarter trends. UPS was downgraded to Underweight at Barclay’s and maintained $120 PT saying near-term earnings could be pressured by a still weak parcel demand backdrop, but long-term pressures from AMZN, non-union FDX competition and limited dividend growth paint a relatively tough outlook for UPS shares.

 

Stock GAINERS

  • BA +3%; and the union representing 33,000 striking workers reached a tentative agreement on a new contract with help from the White House
  • FTNT +2%; was named the new top pick at Morgan Stanley based on upward revisions potential and valuation discount. The firm said expects strong network security demand in 2025/26 due to ramping firewall refresh cycle given 4-5-year replacement and rising network traffic/threats; sees 20-30% upside to consensus 2026 FCF estimates.
  • HUM +1%; CI revived efforts to combine with its smaller rival Humana after merger talks fell apart late last year, according to people familiar with the matter, Bloomberg reported late Friday.
  • KVUE +6%; after the WSJ reported activist investor Starboard Value has built a stake in consumer-products company, seeking changes that would boost the Tylenol maker’s stock price.
  • SAVE +46%; said it received added months to refinance its 2025 debt. The deadline for the airline to refinance about $1.1 billion in debt has been pushed back from Monday to late December, Spirit said in an 8-K filing.

 

Stock LAGGARDS

  • CWH -3%; was downgraded to Neutral from Overweight at JP Morgan on another round of estimate cuts impacting 2H24, lack of visibility as to the timing and degree of recovery in depressed new and used RV prices presently pressuring near-term estimates.
  • JBLU and ULCC shares fell after competitor SAVE revealed it had struck an 11th-hour deal to extend a key debt-refinancing deadline.
  • PLL -9%; downgraded to Underweight at JP Morgan on its expectation that muted lithium fundamentals will continue to pressure earnings
  • UPS -2%; was downgraded to Underweight at Barclay’s and maintained $120 PT saying near-term earnings could be pressured by a still weak parcel demand backdrop, but long-term pressures from AMZN, non-union FDX competition and limited dividend growth paint a relatively tough outlook for UPS shares.
  • VFC -6%; was added to negative catalyst watch at JP Morgan ahead of earnings as they anticipate downside to Consensus Q2 & FY25 topline/EPS estimates

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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.