Mid-Morning Look

Monday, September 09, 2024

U.S. stocks in rebound mode to start the week, rising as much as 1% after tumbling last week for worst 5-day returns of 2024. Investors taking advantage of the sharp declines last week where the S&P 500 fell -4.25%, the Nasdaq declined -5.77%, and the Dow fell -2.93% as both the Dow Industrials, and S&P 500 register biggest weekly% drop since March 2023 (Silicon Valley bank crisis). Even the Russell 2000 had its 2nd worst week of the year as deteriorating jobs data weighs on whether the Fed will cut 25bps or 50bps next week. We are also in the quiet period ahead of next week’s FOMC meeting, so we won’t be getting any more Fed-speak for a while. No major economic data to move the needle until Wednesday morning with August consumer prices (CPI) and then Producer Prices (PPI) on Thursday, though Wall Street attention has shifted to jobs vs. inflation over the last 2 months. All eyes will be on AAPL’s event which begins at 1pm EST as it reveals its latest iPhones and more details on its “Apple Intelligence” platform. Several stocks were moving this morning after S&P announced index changes effective Monday, September 23, to coincide with the quarterly rebalance. Risk on early as the Philly semi-index (SOX) bounces after falling over -12% last week (weak AVGO guidance and selling pressure in group) and Bitcoin recovers 5% to $55,500. In other key events this week, the first Presidential debate is expected tomorrow night (9/10 at 9:00 PM) between Donald Trump and Kamala Harris in Philadelphia and the European Central Bank (ECB) rate policy decision is Thursday morning (25bps rate cut expected). Stocks popped early but paring gains following a pullback around 10:00 AM.

• PLTR, DELL, ERIE will replace AAL, ETSY, BIO in the S&P 500.
• AAL will replace TGNA in the S&P MidCap 400; TGNA will replace DBI in the S&P Smallcap 600; ETSY will replace HVT in the S&P Smallcap 600 and BIO will replace ERIE in the S&P MidCap 400.
• CNHI, WAL, PSN, HLNE, VNOM, FN will replace MP, PGNY, ADNT, WOLF, HELE and ZD in the S&P MidCap 400 respectively. MP Materials, Progyny, Adient, Wolfspeed, Helen of Troy, and Ziff Davis will replace CVGW, EHAB, MERC, CMP, DDD and FN in the S&P Smallcap 600 respectively.
• ZWS, YOU, TGTX, INSP, CSWI, ADMA and PI will replace CHCT, VREX, DIN, NUS, AMCX, ZEUS and RILY in the S&P Smallcap 600 respectively.
• In Banks & Brokers: RILY said it has entered exclusive negotiations with an unnamed asset manager to sell a 53% stake in its Great American Group business as the proposed transaction values the business at $380M, including debt. WAL advanced after being added to the S&P MidCap 400 index on September 23^rd before the open. KEY said it sold about $7 billion of low-yielding investment securities which is expected to result in an after-tax loss of about $700M in Q3. EWBC lowered its full year loan growth outlook in an investor update. Now sees loan growth of 2% to 4% this year, previously it saw 3% to 5%. TCBI was double upgraded from Underperform to Buy at Bank America and raised tgt to $77 from $51 after announced a series of transactions which help to narrow the Gap vs mgmt.’s 2025 financial targets (reiterated).
• In REITs: NSA was downgraded to Sector Weight from Overweight at Keybanc and Reiterate Overweight on EXR (raise tgt to $178) and SW ratings on CUBE, PSA in Self Storage. CPT was downgraded to Sector Perform from Outperform at RBC Capital saying their recent leasing spreads have given them pause and thinks CPT is likely to miss guidance for 2H24, and this May be another long fall/winter for the Sun Belt. INVH also downgraded to Sector Perform at RBC saying Q3 leasing spreads show further deceleration, and RBC thinks renewals show a higher level of tenant push back on rate increases.

• DELL +4%; will join the S&P 500 index before the open on Monday, Sept. 23, to coincide with the quarterly rebalance.
• PLTR +12%; will join the S&P 500 index before the open on Monday, Sept. 23, to coincide with the quarterly rebalance.
• RLAY +46%; after providing interim data for its treatment aimed at advanced breast cancer.
• RZLT +14%; said the FDA has removed the partial clinical hold on its late-stage study testing its experimental treatment for low blood sugar.
• SMMT +69%; said its cancer drug beat MRK’s Keytruda in a head-to-head trial as Ivonescimab, an antibody treatment, reduced the risk of disease progression or death by 49%, compared with Keytruda. The late-stage trial under the name HARMONi-2 was conducted in China on lung cancer patients.
• SQSP +2%; after PE firm Permira agrees to increase its offer price to take SQSP private, now valuing the deal at $7.2 billion – Cos; Permira to offer $46.50 per share in cash to SQSP stockholders vs earlier proposal of $44 apiece.
• TERN +21%; said an early-stage trial of its obesity pill achieved statistically significant weight loss of up to 5.5% over 28 days and said it would launch a mid-stage trial.

• CL -1%; downgraded to Hold at Deutsche Bank as continues to approach the final third of 2024 “with a degree of caution,” expecting most companies to be fighting against prospects of downward organic sales growth revisions.
• CVS -3%; notable weakness in managed care/services sector with HUM, UNH also under pressure; Leerink said the Medicare Advantage backdrop remains challenged with 62% of the 2025 cut points increasing.
• MRK -1%; after SMMT drug head-to-heard trial in lung cancer.
• PRGS -2%; agreed to buy AI-powered content-sharing platform ShareFile from Cloud Software Group for about $875 million and suspended its quarterly dividend.