Closing Recap

Monday, August 19, 2024

Today was a true summer Monday, light volume, light news, as U.S. stocks continued their push upward and onward. The S&P 500 rose an 8^th straight day and is now less than 1.5% from its all-time highs (closed at highs above 5600) as all eleven S&P sectors closed positive on the day on strong breadth (nearly 3:1). News flow was quiet and no major economic data (lone piece was negative), no major Fed speakers or earnings, but momentum carried major averages higher ahead of this Friday’s centerpiece catalyst where Fed Chairman Powell is expected to speak at the annual Jackson Hole Fed symposium, where several global speakers are expected to comment on the economy. The Nasdaq pushed higher for an 8^th straight day (rising about 1%), having risen over 1,000 points during its win streak, paced by a healthy bounce in semiconductors (SOX) and mega cap tech (TSLA, AMZN, GOOGL, AAPL). Back to Powell, the Chairman is expected to speak on Friday at 10AM and forecasted to guide toward a well-expected rate cut at the September FOMC meeting after last week’s CPI/PPI data. The dovish risk is that Powell goes further and suggests that slowing inflation and rising unemployment May warrant a faster pace of rate reductions. Today’s news was quiet, as investors await several key retailers (LOW, TGT) and technology companies (many software names) including PANW, ADI, SNPS, SNOW, ADI, WOLF, ZM, BIDU, BILL, ESTC, INTU, and WDAY are all expected to report earnings this week.

In Fed speakers today/this weekend: Minneapolis Fed President Neel Kashkari said it was appropriate to discuss potentially cutting U.S. interest rates in September because of the rising possibility of a weakening labor market, the Wall Street Journal reported on Monday. San Francisco Federal Reserve Bank President Mary Daly said it is time to consider adjusting borrowing costs from their current range of 5.25% to 5.5%, in an interview with the Financial Times published on Sunday. In the lone economic data point today, July leading economic indicators fell -0.6% vs consensus drop of -0.3%. MrTopStep tweets this morning: “The outlook for a soft landing is still in play, and the Leading Economic Index continues to signal otherwise. The LEI declined 0.6% in July, bringing the streak to 29 consecutive months without a gain. At 100.4, the index has now fallen below the prior cycle’s low reached in April 2020. #wellsfargo”

• December gold prices edge higher $3.50 to settle at $2,541.30 an ounce (hit record highs earlier of $2,549.90) extending recent gains ahead of expected cues from the Federal Reserve later this week (Jackson Hole) and developments in the Middle East as U.S. Secretary of State Antony Blinken warned on Monday that the latest push for a Gaza ceasefire and hostage release deal was probably the best and possibly last opportunity, urging Israel and Hamas towards an agreement.

• In Beauty: EL said President & CEO Fabrizio Freda announces intention to retire at the end of fiscal year 2025 and guided FY25 EPS $2.75-$2.95 (below est. $3.96) and forecasts 2025 organic net sales -1% to +2%; says board considering internal and external candidates as part of CEO succession plan.
• In Retail: BURL upgraded to Buy from Hold at Gordon Haskett with a $300 price target. In Discount retail, Deutsche Bank said they view the risk/reward profile at DG and DLTR favorably at current levels, while see BJ increasing FY guidance to the high end of the range and see guidance moving lower in 2H for TGT, DG, DLTR, and FIVE
• In Convenience Stores: Circle K operator Alimentation Couche-Tard Inc. (ANCTF) made a proposal to take over much larger rival and 7-Eleven owner Seven & i Holdings Co., in what would be the biggest foreign takeover of a Japanese company. A merger would create the world’s top operator of roughly 100,000 convenience stores.

• In Real Estate Services: RDFN notes sales of existing homes rose 0.6% month over month in July but fell 2% year over year–to a seasonally adjusted annual rate of 4,094,991. That’s the lowest July level in records dating back to 2012. Pending sales–a more current gauge of demand that includes both existing and newly constructed homes–fell to the lowest level of any month on record aside from April 2020, when the pandemic brought the housing market to a halt. They declined 2.9% from a month earlier and 5.8% from a year earlier.

• In Media: FUBO shares rose after FOX, WBD and DIS were blocked by a judge from launching their streaming sports service one week before its rollout.
• In Autos: GM said it is laying off more than 1,000 salaried employees at its software and service units worldwide. NKLA shares dropped after announcing senior convertible note offering.

• In Metals & Mining: industrial metals saw a bounce with shares of aluminum makers (AA), copper (FCX), steel names (CLF) seeing broad strength
• In Paper & Packaging (IP, PKG, SW): RBC Capital noted, according to Random Lengths, the Framing Lumber Composite increased $6 w/w to $389 (Elements estimate: $390) and the OSB Composite decreased $3 w/w to $340 (Elements estimate: $333). For next week, RBC Elements™ forecasts that the RL Framing Lumber Composite will stay flat w/w at $389 and that the RL OSB Composite will gain $1 w/w to $341.
• In Industrial Sector: GTES was upgraded to Outperform at RBC Capital saying one of the primary obstacles to getting investors excited about this global leader in industrial belts and hoses has finally been lifted with the latest selldown taking the sponsor overhang down to an inconsequential ~8%.

• In FinTech: PRG upgraded to a Buy from a Hold rating at Loop Capital while raising its price target to $55 from $41, implying 26% upside from current levels saying they are encouraged by the proactive steps management has been taking recently to reaccelerate GMV growth, including Co-branded marketing programs and improved e-commerce checkout integration with existing retail partners and reinvigorating its regional SMB business.
• In REITs: KIM was downgraded to Neutral on valuation in REITs at Mizuho while the brokerage firm said they see a better relative opportunity in REG (top pick). Mizuho has been constructive on Shopping Center REITs, as landlords continue to benefit from strong leasing demand and higher occupancies / retention, which are supporting rent growth and leasing spreads, while near-term tenant credit risk appears below-trend / manageable.

• BMY said the European Medicines Agency has validated its application for expanded approval of its CAR-T cell therapy Breyanzi for certain patients with follicular lymphoma.
• GVAX, EBS, SIGA shares again active after surging last week among companies developing treatments for mpox, after rival Siga Technologies Inc. said a trial of its antiviral failed to meet its main goal.
• LQDA shares fell as announced that the U.S. FDA has granted tentative approval of YUTREPIA inhalation powder to treat adults with pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease but stopped short of a traditional approval

• In Shipping: ZIM shares rose after Q2 results as EPS $3.08 topped consensus of $1.79 and sales rose 48% y/y to $1.93B topping the $1.78B estimate and said is on track to achieve double-digit volume growth target in 2024. Maersk (AMKBY) said it would stop accepting some Canada-bound shipments, which require movement via rail ahead of an expected strike.
• In Shipping (DSK, SB, GNK, EGLE), The Baltic Exchange’s dry bulk sea freight index, tracking rates for ships carrying dry bulk commodities rose 17 points, or 1%, to 1,708. The Capesize index added 57 points, or about 2.3%, to 2,594. The panamax index lost 8 points, or 0.5%, to 1,544 points. the Supramax index was up 1 point at 1,305.

• AMD said it plans to acquire server maker ZT Systems for $4.9 billion as the company seeks to expand its portfolio of artificial intelligence chips and hardware; AMD plans to pay for 75% of the ZT Systems acquisition with cash and the remainder in stock.
• ONTO was upgraded from Hold to Buy at Needham with 12-month PT of $245 saying they see the company’s underperformance relative to NVMI and CAMT throughout the last cycle was largely a result of both its voluntary, and involuntary, share loss in China. However, the company outperforms KLAC and NVMI on ex-China revenue growth.