Closing Recap

Wednesday, August 28, 2024

U.S. stocks slipped pre-market and continued lower through the morning. Mid-morning breadth was only about 1.2:1 in favor of decliners as small caps held up well. IWM was flat versus SPY -0.25% and QQQ -0.80%. S&P sector ETF outperformers included Financials, Utilities and Health Care all with modest gains. Laggards included Technology, Consumer Discretionary and Communications moving lower. We will see earnings from NVDA and CRM, among others, tonight so part of the move lower may reflect caution into the results with no meaningful economic news to otherwise set direction. The Fear and Greed Index held at 51/100 (Neutral) versus 53 (Neutral) yesterday, and 47 (Neutral) last week, but up from 42 (Fear) a month ago.

In factoids of interest today, recent highs in the Dow may be a good recession indicator (or lack thereof). Per @RyanDetrick, six months after a new all-time high in the Dow we’ve only seen recession about 9% of the time with the last one being 1982, which marked the beginning of a big bull market. On the impact of rising home prices, @Charliebilello notes US home prices are up over 50% in the past five years, more than double the rise in wages and creating an affordability crisis. Even hotels are enjoying rising prices, with the number of US hotels charging an average daily rate of at least $1,000 rising to 80 in the first half of this year versus 22 in 2019, according to CoStar Group. Lastly, in advance of NVDA’s report tonight, @DataTrekMB reminds us NVDA has been beating estimates by smaller margins over the past year and opines tonight’s report needs to reverse the trend.

Heading into the final hour of trading, equities were off the lows but remained jittery ahead of earnings after the close. Small caps held modest outperformance with IWM -0.59% versus SPY -0.66% and QQQ -1.12%. Only Utilities (XLU, +0.15%) remained in the green among S&P Sector ETFs. Technology (XLK, -1.32%) and Consumer Discretionary (XLY, -1.19%) paced the rest to the downside. Value outperformed growth, but neither enjoyed gains with the Russell 1000 Value -0.31% versus its Growth counterpart -1.02%.  Breadth slipped to 5:2 in favor of decliners.

• US MBA 30-yr Mortgage Rate dipped slightly from a prior 6.50% to 6.44%.

• October WTI crude futures faded overnight and never sustained a rally, but settled off the lows, with a decline of $1.01/bbl, or -1.34%, to $74.52. Brent similarly faded -$0.90/bbl, or -1.13%, to $78.65. EIA crude oil inventories fell less than forecast as refineries raised capacity utilization, but supply concerns remain the overarching theme into the Fall. Geopolitical concerns continue to offer modest support.

• In Footwear & Apparel: FL shares dropped after earnings beat, but left year outlook expectations unchanged; Q2 adj EPS loss (-$5.00) vs. est. loss (-$7.70) on better comps +2.6% vs. -9.4% y/y, and est. +1%, while sales rose 1.9% y/y to $1.90B vs. est. $1.88B, but affirmed its full-year guidance for adj EPS of $1.50-$1.70, for sales growth of negative 1% to positive 1%. PVH posted Q2 EPS beat on in-line revs of $2.07B, but shares declined as Wedbush said was likely due to a negative inflection in DTC, Q3 guidance coming in below consensus, and a lack of flow-through of Q2 upside to FY guidance. GOOS will be shifting its product focus on offerings for warmers temperatures per the WSJ
• In Apparel Retail: ANF shares of the red-hot clothing retailer (+218% over past year) falter after earnings this morning showed an EPS beat & sales match, but traders focused on missed gross margins and a narrow comparable sales beat.
• In Specialty Retail: BBWI Shares of beauty retailer fell after this morning’s EPS beat, sales miss and lowered forward guidance. CHWY Shares of the online pet food seller rose following this morning’s EPS beat and matched sales despite muted guidance. A bullish conference call focused on Chewy’s potential growth for its mobile app. ELF Shares of cosmetics maker were higher after announcing a $500M share buyback program.
• In Restaurants: WEST Westrock Coffee shares lifted after the company began a warrant exchange offer and consent solicitation. SHAK the burger purveyor’s shares were weak after announcing a pretax charge of ~$30M due to the closure of 9 company-owned and operated stores.

• In Airlines: Shares of HA moved slightly lower on a negative note on the HA merger from the Capital Forum. UAL United’s flight attendants voted to authorize a strike

• In PE: ARES NFL owners are set to vote today on private equity firms investing in NFL teams through minority stakes.
• In Crypto: CIFR Shares drifted negatively after the company announced they had bought a new 300 MW Data center in West Texas last night.
• In Banks and Brokerages: BMO Shares drifted lower for a second day after being downgraded by several analysts and lowered price targets across the board following yesterday’s weak earnings report. HSBC Bloomberg reports that incoming CEO George Elhedery is considering cutting layers of middle management. RILY The troubled investment bank’s shares traded downward after news that B. Rily was in talks for a loan amendment to ease the company’s debt burden.
• In Financing: SOFI The Supreme Court keeps Biden’s student loan relief plan on hold.

• MRNA was upgraded from Reduce to Hold w/ $82 PT at HSBC saying the main risk underpinning HSBC’s earlier cautious stance seems to have played out.
• NBIX shares declined after saying a 20-milligram dose of the drug candidate, NBI-1117568, helped significantly reduce severity of symptoms compared to placebo in adult patients with schizophrenia, and was generally safe, but the 7.5-point improvement on PANSS score was stat significant but no improvement was seen with higher doses.
• In Dental sector: PDCO shares tumbled after results and guidance; reported Q1 adj EPS $0.24 missing the $0.32 estimate on weaker revs of $1.54B vs. est. $1.59B saying profit was negatively impacted by the cybersecurity attack on Change Healthcare but did reaffirm its yearly guidance (Shares of XRAY, HSIC fell in sympathy).
• MNKD notched 52-week highs following an Outperform reiteration from OPCO and 2 medium-sized block trades (275K shares) going up.
• GILD shares lifted today in part due to a Jefferies industry conference where Gilead’s HIV+PrEP use was discussed.
• LIVN Shares gapped higher following the release of a midday note from Baird which state at LivaNova could be a winner following the CMS vote on reimbursement.

• In Software: NCNO shares fell on mixed results; reported better Q2 revenue but Barclays noted it sounds like new logos internationally are taking longer to close which is making bookings more 2H-weighted.
• AAPL Apple shares were mixed on the day after announcing that they were cutting 100 service jobs overnight as part of a “priority shift.”
• BOX shares rose following last night’s earnings beat and guidance raise along with several upward price target changes.
• In Digital Media: GCI was downgraded by Citigroup to Sell with a $5.10 PT this morning.
• META Meta Platforms is planning a new mixed reality device that resembles a bulky pair of glasses, according to two Meta employees per The Information.

• SMCI Shares fell sharply after Super Micro issued a press release stating that they would be delaying their Form 10-K filing for FY24 just day after Hindenburg Research published a negative report. In a midday note, Wells Fargo reiterated their Equal Weight rating but cut their PT to $375 from $650. SMCI was defended in an afternoon note at Rosenblatt, calling the -25% selloff “over the top,” and reiterated their Buy & $1300 PT.
• AMBA shares jump; reported Q2 FY25 revenue/non-GAAP EPS above consensus estimates, coming in at $63.7M/($0.13) vs $62.1M/($0.19), as the company saw sequential growth in both the IoT and Automotive end-markets.
• SMTC reported Q2 above guidance midpoint, with $215.4mn in sales, up +4.5% q/q and +1.6% higher than estimates while EPS topped views and issued mostly in-line F3Q25 (Oct) guidance.