Closing Recap

Monday, May 13, 2024

U.S. stocks opened higher and moved sideways this afternoon finishing mixed as investors/markets await tomorrow’s first key inflation report of the week (PPI) and a few retail earnings (HD, BABA). Major averages have had a great run after closing April with losses, moving to within 1% of all-time highs for the S&P 500 last Friday into inflation data (PPI, CPI) and retail sales reports the next two days. The Dow Jones Industrial Average edged lower, snapping its 7-day losing streak as markets were very quiet today outside of a few market moving stocks. Data tomorrow at 8:30 AM, could move the needle as April Producer Price Index (PPI) M/M is est. to rise +0.3% (prior +0.2%) and on a Y/Y basis to rise +2.2% (prior +2.1%). On a core level, PPI (ex: food and energy) M/M for April est. +0.2% (prior +0.2%) and Y/Y to rise +2.4% (prior +2.4%). Note CPI and retail sales data due out on Wednesday 5/15. Today saw positive market breadth despite led by technology, REITs, and utilities offsetting weakness in Industrials, Energy, and Consumer Staples. Treasury yields bounced slightly, while Bitcoin rose 4% to $63K, oil climbed, and gold dropped. Stock market news was generally light outside of a few movers in the old “meme” space, boosting shares of names with high short interest (see below).

• In Consumer Staples: KHC is looking to sell Oscar Mayer, the big maker of hot dogs, cold cuts, and bacon the WSJ reported saying the company recently tapped Bank of America and Centerview Partners to gauge interest in the business, which could fetch something in the neighborhood of $3B to $5B.

• In Oil E&P: Mizuho raises price targets for COP, CVX, FANG, EQT, CHK, XOM and others as overall, see strength in global oil prices near-term, given higher non-OECD demand and more modest supply gains (particularly OPEC+ spare capacity); says that although natural gas prices have been weak this year, based on their supply-demand outlook, they see more bullish inventory changes for the rest of 2024 and into 2025. Adds that the potential for stronger domestic demand in the U.S. led by power generation offsets delays in LNG projects and potential competition from international LNG. PR announces ~51.8M shares to be sold by EnCap Investments, NGP Energy, Pearl Energy Investments and Riverstone along with certain of Co’s board members; PR plans to purchase 1.8M common units and cancel corresponding Class C shares held by selling holders.
• In MLPs/Pipelines: OKE announced that it has agreed to acquire a system of natural gas liquids pipelines from Easton Energy, a Houston-based midstream company, for approximately $280 million, subject to customary purchase price adjustments.
• In Chemicals: AXTA has entered into a definitive agreement to acquire The CoverFlexx Group from Transtar Holding Company for initial cash consideration of $285M, plus an additional $10M earnout based on the business’s 2024 performance. Closing is expected to occur in the third quarter and is subject to regulatory approval and other customary closing conditions.
• In Metals & Mining: BHP group makes revised proposal for Anglo American (NGLOY); Anglo American rejected a raised takeover offer of 34 billion pounds ($42.67 billion) from BHP Group Monday, saying the world’s largest listed miner "continues to significantly undervalue" the company. Anglo had already rebuffed BHP’s initial $39B all-share takeover proposal, made on April 25, dismissing it as opportunistic and saying it would dilute the upside value for its shareholders relative to BHP’s.
• In Transports: Airlines AAL, DAL, UAL, ALK, HA filed suit in the U.S. Fifth Circuit Court of Appeals late Friday, suing the U.S. Transportation Department over a new rule requiring upfront disclosure of airline fees.

• In Banks: BANC shares slipped after late Friday announced disclosure of a -$0.05/share EPS reduction due to an identified error in the accounting for loan discount. Canadian Bank RY upgraded to Buy at Jefferies saying their more constructive outlook is predicated on the HSBC Canada acquisition and enhanced infrastructure for City National. They expect incremental topline growth, expense synergies($740M), increased cross-selling and market share gains from the HSBC acquisition. The full impact of which will contribute to more than 1/3 of EPS growth (from ~$12 in ’23 to ~$16 in ’26).
• In Real Estate Services: RDFN said U.S. homebuyers took out 90,772 mortgages for second homes in 2023, down 40% from a year earlier and down 65% from the height of the pandemic housing boom in 2021, according to a new report from Redfin. Mortgages for primary homes fell at half that rate; they were down 20% year over year in 2023 and down 35% from 2021.

• CYTK shares fell after latest data on its promising heart drug may contain a warning sign on safety, said Mizuho.
• DCGO failed to protect the personal information of current and former patients in connection with a data breach announced by the company earlier this week, a proposed federal class action said.
• FULC enters into a collaboration and license agreement with SNY for the development and commercialization of losmapimod in facioscapulohumeral muscular dystrophy; Fulcrum will receive an upfront payment of $80.0M and is eligible to receive up to an additional $975.0M in specified regulatory and sales-based milestones.
• INCY said it is buying back $2 billion worth of stock, including more than $1.67 billion through a modified "Dutch Auction" tender offer; said it set a price range of $52 to $60 a share for the tender offer.
• MRK said it had discontinued the arm of a late-stage study, which tested an experimental antibody-based drug with its blockbuster immunotherapy Keytruda for some patients with the most severe form of skin cancer.
• NVO announced the headline results from the FRONTIER 2 trial, a pivotal phase 3a, 26-week open-label, randomized, controlled, multi-arm trial in 254 people; the trial achieved its co-primary endpoints by demonstrating a statistically significant and superior reduction of treated bleeding episodes with both once-weekly and once-monthly Mim8.

• In Medical Devices: FDA announces the recall of 90,905 Philips (PHG) Respironics Trilogy EVO, Trilogy EV300, Trilogy Evo O2, and Trilogy Evo Universal continuous ventilators due to a software-related possible power malfunction. In Services, WBA shares popped after Bloomberg reported the company is contacting potential buyers to sell its UK-based Boots drugstore chain and working with advisers to hold early-stage discussions with prospective bidders.

• In Software: MSFT held its Spring event update as OpenAI announces its new model, GPT-4o; AAPL and OpenAI have been finalizing terms for a pact to use ChatGPT features in Apple’s iOS 18, the next iPhone operating system; shares of GOOGL lower this morning on headlines.
• In Semiconductors: AMAT downgraded to Hold from Buy at Jefferies with a price target of $210, down from $215 and downgraded TXN to Hold from Buy in semiconductors. ARM is setting up an AI division and will have a prototype in the spring of next year, Japan’s Nikkei news agency reported; Arm will set up an AI chip division and target a prototype by next spring, and mass production will be carried out by contract manufacturers. MKSI files to sell $1B of convertible senior notes due 2030. INTC is in advanced talks for a deal with APO in which the equity firm would provide more than $11 billion to build a facility in Ireland, the Wall Street Journal reported.
• In Media & Telecom: NXST upgraded to Overweight from Equal Weight at Wells Fargo; TME Q1 revs $935.9M vs. est. $917.6M; Paying users at its online music streaming service rose 20.2% to 113.5 million y/y; revenue from online music services rose 43%, driven by solid growth in music subscription revenue.