Closing Recap

Wednesday, November 06, 2024

U.S. stocks saw a non-stop day of upside stock momentum, as the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite (topped 19K) all touched new record highs while The Smallcap Russell 2000 moved to less than 4% of an all-time high for the first time in in nearly three years (11/18/21). Donald Trump beat Kamala Harris to become the 47^th President of the United States after winning both the popular and electoral vote count, helped by wins in 5 key battleground states North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin (while still awaiting to see the outcome of rother battleground states Nevada, Arizona), while the GOP also took control of the Senate and the House remains a close race at this time with some races still too close to call. That news had wide ranging positive implications for U.S. stocks with Trump seen as pro-business and has called for less regulation. Bitcoin spiked to a new record above $76,000, up more than 9% and topped the cryptocurrency’s previous all-time high of $73,798 from March 14.

Outside of weakness in interest rate sensitive sectors such as REITS (XLRE -2.5%) and declines for Utilities (XLU) and Consumer Staples (XLP), the buying in other sectors was relentless. Financials (XLF +6%) were the big winners on less regulation concerns (banks and consumer finance names saw massive gains) along with Energy (XLE +4.5%) and then the Smallcap (IWM +5.5%) and mega cap tech/discretionary names (XLK +2.8%). CNBC’s David Faber said today that the big winner under Trump is the M&A market as more deals may see less pushback. The top movers to the downside were names associated with potential tariff related impacts, so specific discount retail, toy retailers, and US listed China stocks. Solar stocks were also big losers. Healthcare was a mixed bag as some names were seen strong under Trump (managed care) while some not as much (hospitals/pharma). Next up on the agenda after today’s buying blitz is tomorrow’s FOMC meeting where the Federal Reserve is widely expected to cut interest rates by a quarter-percentage point at its meeting that ends Thursday. But given the stock market reaction to the Presidential election, the language from Chairman Powell will be closely watched.

In Data & Stats: Almanac Trader tweets: “With a few exceptions the market tends to rally from Election Day to Yearend. DJIA is up 72.2% of the time, average +2.38%. The S&P 500 is up 66.7%, average +2.03%. Nasdaq is up 76.9%, average +1.50% and Russell 2000 is up 61.5%, average +4.93%.” @KevRGordon noted today: A 1,500-point gain in the Dow today is a 3.6% increase.  Here is roughly what a 1,500-point gain would be in % terms (this day) in: 2020: 5.3%, 2016: 8.2%, 2008: 17.2%, 2004: 14.9%, 2000: 13.7%.”

• U.S. WTI crude oil futures settle at $71.69/bbl, down 30 cents, 0.42% and Brent Crude futures settle at $74.92/bbl, down 61 cents, or 0.81%. In weekly inventory data, the Energy Information Administration (EIA) said on Wednesday that Crude inventories rose by 2.1 million barrels vs. expectations for a 1.1M -barrel rise. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 522,000 barrels in the week. U.S. gasoline stocks rose by 412,000 barrels vs.  expectations for a 878,000 barrel draw.​ Distillate stockpiles rose by 2.9M barrels vs. expectations for a 1.1M draw.
• December gold prices fell -$73.40 or 2.7% to settle at $2,676.30 an ounce (off last record highs of $2,801.80), down to 3-week lows amid a soaring U.S. dollar and Treasury yields after Donald Trump won the election. It appears the stock market feeling was that inflation will rise in the long-term, per Trump’s promised new policies, lifting the dollar/yields and weighing on gold prices.
• Treasury yields jumped overnight with the 10-year hitting highs of 4.47%, highest since July following the Trump election victory. Yields pulled back off highs following a strong 30-year auction as the U.S. Treasury sold $25B in 30-year bond at high yield 4.608%, vs. 4.63% when issued prior with a bid-to-cover ratio 2.64 as primary dealers take 10.18% of U.S. 30-year bond sale, direct 27.09% and indirect 62.73%.

• In Food & Beverages: BGS shares fell on Q3 miss and lower guide as Q3 adj EPS $0.13 vs. est. $0.20 and revs $461.1M below consensus $473.12M; guides FY24 adjusted EPS $0.67-$0.77 vs. consensus $0.74; CELH reports a top and bottom-line miss, as revs fell -31% y/y to $265.7M vs. est. $267M and a -96% plunge in Ebitda y/y.

• In Swimming Pools: SWIM reported a miss and lower guide as Q3 EPS $0.05 vs est. $0.07, adj EBITDA $29.8Mm vs est. $27.9Mm on sales $150.5Mm vs est. $152.3Mm; guides FY sales $500-510Mm vs prior $495-525Mm and est. $512.39Mm, adj EBITDA $77-83Mm vs prior $75-85Mm and est. $81.7Mm (weighed on PNR, POOL, HAYW, LESL).
• In Lodging: CHH was downgraded to Hold from Buy at Jefferies given that CHH has rerated post the WH deal pursuit, and the valuation appears appropriately balanced.

• In Oil names: DVN Q3 core EPS $1.10 vs. $1.11 on production 725 MBOED vs. 694 estimates. 3Q24 EBITDA $1.85bn vs. est. $1.73bn and 3Q24 FCF of $731mn vs. est. $663mn. Oil reached 335k per day in the quarter. GPOR Q3 adj EBITDA $178.1mn vs. est. $168.5mn. Capex came in lower at $82.5mn vs. est. $87.6mn. For FY, reduced guidance for D&C capex to $325-$335mn, a decrease of 4%. CRC Q3 EPS of $1.50 vs. est. $1.26. Q3 production came in at 145 Mboe/d vs. cons 143.8 Mboe/d. Adj EBITDAX came in at $402mn vs. cons $361.4mn. Capex came in at $79mn vs. est. $98mn. For Q4, guided production to 140-144 Mboe/d vs. est. 142.1. NOG Q3 EPS $2.96 vs. cons $1.20. Revenue came in at $753.6mn and adj EBITDA came in at $12.4mn vs. est. $379.9mn. Production came in at 121.8 Mboe/d vs. cons 121.9 Mboe/d. For FY, NOG reiterated capex and production guidance.

• In Brokers & Exchanges: CBOE was downgraded to Underweight at Morgan Stanley saying they see the shares pricing in HSD to DD topline acceleration, but its work shows risks to growth and the valuation multiple. The firm sees downside risks as decelerating growth could drive earnings misses.
• In Consumer Finance: KBW Inc noted view the Trump win as a significant positive for the financial sector. Despite the majority of market participants increasingly positioning for this outcome over the past few months, the financial sector is likely to be an outperformer on the back of this news. KBW Inc. noted COF deal increased probability of merger approval and for SYF, firm says has significant exposure to late fees and gets relief if late rule is delayed or goes away and lower Regulatory risk. Separately, Reuters reported that European Union antitrust regulators are investigating whether the fees charged by Visa (V) and Mastercard (MA) have a negative impact on retailers
• In Asset Managers (CG, KKR, APO, BX), group showed strength as Donald Trump has positioned himself as a pro-business candidate committed to easing regulation and antitrust pressure on mergers and acquisitions.
• In Crypto: Bitcoin prices hit fresh record highs around $75,000 overnight before paring gains as crypto related stocks gain with Bitcoin (MSTR, MARA, COIN, CLSK, RIOT), because Trump embraced digital assets during his campaign after a major push by the industry.
• In REITs: prison operators rise (GEO, CXW), with Trump seen as having a harder stance on the immigration issue.

• NVAX shares slipped after saying it has entered into a termination and settlement agreement with the UK Health Security Agency (UKHSA) related to supply of its COVID-19 vaccine.
• NVO Q3 sales came in at 71.3B Danish crowns ($10.3B) and diluted EPS of DKK 6.12 – analysts expected sales to be a little higher but EPS were a slight beat. Ozempic sales were a bit lower than expectations and Wegovy higher.
• TEVA reported a larger than expected rise in Q3 profit, boosted by strong sales of generics and its branded drugs to treat migraines and Huntington’s disease; Q3 revs rose 13% to $4.33 billion vs. est. $4.12B.
• TNGX shares fell after saying one of its PRMT5 inhibitors failed to reach a threshold for clinical efficacy in a cancer trial.
• Cannabis stocks slip (CURLF, TCNNF, TLRY, CGC, GTBIF, GRWG) after Florida voters rejected a ballot measure to legalize recreational marijuana
• Vaccine makers (MRNA, BNTX, PFE) slide as Trump recently said he would let former presidential candidate and anti-vaccine advocate Robert F. Kennedy Jr. "go wild," on vaccine and healthcare policy.

• CRL Q3 revenue above expectations ($1.01B vs $976M est.), raises FY EPS forecast to $10.10 to $10.30, saw $9.90 to $10.20. co said they are continuing to navigate through a challenging period as global biopharmaceutical clients reduce spending in conjunction with major restructuring and pipeline reprioritization activities, but overall demand trends do not appear to have deteriorated further.
• CVS shares rose after the announcement of former UNH exec Steve Nelson to head up Aetna; 3Q largely consistent with preannouncement, with Medicare Benefit Ratio of 95.2% (also consistent with neg pre).
• EXAS shares tumbled following below-consensus 3Q and reduced 4Q outlook amid lower demand at primary care offices, impact of hurricanes, a slower ramp-up for new reps, and transitional challenges on ExactNexus; cuts FY24 revenue view to $2.73B-$2.75B from $2.81B-$2.85B prior and adj EBITDA view to $310M-$320M from $335M-$355M.

• In Metals: gold miners (AEM, AUY, GOLD, NEM) tumbled along with gold prices which hit 3-week lows as the dollar surged along with Treasury yields while attention turns to the FOMC policy meeting on Thursday. Copper producers also saw early weakness with FCX, SCCO moving lower. Steel stocks (X, STLD, NUE) rising on hopes Trump admin would be tough on tariffs for outside US steel makers.

• In Software/Security: QLYS shares surged after reported Q3 results of $153.9M and $1.56 compared to consensus estimates for $150.7M and $1.33 while gross margins fell slightly to 82.6% from 83.5%, and mgmt raises 4Q and FY24 guidance – raised full year guidance to $602.9M-$605.9M with EPS of $5.81-$5.91.

• MCHP reported in-line F2Q (Sept) results but guided December below-seasonal on softer macro demand, especially in Europe. While indicating most regions and end-markets are soft, mgmt noted that Europe and Industrials were particularly weak and noted that inventory destocking remains a headwind.
• Overall, U.S. semiconductor firms’ shares rise (AMD, NVDA, AVGO) as Philly semi-index (SOX) rises over 3% as Donald Trump has previously vowed to impose a 10% tariff on imports from all countries, and 60% duties on imports from China. Trump previously said Taiwan had taken America’s semiconductor business.