Closing Recap

Monday, November 20, 2023

Index	Up/Down	%	Last
DJ Industrials	203.76	0.58%	35,151
S&P 500	33.38	0.74%	4,547
Nasdaq	159.05	1.13%	14,284
Russell 2000	8.30	0.46%	1,806

 

 

 

 

 

 

 

 

 

Another day, another stock market “melt-up” as the strength on Wall Street remains astounding! An absolute runaway train to the upside once again as the Nasdaq is up 14% from the October lows and the S&P up just shy of that mark in what has been hand over fist buying of U.S. stocks for 4-weeks now on expectations the Fed is done raising rates and may begin easing next year (fed fund futures have 27% chance of a March cut – despite the Fed not giving any hints to that point). Momentum continues to be the key driver in 2023 (both upside like now and downside like in October), with the S&P 500 index posting its 14^th winning day in the last 16-days into a seasonally strong time of year for U.S. stocks generally while the Nasdaq 100 hits its best levels since January 2022. Communications (XLC +49% YTD) and Technology (XLK +47% YTD) have been the market drivers all year long after lagging in 2022 led by the biggest mega cap tech names doing the bulk of the “heavy lifting” such as AAPL, AMZN, GOOGL, META, MSFT, NVDA. There was no news to change the market momentum with earnings and data absent, while a 20-year bond auction was well received this afternoon, lifting stocks to new highs, adding to the 3-week win streak. Treasury yields sunk following the 20-yr auction (10-yr hit 4.41%) and the dollar dipped while crypto assets rose with stocks. While its hard to imagine stocks continuing at this pace heading further into the “Santa rally” there aren’t many potential catalysts on the n-t horizon that are seen denting the investor euphoria. NVDA earnings on deck tomorrow night for semis and the Minutes from the FOMC November meeting also on deck, but then light trading into the Thanksgiving Day holiday could spark another push higher. @AlmanacTrader tweets “Thanksgiving to Santa Claus Rally trade starts on Tuesday. S&P 500 up 79.45% of the time since 1950. Avg performance: +2.57%. Trade combines the best consecutive 3-month span, Santa Claus Rally and January Effect.”

 

Economic Data

·     U.S. leading index fell -0.8% to 103.9 in October following the -0.7% drop to 104.7 (was 104.6) in September. This is the lowest level since 102.1 in May 2020. Additionally, it is a 19th straight monthly decline and has not posted an increase since February 2022.

 

Commodities, Currencies & Treasuries

·     Oil prices finish higher as WTI crude gains $1.71 or 2.25% to settle at $77.60 per barrel. Gold prices edge lower amid a drop in the dollar and Treasury yields, as well as waning interest in “haven” related assets with investors opting for riskier bets such as stocks and crypto. Gold ended the day at $1,980.30 an ounce, down -$4.40 on the day and off two-week highs hit in the last session, as U.S. Treasury yields bounced back. The U.S dollar (DXY) slipped 0.45% to a more than a 2-1/2-month low against its rivals, around 103.40 after falling 1.6% last week. Treasury yields finished slightly lower as bonds rebounded following a better-than-expected $16B 20-year auction and ahead of Tuesday’s FOMC minutes as the 10-yr fell -2bps to 4.42%.

 

 

Macro	Up/Down	Last
WTI Crude	1.71	77.60
Brent	1.71	82.32
Gold	-4.40	1,980.30
EUR/USD	0.0036	1.0943
JPY/USD	-1.27	148.35
10-Year Note	-0.023	4.418%

 

 

Sector News Breakdown

Consumer

Retail, Consumer Staples & Restaurants:

·     BROS was upgraded from Neutral to Overweight at JP Morgan and raised tgt to $35 from $30 saying the co has seen significant changes in its capital structure and shareholder base in the past few months, providing substantial available liquidity to the company.

·     DNUT was downgraded to Neutral from Overweight at JP Morgan, as the firm said it took a “deeper dive” post EPS & in-market time with CEO + CFO in pursuit of more CPG style capabilities.

·     MCD said it would expand its ownership stake in its Chinese operations, buying out minority shareholder Carlyle Group, boosting its stake in its Chinese business to 48% from 20%.

·     TPX said it expects to close the acquisition of Mattress Firm in mid to late 2024. as soon as all regulatory approvals have been received.

 

Leisure, Gaming & Lodging:

·     In Ride Sharing: UBER announces proposed $1.2B convertible senior notes offering.

·     In Casinos: PENN upgraded from Neutral to Buy at Bank America as thinks ESPN Bet creates an asymmetric risk-reward, with 1) initial download and app activity much stronger than anticipated, 2) initial offers showing promotional discipline, and 3) stable Q3 earnings.

·     In Theme Parks: SIX upgraded to Buy at Jefferies saying they see an oppty for value capture in the SIX and FUN merger announced 11/2 saying pro forma analysis suggests that the combined entity can generate $1.2B of EBITDA including the $200M synergy target.

 

Energy

·     In Aerospace & Defense: BA upgraded to Buy from Hold at Deutsche Bank and raise tgt to $270 from $204 saying rationale is simple: aircraft deliveries are accelerating, and it thinks there’s a credible case to be made that this improved performance can be sustained.

·     In Chemicals: SHW was raised to one of BMO’s "Top Picks" and boosted price tgt to $301 as believes its above-consensus estimates (which it tweaked up modestly just on FX today) have reasonable upside to them as it looks to 2024/25, particularly on the GM line.

·     Paper & Packaging sector: Truist noted containerboard prices soften for first time since May – boxboard remains flat (GPK, WRK, IP). Noted on Friday, Fastmarkets RISI released its weekly Pulp & Paper Week (PPW) publication that included November containerboard and boxboard pricing and relevant commentary. Pricing for domestic containerboard declined $20/ton, while boxboard pricing remained unchanged from October.

 

Financials

·     In Crypto: COIN rises over 6% above $105 behind crypto strength, highest levels since July with Bitcoin above $37,500; MSTR shares top $500 per share +4.8% to highest since March 2022; again, just another sector seeing chasing into year-end strength.

·     Banks: Julius Baer shares slip after dampens profit expectations after loan provisions amounting to 82 million Swiss francs ($92.6 million). Strength in other Argentina listed stocks (BBAR ) after right-wing Javier Milei wins Argentina’s presidential election in a surprising development.

·     In Equipment Rental: URI shares dipped after UK competitor Ashtead Group issues warning citing lower emergency response activity in its U.S. business as expects annual group and U.S. rental rev growth of 11%-13%, below prior forecast of 13%-16%.

·     In Payments: Mizuho updated models and tgts for MQ to $8 from $7 and FOUR to $75 from $80, while keeping PT for UPST at $19 noting MQ recently reported solid Q3 results and held an investor day to discuss the 2024 outlook, and FOUR recently reported Q3 results.

·     In Lending: for auto lending (SYF, AALY): from the NY Fed – "The average rejection rate on auto loans increased by 5.8 percentage point to 11.0% in 2023, the highest rate since the start of our series in 2013."

·     In Insurance: RYAN was downgraded from Buy to Neutral at Goldman Sachs saying analysis points to a progressing Excess & Surplus Lines insurance cycle.

 

Healthcare

Biotech & Pharma:

·     BAYRY shares fell after saying it is cancelling a phase III study program to investigate the efficacy and safety of asundexian, an oral Factor XIa (FXIa) inhibitor; the study showed inferior efficacy compared to a standard treatment.

·     BMY shares fell after saying the FDA is convening an advisory committee to review a drug application and peer Bayer stopped a trial as analysts note feedback suggests heightened risk to broader Factor XIa inhibitors, including BMY’s Phase 3 trial of milvexian.

·     Ipsen (IPSEY) downgraded to Hold from Buy at Jefferies as cut sales estimates for 4 key drugs (c.30% NPV; Onivyde, elafibranor, Tazverik, Decapeptyl) following physician feedback.

·     MDT said the U.S. FDA approved the use of its treatment device Symplicity in renal denervation surgery for patients whose high blood pressure cannot be controlled by drugs.

·     MNOV reported positive results from mid-stage trial of its experimental treatment, MN-166, against Glioblastoma saying MN-166 and anti-cancer medication temozolomide’s combo was safe and well-tolerated, and no unexpected adverse effects were reported.

·     TSVT shares fall after the company along with BMY said the FDA won’t meet its Dec. 16 target action date application seeking approval of Abecma for earlier lines of triple-class exposed relapsed or refractory multiple myeloma after opting for AdCom meeting.

·     TXG won a unanimous verdict in a patent infringement case against GeoMx products from NSTG while NSTG withdrew full-year and Q4 guidance after losing the patent verdict.

·     For EW, SWAV: Deutsche Bank highlight first-in-human results for a novel new non-invasive ultrasound therapy called Valvosoft (France-based/privately held Cardiawave) targeting aortic valve leaflet calcification in patients with severe symptomatic AS just published in Lancet. Firm said could have long-term implications for Shockwave’s (SWAV) structural heart pipeline and could ultimately have implications for Edwards (EW) and the TAVR market broadly.

 

Technology

·     What a weekend for OpenAI and MSFT! Current CTO Mira Murati appointed as interim CEO following OpenAI board’s sudden decision to terminate Sam Altman late Friday – key executives Greg Brockman, President and Co-Founder also resigned following Mr. Altman’s departure. Then OpenAI co-founder Sam Altman joined MSFT to lead its AI effort after the board replaced him with Twitch’s ex-CEO. Altman and Greg Brockman will lead a newly created in-house AI development team at the US software firm, a major OpenAI backer. Microsoft remains committed to the relationship and is looking forward to working with the startup’s new CEO, Emmett Shear, CEO Satya Nadella said in a post early on Monday. More than 500 OpenAI staffers have reportedly threatened to quit on Monday unless the company’s embattled board of directors resigns over its surprise move on Friday to oust Sam Altman from the company.

·     The Philly semi-index (SOX) hit highs above 3,800, rising over 1.4% as NVDA surges to highs above $500 into its earnings results tomorrow night as the sector extends gains (about 100 points away from 2023 highs). ARM shares outperformed up over 7% late day.

·     ADTN was downgraded to Hold from Buy at Argus noting this formerly high-yielding company has paused its dividend and noted third-quarter revenue was below guidance, and the non-GAAP loss missed consensus expectations.

·     VEON raised its full-year EBITDA guidance, now expecting growth of between 18%-20%, the against 10%-14% guided previously; also expects FY sales to grow 18%-20%, against previous guidance of growth between 16%-19%.