Closing Recap

Monday, October 14, 2024

U.S. stocks continued their climb, marking new record highs for the Dow Jones Industrial Average topping 43,000 for the first time ever while the S&P 500 index (SPX) also made another record high, all driven by continued upward buying momentum ahead of a big week of earnings. There were no major news events today, but that didn’t stop the FOMO stock market buying as major U.S. stock averages look to make it a 6^th straight week of gains. Volumes were notably lower given the Columbus Day holiday, as banks and bond markets were closed, but stocks still saw another “melt-up” led by gains in nearly every sector in the S&P excluding energy, which was down amid a drop in oil prices. Technology and utilities were the big winners today, and remain amongst the top year-to-date sector leaders. No earnings today due to the holiday but tomorrow morning in financials Dow component GS is expected to report as well as Citi, MS, STT, BAC, PNC and SCHW amid heavy dose of banks as well as JNJ and WBA in the healthcare sector. U.S. listed Chinese stocks slipped this morning, along with sectors that tend to benefit from a strong China economy such as energy, materials, and industrials as the overnight response to Beijing’s weekend fiscal spending plans was underwhelming. China’s Ministry of Finance meeting on Saturday showed Beijing reiterated that there will be targeted incremental fiscal policy measures to boost the economy/they will raise the debt ceiling/stabilize property market (but no quantifiable numbers were announced which disappointed investors). We also had weaker than expected China CPI (0.4% yoy vs est. 0.6%), PPI (-2.8% yoy vs est. -2.5%) and trade data (exports/imports). The dollar index (DXY) hit 10-week highs, Bitcoin +4.7% topping $66,000 while gold prices sunk. Semis continued recent outperformance as NVDA neared its all-time highs and the SOX index rose 1.9% to 5,435. Markets failed to pullback even a little late day after Federal Reserve Governor Christopher Waller called for “more caution” on interest-rate cuts ahead citing recent data showing an uptick in inflation and a U.S. economy and labor market that are stronger than previously thought.

• Natural gas prices extended last week’s declines on forecasts for milder weather and less demand next week than previously expected (after hitting 3-month highs the week prior).
• December gold prices fell -$10.70 to settle at $2,665.60 an ounce after the precious metal settled higher for a 5^th straight week last Friday. Extended gains by the U.S. dollar (DXY +0.35% to 103.25) weighed on prices as did lack of detailed information out of China on additional stimulus on Saturday weighing on commodity prices.
• Treasury markets were closed today for Columbus Day holiday.

• In Autos: GM and Barclays US Consumer Bank today announced they have entered into a long-term partnership agreement for Barclays to be the exclusive issuer of the GM Rewards Mastercard and the GM Business Mastercard in the United States starting next summer. The EU’s planned tariffs on Chinese-made EVs will lead to higher prices and deter buyers, Chinese EV giant BYDDF warned, adding the tariffs proposed for its vehicles were not a fair, but that it had also not challenged them.

• AS was downgraded to Equal Weight from Overweight at Wells Fargo saying China growth continues to be impressive at AS but concerns about weak consumer demand and time for stimulus to be effective linger.
• DECK raised its tgt to $178 at TD Cowen saying they like the stock into earnings but recognize it’s one of the more owned stocks in its coverage list. The firm said proprietary survey and field work continues to show momentum at HOKA with ASPs rising in Q2, full price sell through high, and FY25 gross margin guidance being conservative.
• GOOS downgraded from Equal Weight to Underweight at Wells Fargo citing concerns around weakening global brand heat, China macro and margin headwinds (via DTC deleverage, inventory issues and category mix).
• VFC was downgraded to Underweight from Equal Weight and cut tgt to $15 at Wells Fargo saying current valuation appears to be baking in much more upside than appears realistic; says Vans’ average transaction value is deteriorating into 2Q25, which could be another sign of pricing headwinds.

• In FinTech: Wedbush upgraded shares of UPST to Neutral from Underperform and raised tgt to $45 from $10 and upgraded AFRM as well to Neutral from Underperform with a $45 price target from $25 saying for AFRM, believes a lower interest rate environment should be beneficial to the company on several fronts, including lower funding costs and incremental GMV growth. For UPST, believe improving credit quality metrics, lower rates and an improving UMI could drive a positive inflection in originations and adjusted EBITDA in 2H’24. Nu received positive mention in Barron’s this weekend saying the company is the owner of Nubank, Latin America’s largest Fintech bank focusing on the large population of underserved consumers. The growth portion of the equation comes from Nu’s rapidly expanding profits.
• In Exchanges: ICE was downgraded from Strong Buy to Outperform at Raymond James and upgraded NDAQ from Market Perform to Outperform saying both have grown increasingly and remarkably similar over time in several ways. The firm believes ICE has a far superior trading franchise, and it boasts a higher operating margin as well. However, the two firms’ revenue and EPS growth profiles, business composition, balance sheet leverage, and returns on invested capital have become remarkably similar. Oppenheimer said they believe CME is an attractive investment tactically noting three near-term catalysts are: 1) volatility in interest rate/energy/equity markets; 2) variable dividend, or even share repurchase; and 3) abating threat from FMX exchange. CME also trades at a discount vs peers.
• In Finance & Lending: DFS credit card delinquency rate 1.70% at Sept end (up from 1.67% end of Aug) and its credit card charge-off rate 2.63% at Sept end (up from 2.48% in Aug). SOFI announced a $2 billion pact for personal loans with funds managed by affiliates of investment-manager Fortress Investment Group LLC.

• BLCO shares advanced after the Financial Times reported this weekend TPG and Blackstone (BX) are teaming up to jointly bid for the eyecare company, which was put up for sale to resolve an impasse over a separation from its heavily indebted parent company https://www.ft.com/content/52aaf972-1f3a-4017-b181-74c3a3c1e6ef
• KURA was downgraded to Hold from Buy at Stife and reiterated its Buy on SNDX saying near-term Menin Inhibitor AML updates likely favors SNDX at these prices. The next six months encompass major menin inhibitor clinical readouts. SNDX and KURA’s independent monotherapy R/R NPM1M AML pivotal readouts could unlock access to the largest AML subtype, and critically give the clearest view of efficacy differentiation.
• JSPR shares rose after saying prelim data shows its experimental skin disorder drug was well-tolerated in an early- to mid-stage study; the co is testing the safety and tolerability of its drug, briquilimab, in adult patients with cold urticaria, which causes hives and itches after the skin is exposed to something cold.
• LPBH shares jumped after Lundbeck agreed to acquire Longboard Pharmaceuticals in a strategic deal, significantly enhancing Its Neuroscience Pipeline; LBPH shareholders will receive $60 per share in a transaction valued at approximately $2.6B equity value and $2.5B net of cash, on a fully diluted basis.
• VNDA shares jumped as Cycle Pharmaceuticals reaffirms all-cash proposal to acquire the company for $8.00 per share. The move comes despite one of Vanda’s drugs failing to receive regulatory approval. The $488M offer has been reaffirmed by Cycle even though Vanda’s stock has fallen 29% since June.

• In Airlines: LUV shares active after activist investor Elliott Investment Management L.P. said it called a special meeting for shareholders, so they can elect “a completely independent” board of directors. Elliott, which owns an 11% stake, said it called the meeting after “exhaustive attempts” to implement necessary changes to its corporate

• TGI was downgraded to Underweight, at JP Morgan with $12 tgt noting Triumph has faced multiple challenges resetting the company over the past decade and management has accomplished a great deal. Nevertheless, cash flow improvement has fallen consistently short of expectations.
• SpaceX Starship IFT-5 surprise success as Deutsche Bank noted the fifth test flight of Starship (IFT-5) surprised US/many to be a big success. Most notably, the Super Heavy booster (large first stage of rocket) launched and came back to the Texas launch site, getting caught by the mechanical arms (without blowing up). The second stage also landed in its desired location in the Indian Ocean seemingly in better condition than test flight 4, using an upgraded heatshield but exploded shortly after splash down.

• In Metals & Mining: Sibanye Stillwater (SSW) is facing a $522M compensation claim from investment firm Appian Capital Advisory over the termination of a $1.2B deal to buy Appian’s Brazilian nickel and copper mines, the South African miner said on Monday.

• In Telecom: Keybanc raised its price tgt to $280 from $230 on SBAC and Reiterate Overweight heading into Q3 earnings saying they prefer Towers over Data Centers (DLR, EQIX). Heading into Q3 earnings, beginning with $CCI on 10/16, KEYB’s view remains consistent, and it continues to prefer Towers vs Data Centers. With Data Centers growing AFFO/share 5-10% at peak and Towers likely to return to 5-10% in the next couple of years, thinks the valuation spreads appear unsustainable. The firm is most cautious on expectations going into 2025 on AMT, see the lowest expectations on SBAC, and believe CCI has underappreciated catalysts from the Fiber Sale.

• AAPL was added to Evercore/ISI Tactical Outperform list into earnings as sees China risks as overstated and believes that risk can be offset by growth in developing markets and a strong upgrade cycle in the US.
• ESTC was upgraded from Market Perform to Outperform at William Blair saying believes that Elastic has a large opportunity ahead for its vector/ hybrid search solutions as more AI applications are launched over the next few years.
• GOOGL committed to buying power generated by seven reactors to be built by nuclear-energy startup Kairos Power. The agreement targets adding 500 megawatts of nuclear power starting at the end of the decade, the companies said Monday.
• NOW to invest $1.5 billion in the UK to localize AI data processing.
• SentinelOne (S) was upgraded from Neutral to Overweight at Piper and raise tgt to $32 from $25 saying they see multiple catalysts to buoy shares into year’s end, including: incremental share gains versus CRWD beginning to surface providing upside to modest NNARR expectations, increased partner activity which better positions for share gains.

• NVDA shares outperformed, rising for the 7th time in 9-days approaching its all-time high of $140.76 on 6/20.
• QCOM got a boost after influential chip analyst Ming Chi Kuo reported strong Snapdragon 8 Gen 4 shipments to significantly boost Qualcomm’s 4Q24/F1Q25 business momentum.
• WDC announced that its PCIe(R) Gen5 DC SN861 E.1S enterprise-class NVMe SSDs have been certified to support the NVDA GB200 NVL72 rack-scale system