Market Review: October 24, 2024

Auto PostDaily Market Report

Closing Recap

Thursday, October 24, 2024

Index

Up/Down

%

Last

DJ Industrials

-140.06

0.33%

42,374

S&P 500

12.47

0.22%

5,809

Nasdaq

138.83

0.76%

18,415

Russell 2000

5.08

0.23%

2,218

 

 

 

 

 

 

 

 

 

U.S. stocks finish mixed in another very slow trading day as the S&P and Nasdaq were propelled higher mainly in part due to Tesla (TSLA) stock outperformance, rising over 22% after earnings results and CEO Elon Musk provided a forecast for robust car sales growth next year that reassured investors, which lifted the consumer discretionary sector (XLY) by over 3%. However, the Russell 2000 underperformed along with the Dow Jones Industrial Average as tech was the winner again today. S&P Sector losses were led by materials and industrial equities. We saw some economic data that showed improving jobless claims, manufacturing and housing data further reducing chances of an aggressive Fed rate cut move heading into year end. Currently, traders are pricing in a near-92% chance of a 25-basis-point cut at the Federal Reserve’s November meeting, according to the CME Group’s FedWatch Tool. Benchmark 10-year note yields were last down 4.4 basis points at 4.2% after reaching 4.26% on Wednesday, the highest since July 26. The S&P 500 index (SPX) snapped its small 3-day losing streak and falling every day this week off recent all-time highs as earnings season giving investors some reasons to lighten positions, along with more positioning ahead of the Presidential Election in less than two weeks! Very busy round of earnings again tonight before the onslaught of results next week. Interesting stat of the day – before the Fed cut interest rates by 0.50% on September 18, the 30-year mortgage rate in the US was at 6.11%. Since then, it has risen, with today at 6.92%, the highest point since July. Also, over the past 32 sessions, the Nasdaq has not suffered back-to-back down days (and up 6 of last 7). Only 11 other occurrences this long without at least small consecutive losses.

Economic Data

  • Jobless Claims fell to 227,000 from 242,000 the prior week (vs. est. 242,000) as the 4-week moving average climbed to 238,500 from 236,500 the prior week (previous 236,250) and continued claims climbed to 1.897M from 1.869M prior.
  • S&P Global October flash manufacturing PMI at 47.8 (vs 47.3 in September); U.S. S&P Global October flash composite PMI at 54.3 (vs 54.0 in September); U.S. S&P Global October flash services PMI at 55.3 (vs 55.2 in September)
  • Sept. New Home Sales rose 4.1% M/M to 738,000 annual rates; above est. 720k; US homes for sale at end of Sept 0.470M units vs Aug 0.468M units and Sept median sale price $426,300, unchanged from Sept 2023 ($426,100).

Commodities, Currencies

  • Gold prices bounced $19.50 to settle at $2,748.90 an ounce (hit ATH day prior $2,772.60 before prices tumbled), while Palladium hit a monthly high on fears of sanctions on Russian supplies. U.S. WTI crude futures fell -$0.58 or 0.82% to settle at $70.19 per barrel while Brent Crude futures settle at $74.38/bbl, falling -$0.58 or 0.77%.
  • U.S. natural gas futures jumped about 8% to a one-week high on forecasts for cooler weather and more heating demand over the next two weeks than previously expected and on rising prices for gas in global markets Front-month gas futures for November delivery on the New York Mercantile Exchange rose 18.0 cents, or 7.7%, to settle at $2.522 per million British thermal units (mmBtu), their highest close since Oct. 11.
  • The U.S. dollar slipped as data supported views for a slower pace of rate cuts by the Fed. The greenback weakened 0.62% against the Japanese yen to 151.8 while the euro was up 0.2% at $1.0802 (both were at more than 3-month lows vs. the dollar coming into the day). The dollar index (DXY) which measures the greenback against a basket of currencies including the yen and the euro, fell 0.25% to 104.18.

 

Macro

Up/Down

Last

WTI Crude

-0.58

70.19

Brent

-0.58

74.38

Gold

19.50

2,748.90

EUR/USD

0.0038

1.0819

JPY/USD

-1.16

151.59

10-Year Note

-0.018

4.224%

 

Sector News Breakdown

Retail, Consumer Staples & Restaurants:

  • In Toy Retail: MAT reported Q3 adj EPS $1.14 tops consensus $0.95; Q3 revs fell -4% y/y to $1.844B vs. consensus $1.86B; Barbie posted a 17% drop in gross billings in Q3 which was offset by a 12% increase for Hot Wheels, while Fisher Price was flat; backed year EPS outlook but now expects net sales, excluding currency effects, to be flat to slightly down for the year vs. its prior forecast that sales would be in line with last year’s $5.44B. HAS not as good as MAT, posting a wider than-expected drop in Q3 sales, owing to weaker demand for its toys.
  • In Retail: BYON shares tumbled over 20% after the owner of Bed Bath & Beyond, Overstock, and Zulily logged a sharp decrease in Q3 revenue even as it invested millions in building out a physical retail presence. BYO lost $61M in Q3, slightly less than the $63M y/y while revs fell -17% to $311.4M.

Autos, Leisure, Gaming & Lodging:

  • In Autos: TSLA the big story of the day, helping boost the Nasdaq after the EV maker Q3 adj EPS $0.72 topped est. $0.60 and revs $25.18B vs. est. $25.43B; Q3 gross margin 19.8% tops estimates 16.8% and vs 18% in Q2; said expects slight growth in vehicle deliveries in 2024; says remains on track to launch affordable models in first half 2025; CEO Musk said that Tesla could see 20% to 30% "vehicle growth" in 2025, which would mark a significant improvement from this year, in which global deliveries are down nearly 6% for the first three quarters of 2024.
  • In Casinos: CHDN reported a record for 3Q EBITDA of $235M but was mixed across its three segments; overall results were -1% vs. expectations. The downside pressure was driven by its gaming segment on the back of same store revenue down 3% YoY. LVS missed analysts’ expectations for quarterly profit (EPS $0.44 vs. est. $0.53) and Total quarterly revenue fell 4% to $2.68 billion from a year earlier, coming below analysts’ estimate of $2.78 billion, but shares bounced with Macau solid, relative to expectations helping sentiment.
  • Leisure product vehicles continue to disappoint as HOG lowered its 2024 revenue from motorcycles and related products to be down 14% to 16%, compared with its prior forecast of down 5% to 9% (follows weaker results/forecasts from WGO in RV space this week as well as PII in powersport vehicles). In the boating sector, BC was also weak as reported a Q3 EPS and revs miss and lowered its year EPS outlook to $4.50 from $5.00-$5.50 prior on lower sales view.
  • In Ride Hailing: shares of UBER, LYFT slipped after TSLA said last night that it expects paid rides to start occurring in Texas and California by next year, pending regulatory approval – and later added it could target other markets by next year as well. The move comes after TSLA didn’t announce the rollout of a formal ride-hailing service at its Oct. 10th Cybercab launch event, Tesla said on its earnings call.

Banks, Brokers, Asset Managers:

  • In Banks: RF was upgraded to Buy from Hold at Deutsche Bank with a price target of $26 saying shares should benefit from relatively low expectations, less risk of regulatory related earnings hits and a low valuation versus peers (was also upgraded to Buy and $26 tgt at Argus today as well). USB was downgraded to Hold from Buy at Deutsche bank with an unchanged price target of $51 saying a further meaningful recovery of U.S. Bancorp shares relative to peers "may be tough" with fewer Fed rate cuts, potentially continued disappointment in payments revenues in the near term and longer-term uncertainty. HAFC was upgraded to Overweight on much better NIM outlook at Piper.
  • In Insurance: GSHD reported a revenue miss for Q324 as compared with having reported a revenue beat three months earlier; EBITDA margins improved as both comp/benefits and G&A expenses came in below forecast.
  • In Brokers: RJF reported above consensus EPS driven by a sizable uptick in capital markets activity, specifically investment banking

Biotech & Pharma:

  • DYN downgraded to Neutral from Overweight at JP Morgan post strong YTD outperformance.
  • MCRB downgraded to Underweight from Neutral at JP Morgan following Vowst sale with lack of near-term catalysts
  • MRNS said that it is exploring strategic alternatives after its drug for treating seizures related to a rare brain disease failed to meet the main goal in a late-stage study.
  • NTLA shares tumbled after its experimental gene therapy to treat a rare disorder called hereditary angioedema (HAE) helped reduce monthly swelling attacks by up to 81% vs placebo in a mid-stage study – failed to impress Wall Street.
  • SNY and REGN said they will present positive data from the Phase 3 LIBERTY-CUPID Study C evaluating the investigational use of Dupixent® (dupilumab) in biologic-naïve patients with uncontrolled chronic spontaneous urticaria (CSU) who receive background therapy with antihistamines.
  • VKTX shares rose as much as 24% before paring gains after earnings, amid optimism as the company set to present data from 60/80/100mg doses of its oral obesity drug VK2735 at an upcoming conference in first week of November.
  • WST 3Q revenue was $747M vs. $710M est., driven by Proprietary Products, Contracting Manufacturing was inline. EBITDA was solidly ahead as well, at $200M (vs. $172M cons). The company raised its guidance, expecting sales to $2.88B to $2.91B (from $2.87B to $2.9B prior) and EPS of $6.55 to $6.75 (from $6.35 to $6.65).

Healthcare Services & MedTech movers:

  • ALGN reported Q3 results that missed consensus expectations for clear aligner volumes and revenue, with management downshifting tone around U.S. consumer demand during the earnings call said Piper; the company also announced a restructuring plan.
  • CYH 3Q EBITDA missed consensus, with $347M of EBITDA (vs. $367M est.), with the company pointing to higher SW&B, increased costs for outsourced medical specialists, hurricane impact and impatient claim denials. EBITDA going to $1.5B to $1.54B (vs. $1.52B to $1.6B prior), suggesting a downside to 4Q consensus.
  • ICLR tumbles as Q3 adj EPS $3.35 missed consensus $3.84 on lighter revs $2.03B (est. $2.13B); guided FY24 EPS $13.90-$14.10 below consensus $15.06 on revs $8.26B-$8.3B (est. $8.51B); said Q3 revenue shortfall was attributable to more material headwinds from two large customers undergoing budget cuts and changes in their development model, lower than anticipated vaccine-related activity, and ongoing cautiousness from biotech customers
  • MOH shares jumped on results and maintained guidance while MCR 89.2% (vs. 88.4% cons) with Medicaid MCR 90.5% (vs. 89% cons) and Medicare 89.6% (vs. 88.9%). This compares to a ~500 bps MCR pressure in ELV’s Medicaid segment. The company maintaining FY rev and adj EPS guidance.
  • STE upgraded to Overweight, PT to $260 at Piper saying key risks associated with the story (HC equipment guidance, upcoming EO litigation) seem well socialized among investors, and the long-term thesis looks attractive on several levels (accelerating growth in high-margin AST, balance sheet optionality, protection against election-related volatility).

Transports

  • In Package Delivery: UPS Q3 adj EPS $1.76 vs. consensus $1.63; Q3 revs $22.2B vs. est. $22.14B; Q3 average daily volume increased 6.5%; cuts FY24 revenue view to ~$91.1B from ~$93B, vs. consensus $91.85B after the company completed the disposition of Coyote Logistics.
  • In Airlines: AAL lifted its annual profit forecast on improved pricing power and a recovery from the missteps in its sales strategy that led to an exodus of corporate clients; LUV posts surprise Q3 profit of $89M vs. est. loss -$12.65M as EPS beat and revs rose 5.3% to $6.87B
  • In Rails: UNP Total operating revenue came in at $6.09 billion, an increase from $5.94 billion a year earlier, but was below analysts’ estimates of $6.14 billion while profit missed as well citing an unfavorable business mix and reduced fuel surcharge revenue that offset gains from higher shipments and price hikes. CP upgraded from Neutral to Positive at Susquehanna saying its favorable fundamental view toward CP is steady since its update 3 weeks ago, but shares are down 6% on cross-border regulatory fears (underperforming rails, XLI, S&P). Near-term headline risk creates a long-term opportunity to own what SUSQ sees as the best growth story in rails at a fair price.

Aerospace & Defense

  • BA shares fell after its largest union rejected a new labor contract, extending a six-week strike that has crippled production. The International Association of Machinists and Aerospace Workers Union, representing about 33,000 Boeing employees in the Pacific Northwest, said that 64% of voting members checked "no" to the new labor deal. A tentative deal, agreed to over the weekend, would raise base wages by 35% over four years.
  • Aero supplier parts makers ATI and HWM downgraded to Sector Weight from OW at Keybanc saying post analysis, including its proprietary Q324 Plane Chain survey of aerospace suppliers, it is adjusting its expectations for aero-centric suppliers under coverage to reflect slowing order rates and the onset of inventory accumulation after nearly unabated positive momentum over the last three years. Given incremental uncertainty, notably at Boeing, and volatility in aircraft production and engine delivery rates, the firm believes it’s prudent to cut its near-term EPS expectations.

Materials, Metals & Mining

  • In Industrials: HON Q3 revs $9.73B vs. est. $9.9B and guides annual sales below consensus estimates to $38.6B-$38.8B (est. $39.2b) after weakness in its industrial automation business led to lower-than-expected quarterly sales. TXT shares tumbled after lowering its 2024 EPS to $5.40-$5.60 from prior view $6.20-$6.40 and posted a Q3 EPS and revenue miss citing impact of the four-week strike by 5,000 workers at its Wichita plant. SUM shares spiked late in the day after Bloomberg News reported Quikrete Holdings has approached Summit Materials about a potential takeover and the building materials maker is working with advisers as it pursues a bid for Summit.
  • In Metals: NEM shares fall as earnings miss undermines profit surge; the earnings miss came even as Newmont posted its largest quarterly profit in five years. TECK lowered its FY24 copper production forecast for second time, citing labor issues and mining delays at Highland Valley Copper mine in Canada as now expects annual copper production of 420,000 to 455,000 tons vs prior expectations of 435,000 to 500,000 tons.
  • In Energy: oil driller SDRL shares jumped after Bloomberg reported RIG was in talks to merge with its rival offshore drilling contractor. Discussions are ongoing about the potential structure of a combination. Refiner VLO shares slip following a -86% decline in Q3 profit citing weak refining margins (Q3 refining margins fall to $2.41 billion from $5.41 billion last year)

Internet, Media & Telecom

  • In Media: TKO said it would acquire some of EDR’s sports assets in a deal valued at $3.25 billion. SIRI was resumed Underperform and $23 tgt at Bank America calling it a “show-me-story” due to a challenging sub outlook, with buybacks stalled due to several factors (e.g. de-levering).
  • In Telecom: TMUS added 865,000 postpaid phone customers in Q3, its highest for the period in a decade, surpassing estimates of 727,500 additions and now expects 2024 postpaid net customer additions to be between 5.6-5.8M vs prior view of 5.4-5.7M. VZ was downgraded to Sector Weight (from OW) at Keybanc noting results were below expectations and sees limited room for EBITDA acceleration in 2025 and likely declining FCF growth.

Hardware & Software movers:

  • CLS gives the EMS sector a boost (SANM, JBL, BHE) as Q3 sales of $2.5B grew 22.3% y/y, with 42% growth from its hyperscale-heavy datacom segment (CCS), offsetting a 5% y/y decline in its industrial segment (ATS), while Volumes and mix drove record adjusted EBIT margin of 6.7%.
  • IBM shares slipped despite positive AI commentary as missed on Q3 revs, beat on EPS as software strength was offset by consulting and infrastructure weighing on results.
  • NOW posted 150bps of Q3 cRPO upside, in line with Stifel’s expectations, driven by strong NNACV outperformance (~100bps) and modestly higher early renewals (~50bps). Stifel notes Q4 cRPO guidance came in line with consensus (21.5% Y/Y-CC).

Semiconductors:

  • LRCX shares rose on results, boosting the semi equipment space (AMAT, KLAC) which was hit a week ago on softer ASML results. LRCX reported better-than-expected F1Q(Sept) results and guided above consensus for F2Q(Dec), even with China expected to decline mid-teens QQ. Overall, Lam CY24 revenue is on track to grow +13% YY, led by DRAM, China, and Foundry. Yet the big elephant is China and its impact on WFE spending next year.

_________________________________________________________________

Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

Live Trading

Open an Account

Paper Trading

Register