Closing Recap
Monday, October 28, 2024
Index |
Up/Down |
% |
Last |
DJ Industrials |
273.63 |
0.65% |
42,388 |
S&P 500 |
15.47 |
0.27% |
5,823 |
Nasdaq |
48.58 |
0.26% |
18,567 |
Russell 2000 |
36.07 |
1.63% |
2,244 |
U.S. stocks opened higher following strength in overnight futures and then did a whole lot of nothing the remainder of the day, holding those gains as the S&P 500 Index traded in a narrow 10-point range all afternoon ahead of a deluge of earnings results (more than 33% of the S&P reports this week) and a flurry of key economic data on tap as well. The Nasdaq hit highs of 18,671.01 (in-line with the July 11th high), just below Friday’s record high of 18,690.01 as tech remains a leader (Nasdaq up 7 straight weeks and rising and up 8 of the last 9 trading days into key earnings this week including AAPL, AMZN, AMD, GOOGL, META and MSFT). One of the most surprising market actions was the broad strength in Smallcap stocks, as the Russell 2000 outperformed rising over 1.7% despite a sharp jump in Treasury yields and rates overall. Transportation stocks rallied over 1% as the drop in oil prices was seen as a tailwind to airlines and truckers. Stocks still have no concern with just one week away from the Presidential election, as the S&P 500 Index is up over 40% y/y and 22% YTD.
Oil stocks fall as oil prices tumbled widely anticipated Israeli airstrikes against Iran did not hit crucial oil facilities. Oil futures rose last week on worries that the impending Israeli attack, in retaliation for an Iranian missile barrage against Israel on Oct. 1, would target Iran’s oil facilities and potentially spark a wider war in the Middle East. Saturday’s strikes by Israeli jets and missiles instead targeted Iranian air-defense sites and military infrastructure
Reminder that Federal Reserve officials, following their internal guidelines, have gone silent to prepare for their interest-rate policy meeting on Nov. 7 (blackout period has begun). Despite the heavy dose of data coming up this week, based on speeches from Fed officials over the past six weeks, economists expect the central bank to lower its benchmark interest rate by a quarter percentage point to a range of 4.5%-4.75%. Data this week still includes, Tuesday brings a consumer-confidence survey and JOLTs job-openings data and Wednesday a look at third-quarter GDP. On Thursday, Personal-consumption expenditures inflation data, and the October jobs report lands Friday morning.
Economic Data
- Dallas Fed Texas manufacturing index of general business activity -3.0 in October vs -9.0 in September; Dallas Fed Texas manufacturing output index 14.6 in October vs -3.2 in September
Commodities, Currencies & Treasuries
- U.S. WTI crude oil futures settle at $67.38/bbl, down $4.40, or 6.13% and Brent crude settle at $71.42/bbl, down -$4.63, or 6.09% after Saturday’s retaliatory strike by Israel against Iran’s military bypassed oil and nuclear facilities, not disrupting energy supplies. Separately, the U.S. Department of Energy announced on Monday a new solicitation for up to 3 million barrels of oil for delivery to the strategic petroleum reserve (SPR) from April 2025 through May 2025. Natural gas prices tumbled 9.8% to $2.309/mmBtu ahead of tomorrow’s expiration.
- The yen hit three-month lows against the dollar, as the buck rose as much as 1% to a high of 153.88 (before pulling back), the yen’s weakest level since July as Japan’s ruling coalition’s election loss raises political and monetary policy uncertainty, while the U.S. dollar headed for its biggest monthly gain since April 2022. The cheaper currency buoyed Japan’s export-orientated stocks, sending the Nikkei 225 up nearly 2%. The yen is down over 6% in October so far.
- Gold prices edged higher $1.30 to settle at $2,755.90 an ounce in lackluster action as the dollar slipped and Treasury yields rose. Gold’s record rally took a breather as investors awaited a series of U.S. economic data due this week for cues on the Federal Reserve’s interest rate outlook.
- Yields on benchmark 10-year Treasuries rose to a three-month high of 4.29%, propelled by two weak treasury auctions. The U.S. government posted two bond auctions with the first showing the U.S. Treasury sold $69 bln 2-year notes at high yield 4.130%, above the 4.122% when issued prior as bid-to-cover ratio was at 2.50 with direct bidders taking 23.84%, 21.0% of six-month bills to primary dealers and indirects getting 58.23%. Later, the US gov’t sold $70B 5-year notes at high yield 4.138%, above the prior 4.122% when issued with a softer bid-to-cover ratio 2.39, as Primary dealers take 14.17% of U.S. 5-year notes sale, direct 9.47% and indirect 76.35%
Macro |
Up/Down |
Last |
WTI Crude |
-4.40 |
67.38 |
Brent |
-4.63 |
71.42 |
Gold |
1.30 |
2,755.90 |
EUR/USD |
0.0023 |
1.0816 |
JPY/USD |
0.96 |
153.26 |
10-Year Note |
0.056 |
4.288% |
Sector News Breakdown
Retail, Consumer Staples & Restaurants:
- In Restaurants: MCD Chief supply chain office Cesar Pina for North America issued a statement ruling out beef patties as E. Coli outbreak source, the company will stop sourcing onions from Taylor Farms Colorado Springs facility indefinitely. CMG shares outperformed, hitting their highest levels since the middle of July. SHAK tgt was raised to $135 from $122 at Oppenheimer saying new management possesses tools to drive mid-teens unit growth and could soon communicate a refreshed target vs. its legacy 450-unit goal.
- In Retail: REAL shares dropped as issues upbeat guidance, but notes CEO departs; BYON shares got a bounce after tumbling last week on earnings and guidance, boosted after executive chairman Marcus Lemonis discloses purchase of ~157k shares in filing.
- In Consumer Products: CL was downgraded to hold from buy at Stifel, saying the consumer-products maker’s third quarter and outlook were solid but already factored into the shares.
- In Home Improvement/furniture: Piper lowered Q3 and Q4 estimates for Wayfair (W) ahead of Q3 earnings saying survey work and industry checks suggest demand trends in home furnishings have fallen off in Sept and Oct – due to pre-election consumer malaise while saying Wayfair may also see margin pressure in Q3/Q4.
Autos, Leisure, Gaming & Lodging:
- In Autos: Volkswagen’s (VWAGY) mgmt discussed a list of measures for its brand that could achieve savings of 4 billion euros ($4.32 billion), German finance newspaper Handelsblatt reports, citing company sources. The measures include pay cuts of 10%, no wage increases for the next two years and potential closures of some sites in Germany.
- In Cruise lines: RCL, VIK, NCLH, CCL, shares advanced early following the 6% drop in oil prices overnight
Energy, Industrials and Materials
- In Airlines: UAL climbing with other airline stocks AAL, DAL, JBLU, LUV, ALK, which are getting a boost as a drop in crude prices signaled a potential impact on jet fuel costs.
- In Aerospace & Defense: BA launched a widely anticipated capital raise to bolster its reserves amid a prolonged strike saying it plans to announce concurrent offerings of 90 mln shares and $5 bln mandatory convertible.
- In Materials: cement maker CX shares dropped after lowering guidance saying expects a low single-digit percentage decline in 2024 Ebitda, below the prior view of mid-single-digit Ebitda growth. Cemex cut its estimates for sales volume, and now sees low to single-digit declines for cement and aggregates and a mid-single-digit decrease for ready mix concrete
- In Energy: CVX shares fell with other energy stocks BP, XOM, COP, SLB, amid a drop in Brent crude. In Coal: CNX was downgraded to Hold on valuation at Truist noting CNX reported a Q3 beat, but as was the case for the past few earnings calls, the primary topic of discussion continued to be New Tech FCF. In utilities, HE shares rose after per regulatory filing late Friday, Citadel’s Griffin owns ~8.9M shares for ~5.4% passive stake. Nuclear stock momentum continued with shares of SMR, OKLO, CEG, VST, TLN moving higher initially (on growing need by companies involved with AI to grab more power).
Financials
- In Services: ADT announced a proposed secondary public offering of 56M shares of the company’s common stock held by certain entities managed by affiliates of Apollo Global Management.
- In brokers: HOOD said it will allow trading in U.S. presidential election event contracts, as it seeks to capitalize on growing retail demand for betting products. This will offer users a chance to profit from speculation on the close contest between Vice President Kamala Harris and former President Donald Trump.
- In Banks: CBU was upgraded to Strong Buy from Market Perform at Raymond James to reflect the improved earnings outlook for Community’s bank and continued strong growth from its three-fee based-businesses, employee benefits, insurance, and wealth management. HTBI was downgraded to Market Perform from Outperform at Raymond James and upgraded ABCB to Outperform from Market Perform with a $67 price target. BOH shares jumped about 10% after Q3 results topped consensus earlier; hits 10-month highs.
Biotech & Pharma:
- ABBV said it would acquire privately held Aliada Therapeutics for $1.4 billion in cash, gaining access to the therapy developer’s Alzheimer’s disease drug candidate ALIA-1758.
- EW upgraded from Underperform to Market Perform at Bernstein saying now as investor expectations have come down for TAVR and as EW’s 2025 outlook is starting to come into focus, Bernstein sees risk/reward as more balanced.
- EVOK shares soared after saying Gimoti, its nasal spray version of drug metoclopramide, when given to patients on GLP-1 weight loss treatments showed better reduction in symptoms compared to the oral version of metoclopramide.
- GLUE entered into an exclusive agreement with NVS to advance its medicines for immune-mediated conditions. Novartis agreed to pay Monte Rosa $150 million up front. Monte Rosa is eligible to receive up to $2.1 billion in development, regulatory, and sales milestones.
- MRK and MRNA initiate phase 3 trial evaluating adjuvant V940 (mRNA-4157)+KEYTRUDA (pembro) in Stage II-IIIB NSCLC Pts who did not achieve a pathological complete response after neoadjuvant KEYTRUDA+Pt-chemo.
- VERA shares higher after reported additional data from a mid-stage study on Saturday testing its kidney disease drug, atacicept, as a potential treatment for IgA nephropathy; at week 96, atacicept helped in reducing excess levels of a protein in urine and stabilizing kidney function levels, compared to placebo.
Healthcare Services & MedTech movers:
- In Medical devices: PHG shares slumped as the medical device maker cut its 2024 sales guidance to grow by 0.5%-1.5%, down from prior view 3%-5% due to weak demand in China. PHG also reported weaker than expected Q3 sales, down 0.5% YoY vs consensus estimate for 2.1% growth; order intake falls 2% vs 9% growth in Q2. PRCT beat expectations with a narrowed third-quarter loss and lifted its outlook for 2024.
Technology
- In Computer Storage & Hardware: CDW was downgraded to Neutral (from OW) at JP Morgan and lower PT to $235 from $260 saying shares are likely to find it challenging to justify the premium valuation that the shares have traded at in recent years given the continued headwind from sluggish Enterprise spending and the limited levers that the company has been able to use to offset the headwinds to EPS growth. NTNX upgraded to Overweight from Equal Weight at Morgan Stanley saying share setup looks attractive as Nutanix positions itself to capture a portion of VMware’s greater than $5B hypervisor business.
- In internet: a report out of The Information indicated that META Develops AI search engine to lessen reliance on GOOGL. The Facebook owner is working on a search engine that crawls the web to provide conversational answers about current events to people using its Meta AI chatbot.
- In Gaming: RBLX added to Wedbush "best ideas" list saying it expects the co’s revenue growth to outpace the industry for the next three years on continued traffic growth, growth in advertising and potential for adding recurring revenues from season passes and a change to the developer pay structure.
- In Software: Sierra, a software startup Co-founded by former CRM Salesforce Co-CEO Bret Taylor, has raised $175M in a new funding round led by GreenOak’s Capital that gave it a $4.5B valuation, the company said on Monday.
- In Telecom: ATannounced a multi-year purchase agreement with GLW to provide next-generation fiber, cable, and connectivity solutions to support the expansion of AT&T’s fiber network and help bring high-speed internet to more Americans. GLW signs $1B multi-year deal to supply optical fiber, cables to expand AT&T’s fiber network.
- In Semis: Morgan Stanley downgraded UMC and GFS to Equal weight from Overweight given potential wafer pricing pressure from both TSMC and China’s competition. Global Foundries continues to benefit from a strategic position, but benefits need to be weighed against too slower semi market recovery and more challenging competitive backdrop. TSM shares dropped following news reports that the company violated trade restrictions with China. ON shares outperformed following earnings and guidance results this morning.
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.