Mid-Morning Look

Thursday, April 18, 2024

U.S. stocks opened in positive territory again, quickly faded, and has since rebounded as the S&P 500 attempts to snap its 4-day losing streak, the longest since the first week of January, and down roughly 5% from its all-time highs.  Weakness has come from semiconductors the last few days as ASML results yesterday sunk the group while TSM last night posted mixed results and commentary that is pressuring early. Early broad-based strength as 10 of 11 S&P sectors are in the green with the aforementioned technology the lone laggard. U.S. Treasury yields continued to move higher as investors weighed economic data (jobless claims today) and warnings from Federal Reserve officials that the decline in inflation may have stalled. Yields have jumped near five-month highs this week following stronger-than-expected inflation data last week. Markets are now pricing in a total of 42 basis points in cuts by the end of this year, down from more than 160 basis points in cuts expected in January. Bitcoin a strong rebound, at highs up nearly 5% at $63,775 (after dropping briefly below 60K yesterday). Earnings recaps from this morning below while NFLX in the tech space the highlight name reporting after the bell tonight.

• Weekly Jobless Claims unchanged at 212,000 vs. consensus 215,000 and from 212,000 prior week; the 4-week moving average unchanged at 214,500 from 214,500 prior week (previous 214,250); continued claims climbed to 1.812M vs. consensus 1.810M from 1.810M prior week.
• March Existing Home Sales fell -4.3% y/y to 4.19M unit rate vs. consensus 4.20M and down from Feb 4.38M; March inventory of homes for sale 1.11M units, 3.2 months’ worth; the national median home price for existing homes $393,500, +4.8% from March 2023.
• March leading economic indicators (LEI) fell (-0.3%) vs. consensus drop of (-0.1%); Feb leading economic indicators revised to +0.2%.

• In Chemicals: Deutsche Bank upgraded WLK to Buy from Hold and raising price target to $174, upside of 17% noting stock outperformance has occurred despite weak fundamentals in each of Westlake’s its commodity chains – chlor-alkali / PVC, ethylene / polyethylene, and epoxy. DBAB downgraded CBT to Hold from Buy saying there is a modest 3% upside potential to their upwardly revised $95 price target. LIN was upgraded to Buy from Neutral with an unchanged price target of $510 at Mizuho as believes LIN’s defensiveness and consistency in growing EPS should lead to market outperformance.
• In Life Sciences: the group was weak after German lab supplies maker Sartorius (SOAGY) posted Q1 results that missed expectations for order intake and revenues as order intake came in at 826.3M euros ($882.82M), while revenues reached 819.6M euros; company reported a (-6%) sequential decline in Bioprocessing Solutions order intake (equating to a 10% miss vs. expectations); shares of DHR, RGEN, AVTR, WAT, MTD, A, TMO were volatile.

• ALLY +7%; Q1 adj EPS of $0.45 topped the $0.33 consensus as Q1 consumer auto applications were a record 3.8Mm, driving $9.8B of origination volume; provision for credit losses rose to $507M from $446M y/y but down from $587M in Q4.
• DHI +3%; as Q2 revs rose 14% to $9.11B, above ests $8.15B and vs. $7.97B y/y; raised its FY24 rev outlook to $36.7B-$37.7B from the prior $36B-$37.3B, citing current market conditions and results for 1H of the year.
• DUOL +6%; to be added to the S&P 400 Index, replacing CABO, which moves down to the S&P 600.
• EBAY +2%; double-upgraded to Overweight from Underweight at Morgan Stanley as recommends pair trade with ETSY on the prospect of a narrowing valuation gap as eBay approaches growth thanks to a boost from AI.
• ELV +5%; Q1 beats as adj EPS $10.64 tops est. $10.53 on mostly in-line revs of $42.3B amid higher premiums in its commercial plans and lower-than-expected medical costs which was 85.6% for the first quarter and raises FY24 adjusted EPS view.
• GPC +11%; after earnings and raised its adjusted earnings per-share outlook for 2024.

• DHR -2%; along with weakness in WAT, RGEN and other Life Sciences after German comp Sartorius AG in bioprocessing, reported Q1 results that fell short of expectations.
• EFX -5%; shares dropped on mixed Q1 results, and weaker guide as sees Q2 revs $1.41-1.43B below est. $1.44B and adj EPS $1.65-1.75 vs est. $1.87; sees FY revs $5.67-5.77B vs est. $5.783B.
• ETSY -2%; Morgan Stanley downgraded to underweight saying after the COVID pull-forward, believes Etsy has reached a new level of saturation which May limit the medium-term GMS growth trajectory and multiple.
• LAC -27%; LAC shares tumbled as a 55M share Spot Secondary priced at $5.00.
• LVS -7%; reported Q1 profit above estimates (EPS $0.75 vs $0.62), but analyst noted while Q1 results out of Singapore were better than expected, results out of its Macau operations were a lot softer than expected.
• SNV -6%; after Q1 adj EPS $0.79 missed the $0.99 estimate on weaker revs $537.7M vs. est. $547M; Net interest income slipped 13% y/y citing lower average earnings assets and higher funding costs.
• TSLA -2%; was downgraded to Hold from Buy at Deutsche Bank and cut-price target to $123 (from $189) citing the high likelihood of Model 2 push-out and the company’s change of strategic priority to Robotaxi.
• TSM -4%; posted good beat for the Q and guided next Q and FY higher; said AI demand remains high but said global foundry sales will be weaker this year despite reaffirming their own FY guide and capex was not raised.