Mid-Morning Look

Friday, August 16, 2024

U.S. stocks off to a choppy start, but bouncing off overnight weakness after the S&P 500 and Nasdaq closed near the highs for a 3^rd straight day on Thursday and are up 6-straight days coming into the day, while most major averages have recouped their August declines on improved sentiment. After tumbling to start August on weak jobs data/recession fears, markets have recovered in a “V” formation, the best 6-day stretch since Nov 2022 and up around 8% off August lows. The rally has been led by in-line to slightly better CPI/PPI inflation data, upbeat earnings results from retailing giant WMT/positive commentary about the health of the consumer, currency markets have leveled off, Treasury yields have fallen, oil prices have eased and Fed rate cut expectations continue to grow for 2024 (mkts currently baking in about 100-bps worth of cuts into December despite the Presidential election in November – with 25 seen as a certainty in Sept, possibly 50bps).  The Japanese yen -0.7% to 148.18, more than 100-bps roll off overnight highs (off the seven-month high of 141.675 per dollar touched during last week’s market carry trader concerns and well beyond the 38-year lows of at the start of July 161.99). Gold prices soar back near record highs. New flow quiet outside of a few data points (see below), and few macro/geopolitical developments overnight.

• University of Michigan surveys of consumers sentiment prelim Aug 67.8 above consensus 66.9 and vs final July reading of 66.4; the current conditions index prelim aug 60.9 vs final July 62.7 and expectations index prelim aug 72.1 vs final July 68.8. The 1-year inflation outlook prelim for Aug 2.9% and 5-yr at 3%, both in-line with prior reading.

• COHR +4%; posted results slightly above investor expectations and guided September non-GAAP earnings within investor expectations; Revenues increased 9% y/o/y (vs. +6% consensus) and EPS came in slightly above the midpoint of guidance.
• EBS +32%; along with strength in GOVX, SIGA given the recent Monkey Pox headlines overseas; more cases were found outside Africa. A case of mpox is reported in Pakistan, while another was reported in Sweden on Thursday.
• HRB +16%; after better Q4 results and guidance, reports a new share buyback authorization of $1.5B; FY24 total revenue/adjusted EBITDA/EPS grew 4%/5%/15% y/y, respectively as the tax industry’s FY24 season was better than originally expected.
• MCHP +1%; upgraded to Overweight from Neutral at Piper and raise tgt to $100 citing numerous growth levers set to turn on in the near term for the company and says Microchip is set up for a substantial gross margin uptick as underutilization and inventory reserve charges abate and reverse.
• PL +10%; announced that its first hyperspectral satellite, Tanager-1, along with 36 SuperDoves (Flock 4BE) will launch on the Transporter-11 Rideshare mission with SpaceX today from Vandenberg Space Force Base in California.
• RILY +28%; shares jumped after CEO Bryant Riley made a proposal to buy out the investment bank, he disclosed in a regulatory filing on Friday. Shares have tumbled this week after the Chairman disclosed subpoenas from regulators and said the company would suspend its dividend.

• AMAT -2%; beat for the Q and guided in line which disappointed after beat while China was weaker down 24% Q/Q.
• BNTX -4%; said its combination vaccine candidate against influenza and Covid-19, developed with PFE, missed on one of its two main goals in a late-stage study.
• EL -1%; was downgraded to Neutral from Buy at Bank America and cut its tgt to $100 from $140 to reflect the reality of weaker than expected beauty category performance in China (historically around a third of sales).
• LUMN -4%; downgraded from Equal Weight to Underweight at Wells Fargo while raising its tgt to $4 from $1.75 after recent run saying the risk/reward not as favorable (+378% past month vs S&P -2.0%) and now trades nearly in line with peers like T, VZ and FYBR
• SIMO -4%; double downgraded to Underperform from Buy at Bank America as does not expect any meaningful growth after the 1H24 upturn.