Mid-Morning Look

Monday, August 19, 2024

U.S. stocks are quiet to start the week, with the S&P 500 and Nasdaq coming into today riding 7-day win streak ahead of the Jackson Hole Symposium. RyanDetrick tweets: “The S&P 500 hasn’t had an 8-day win streak since Nov ’23. It could happen tomorrow. The past 4 years that had an 8-day win streak during the year did this. 2013 – 29.6%, 2017 – 19.4%, 2019 – 28.9%, 2021 – 26.9%, while 2024 currently up 16.4% YTD.” Overseas, the Nikkei 225 snapped its 5-day win streak, where it gained over 8% as the Japanese yen advanced overnight. In lone economic data point today, July leading economic indicators fell -0.6% vs consensus drop of -0.3%, while there were a few Fed speakers out over weekend, but all eyes on Jackson Hole this week. Markets barely moving to start the day, holding the recent rally. Note the S&P 500 (SPX) has rallied 8.5% and the Nasdaq 100 up 9.4% off the bottoms we saw on August 4^th following the weaker jobs report the Friday prior. Market concerns about a hard landing have eased following signals of consumer resilience (WMT comments last week), and initial jobless claims but investors still seem to be a bit on edge. Also, the 2024 Democratic National Convention kicks off in Chicago on Monday where Vice President Kamala Harris is expected to ceremonially accept the Democratic nomination. Note a recent survey (Reuters) showed the Federal Reserve is expected to cut Fed funds rate by 75 bps this year, note 55 of 101 economists (vs 50 bps in July). U.S. economic growth to average 2.5% and 1.8% in 2024 and 2025; median probability of recession in 2 years 30%. So, as long as today’s low does not exceed Friday’s low of 5525.17, it would be the 10th straight day of higher lows for the SPY in an incredible bounce off August lows.

• In Homebuilders: TMHC was upgraded to Buy from Neutral at BTIG with a $78 price target after hosting investor meetings with management last week. The firm cites valuation for the upgrade and says it has increased confidence in the roadmap for how Taylor Morrison gets to its long-term structural goals beyond the next 12 months. DHI was mentioned positively in Barron’ saying it is the home builder stock to buy now as shares look attractive; noting it’s a bet on a company, one that has historically paid off handsomely for investors, with shares returning about 25% annually over the past 10 years.

• FUBO +13%; shares rose after FOX, WBD and DIS were blocked by a judge from launching their streaming sports service one week before its rollout.
• PANW +2%; ahead of earnings this week and general strength in software stocks (CRWD, SNOW).
• SOND +19%; after saying it has reached a series of deals to raise capital and integrate its brand into MAR’s system, as the alternative-lodging company seeks to strengthen its financial health. Sonder operates more than 9,000 boutique hotel rooms and apartment-style short-term rentals.
• XPER +20%; said late Friday that it agreed to sell Perceive assets to AMZN for $80Mm in cash.
• ZIM +14%; after Q2 results as EPS $3.08 topped consensus of $1.79 and sales rose 48% y/y to $1.93B topping the $1.78B estimate and said is on track to achieve double-digit volume growth target in 2024.

• BROS -2%; downgraded along with SG and SHAK to Neutral from Overweight at Piper in the Restaurant sector saying coming out of earnings season, they are tempering their view on the Fast Casual sub-sector, which has navigated this year quite well thus far and think the risk-reward has become more balanced at current levels, hence the rating changes.
• CING -21%; files for common stock offering up to $2.9M.
• EL -1%; after saying President & CEO Fabrizio Freda announces intention to retire at the end of fiscal year 2025 and guided FY25 EPS $2.75-$2.95 (below est. $3.96) and forecasts 2025 organic net sales -1% to +2%; says board considering internal and external candidates as part of CEO succession plan.
• HPQ -3%; downgraded to EW from OW as Morgan Stanley as sees limited upside to valuation with HPQ trading ~1 standard deviation above its historical average, and limited upside to FY25-26 estimates as the PC market recovery and improving print hardware trajectory are largely priced in. PT unchanged at $37.
• LQDA -36%; said the U.S. FDA has granted tentative approval of YUTREPIA inhalation powder to treat adults with pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease but stopped short of a traditional approval.
• RILY -16%; shares extended last week’s losses after the investment bank warned of a Q2 loss, and noted the company received SEC subpoenas, while co-founder and co-CEO Bryant Riley on Friday offered to buy RILY at $7 per share or $212M.