Mid-Morning Look

Monday, December 04, 2023

U.S. stocks slip on the open amid profit taking in big tech as the S&P, Dow and Nasdaq look to extend their weekly winning streaks to six after strength last Friday! Early weakness in mega cap tech (AAPL, AMZN, GOOG, META, NVDA) pressuring the major averages, while consumer staples (XLP) among early leaders. Stocks and bonds retreated as traders paused after November’s blockbuster rally and debated the case for interest rate cuts. Bitcoin prices surged to 20-month highs above $42,000 while gold hit an all-time peak of $2,152.30 an ounce overnight before tumbling more than 2% back below $2,050 in volatile trading amid investor speculation that interest rates will fall next year. Traders are now pricing in a 70% chance for a rate cut by March, CME‘s FedWatch Tool showed despite several Fed members, including Fed Chair Powell on Friday, downplaying chances of any near-term cuts. Note the S&P 500 index came into the week at fresh 52-week highs. Pressuring equities on Monday were higher U.S. Treasury yields, and a bounce in the dollar.

Economic Data

·     Factory Orders for October slid (-3.6%) M/M to $576.8B, vs. the (-2.6%) decrease expected and the 2.3% rise in September (revised from +2.8%), the U.S. Census Bureau said.

Sector Movers Today

·     Solar (FSLR, SPWR, ENPH, SEDG), nuclear names (CCJ, UUUU) moved high, possibly being helped by COP 28 headlines as several countries (16) have officially pledged to TRIPLE nuclear energy by 2050, including the U.S., Canada, Japan, France, and the UK.

·     In Aerospace & Defense: South Korea agreed to buy an undisclosed number of ERJ’s C-390 Millennium cargo aircraft, the aerospace company said; SPCE shares fell after Richard Branson told the Financial Times that he doesn’t plan further investments in the space tourism startup he founded; SAIC shares strong as Q3 top and bottom line results topped estimates and boosted its FY24 revenue view to $7.33B-$7.35B from $7.2B-$7.25B, above consensus $7.24B.

·     In Autos: GM was upgraded to Buy from Neutral at Mizuho and raised tgt to $42 saying sentiment on GM is at a bottom given weak consumer, 25% UAW wage hikes, Cruise, and EV challenges, are reflected in 10-year valuation lows. Firm notes the UAW strike is in the rearview mirror, production has resumed, and now sees idiosyncratic catalysts. CVNA was upgraded from Underweight to Neutral at JP Morgan and raised tgt to $40 from $25 as believes Carvana’s approach to retailing used vehicles had given it a multi-year head start in the online-only space of a fragmented used vehicle industry. FSR downgraded from Outperform to In Line at Evercore/ISI and cut tgt to $2 from $6 on production (again) reduced to 10k (from 13-17k reduced guide only 3 weeks ago). TSLA’s China-made electric vehicles (EVs) sales slid -17.8% in November y/y to 82,432 cars, China Passenger Car Association (CPCA) data showed; the biggest fall since December 2022 when Tesla’s sales of China-made EVs fell 21% on the year.

Stock GAINERS

·     ABSI +25%; announced a collaboration with AZN to deliver an AI-designed antibody against an oncology target.

·     BYON +6%; announced a restructuring plan targeting about $25 million of annualized reductions by early 2025 saying it would cut about 10% of the current employee base as part of the plan.

·     COIN +7%; shares of Cryptocurrency-linked stocks COIN, MARA, MSTR, RIOT rallied as Bitcoin extends gains to surpass the $42,000 mark, its highest level since April 2022 in what has been a massive upward momentum trend in 2023 (up 150% YTD).

·     CVNA +15%; was upgraded from Underweight to Neutral at JP Morgan and raised tgt to $40 from $25 as believes Carvana’s approach to retailing used vehicles had given it a multi-year head start.

·     EYPT +197%; after company announces positive data from trial of wet AMD treatment.

·     HA +180%; as ALK reached roughly $1.9 billion deal (includes debt) to buy HA with Hawaiian shareholders to receive $18 a share in cash under the deal after closing under $5 a share on Friday. https://tinyurl.com/4zuu23xm 

·     SAIC +6%; as Q3 top and bottom-line results topped estimates and boosted its FY24 revenue view to $7.33B-$7.35B from $7.2B-$7.25B, above consensus $7.24B.

·     SPOT +8%; announced a reduction in the company’s employee base by approximately 17% and estimates that it will incur approximately EUR 130M- EUR 145M in charges.

·     UBER +5%; shares jump just shy of all-time highs after being added to the S&P 500 index effective Monday, December 18, to coincide with the quarterly rebalance.

·     WBX +13%; as GNRC announced it made a minority investment in WBX and will take a seat on the EV-charging company’s board.

Stock LAGGARDS

·     ALB -4%; amid continued weakness in lithium space as prices been falling (52-week lows at $112 on 11/13 FWIW).

·     AMZN -2%; weakness in the large cap mega tech (AAPL, META, GOOGL, MSFT, NVDA, INTC ), as investors rotate into underperforming SMID stocks.

·     LULU -2%; was downgraded to EW from OW at Wells Fargo while the firm names NKE as a Top Pick, raises price target to $125 and maintains Overweight as expects a Q2 beat.

·     SPCE 12%; shares fell after Richard Branson told the Financial Times that he doesn’t plan further investments in the space tourism startup he founded.