Mid-Morning Look

Thursday, January 02, 2025

U.S. stocks looked strong overnight despite news reports of two suspected terrorist attacks in New Orleans which killed 15 and injured others and Las Vegas where a car bomb went off, though didn’t injure anyone. Stock selling resumed on the open, with the biggest declines in Tech and Discretionary before a quick bounce and spike for major averages as investors look to start 2025 in solid fashion. The S&P 500 gained 23.31% in 2024 and was up 53.19% over past two years, the biggest 2-year % jump since 1997-1998, while the Nasdaq jumps as much as 1% this morning after a near 29% spike in 2024. TSLA shares declined after monthly Q4 deliveries disappointed investor expectations. Crypto seeing a big bounce with Bitcoin +2.35% to $97K, more than $5K off recent lows while some of the biggest laggards last year like solar (FSLR, ENPH, SEDG) are seeing some of the biggest bounces early. Nearly all eleven S&P sectors in the “green” early, paced by Energy (XLE), Technology (XLK) and Communications (XLC) all up over 1%. The US dollar hit 2-year highs, extending last year advances while Treasury yields dip slightly after popping in 2024.

• U.S. S&P Global December final manufacturing PMI at 49.4 (vs flash 48.3) and S&P Manufacturing PMI Final Actual 49.4 (Forecast 48.3, Previous 48.3).
• November construction spending unchanged (consensus +0.3%) at $2.153 trln, vs Oct +0.5% (prev +0.4%); US Nov private construction spending +0.1%, public spending -0.1%.

• In 2025 Aerospace & Defense outlook, Deutsche bank upgraded RTX to Buy from Hold (PT to $140 from $131) while downgraded LMT to Hold from Buy (PT to $523 from $611) and TDG to Hold from Buy (PT to $1,348 from $1,444). The firm said they are positive on the OE complex entering 2025, supported by improving production momentum at Boeing exiting the IAM strike and extensive buffer inventory of engines and clean fuselages to support the ramp. GE remains the top pick in aftermarket and RTX, NOC, and CW are favorite ideas in defense. Raymond James with changes in Defense & Gov’t IT Services as they upgraded CACI, MMS, & VVX to Outperform and downgraded PSN and LHX to Market Perform. While 2023 and the first 11 months of 2024 were the best periods for the Government Service cohort in more than 20-years; a new administration, a provocative group of Political appointee nominations, and DOGE have significantly dented investor psyche, the trading multiples, and halted stock momentum over the last 45-days. Raymond James said they believe the dislocation in equities has created opportunities across our Gov IT coverage.

• MODG +12%; was upgraded from Hold to Buy at Jefferies and raised tgt to $13 from $11 saying shares are pricing Callaway at a discount to GOLF despite faster 3Y growth, and ascribing no value to Topgolf. While Top Golf fundamentals are weak, and MODG has suffered mis execution, and said shares appear oversold.
• NET +7%; was double upgraded from Sell to Buy at Goldman Sachs and raised tgt to $140 from $77 noting their Sell thesis was predicated on post COVID normalization driving more muted revenue growth, and the company’s progress in network security and in the enterprise taking longer and costing more than planned.
• UBER +4%; added to Goldman Sachs conviction list saying sees a company that can continue to deliver on its February 2024 Investor Day commitments despite the rise of autonomous vehicles.
• UEC +8%; along with gains in UUUU in uranium sector after Kazatomprom announces temporary suspension of production at JV Inkai.

• FUL -5%; cuts FY24 adjusted EPS view to $3.84 from $4.10-$4.20 (est. $4.16) on in-line rev guidance of $3.57B, but cuts FY24 adjusted EBITDA view to $594M from $610M-$620M noting Q4 results were adversely impacted by weaker than expected conditions and delayed orders.
• NMRA -80%; said a study of major depressive disorder treatment navacaprant didn’t demonstrate a statistically significant improvement on the primary endpoint of change from baseline in a scale that measures depression at Week 6 or the key secondary endpoint of change from baseline in a separate scale
• SOFI -4%; was downgraded from Market Perform to Underperform at KBW Inc after shares rallied +57% in 2024, including +100% since September largely driven by investor optimism regarding high-growth FinTechs following the election.
• TSLA 4%; reported Q4 deliveries 496k actual vs. 512k estimated; Total Q4 production was 459,445; the company delivered a total of 1,789,226 vehicles in 2024 (-1% YoY); Tesla also shared that they deployed 11GWh of energy storage in Q4 2024, up 243% YoY.