Mid-Morning Look

Monday, January 06, 2025

U.S. stocks are surging to kick off the week, adding to the broad-based rally on Friday as investors put the recent 5-day losing streak by the S&P 500 and Nasdaq in the rear-view mirror, as we head to several important market catalysts the next two weeks. The S&P 500 (SPX) moves back above the 6,000 level, the Dow nears 43,000 and the Nasdaq is approaching 20,000. Markets begin to “ease-in” to earnings season later this week (DAL, WBA, STZ) before the big banks start things off in full next week. We get the FOMC Minutes from the December FOMC Meeting mid-week, the Consumer Electronics (CES) trade show begins tonight in Las Vegas with NVDA CEO the keynote speaker, several Fed speakers and key payroll data (JOLTs, ADP, Nonfarm payrolls) are expected throughout the week. After pulling back from overnight highs, the 10-yr yield is back at those highs, rising 3.4bps to 4.63%. Bitcoin resumes upward momentum after a weak start to 2025, surging around 3% back above $102,000 after lows of $92K the week prior (still below ATH above $108K). Technology (XLK) up over 2% led by a 4% spike in semiconductors (SOX) while defensive Utilities (XLU) -1.3% and Consumer Staples (XLP) were the only S&P sectors lower. A report in the Washington Post overnight suggested the incoming Trump administration could adopt a less aggressive stance on tariffs than previously anticipated, which provided the upward momentum in stocks today (especially sectors most vulnerable to tariffs such as autos, solar, metals, and materials).

• U.S. Nov factory orders fell -0.4% vs. consensus -0.3% and vs Oct +0.5%; Nov factory orders ex-transportation +0.2% vs Oct +0.2%, factory orders ex-defense unchanged vs Oct +0.5%, nondurables orders +0.4% vs Oct +0.2%, total manufacturing inventories +0.3% vs Oct -0.1%. U.S. Nov nondefense cap orders ex-aircraft revised to +0.4% from +0.7%; Nov shipments revised to +0.3% from +0.5%

• In Consumer Finance/Lending: COF and DFS both upgraded to Overweight from EW and SYF upgraded to Overweight in the Consumer Lender Space at Barclay’s while in Mortgage Finance, the firm downgraded ESNT and NMIH to Equal weight (from OW) and maintains Overweight on PFSI and COOP. Heading into 2025, the firm said they favor consumer finance stocks with positive catalysts that have not been fully priced in and could drive additional upside as upgrade COF, DFS, SYF. For ESNT , Barclay’s says mortgage credit should remain benign, but credit normalization has begun more meaningfully as vintages continue to season, which means the default rate could accelerate in upcoming quarters.
• In Brokers, Asset Managers: SF announced it has signed a definitive agreement to acquire Bryan, Garnier & Co., a leading independent full-service investment bank focused on European technology and healthcare companies. PIPR was downgraded from Buy to Neutral at Goldman Sachs. At UBS, the firm upgraded RJF to Buy because the company’s differentiated advisor platform has enabled superior recruitment and retention; upgraded LPLA to Buy (tgt to $390 from $280) as anticipates an acceleration of client asset and cash growth over the coming quarters amid a more bullish environment for WM firms and downgraded AMP to Neutral as its re-rating thesis has played out and the stock now trades in line with publicly traded WM peers on FY2026 estimates.
• In Banks: UBS downgraded GS to Neutral from Buy with $610 tgt. Citigroup (C) was upgraded to Overweight from Equal Weight at Barclays with $95 tgt saying they remain constructive on bank stocks for 2025 as EPS growth accelerates (improving loan growth, increasing capital markets activity, return of positive operating leverage, share buyback) and P/E multiples expand. KRNY upgraded from Neutral to Overweight at Piper noting since the end of 2023, shares have fallen 24%, versus about a 16% rise in the Nasdaq Bank Index (and peers about flat). As a result, KRNY shares are now trading at just ~70% of tangible book value, versus peer banks at 97%. Wells Fargo with several changes, as upgraded WBS, COLM and BANC to Overweight and raised tgts.

• CPRI +8%; was upgraded to Outperform at BMO Capital and raised tgt to $31 from $25 as sees a meaningful, under-appreciated opportunity to narrow an inflated Equity-to-Enterprise Value Gap.
• FUBO +165%; DIS to combine its Hulu + Live TV business with Fubo and become majority owner of the resulting company. The combined business will operate under the Fubo publicly traded company name (FUBO) led by the existing Fubo mgmt team; Fubo and Hulu + Live TV will continue to be available to consumers as separate offerings.
• NUE +5%; steel stocks (STLD) among sectors benefitting from media report the incoming Trump administration could adopt a less aggressive stance on tariffs than previously anticipated.
• PYCR +23%; PAYX is in advanced talks to acquire smaller payroll processing rival PYCR, people with knowledge of the matter told Bloomberg. Talks may still fall apart, but if they are successful a deal may be announced as soon as this week, said the sources https://tinyurl.com/sudpaesu
• SEDG +17%; after announced job and cost cuts while the solar industry rallied on reports in the Washington Post that President-elect Donald Trump is considering tariff plans that would be applied to every country, but would cover only critical imports, a shift from his plans during the 2024 presidential campaign.
• UBER +3%; shares rose after announces $1.5B accelerated share buyback program

• D -2%; as defensive utilities (SRE, AEE, ES, ETR) among biggest decliners in S&P 500
• GIS -2%; as defensive consumer staples (CLX, CHD) also lagging broader market strength.
• TMUS -4%; RBC downgraded to Sector perform saying although execution appears solid, sees less favorable reward/risk based on current valuation and what it views as stronger prospects elsewhere.