Mid-Morning Look

Wednesday, January 08, 2025

U.S. stocks looked higher overnight but quickly turned lower this morning after a media report from CNN said President-elect Donald Trump is considering declaring a national economic emergency to provide legal justification for a large swath of universal tariffs on allies and adversaries, four sources familiar told them. The declaration would allow Trump to construct a new tariff program by using the International Economic Emergency Powers Act, known as “IEEPA,” which unilaterally authorizes a president to manage imports during a national emergency. The headlines pushed U.S. stocks lower while boosting the 10-yr Treasury yield to 8-month highs of 4.73% and the US dollar index (DXY) gained +0.6% to 109.25 while the euro slumped -0.5%. All eleven S&P sectors are in negative territory, with the biggest declines in Utilities, Industrials and Communications while Smallcaps are down over -1.5% on tariff impact concerns. Federal Reserve Governor Christopher Waller said earlier this morning that he doesn’t think that proposed import tariffs from the incoming Trump administration will lead to upward pressure on inflation. Next up, this week’s Treasury auction cycle concludes at 1pm New York time with $22B 30-year bond reopening at 1:00 PM and the FOMC minutes from the Dec 17&18 meeting get released at 2:00 pm. Reminder that U.S. stock markets are closed tomorrow Thursday January 9^th in observance of former President Jimmy Carter’s passing and reopens Friday with nonfarm payroll data.

• Weekly Jobless Claims fell to 201,000 from 211,00 the prior week (and vs. consensus 218,000); the 4-week moving average fell to 213,000 from 223,250 prior week; continued claims climbed to 1.867M from 1.834M prior week (vs. est. 1.867M) and the US insured unemployment rate unchanged at 1.2%.
• November wholesale sales +0.6% (consensus unchanged) vs Oct -0.3% (prev -0.1%); Nov wholesale inventories unrevised at -0.2% (consensus -0.2%); Nov stock/sales ratio 1.33 months’ worth vs Oct 1.34 months.

• In Solar, Alternative Energy sector: Citigroup downgrade SEDG to Sell due to its tight liquidity, challenging earnings outlook, upgraded HASI to Buy as it is more insulated from potential policy changes and is out GNRC on negative catalyst watch in 2025 outlook call. Citi noted last year proved tumultuous for the sector as commodity, regulatory and political changes weighed on the stocks. To make things worse, several guidance cuts led to heightened volatility and lower investor confidence. Citi said they remain cautious on residential solar largely due to dependence of companies on incentives and relatively weaker financial flexibility.
• Healthcare Technology: Keybanc said its key ideas for the next 12 months include ALIT, CERT, HCAT, HQY, SLP, TALK, for which it sees: 1) NTM estimates largely de-risked over the next 12 months; and 2) attractive and/or deeply discounted valuations. The firm also upgraded HCAT to Overweight (from Sector Weight) given sustained healthy utilization levels it is seeing from its credit card data, which should bode well for hospital tech budgets and early stages of healthy margin expansion into healthier tech revenue growth. In earnings, SLP reported a solid top-line beat driven by strength in its higher margin Software business while noted that services revenue faced some temporary headwinds this quarter (client-driven data delays that postponed the ramp up of projects into 2Q).
• In Aerospace & Defense: AIR shares rose after earnings; Q2 adj EPS $0.90 vs. est. $0.84; Q2 revs grew 26% y/y to $686M vs. est. $654.09M; LDOS downgraded to Hold from Buy at TD Cowen saying the company faces a transition (low growth) C25 following C24’s explosive growth, which limits its upward re-rating prospects; LHX was upgraded to Outperform from Market Perform at Bernstein citing valuation following the stock’s post-election pullback; NOC was upgraded to Overweight from Equal Weight at Wells Fargo and raised tgt to $595 from $505; RKLB announced that it was selected to be a member of a team of subcontractors, led by KTOS to be part of a 5-year OTA contract for the MACH-TB 2.0 under Task Area 1; SAIC was downgrade to Hold from Buy at TD Cowen and cut tgt to $120.

• ANGO +29%; after earnings results top consensus and slightly improves FY adj EPS loss view while maintains FY gross margin and revenue outlooks.
• BSX +4%; announces agreement to acquire Bolt Medical, Inc. to further Co’s strategy to address coronary and peripheral disease; deal includes upfront payment of about $443M for 74% stake not yet owned.
• CART +4%; was selected for inclusion in the S&P MidCap 400 index effective Jan. 14, when ENOV will move to the S&P SmallCap 600.
• EBAY +12%; after META said it would test showing the firm’s listings on Facebook Marketplace in Germany, France and the U.S. that will enable buyers to browse eBay listings and then complete their transactions on eBay.
• GEHC +3%; upgraded to Buy from Hold at Jefferies and raise tgt to $103 after the stock has pulled back and now trades at “just” 17-18 times estimated 2025 earnings.
• NVDA +2%; bounces after falling more than 5% on Tuesday to 50dma support around $140.
• SANA +222%; after announcing results from the FIH IST of UP421 in a patient with T1D which demonstrated islet cell engraftment, avoidance of immune response and production of insulin out to 28 days post transplantation.

• IONQ -44%; along with weakness in other quantum compute names (RGTI, QUBT, QMCO) following NVDA CEO Jensen Huang’s statement that computers using this emerging technology could be up to 30 years away.
• JSPR -57%; after saying says its skin disease drug, briquilimab, met the main goal in the early-stage trial for treating chronic spontaneous urticaria (CSU); one firm, William Blair, says patients treated with the 180-milligram dose every 8 weeks showed a weaker reduction in disease activity compared with other dose levels.
• OKLO -11%; as nuclear power related names extending their weakness from yesterday (SMR, CEG, VST).
• PANW -4%; downgraded to Hold from Buy at Deutsche Bank as expect Security to underperform broader Software this year after last year’s strong performance with our Cyber coverage +22% (also downgraded at BTIG).
• RCEL -35%; lowers 4Q revenue guidance due to slower-than-anticipated purchasing activity; lowers Q4 revenue view to $18.4M, reflecting growth of about 30% y/y from prior view $22.3M-$24.3M (est. $35.85M); now expects full-year 2024 commercial revenue to be approximately $64.3M, below the prior range of $68M-$70M.