Mid-Morning Look

Wednesday, January 15, 2025

An incredible start to the day for U.S. stocks as the S&P 500, Nasdaq Composite, DJIA, Russell 2000 all posting their best sessions since the day after the election, getting a double boost after CPI inflation data for December pleased investors as well as better earnings reports from some of the large cap banks, with JPM, GS, Citi, BK all jumping on results. Dec core CPI comes in below views while headline was above. Following the data, interest-rate futures traders bet on a June Fed rate cut and about a 50% chance of a second Fed rate cut by the end of 2025. Interest rate sensitive stocks/sectors such as homebuilders and high dividend paying names such as utilities and REITs given the pullback in Treasury yields bounced the most along with outperformance in Smallcaps (IWM). But NYSE market breadth very strong as advancers lead decliners by over a 10:1 margin as all eleven S&P sectors surge. Consumer Staples up the least given weakness in food stocks. Financials up over 2% after the better bank earnings, Utilities up over 2% on lower Treasury yields.  The 10-year Treasury yield tumbles 14bps to 4.64% while the dollar index (DXY) -0.4% to 108.84 while gold jumps over 1% and Bitcoin rises a second day, back above $99,000 after falling below $90K late last week.

• The US Mortgage Bankers Association weekly data showed US applications index rose +33.3% in the week ended Jan 10, the mortgage purchase index climbs 26.9%, the mortgage refinance index climbs 43.5% despite the US average 30-year mortgage rate climbs 10 bps to 7.09% in Jan 10 week, highest since May 2024.

• In Energy Equipment and Drilling: Evercore ISI downgraded shares of VAL, RIG, NE, HP, SLB, and NOV to In Line from Outperform noting oilfield services have been hit with the dual negatives of a low growth NAM contending with a rapidly consolidating customer base and capital restraint internationally that has ended any semblance of a coordinated global upcycle for the industry. The fear is another leg down in activity will see pricing pressure in areas that have to date been somewhat immune.
• In Trucking: Stifel with Q4 preview for LTL trucking sector saying heading into Q424 earnings, its channel checks suggest that last year finished with relatively soft fundamentals, losing some sequential momentum in demand, with sub-seasonal volumes. The market still appears to be moving sideways and intra-quarter reports from the public carriers corroborate that view. The firm downgraded XPO to Hold from Buy saying shares currently trade near peak valuation. Notes stock price appreciation following the election have been given back across our trucking coverage with valuation multiples of KNX, LSTR, SNDR, and WERN compressing from peak levels as demand uncertainty heightens early in the new year, in our view.

• BK +6%; along with gains in BLK, C, GS and WFC after solid earnings in financials boost the sector this morning.
• COMP +18%; raises Q4 revenue view to $1.36B-$1.39B from $1.225B-$1.325B and raises Q4 adj EBITDA view to $15M-$18M from $0-$10M, in turn boosting its yearly outlooks.
• EIX +9%; amid a big bounce in utility stocks on lower Treasury yields; also, stock was upgraded to Neutral from Sell at Ladenburg based on valuation following the recent sell-off in the stock.
• IONQ +24%; along with gains in other quantum computing names QBTS, QMCO, QUBT, RGTI after MSFT said in a blog post last night that 2025 is the year to become “quantum ready.” “We are right on the cusp of seeing quantum computers solve meaningful problems and capture new business value”.
• ISRG +5%; guided preliminary Q4 revenue $2.41B above consensus $2.2B saying 2024 worldwide da Vinci procedures grew approximately 18% y/y; placed 493 da Vinci surgical systems, of which 174 were da Vinci 5 systems, in Q4, an increase of 19% compared with 415 y/y.
• TSLA +5%; as large cap tech, Mag 7 names outperform AAPL, AMZN, GOOGL, META, NVDA all higher.

• KROS -16%; it has voluntarily halted all dosing in the TROPOS trial, a Phase 2 clinical trial of cibotercept in combination with background therapy in patients with pulmonary arterial hypertension, including the 1.5 mg/kg and placebo treatment arms, based on the ongoing safety review.
• LASR -14%; after guided prelim Q4 revenue $46M-$48M, below consensus est. of $52M and says gross margin and adjusted EBITDA expected below Q4 guidance.
• MYGN -4%; as guided prelim Q4 revs $209M-$211M vs. est. $212.9M and EPS of $0.03-$0.04 vs. est. $0.03; forecasts 2025 revs between $840M-$860M vs. est. of $876.7M.
• PI -6%; reiterates Q4 revenue and adjusted EBITDA guidance ahead of Needham growth conference; forecasts Q4 adj EBITDA within guidance of $13.6M-$15.1M and forecasts Q4 rev within prior guidance of $91M-$94.0M.
• VCEL -6%; shares fell as delivered preliminary Q4/24 revenue of $75.2M-$75.7M, an increase of 15.7%-16.5% Y/Y, compared to consensus estimates of $77.9M; Burn Care prelim results were announced to be $40M, below Canaccord’s estimates of $41.9M.