Mid-Morning Look

Thursday, March 07, 2024

Index	Up/Down	%	Last
DJ Industrials	166.04	0.43%	38,827
S&P 500	42.29	0.83%	5,147
Nasdaq	163.19	1.03%	16,195
Russell 2000	16.98	0.82%	2,084

 

 

Another day, and another new high for the S&P 500 index (SPX), continuing the more than 4-month rally and taking out last Friday’s highs in another broad-based rally. All eleven S&P sectors are in the “green” with the biggest winners Materials, Communications, and Technology. The move higher extends yesterday’s rebound after the S&P fell -1% on Tuesday (its 1^st 1% decline in over a month), with major averages sharply higher led by usual suspects. The Philly semi-index (SOX) +2.5% to new record highs topping 5,120 behind NVDA strength +3% above $900, INTC on gov’t invest headlines overnight, and AVGO ahead of earnings tonight. There have been many other sectors adding to S&P record highs such as Industrials, Healthcare, and Materials, but the larger weighting and continued upside momentum in tech/AI has been the main driver for US stocks the end of 2023/carried into 2024. The S&P 500 and Nasdaq flirting with positive territory for week, trying to extend gains to 17^th winning week in last 19. Events today include earnings overnight in chip space (AVGO, MRVL) and the State of the Union address tonight from President Biden and jobs report Friday morning.

 

The European Central Bank (ECB) left interest rates unchanged as expected and issued new forecasts, raising prospects for a rate cut in June but dashing expectations of a cut earlier in April. Market expectations remain that the ECB will execute four 25 basis points cuts for this year. The message seems to be that the ECB needs more evidence that inflation is sustainably coming down before considering easing policy. The ECB revised down projections for 2024 inflation to average at 2.3%, from 2.7% previously. Fed Chairman Powell on day 2 of testimony on economy. Yesterday, Powell continued the chorus that the Fed needs more confidence (and data) that inflation is headed towards its 2% goal, but that it is on course for rate cuts at some point. AAII bullish sentiment improved to the highest (51.7%) since December 20.

• Weekly Jobless Claims unchanged at 217,000 and vs. consensus 215,00, while the 4-week moving average fell to 212,250 from 213,000 the prior week and continued claims climbed to 1.906M from 1.898M prior week.
• The US January trade deficit (-$67.4B) vs. consensus (-$63.5B) and vs December deficit (-$64.2B); Jan exports +0.1% vs Dec +1.1%, imports +1.1% vs Dec +1.4%; Jan exports $257.19B vs Dec $256.86B, imports $324.63B vs Dec $321.03B. China Jan trade deficit $23.72B vs Dec deficit $22.09B.

 

 

Macro	Up/Down	Last
WTI Crude	-0.76	78.37
Brent	-0.69	82.26
Gold	4.60	2,162.80
EUR/USD	0.002	1.0917
JPY/USD	-1.20	148.16
10-Year Note	0.004	4.108%

 

• In Chemicals: CC shares jumped following Internal Review results saying findings do not affect the prelim, unaudited estimates of operating results and other financial measures as of and for the year ended. In Research, PPG was downgraded to Neutral from Buy at UBS and cut tgt to $156 from $173 saying after its strategic review of NA arch. coatings (~10% of sales), UBS is less constructive on PPG’s medium-term growth potential. UBS upgraded SHW to Buy from Neutral with a price target of $402, up from $312 saying with inflections in U.S. residential data starting to show, Sherwin-Williams is in the prime position to capture this growth.
• In Apparel/Footwear: AEO posted Q4 revs of $1.68B topping the $1.66B estimate and said it expects revenue and profit growth to be skewed to the first half of the year when issuing its outlook for fiscal 2024, citing easier comparisons in the first half of the year; ONON was downgraded to Neutral at Redburn saying their optimism about the long-run business potential is little changed, but the valuation has caught up with that positivity and industry conditions in Sportswear carry challenge as well as opportunity in 2024. VSCO posted Q4 EPS beat with in-line top line but better GM and announces new $250M buyback authorization, but shares sunk as guided FY net sales about $6.0B vs est. $6.176B and adj op Inc $250-275Mm vs est. $353.04Mm.

 

• CC+ 18%; following Internal Review results saying findings do not affect the prelim, unaudited estimates of operating results and other financial measures as of and for the year ended.
• FCX +5%; as industrial metals/commodity prices rise given a weaker US dollar.
• HNST +14%; following a surprise profit of $0.01 EPS vs. a year ago loss of (-$0.14) while revs rose 10% y/y to $90.3M topping ests $84M and sees FY24 to benefit from its brand maximization, margin enhancement and operating discipline initiative.
• INTC +2%; shares rose after Bloomberg reported overnight that the US government is poised to invest $3.5 billion in Intel Corp. so the chipmaker can produce advanced semiconductors for military and intelligence programs, according to congressional aides.  https://tinyurl.com/54j3uuxn
• KR +6%; projected full year adjusted EPS of $4.30 to $4.50, largely above estimates of $4.34 and expects FY24 comp sales, excluding fuel, to increase to 1.75% from 0.25% and above est. for a 0.7% increase.
• MNMD +11%; said the U.S. FDA granted breakthrough therapy status to its treatment, MM120, for generalized anxiety disorder after its mid-stage trial evaluating the therapy showed positive results after 12 weeks.
• MU +4%; upgraded to Buy at Stifel and raised its price target to $120 saying channel checks confirm DRAM supply is tightening and, on a trajectory, to recover into the 90s by mid-year, and sees leverage returning and believes consensus estimates for 2025 are well wrong and too low.
• NVO +9%; shares jumped after saying its experimental drug amycretin, which combines a GLP-1 medicine like its blockbuster Wegovy with another in a daily pill, helped patients in an early-stage test shed 13% of their weight in 12 weeks (shares of obese drug maker LLY dipped initially on headlines).
• RSI +23%; shares jumped after providing initial ’24 rev./EBITDA guidance 5%/$2M above Street on double-digit iGaming growth, higher CAC efficiencies, and scaling LATAM, noted Oppenheimer.

 

• CDMO -26%; shares tumbled after announced a private offering of $160M 7% convertible bonds due 2029.
• CIEN -13%; posted big Q1 EPS beat $0.66 vs. $0.48 while revs fell -1.8% y/y to $1.04B but topped consensus, while guided Q2 revenue $850M-$930M below consensus $1.1B; also noted optical-networking sales decreased 5% to $695.8M
• EBS -2%; as reported adjusted losses for the fourth quarter that were wider than analysts expected.
• INFN -13%; shares declined after guiding Q1 EPS loss to (18c)-(10c) vs. the Street profit est. $0.01 on light revs $320M-$350M below consensus $378.36M.
• VKTX -14%; and LLY shares fell on competitor NVO obesity drug results: NVO’s oral amycretin data very strong with no new side effects 13.1% weight loss after 12 weeks looks strong in comparison to LLY’s oral orforglipron which showed 14.7% weight loss after 36 weeks at the high dose and roughly in line with Viking’s recent phase 2 data.
• VSCO -29%; posted Q4 EPS beat with in-line top line but better GM and announces new $250M buyback authorization, but shares sunk as guided FY net sales about $6.0B vs est. $6.176B and adj op Inc $250-275Mm vs est. $353.04Mm.

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.