Mid-Morning Look

Monday, March 25, 2024

U.S. stocks pointed to a weaker open after big gains the prior week, but bounced (again), resuming upward momentum as the S&P 500 remains on track for its 5^th straight month of gains into quarter end. Treasury yields edged higher, with the 10-yr at 4.24% as the market awaits the auction of $176 billion of U.S. government debt this week and prepares for the likelihood that the Federal Reserve and other central banks begin to cut interest rates in coming months. Lone piece of economic data today showed New Home Sales for February fell sales -0.3% to 662K unit annual rate vs January +1.7% (prev +1.5%) and vs. estimate 675K. A few Fed speakers with comments, as Atlanta Federal Reserve Bank President Raphael Bostic said late on Friday, he now expects just one 25 basis-point rate cut this year instead of the two he had projected, citing persistent inflation, and stronger-than-anticipated economic data. Meanwhile Fed’s Goolsbee said that three cuts in 2024 was in line with his thinking.  Bitcoin +9% as crypto prices rebound after falling last week, back above $69,000. Stocks closed out strong last week when the S&P 500 gained 2.29%, the Nasdaq rose 2.85%, and the Dow climbed 1.96%. The S&P 500 500 index now sits about 27% above its Oct. 27 low, after posting their biggest weekly gains in months just days after Fed Chair Powell kept three rate cuts on the table for this year despite signs of “hotter” inflation.

• In Electric Vehicles: TSLA, RIVN, NIO were all downgraded to Neutral from Buy at Mizuho saying while they remain constructive on the broader EV landscape with the LT trend to electrification, near-term EV demand and tightening liquidity are creating challenges into 2025E. Mizuho downgrades the stocks citing near-term demand weakness for EVs and tightening liquidity. LCID shares jump after announces Investment of $1B by an Affiliate of PIF in a newly created series of convertible preferred stock via private placement. The sovereign wealth fund of Saudi Arabia (PIF) owns 1.37B shares of LCID.
• In Metals & Mining: CENX said it is starting negotiations for up to $500M in funding from the U.S. government that will go toward building the first new U.S. primary aluminum smelter in 45 years. CMP said U.S. Forest Service will not hand over a contract of magnesium chloride-based aerial fire retardants to CMP for the 2024 fire season. CLF said it will receive up to $575 million in U.S. funding for decarbonization investments at two of the steel producer’s sites including its Middletown Works Facility in Middletown, Ohio and at its facility in Butler, Pa.
• In Restaurants: MCD was downgraded to Hold from Buy at Argus saying the company’s sales have been hurt recently as more customers choose meals at home over dining out as food price inflation is moderating and the cost of dining out is rising. PLAY was downgraded to Market Perform from Outperform at Raymond James ahead of Q4 earnings as sees a more balanced risk/reward following the stock’s strong recent gains and as industry comps remain sluggish entering an important phase for the story. Also notes third party data suggests comps remain negative through mid-March, noting soft recent industry trends.

• CENX +8%; said it is starting negotiations for up to $500M in funding from the U.S. government that will go toward building the first new U.S. primary aluminum smelter in 45 years.
• DIS +2%; Barclays upgraded DIS to Overweight from Equal Weight and raised price tgt to $135 from $95 saying the recent narrative reset is likely to be followed by positive estimate revisions, which is still early in the cycle and should further support the stock’s valuation.
• LABP +175%; to be acquired by ABBV for $20.42 per share in cash in a deal valued at $137.5M, further strengthening its portfolio in inflammatory and autoimmune diseases.
• LCID +7%; after announces Investment of $1B by an Affiliate of Saudi’s PIF in a newly created series of convertible preferred stock via private placement.
• MASI +5%; after active investor Politan Capital Management said it had nominated two director candidates to the board, in addition to the two seats it had won last year, marking the possible start of a second proxy battle.
• TH +22%; after receiving an unsolicited non-binding proposal from Arrow Holdings, an affiliate of TDR Capital LLP to acquire all the outstanding shares of common stock that are not owned by any of Arrow, for cash consideration of $10.80 per share. https://tinyurl.com/54hfcdey
• VSTO +2%; after MNC Capital boosted its bid for the sporting goods retailer to $3B, or $37.50 per share offer is an improvement from last month’s bid of $35.00 per share MNC Capital said it expects Vista to promptly engage and agree to the proposal, which is advocated is clearly in the best interest of company. https://tinyurl.com/3twe57ey

• CMP -15%; said U.S. Forest Service will not hand over a contract of magnesium chloride-based aerial fire retardants to CMP for the 2024 fire season.
• DYN -13%; said CEO Joshua Brumm was leaving the company to pursue a career in health care investing. He will be replaced by John Cox as Dyne’s new CEO and board member. Cox was formerly CEO of Bioverativ.
• REGN -1%; after saying the FDA declined to approve its experimental blood cancer therapy, odronextamab, for two forms of lymphoma; said in the complete response letter (CRL), the FDA raised concerns over the progress of ongoing confirmatory trials.
• UAL -5%; shares dropped after the FAA moved to increase its oversight of the carrier after a series of recent safety incidents. Last week, the FAA said it would initiate a formal evaluation to ensure the Chicago-based airline was complying with safety regulations.