Mid-Morning Look

Wednesday, May 15, 2024

U.S. stocks hitting all-time highs for the S&P 500 and Nasdaq, as the SPY rises for a 10^th straight day after the April Consumer Price Index (CPI) was reported in-line with consensus and down from the prior month, boosting market hopes/expectations of a sooner interest rate cut by the Fed. A weaker Retail Sales report for April also helped juice hopes of a cut to help stimulate the economy. SPY hitting a new ATH above $526.70 ($524.61 the prior ATH made 3/28). Treasury yields dropped following the CPI data, as the U.S. 10-year and 2-year Treasury yields lowest since April 5 at 4.34% and 4.73% respectively. @charliebilello noted “Overall US CPI moved down to 3.36% YoY in April from 3.48% in March. US inflation has now been above 3% for 37 straight months. US Core CPI (ex-Food/Energy) moved down to 3.62% YoY from 3.80% last month. This is the lowest core inflation reading since April 2021.” The Canadian dollar strengthens to touch a five-week high per U.S. dollar while the Japanese yen continues gain against dollar advance and the Euro also pops on data. Gold prices climbed to a more than three-week peak aided by a weaker dollar after data (has since pared gains). Smallcaps outperform on rate cut hopes as the Russell 2000 rises more than 1% initially; Bitcoin another asset rising, up over 4% topping $64K. In sector movers, Energy (XLE) and Consumer Discretionary (XLY) were weak, but other sectors higher including 1% gains for Utilities (XLU) and REITs (XLRE) as interest rate sensitive sectors rose. Also, the two-day craze of stock buying in high “short interest” and “meme” names like GME, AMC seeing profit taking early today. Oil prices slid to the lowest levels since February.

• April Retail Sales M/M was flat at 0% below consensus for a +0.4% rise and retail sales ex-autos +0.2%, in-line with consensus and down from March +0.9% (prev +1.1%); April gasoline sales +3.1% vs March +2.1%, April cars/parts sales -0.8% vs March -0.3%, Retail Sales Ex-autos/gas/building materials/food services -0.3% (est. +0.1%) vs March +1.0%.
• March inventory/sales ratio 1.37 months’ worth vs Feb 1.37 months; U.S. March business sales -0.1% vs Feb +1.4% (prev +1.6%); U.S. March retail inventories ex-autos revised to -0.2% (prev -0.1%).
• May NAHB Housing market index 45 (consensus 51) versus 51 in April (previous 51); May index of current single-family home sales 51 versus 57 in April (previous 57); May index of home sales over next six months 51 versus 60 in April (previous 60); May index of prospective buyers 30 versus revised 34 in April (previous 35).

• In Analog Semis: Cantor said investor interest in the Analog sector is on the rise with a clear vision to a trough in fundamentals in 1HCY24. Continues to recommend NXPI (raising price target to $325 for upside of ~20%+) as Analog favorite, but also recognize incrementally more upside for both ADI (raising price target to $240 for upside of ~15%) and TXN (raising price target to $210 for upside of ~10%+) as the cyclical rule of thumb — a trough is a trough is a trough — should never be forgotten – says Analog cyclical bottom a done deal for 1H24.
• In Retail: BOOT reported Q4 EPS above estimates due to higher sales and a much better margin structure than expected as EPS came in at $0.96 which was well above $0.8 consensus as sales improved sequentially in Q424, and trends have turned positive in early Q125; but guides FY25 sales $1.766B to $1.8B below the estimate $1.824B. In luxury retail, Burberry (BURBY) said sees 1H of current financial year to remain challenging after posting a 34% drop in annual operating profit on weak China performance; said comp sales in Q4 down (-12%).

• ARQT +13%; rallied on earnings as Needham noted total Zoryve sales of $21.6MM (+60%Q/Q), was significantly above the Street’s $15.2MM, driven by continued GTN improvements (to low-60%s) and the launch of Zoryve foam that drove a ~70%Q/Q Rx increase.
• BOOT +1%; reported Q4 EPS above estimates due to higher sales and a much better margin structure than expected as EPS came in at $0.96 which was well above $0.8 consensus as sales improved sequentially in Q424, and trends have turned positive in early Q125; but guides FY25 sales $1.766B to $1.8B below the estimate $1.824B.
• DELL +3%; price tgt raised to $152 from $128 at Morgan Stanley saying supply chain and VAR/CIO checks show DELL gaining momentum in enterprise infrastructure, including competitive AI server wins and inflecting storage strength.
• FOUR +6%; after filing last night showed Chairman Isaacman buys 85,916 @ $67.09 valued at $5.76M.
• MNDY +20%; on results/guidance; Q1 revs rose 34% y/y to $216.9M vs. est. $210.5M and guided Q2 revenue $226M-$230M above consensus $225.1M, with Q2 operating income $17M-$21M and Q2 free cash flow $47M-$51M.
• NU +5%; Q1 revenue $2.7B vs. est. $2.49B; added 5.5M customers in Q1, reaching total of 99.3M globally by March 31, compared to 59.6M only two years ago; delivered accelerating KPIs that included a sharp increase in Active Customers up 27% (+27% last quarter).
• NXT +8%; reported strong 4Q results ahead of expectations and introduced 2025 guidance as benefited from continuing strong demand, NXT’s discipline around pricing and costs, and a favorable sales mix, skewed more heavily toward U.S.

• BA -1%; shares slipped after the Justice Department says Boeing breached 2021 agreement that shielded it from criminal charges over 737 Max crashes.
• DLO -26%; fell on earnings as Susquehanna noted Despite very strong TPV growth up nearly 50% (up 4% Q/Q) and solid revenue up 34%, a 31% decline in revenue from Argentina due largely to devaluation weighed on results. Consequently, DLO fell short on the "rule of 100," landing closer to 60% (EBITDA/gross profit + gross profit growth).
• HAL -2%; oil stocks tumble behind decline in WTI crude to lowest levels since February.
• INFN -6%; reported its preliminary 1Q financial results below expectations with the sharper-than-expected revenue decline related partially to delayed release in book-to-ship orders creating an impact of $25mn, coupled with order push outs into the second half of the year.
• KVUE -1%; as JNJ exited his remaining stake in company, selling ~182.3Mm shares in an offering priced at $20 as part of debt-for-equity exchange; J&J spun off Kenvue a year ago in IPO priced at $22.
• PBR -9%; after the Brazilian government announced a decision to replace PBR’s CEO Prates with former energy regulator Magda Chambriard in push to intervene in the company.
• SPWR -30%; shares tumbled after Wolfe downgraded shares to Underperform from Peer Perform noting the co is currently undergoing a CEO search which adds additional uncertainty around the strategic outlook.