Mid-Morning Look

Thursday, November 14, 2024

U.S. stocks are edging slightly lower but remain not far off record highs reached this week as investors digest another inflation report, this time a bit on the “hotter” side. Yesterday, markets liked the October CPI report, which was mostly in-line across the board with estimates/prior month, boosting expectations for another 25bps rate cut by the Fed in December. However, today the October producer price index (PPI) reading came in above expectations and notably above the prior month readings, throwing a little cool water on aggressive rate cut hopes. Outside of data, a handful of earnings moving names like Dow component Disney (DIS) rising to 6-month highs following better earnings results, while fellow component CSCO slips on its results. The U.S. dollar extended gains as the DXY hit highs above 107 briefly (highest since Nov 2023) and headed for a fifth straight daily gain fueled by higher yields and Donald Trump’s election victory in the United States. The bounce in the buck has sent gold prices lower a 5^th straight session. Treasury yields off the highs post PPI, but still holds above 4.4% on the 10-year. Bitcoin prices are around $90,000 after a massive post-election surge as Crypto Fear and Greed Index at 88/100 = Extreme Greed.  

• Jobless Claims fell to 217,000 in the latest week vs. consensus 223,000 and from 221,000 prior week; the 4-week moving average fell to 221,000 from 227,250 prior week; continued claims fell to 1.873M from 1.884M prior week and the insured unemployment rate unchanged at 1.2%.

• In Insurance: UNM upgraded to OP from In-line, PRU upgraded to In-line from underperform and downgraded JXN to underperform from in-line in global insurance at Evercore ISI saying a strong case can be made for a higher re-rating of the life insurance sector as the investor base broadens. Also notes the life insurance sector currently trades at 8.5x on forward earnings estimates, in line with its 10-year average and a modest premium to its 5-year average, and a discount to P&C insurers, banks, traditional asset managers, and alt managers.
• In Nuclear: TLN swung to a profit in Q3 with net income of $168M vs. -$77M loss y/y, as certain investments improved with stronger equity markets and declining interest rates; Q3 revs rose to $650M vs. est. $522M. OKLO signs a letter of intent to buy Atomic Alchemy, a U.S.-based company specializing in the production of radioisotopes, for $25 mln in an all-stock transaction.
• In Homebuilders: BZH shares jumped on better results as Q4 revs rose 25% y/y to $806.2M topping consensus est. $777.8M while Homebuilding revenue of $2.29B, up 4.3% on a 4.8% increase in home closings to 4,450; Q4 Homebuilding gross margin was 18.0%, down 190 basis points. PHM raised its quarterly dividend by 10%. Rest of the group rallied with BZH results and pullback in Treasury yields.

• ACIU +14%; said its experimental immunotherapy to treat early Parkinson’s disease was well tolerated with no clinically relevant safety issues, it says citing interim data from a mid-stage study
• ASML +4%; reiterated its 2030 goal of annual revenue between approximately EUR44 billion and EUR60 billion ($46 billion and $63 billion) with a gross margin in a range of 56%-60% (comes after ASML cut its 2025 forecasts last month, citing a slow recovery in some areas of the chip market).
• BZH +18%; shares jumped on better results as Q4 revs rose 25% y/y to $806.2M topping consensus est. $777.8M while Homebuilding revenue of $2.29B, up 4.3% on a 4.8% increase in home closings to 4,450.
• DIS +10%; shares touch 6-month highs following earnings results topping views, while Disney+, Hulu and ESPN+ report Q4 operating profit of $321 mln vs a loss of $387 mln a year ago and Disney+, had 122.7 million subscribers outside of India in Q4, a gain of 4.4 million from the prior quarter.
• SCHW +4%; up 9 of last 10 trading days, rising on October metrics and looking for highest close since January 2023
• TPR +11%; as the company and CPRI agree to end $8.5B merger deal; TPR reaffirms guide, announces buyback.
• WYNN +6%; shares jumped after a 13G filing late yesterday; CNBC’s David Faber said this morning filing showed Tilman Fertitta reports 9.9% passive stake in Wynn Resorts.

• CSCO -4%; posted beat and raise, better than expected artificial intelligence orders, and promising trends in core networking orders were offset by only a slightly raised fiscal 2025 growth outlook and an unchanged AI guide.
• HIMS -14%; after Amazon One Medical launches service to compete with Hims & Hers.
• HP -7%; after earnings results last night in energy space.
• IBTA -15%; shares tumble as posted quarterly beat and lower quarter as annual consumer packaged goods budgets were exhausted by robust coupon inventory growth earlier in the year, said JMP Securities.
• OPRX -25%; reported Q324 results, with revenue of $21.3M falling below consensus $25M
• SMCI -7%; falling for a 5^th straight day after having delayed yet another filing as it continues to search for a new accounting firm.