Mid-Morning Look

Monday, October 14, 2024

U.S. stock markets making new highs again, with a near 1% jump in the Nasdaq and 0.6% in the S&P 500 (another record high) on no news specifically today, but just continued upward momentum as investors keep buying on fear of missing out (FOMO). Banks got earnings season off to a good start last week as JPM and WFC rallied on better results, ahead of many banks/insurance names reporting this week. Strength in semiconductors still pushing big tech, Nasdaq higher as NVDA rises for the 7th time in 9-days approaching its all-time high of $140.76 on 6/20 as semis (SOX) +1.8% at 5,430. But big gains in AAPL, GOOGL, META, MSFT as the large cap names still doing the heavy lifting, though other sectors have been strong this year Financials XLF +24% YTD, and Utilities XLU +26% YTD followed then by Technology XLK and Industrials XLI +21% YTD. Lots of risk bets continue as Bitcoin rises over 3% topping $65,000, the dollar index (DXY) extends recent gains topping 103.25 (euro, yen fall further) while oil prices fall. Treasury markets closed today for Columbus Day holiday. Also, no economic data given the holiday as well. Markets get ready for at least 40 S&P earnings reports this week. US listed China stocks falter early after Saturday’s China stimulus news ended up shy on details.

• In Exchanges: ICE was downgraded from Strong Buy to Outperform at Raymond James and upgraded NDAQ from Market Perform to Outperform saying both have grown increasingly and remarkably similar over time in several ways. The firm believes ICE has a far superior trading franchise, and it boasts a higher operating margin as well. However, the two firms’ revenue and EPS growth profiles, business composition, balance sheet leverage, and returns on invested capital have become remarkably similar. Oppenheimer said they believe CME is an attractive investment tactically noting three near-term catalysts are: 1) volatility in interest rate/energy/equity markets; 2) variable dividend, or even share repurchase; and 3) abating threat from FMX exchange. CME also trades at a discount vs peers.
• In LT/Logistics/Trucking: TD Cowen downgraded EXPD from Hold to Sell and cut tgt to $106 from $112 saying the outlook has deteriorated as exogenous factors propping the forwarding market have proven temporary with a short-lived port strike and adaptation to Red Sea congestion well underway at this stage. TD Cowen also cut ARCB from Buy to Hold and tgt to $114 from $131 as tonnage and pricing growth come into question amid recent industry channel checks. The firm said ARCB is set to move less tonnage in ’24 than they did pre-COVID. MRTN was downgraded from Outperform to Market Perform at Raymond James saying as rate cuts take root and freight markets inflect, Marten’s defensive posturing is set to be at a disadvantage in the coming quarters given their lack of debt (no financial leverage) and contract-centric book of business.

• HIMS +7%; along with gains in WW after late Friday, the FDA said it will reconsider a decision to bar drug compounders from selling their own versions of Eli Lilly’s widely popular weight-loss and diabetes drugs.
• JSPR +22%; after saying prelim data shows its experimental skin disorder drug was well-tolerated in an early- to mid-stage study; the co is testing the safety and tolerability of its drug, briquilimab.
• LBPH +51%; after agreeing to be acquired by Danish pharmaceutical company H. Lundbeck A/S in a deal with an equity value of $2.6 billion.
• MSTR +6%; strength in crypto names again as Bitcoin rises over 3% topping $65,000; lifting COIN, MARA others.
• RILY +24%; after saying it has agreed to sell its appraisal and valuations unit, Great American, to asset manager Oaktree Capital in a $386M deal that would help the investment bank pare its debt and bolster the balance sheet.
• SOFI +9%; announced a $2 billion pact for personal loans with funds managed by affiliates of investment-manager Fortress Investment Group LLC.
• UPST +11%; Wedbush upgraded shares to Neutral from Underperform and raised tgt to $45 from $10 as believe improving credit quality metrics, lower rates and an improving UMI could drive a positive inflection in originations and adjusted EBITDA in 2H’24.
• VNDA +15%; as Cycle Pharmaceuticals reaffirms all-cash proposal to acquire the company for $8.00 per share.
• WFC +3%; adds to Friday gains after earnings beat.

• BA -2%; after saying late Friday it will recognize $5 billion in earnings charges, announced plans to cut about 10% of jobs (17K), and reported preliminary 3Q revenue $17.8B missing est. $18.58B and Q3 loss (-$9.97).
• CAT -2%; downgraded to Underweight from Equal Weight at Morgan Stanley citing mounting pressures on CAT’s construction industries segment from potential destocking and cuts tgt to $332 from $349.
• FCX -3% after China stimulus detail Saturday come up short on details
• GOOS -6%; downgraded from Equal Weight to Underweight at Wells Fargo citing concerns around weakening global brand heat, China macro and margin headwinds (via DTC deleverage, inventory issues and category mix).
• VFC -3%; was downgraded to Underweight from Equal Weight and cut tgt to $15 at Wells Fargo saying current valuation appears to be baking in much more upside than appears realistic.