Mid-Morning Look
Wednesday, October 16, 2024
Index |
Up/Down |
% |
Last |
DJ Industrials |
187.04 |
0.44% |
42,930 |
S&P 500 |
13.60 |
0.23% |
5,828 |
Nasdaq |
19.64 |
0.10% |
18,334 |
Russell 2000 |
29.57 |
1.31% |
2,279 |
U.S. stocks rebounding after initial weakness in large cap names, while Smallcaps outperform as markets prepare for the earnings onslaught the next three weeks. As per Goldman Sachs data, we got 12% of the S&P reporting earnings this week…but the upcoming week of October 25th is the busiest week of earnings season with 37% reporting. The week of Nov 1st has about 24% of SPX reporting, 8% on week of Nov 8th, 2% the week of Nov 15th, and 9% week of Nov 22 (1% and 2% the next two weeks after). Transportation stocks a bright spot today after JBHT (trucker) and UAL (airlines) earnings last night topped consensus, lifting the Dow Transports Index more than 2% to the highest levels since July 2023. Another strong area was Smallcaps (Russell 2000), up again as large cap S&P and Nasdaq lag after Treasury yields pull back after recent spike. Regional banks are another pocket of strength as the KRE rises 2% helped by earnings from UBS, FHN, etc. Large cap tech lagging, led by mega cap tech (AAPL, AMZN, GOOGL, META, MSFT, NFLX and a handful of key semi stocks). Nuclear energy stocks soaring again (SMR, D, VST, NNE, OKLO, MIR) after AMZN signed a deal Wednesday with Dominion Energy Virginia to develop new technology that would help advance potential Small Modular Reactor nuclear development in Virginia (showing ongoing need by big tech for more power to help AI push). Treasury yields have pared recent gains (10-yr back to 4%), though the US dollar remains strong (DXY 103.33) especially after the British Pound fell overnight following a softer inflation report, leading to more aggressive rate cut expectations. At the same point, the last few inflation reports in the U.S. have been “hotter” than expected, with the Fed/markets keeping a close eye on it. Markets fell on the open, but have quickly recovered as the S&P and Dow remain not far off record highs reached Monday!
Economic Data
- U.S. Sept export prices declined -0.7% vs. consensus -0.4% and vs Aug drop of -0.9%; Sept import prices dropped -0.4%, in-line with economist estimates and vs Aug drop of -0.2%. Sept import prices y/y fell -0.1%, and export prices -2.1%.
- U.S. MBA mortgage applications plunged -17.0% in the week ending October 11, after falling -5.1% and -1.3% respectively in the two weeks prior. Purchases declined -7.2%, after inching down -0.1% in the week ending October 4. Refinancing plunged -26.3%, the third weekly drop, as the 30-year rate jumped to 6.52% from 6.36%.
- UK CPI decelerated much faster than expected to 1.7% YoY in September from 2.2% YoY in August. The services CPI markedly surprised on the downside easing to 4.9% YoY from 5.6% YoY boosting the odds of quicker rate cuts by the BoE. The weaker inflation reading pushed the British Pound to a monthly low below the 1.304 threshold.
Macro |
Up/Down |
Last |
WTI Crude |
-0.08 |
70.50 |
Brent |
-0.11 |
74.14 |
Gold |
17.10 |
2,696.00 |
EUR/USD |
-0.0012 |
1.0878 |
JPY/USD |
0.41 |
149.60 |
10-Year Note |
-0.03 |
4.008% |
Sector Movers Today
- Large cap banks did heavy lifting last few days behind earnings from GS, BAC, MS, JPM, WFC that lifted financials/banks but regional banks now leading with the LRE rising over 2% early behind better results. CFG posted a miss as revenues missed, but CFG hit consensus on lower expenses and a modest under provision of NCOs (NII and fees missed by $0.03 and 0.04, respectively), but USB a good beat driven by NII +.05, lower provision, in-line core fees, a lower tax rate of 18% vs or 23% was also a positive; partially offset by higher core expenses. NIM came in at 2.74%, up 7bps Q/Q; FHN a beat by 7c on EPS driven by a higher provision, fees, taxes and expenses -$0.01 – Stronger fees (fixed income) drove the upside with fixed income; IBKR shares slumped on earnings miss as adj EPS $1.75 below consensus $1.82; Q3 revs $1.365B vs. est. $1.33B; positives included Q3 commission rev increased 31% to $435M on higher customer trading volumes; Q3 Net interest income (NII) increased 9% to $802M.
- In Chemicals: Bank America made a few changes as they upgraded CTVA to Buy from Neutral with a raised $67 PT (up from $59), given several recent tailwinds that position the company for success in 2025 and beyond; they downgraded CF from Neutral to Underperform as believes the rally is likely to fizzle after significant supply disruptions and back-to-back India urea tenders have lent strong support to ex-US urea prices as well as global ammonia prices. WLK was upgraded to Neutral from Underperform and raise its PO to $159 from $151, as it balances near-term concerns with a more favorable mid/long-term opportunity. Lastly the firm downgraded EMN to Neutral from Buy following the 26% YTD and 57% 1-yr return, as thinks current valuation leaves little room for upside potential.
- In Nuclear/Power stocks: shares of SMR, CCJ, OKLO, NNE, VST, UEC, D all showing strength early after AMZN signs agreements for innovative nuclear energy projects to address growing energy demands. Amazon said it signed 3 new agreements to support development of nuclear energy projects—including enabling construction of several new SMRs. The news shows the continued need by big tech to find more power sources to fund AI. Recall in mid-September, MSFT and CEG entered a deal to restart Pennsylvania’s Three Mile Island to help power the tech giant’s growing artificial intelligence ambitions. Over the summer, The WSJ reported that Amazon Web Services was nearing a deal for electricity supplied directly from a nuclear plant on the East Coast with CEG, the largest owner of U.S. nuclear-power plants. Now, Amazon is partnering with Dominion Energy Virginia to explore ways to advance SMR development and financing, while also mitigating potential cost and development risks for customers and capital providers.
Stock GAINERS
- ASPN +12%; secured a $670.6M loan from the US Department of Energy to build a new Georgia factory dedicated to producing fire-suppressing materials for EV batteries.
- CSCO +2%; upgraded to Buy at Citigroup and raised price tgt to $62 from $52 as expects the company to benefit from an expanding ethernet artificial intelligence total addressable market and a narrowing valuation gap versus peers
- JBHT +4%; Q3 EPS of $1.49 was down 9% y/y but beat Street estimate of $1.39 led by above-target Intermodal Load growth as shippers pulled-forward volumes in anticipation of an East Coast Port strike
- LAC +16%; after saying entered into a new investment agreement with GM to establish a joint venture for the purpose of funding, developing, constructing and operating Thacker Pass in Humboldt County, Nevada. The Transaction will deliver $625 million of cash and letters of credit from GM.
- MS +6%; reported Q3 revs $15.38B vs. est. $14.41B; Q3 provision for credit losses $79M vs. est. $58M; Q3 total client assets surpassed $7.5 trln across wealth and investment management; Q3 net interest income $2.20B vs. est. $1.87B.
- NVCR +4%; shares jumped after saying the FDA approved Optune Lua to treat metastatic non-small cell lung cancer in adults who have progressed on or after a platinum-based regimen.
- UAL +8%; posted better than expected Q3 results despite numerous headwinds as EPS came in at $3.33, well ahead of consensus of $3.07 despite the Crowdstrike “hit” which resulted in ~2,600 cancellations at mainline and regional partners over a 5-day period.
Stock LAGGARDS
- ASML -3%; adds to prior day weakness after softer guidance pressured semiconductor names; yesterday 2025 sales to be between EU30-35bn (from EU30-40bn) and gross margin between 51-53% (from 54-56%).
- ENPH -1%; received its 2nd analyst downgrade in as many days as Susquehanna cut its rating from Positive to Neutral and cut price tgt to $104 from $147 saying generally, recent conversations indicate project delays remain a headwind for utility-scale projects.
- IBKR -3%; slumped on earnings miss as adj EPS $1.75 below consensus $1.82; Q3 revs $1.365B vs. est. $1.33B; positives included Q3 commission rev increased 31% to $435M on higher customer trading volumes; Q3 Net interest income (NII) increased 9% to $802M on higher customer margin loans and customer credit balances.
- NVAX -18%; after saying the FDA has placed a clinical hold on Novavax’s IND for its COVID-19-influenza combination and standalone influenza vaccine candidates; FDA notified Co that FDA placed clinical hold on ind application for COVID-19-influenza combination & standalone influenza vaccine candidates.
- PENG -13%; after results and guidance last night disappoint.
- SVC -14%; slashed its dividend by 95% and made plans to sell over a hundred of its focused-service hotels as it looks to reduce debt and improve its liquidity.
- SVCO -26%; after cuts FY24 revenue view to $60M-$63M from $63M-$66M (est. $64.54M) and lowered its FY24 gross bookings view to $64M-$67M from $67M-$71M saying they “saw a decline in orders from Asia during Q3 primarily driven by economic challenges and the ongoing strain in U.S.-China trade relations”.
- ULTA -2%; after the company announced long-term financial targets and strategic priorities.
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.