Mid-Morning Look

Friday, September 22, 2023

U.S. stocks with an early bounce after tumbling this week (Nasdaq, S&P are both down over 2% WTD) as a small pullback in Treasury yields, after posting highest levels in 16-years yesterday (10-yr hit 4.5%), helps ease selling pressure on interest rate sensitive sectors. Central banks dominated headlines this week as the Fed kept rates unchanged but with a more hawkish outlook, while the Bank of England, SNB, and Bank of Japan also made no significant changes. The two notable sector stories today are in the auto sector and China stocks. 1) US listed China stocks (BABA, BIDU, JD, PDD) rally behind big gains in Shanghai index overnight (up over 2%) following a report China is considering relaxing foreign ownership rules in domestic publicly traded firms also aiding sentiment. Also, China’s market regulator issue measures to promote development of the private economy – State media reported. 2) In auto news, a week into strikes at the Detroit Big 3 may see additional walkouts today. The UAW announced significant new strikes against Stellantis and GM, with new labor actions targeting at least six of their facilities in Michigan. UAW President Shawn Fain said the UAW has made real progress with Ford Motor in talks over a new labor contract. Fain says Stellantis and GM rejected profit sharing proposals and says all parts centers at GM, Stellantis, are on strike at noon.

Economic Data

·     S&P Global September flash composite PMI at 50.1 vs 50.2 in August.

·     S&P Global September flash services PMI at 50.2 vs 50.5 in August.

Stock GAINERS

·     ATVI +2%; as MSFT’s $69B purchase ($95 per share) of the company gets closer after the UK’s competition regulator has given provisional approval to the revised deal that gives Ubisoft control of cloud gaming rights for Activision Blizzard games.

·     BABA +3%; Alibaba’s logistics arm Cainiao is planning to file for its Hong Kong initial public offering as soon as next week, according to Bloomberg saying they aim to raise at least $1 billion in the share sale (Chinese stocks also rise on State media headlines).

·     CHTR +1%; upgraded to Overweight from Equal Weight at Wells Fargo and raised its price tgt to $550 from $450 saying they see mobile roll-to-pay, rural growth and video contributing to EBITDA acceleration; as a levered return, this should re-rate CHTR.

·     F +3%; after UAW President Shawn Fain said the UAW has made real progress with Ford Motor in talks over a new labor contract and is not ordering additional strikes at their plants.

·     SGEN +3%; and Astellas Pharma’s Padcev in combination with MRK’s Keytruda met main goals in a late-stage confirmatory trial for a type of bladder cancer; said the trial met overall survival (OS) and progression-free survival (PFS) measures, compared with chemotherapy.

·     X +1%; as Stelco (STLC) is pursuing a bid for U.S. Steel Corp (X), adding to a growing list of suitors for steel producer, Bloomberg News reported on Thursday, citing people familiar with the matter. https://tinyurl.com/msrw5w7k 

·     W +1%; upgraded from Underperform to Market Perform at Bernstein and raised tgt to $65 from $60 saying it’s more of a tactical call given improving revenue growth and margin commentary.

Stock LAGGARDS

·     DE -1%; downgraded to Hold from Buy at Canaccord and lowered its price tgt to $400 from $530 as industry data shows slowing unit growth for ag equipment.

·     NKLA -3%; said it is offering $40 million of senior convertible notes due in 2024.

·     SCHL -18%; reported a larger-than-expected Q1 adj EPS loss after spending on other areas of its business for growth and flagged the seasonality of sales in its Education Solutions units.

·     WBD -2% as media companies give back recent gains Hollywood studios and striking screenwriters are expected to resume talks today amid rising hopes for an end to the nearly five-month dispute.