Closing Recap

Monday, April 01, 2024

U.S. stocks slipped on the open into negative territory and never recovered, trading in a narrow range on light volumes all afternoon before a late day pop pared losses as investors returned from the three-day holiday weekend. Data helped boost sentiment early as the Feb PCE data (released Friday morning) signaled strong consumption—real spending +0.4% m/m. Inflation data were in line with expectations, easing acceleration concerns. Next major economic data points focus turns back to jobs with JOLTs job openings Tuesday, ADP private payrolls Wednesday, weekly jobless claims Thursday and Nonfarm payrolls on Friday 4/5. Stocks took a turn lower after 10:00 ISM manufacturing data, rising into expansion territory with a rise in priced paid, sending Treasury yields and the dollar higher and paring gold gains (pulled back from record highs) as well as stocks. Energy (XLE) was the day’s big winner behind a jump in oil prices, followed by gains in Communications (XLC) and Technology (XLK). REITs (XLRE), Healthcare (XLV) and Industrials (XLI) were the days’ biggest losers behind weakness in Smallcaps. NYSE breadth nearly 2:1 edge decliners leading advancers. Interest rate sensitive sectors such as housing related stocks were weak amid the on spike in Treasury yields. A quiet news day in general with markets awaiting a busy Fed speaker schedule tomorrow.

• February construction spending (-0.3%) month/month vs. +0.7% est. and vs. (-0.2%) the prior month … second consecutive monthly drop, driven by weakness in public spending (-1.2%); private residential was strong at +0.7%; private residential home improvement +0.2%.

• The U.S. dollar index (DXY) rose 0.4% to a more than six-week peak around 105 against rivals, making gold more expensive for other currency holders, while yields on 10-year Treasury notes also climbed. Bonds were very weak as Treasury yields extended gains, with the 10-yr at highs above 4.325% up 13-bps and 2-yr +3.5bps to 4.655%. Oil futures continue gains as WTI crude futures settle at $83.71 per barrel, up 54 cents, 0.65% its highest close since October 2023 while Brent Crude prices reach $87.85 a barrel, also highest since Oct 2023.

• LI delivered 28,984 vehicles in March 2024, increasing by 39.2% year over year. This brought the Company’s first-quarter deliveries to 80,400, up 52.9% year over year. The cumulative deliveries of Li Auto vehicles reached 713,764 as of the end of March 2024.
• NIO delivered 11,866 vehicles in March 2024, increasing by 14.3% y/y; NIO delivered 30,053 vehicles in the three months ended March 2024; Cumulative deliveries of NIO vehicles reached 479,647 as of March 31, 2024.
• XPEV said they delivered 9,026 Smart EVs in March, representing a 99% increase over the prior month and 29% increase year-over-year. The XPENG X9 maintained its position as the top-selling all-electric MPV in China, with 3,946 units delivered in March and nearly 8,000 units delivered since its launch. Overall, XPENG delivered 21,821 Smart EVs in the first quarter of 2024, a 20% increase from last year.

• CURV Q4 adj EBITDA $16.4Mm vs est. $10.9Mm on revs $293.539Mm vs est. $274.83Mm; sees Q1 net sales $277-282Mm vs est. $296.44Mm; sees FY net sales $1.135-1.155B vs est. $1.169B.
• GES board approved a new $200 mln share repurchase program and announces issuance of ~$12.1 mln of additional 3.75% convertible notes due 2028.
• OXM posted 4Q revenue and adj. EPS within prior ranges; FY24 guide expects sales growth of MSD% for Tommy and Lilly, and LDD% for Johnny and Emerging Brands; mgmt noted softness in trends in Jan and Feb due to muted consumer sentiment and cycling strong comps LY, but noted March has been comping modestly positive to date.
• In Footwear: CROX ($167 tgt), DECK ($1,110 tgt), ONON ($38 tgt) and SKX ($71 tgt) all initiated at Overweight at Barclay’s, expanding its footwear coverage, supported by its market analysis, inventory framework, and its proprietary 1,000+ U.S. consumer survey.

• In Nuclear: CEG, VST, and TLNE mentioned positively in Barron’s noting all are each up more than 90% in the past year and there’s a good chance they’ll go still higher as “AI” is giving nuclear power a big lift. Notes data centers being built to run AI systems require lots of power. Nuclear power is exceptionally well suited to meeting such enormous demands.
• In Industrials: MMM completed the planned spin-off of its healthcare business Solventum, launched as an independent company, listed on the New York Stock Exchange under SOLV. 3M shareholders received one share of SOLV for every four shares of MMM held at the close of business on March 18, 2024. MMM also announces settlement with Public Water Suppliers to Address PFAS in Drinking Water Receives Final Court Approval; agreement includes pre-tax present value commitment of up to $10.3B payable over 13 years.
• In Aerospace & Defense: PL reported in-line FQ424 results, including a continued acceleration of net new customer additions, but held off on providing full-year guidance due to a lack of visibility on several large contracts. GD shares rose as the FAA certified the co’s Gulfstream G700 business jet.
• In Packaging and Containers: AMBP downgraded to Underperform from Neutral and lower PT at Bank America saying their fixed income research colleagues believe that there is some potential for AMBP preferred to be refinanced as debt. BAML details its updated $3.50 PO, down from $4.10, below.
• In Metals: Gold miners extend recent gains (AEM, NEM, GOLD) as gold prices hit fresh new all-time highs behind growing Fed rate cut expectations after PCE data Friday failed to raise inflation concerns.
• In Chemicals: OLN, WLK shares active after Keybanc noted on March 28, Chemical Market Analytics released its monthly chlor-alkali report, which showed the second consecutive $5/ ton increase in the domestic caustic soda index. The increase comes ahead of CMA’s forecast of flat prices largely because of ongoing supply challenges.

• In Banks: TCBI was downgraded from Buy to Hold at Truist and reduced its 2024/2025 estimates by 10%/8%, driven by continued mortgage headwinds and lower confidence in fee income offsets, considering fewer Fed rate cuts through 2025. Raymond James noted following the fourth-slowest year for bank M&A activity since 1991, bank M&A activity in 1Q24 was up both sequentially and y/y. However, the impact of elevated interest rates, AOCI impacts, a still-uncertain economic backdrop, normalizing credit trends, ongoing political uncertainty, and the impacts of recent bank failures and struggles (SIVB, SBNY, FRC, NYCB) are likely to weigh on deal activity S-T.
• In Insurance: AGO was downgraded to Market Perform from Outperform at KBW Inc. citing full valuation, while raises their target to $92 from $75 while notes the company’s story and operating environment are much cleaner now, and KBW is comfortable the $500M annual buyback playbook is attainable. MBI ests and price target lowered after Q4 special dividend implied lower residual value and lower investment portfolio earnings.
• In REITs: DOC upgraded to Buy at Bank America reflects its view that DOC’s earnings will trough in 2024 and there is significant NOI upside from leasing up developments / redevelopments; says additional upside can be driven by asset sales and stock buybacks. ESS upgraded to Buy from Neutral and raised tgt to $275 from $250 at Bank America after their cap rate to 5.4% from 5.6% given more price Discovery.
• In Financial Services: TRU was upgraded to Neutral from Underperform at Bank America and raised tgt to $90, positive amid a steadying consumer lending environment & see opportunity for sales upside in 2024 guidance.

• BAX announced U.S. FDA clearance of Novum IQ large volume infusion pump and dose IQ safety software, advancing connected and intelligent infusion therapy.
• BIIB and partner Eisai announced Sunday night a delay to its application submission for a Leqembi subcutaneous formulation for Q1, attributing the delay to recent feedback from FDA and bureaucratic technicalities; analysts fear second high-profile delay in the past month will raise another round of questions on the joint venture’s ability to execute and any confidence on a meaningful near- or mid-term inflection in Leqembi sales
• BMY announced analysis of results from the first of two induction studies in the Phase 3 YELLOWSTONE clinical trial program evaluating Zeposia (ozanimod) in adult patients with moderate to severe active Crohn’s disease. The study did not meet its primary endpoint of clinical remission at Week 12.
• ELAN reached a cooperation agreement with Ancora Holdings and appointed two new independent directors, Kathy Turner, and Craig Wallace, to its board.
• IRON shares tumbled after saying phase 2 study of its Bitopertin drug candidate in patients with a rare, inherited metabolic disorder met its main goal but missed a key secondary target (didn’t meet statistical significance compared to placebo due to an outsized placebo response).
• LQDA new drug application for Yutrepia was cleared for potential approval from the FDA following a court ruling in a lawsuit filed by UTHR; Judge Andrews of U.S. District Court for the District of Delaware set aside the injunction issued in August 2022 in the lawsuit filed by United Therapeutics. As a result, the FDA is no longer enjoined from issuing final approval of the new drug application for Yutrepia.
• PIII downgraded to Neutral at BTIG after results, citing higher-than-expected medical claims costs in the company’s recent earnings report.

• In Hospital providers: UHS shares tumbled after the hospital chain said a jury awarded damages of $535 million against its indirect subsidiary, Pavilion Behavioral Health System, in a lawsuit.

• In Media: DJT shares tumbled after reported Monday a loss of $58.19 million in 2023 on revenue totaling $4.13 million, up from $1.47 million in 2022; said in filing operating losses raise substantial doubt about its ability to continue as a going concern.
• In Online Retail: for AMZN, Wells Fargo raised tgt to $217 and adds to Q2 Tactical ideas list as raises Q2 OI by 6% and is now 15% above the street driven by new FBA fee structure. For Q1, Wells Fargo is at $12.4B vs Street at 11B. Wells Fargo also notes that DAU’s inflected positively in late-March in conjunction with AMZN’s first.
• In social media: META cannot delay the U.S. FTC from reopening a probe into alleged privacy failures by its Facebook unit while the company pursues a lawsuit challenging the agency’s authority, a U.S. court ruled Friday.

• CTSH downgraded to Neutral from Buy at Susquehanna saying soft demand especially for short duration, discretionary projects…entering the season where sequential growth forms the arc of the year, they do not see much building for Q2 and feels estimates for Q2 are at risk.
• MSFT will sell its chat and video app Teams separately from its Office product globally, the U.S. tech giant said on Monday, six months after it unbundled the two products in Europe in a bid to avert a possible EU antitrust fine.
• MSFT price tgt raised to $550 at Bank America as sees 20% commercial office growth by Q1Fy26 driven by subs growth, ASP growth & copilot adoption, saying 1% penetration of copilot to Commercial office subs equates to 1.5% y/y growth to the total Commercial Office biz.

• IDCC was double downgraded to underperform at Bank America as flag several key risks: 1) growth is highly dependent on recurring smartphone royalties, 2) timing of catch-up revs is unpredictable, 3) growth assumptions depend on new agreements with unlicensed Chinese vendors.
• Feb’24 SIA data showed the fourth consecutive month of double-digit semis growth YoY; February total semis sales +14.3% YoY, ex-memory sales +4.4% YoY, memory sales +112.8% YoY; semis ASPs +20.7% YoY, ex-memory ASPs +26.0% YoY, memory ASPs +39.2% YoY; semis units -3.4% YoY, ex-memory units -13.7% YoY.