Closing Recap

Monday, August 26, 2024

U.S. stocks finish mixed on a quiet/sleepy summer Monday, as markets await earnings from semi-chip giant NVDA mid-week and inflation data later in the week (PCE). The Dow Jones Industrials Average touched a new all-time intraday high, while the S&P and Nasdaq declined behind weakness in Technology (XLK) as the Semiconductor index (SOX) dropped over 2%. The Smallcap Russell 2000 jumped early before fading into the bell, helped initially on Fed interest rate cut hopes after last Friday’s dovish Jackson Hole speech/comments from Chairman Jerome Powell. Most S&P sectors were higher this morning but leveled off as breadth narrowed; Utilities (XLU) rise +0.5% above 76 for best levels since Sept 2022 as yields slide, while REITs (XLRE) hit their best levels since Sept 2022 early before fading this afternoon as interest rate sensitive sectors were strong. Defensive Consumer Staples (XLP) rose +0.7% to all-time best levels. Financials (XLF) also trade at all-time highs, before paring gains. Technology was the biggest drag in the S&P, falling over 1% led by a decline in the Philly semi-index (SOX), falling as much as -2.5% below 5,100 to its 100dma support of 5,099. US listed China stocks tumbled behind weakness in Temu parent PDD after quarterly revs missed and offered downbeat comments going forward (hit shares of BABA, JD). It seems like another week of “waiting” for more important data, with NVDA earnings surely to move technology/semis after earnings Wednesday night, several software earnings this week including Dow component CRM, and then GDP data Thursday and PCE inflation data Friday on the final day of trading for August.

• Dallas Fed Texas manufacturing index of general business activity -9.7 in August vs -17.5 in July; Dallas Fed Texas manufacturing output index 1.6 in August vs -1.3 in July.

• December gold prices gain $8.90 to settle at $2,555.20 an ounce (hit highs of $2,563.20 an ounce earlier), just off recent all-time highs, helped by haven demand due to geopolitical risks in the Middle East. The U.S. dollar hovered at multi-month lows against the euro and pound on Fed rate cut prospects after last week’s dovish Jackson Hole comments from Fed Chairman Powell endorsed an imminent start to interest rate cuts. The U.S. dollar fell to a three-week low against the yen but halted its recent slide against most other currencies. The greenback slumped as much 0.7% to 143.45 yen, its weakest level since Aug. 5, before reversing higher at 144.55. The dollar index (DXY) edged up to 100.82, coming off the 13-month low of 100.60 reached at the end of last week.

• In Home Furnishing/Improvement Retail; Wayfair (W) was downgraded to Hold from Buy at Argus noting the company’s muted prospects due to decelerating home sales trends, with Q2 revenue for Wayfair having fallen 170bps and missing estimates.
• In Beauty: ELF shares tumbled following decelerating Scanner Data; Piper noted the data they received via SPINS + IRI, sales for ELF (cosmetics + skincare) slowed to +17.6% y/y in the four weeks ended 8/11 from +27.1% y/y in the prior four weeks. This puts FQ2 to date at +18.9% y/y vs. the ~20% management has been alluding to. Sales growth for ELF has fallen to the mid-teens to low-20s levels in the past few weeks vs. the high-20s to low-30s range delivered in June.

• In Boating: Keybanc out with July boat retail data saying July’s -7.5% y/y was above normal seasonality following softer than normal June, coming in relatively in line with their sense of expectations and recent checks. Keybanc said BC softer vs industry (~ -15.0% y/y) Ski/Wake: Category -13.9% y/y; MBUU softer, MCFT stronger Pontoon: Category -5.9% y/y; PII softer (note earnings later this week for a few of the boating names).

• In Energy: Stocks got an overall boost behind a spike in oil following Middle east Tensions this weekend between Hezbollah and Israel and Libya headlines that its eastern-based government said on Monday that all oil fields are closing, halting production and exports. PBR was upgraded to Overweight from EW at Morgan Stanley saying the outlook for compelling total return in place as the stock is down 17% since its peak earlier in 2024 and has been flat over the past five months. In utilities, XEL was upgraded to Buy at Argus on data center potential and solid dividend growth.
• In Aerospace & Defense: BA shares dipped early as NASA announced Saturday that two astronauts brought to the International Space Station by Boeing’s Starliner spacecraft in early June will instead return on a SpaceX vehicle.
• In Transports: Elliott investment management L.P. reports 9.7% stake in LUV as of August 22-(previously had stake of 8.2% in Southwest Airlines as of Aug 9^th).

• In FinTech/Payments; FOUR agreed to acquire all the issued and outstanding shares of Givex for about C$200M, with Givex holders to receive C$1.50 in cash for each Givex Share held.

• GH files for common stock offering late Friday of up to $400M.
• MIRA said it novel ketamine-analog drug reduced or reversed nerve pain in rats; said its study found that low oral doses of Ketamir-2 led to a substantial and significant reversal of neuropathic pain for 14 to 22 days following an operation that severed a nerve in rats that was done to test the effects of the drug on damaged tissue.
• RYTM announced FDA acceptance for priority review of supplemental new drug application for Imcivree (setmelanotide) in patients as young as 2 years old.

• In IT Hardware: TD Cowen trims its CY24 PC outlook to +3%, maintain server view at +7%. The firm said the PC market grew 2% Y/Y during C1H24 despite the macro. Expect shipments to improve further in C2H on seasonality and Win11 upgrades but trim estimates modestly, leading to our new CY24 +3% Y/Y view. In Servers, we maintain our CY24 unit forecast of +7% Y/Y as C1H shipments were in line at +7%, and we expect C2H is on track given improving AI accelerator chip supply.
• Also in IT Hardware: TD Cowen with quarterly preview saying investor sentiment remains mixed on the IT HW space, noting checks indicate enterprise storage demand is trending slightly below expectations, AI server supply is improving & PCs are seeing seasonal growth. Into the print setups, TDCowen is tactically cautious on PSTG, slightly positive on DELL as it benefits from traditional server spending, neutral on NTAP . Looking past the print, TDCowen likes NTAP
• IBM is shutting down its China research and development department, the latest retreat from the country by top U.S. technology companies. The company is moving its China R&D functions to other overseas facilities. The closure will affect more than 1,000 people, most of them working for the company’s R&D labs.