Closing Recap

Tuesday, December 19, 2023

Index	Up/Down	%	Last
DJ Industrials	251.96	0.68%	37,557
S&P 500	27.82	0.59%	4,768
Nasdaq	98.03	0.66%	15,003
Russell 2000	38.54	1.94%	2,020

 

 

 

 

 

 

 

 

 

Stop me if you heard this before…US stocks finished at the highs, extending gains as the path of least resistance remains firmly to the upside heading into year-end. The Nasdaq advanced a 9^th straight day, trading to a new all-time high for a 3^rd consecutive day. The QQQ’s hits a new ATH of $408.94 (taking out prior $408.81) before pulling back a bit ever so slightly as markets continue to buy stocks. The Dow Jones Industrial Average made it a 5^th straight day of record highs. A rally off the October lows has the S&P 500 index SPX trading just 1% away from its record close of 4796.56 set on Jan. 2, 2022. The Russell 2000 Index is up 11% this month alone and stocks overall on track for an 8^th straight week of gains in what has been a fascinating and remarkable recovery off the October lows. While the leaders remain Technology, Communications, and Consumer Discretionary – other sectors have played catch up this month, with REITS +6% this month and Industrials +5%. There were over 200 new 52-week highs in the NYSE today vs only around 10 new 52-week lows while market breadth was roughly 4:1 advancers leading decliners as no macro, or stock fundamentals disturb the current market narrative. On the day, it was a slow, steady, calm rise with major averages finishing near their best levels of the day – no mkt concerns to this point.

 

Some impressive statistics: 1) @bespokeinvest noted “say a sad goodbye to Mondays in 2023. Yesterday was the last Monday of the year since next Monday is the Christmas holiday. The S&P gained on 75.6% of Mondays this year, by far the strongest reading in the last 70 years.” 2) Over 80% of S&P 500 stocks are now above their 100-day MA (coming into today); 3) According to Bank of America’s latest survey, global fund managers are the most bullish since January 2022; 4) also @biancoresearch tweets: "In just 5 days, $SPY has taken in $50B+, more than any other ETF YTD! This is the biggest 5-day take for $SPY since January 2018. FYI – the following week Jan 30, 2018, was vol-maggeon, (the $VIX went from 12 to 50 in 3 days and the $SPX plunged 10+% in 9 days)." The list of bullish stats, data points, commentary over the last few weeks has been endless and reflective of the strength in U.S. stock markets heading into the Christmas holiday weekend.

 

Economic Data

·     November Housing starts jumped +14.8% to 1.56M unit rate (highest levels since May) vs Oct +0.2% and well above the consensus 1.36M unit rate; single-family starts +18.0% to 1.143M unit rate; multifamily +6.9% to 417,000-unit rate. Nov Building Permits fell -2.5% to 1.46M unit rate vs. est. 1.465M and vs Oct +1.8%.

 

Commodities

·     Oil prices rose with other commodity prices as the dollar slipped and end of year buying in beaten energy prices helped boost prices with WTI crude rising $0.97, or 1.34% to settle at $73.44 per barrel. Oil futures got a boost after Houthi rebel attacks on shipping in the Red Sea remain a concern, raising concerns about shipping in the oil market yesterday after BP said it would pause sending tankers through the Red Sea

·     Gold prices rose $11.60 to settle at $2,052.10 an ounce as a weaker dollar and yields continue to buoy precious metals in what has been a broad-based buying of assets into year end (bonds, stocks, crypto, commodities). The US dollar dips with dollar index (DXY) -0.4% to 102.15. The yen slumped and global bond yields slid after the Bank of Japan signaled it’s in no hurry to remove negative interest rates.

·     Treasury yields in a narrow range all day, with the 10-yr holding under 4%, between 3.89% and 3.93% awaiting key GDP and inflation data later this week and on continued bond buying since the FOMC meeting last week produced a more dovish outlook on rates then market participants had been anticipating.

 

 

Macro	Up/Down	Last
WTI Crude	0.97	73.44
Brent	1.28	79.23
Gold	11.60	2,052.10
EUR/USD	0.005	1.0974
JPY/USD	1.11	143.86
10-Year Note	-0.03	3.926%

 

 

Sector News Breakdown

Consumer

Retail, Consumer Staples & Restaurants:

·     In food & beverages: PEP downgraded to Neutral from Overweight at JP Morgan in conjunction with its 2024 Year Ahead Outlook saying they don’t see anything fundamentally wrong with PEP and continue to have confidence that the company is well positioned to deliver on its 2024 outlook. Consumer Staples underperformed with KHC, CPB, MDLZ down on day in food sector ahead of GIS earnings tomorrow morning.

·     In Retail: TD Cowen raised price tgts on ASO to $67 from $57, DECK to $808 from $705, DKS to $165 from $138, NKE to $129 from $125 (ahead of earnings this week) and RL to $165 from $147 in retail in Holiday tracker saying UGG, HOKA, On, Ralph Lauren, LULU, Dick’s, Yeti and Academy stand out as maintaining momentum in Nov. and into Dec.

 

Homebuilders, Building Products, Home Furnishing:

·     RDFN said home prices were up 0.6% from October, the smallest monthly increase since June, and were up 6.4% from a year earlier. according to the Redfin Home Price Index– which is like but more current than the Case-Shiller price index–showed that U.S. home-price growth slowed for the third straight month in November.

·     Another day of strong gains for homebuilders given low Treasury yields/mortgage rate expectations to fall further given the recent strong of low inflation reports and dovish Fed commentary.

 

Energy, Industrials and Materials

·     The U.S. bought 2.1M barrels of crude oil, the Energy Department said on Tuesday, to help replenish the Strategic Petroleum Reserve (SPR) after the largest sale in history last year. The department said it bought the oil, for delivery in February, for an average of $74.23 a barrel, below the average of $95 a barrel that oil sold for in 2022. – Reuters

·     In Solar: strength across the board: ENPH announced a restructuring plan; said it decided to reduce our global workforce by approximately 10%, impacting approximately 350 contractors and employees; streamlining operations by ceasing operations at contract manufacturing locations in Timisoara, Romania, and Wisconsin. Another day, another analyst making changes in solar as Piper the latest upgrading RUN to Overweight with $31 tgt, downgraded ARRY to Neutral from OW given limited upside on valuation, risks to top-line expectations in Cal’24, upgraded NOVA to Overweight and raise tgt to $26 and downgraded SEDG to Neutral from OW following the earnings reset from Q3.

·     In Industrials: EMR, ROK and JCI are named top picks in Electrical Equipment at Wells Fargo and upgraded ROK to Overweight as view rates down and PMI moving north as a rising tide effect. Upgraded ROK to overweight combo of improving orders and strengthening PMI will drive outperformance vs EEMI peers on relative valuation expansion. In Aerospace: BA announced an order for up to 100 737 MAX jets by Lufthansa Group. The order by Lufthansa, which is the first by the airline for 737 aircraft since 1995, includes a firm order of 40 planes with options for 60 more. BA rises for the 9th day in last 10, CAT rises for the 16th time in last 18 days.

·     In Tankers: The Baltic Exchange’s dry bulk freight index fell for the fifth straight session, down 69 points, or 3%, at 2,219, its lowest since Nov. 24. The Capesize index was down 206 points, or 5.2%, at 3,730, also hitting a 25-day low. Average daily earnings for capesizes decreased $1,703 to $30,936. The Panamax index was up 9 points, or 0.5%, at 1,915.

 

Financials

·     In Insurance: AIG was upgraded to outperform from market perform at BMO Capital, as lower protection limits and more reinsurance protection lift worries over reserves.

·     In Fintech: AFRM shares jumped after expanded its pay-over-time services with WMT to self-checkout at over 4,500 Walmart stores in the U.S.

·     In Crypto: a resumption of strength in Bitcoin, moving back above the $43K level after sub $42K the other day as the crypto asset(s) see strength to close out what has been a good year (Bitcoin +158% YTD); COIN, MARA, MSTR, HUT, RIOT among the names most tied to Bitcoin moves. MARA entered into a definitive purchase agreement to acquire two currently operational Bitcoin mining sites, totaling 390 megawatts of capacity, for $178.6M.

·     In Financial Services: FDS cut its fiscal-year outlook for EPS to $13.95-$14.35 a share vs. prior $14.20-$14.70 on lower revs and lower margin outlook; Q1 EPS and revs slightly above consensus.

 

Healthcare

Biotech & Pharma:

·     ALDX announces statistically and clinically significant improvement from baseline in phase 2 clinical trial of adx‑629 in patients with atopic dermatitis.

·     AMGN was upgraded to Outperform from market Perform at BMO Capital and raise tgt to $326 from $286 citing closure of Horizon takes a meaningful step towards replacing revenues lost to base business erosion; and interesting pipeline with a rich catalyst path into 2024 could drive additional multiple expansion.

·     ATEC was added to Needham’s Conviction List as expects market growth across the MedTech sector to return to normal pre-COVID levels in 2024 and believe shares of companies that can show consistent above-market growth will outperform.

·     ARVN upgraded to overweight tgt $63 at Wells Fargo as think shares are cheap and Vepdeg’s phase III veritac-2 trail read out in 2h24 seems even more de-risked post SABCS updates.

·     BLUE announces $150M common stock offering.

·     CVAC shares tumbled after a Germany’s patent court invalidated a patent that was the basis of a patent violation lawsuit brought by the co against rival BNTX, a blow to CureVac’s claims for a share in billions in COVID-19 vaccine revenues.

·     GILD and CGEN announce exclusive license agreement for novel pre-clinical immunotherapy program (anti-IL-18 mAb).

·     INMB shares dropped after saying its study for its Alzheimer’s disease treatment would remain on full clinical hold as the FDA requested additional information on the long-term potency of the treatment.

·     IONS announced a licensing agreement with Otsuka Pharmaceuticals, with Otsuka obtaining EU rights to Donidalorsen.

·     KVUE shares rose after court victory in case over Tylenol purported links to autism.

·     QURE downgraded to Neutral from Buy at Mizuho and slash tgt to $10 from $52 as it believes the current stock price fairly reflects the value for Hemgenix gene therapy for hemophilia B and is cautious about ATM-130 gene therapy in Huntington’s disease.

·     WVE upgraded to Outperform from Market Perform at Leerink.

 

Technology

·     Top 10 wish list for tech 2024 @ Wedbush – 1. AI goes mainstream. 2. Apple introduces the AI App Store. 3. M&A ramps in Big Tech. 4. Tesla introduces a sub $30k vehicle by the end of 2024. 5. Tech stocks are up 25% in 2024. 6. Apple buys ESPN. 7. Cyber security is the best sub-sector of tech. 8. Magnificent 7 will lead tech higher. 9. Musk raises additional capital for X and goes for super-app concept. 10. Microsoft and Apple will be on the $4 trillion path by the end of 2024.

·     Big wins in online travel with BKNG, EXPE making 52-week highs; strength in social media space with ETSY and META extending gains; and online names like EBAY, SHOP strong.

·     In IT Services: ACN Q1 adj EPS $3.27 topped $3.14 est. on in-line revs $16.2B while guides Q2 revs $15.4B-$16B vs. est. $16.29B; Q1 new bookings $18.4B, an increase of 14% in U.S. dollars and 12% in local currency.

 

Semiconductors:

·     AVGO shares +20% in last 2-weeks post earnings on 12/7, and favorable analyst comments post the results, now up 100% YTD in hottest semi-index (SOX +62% YTD), with leaders NVDA +242% YTD, AMD +114% YTD, INTC , and equipment names LRCX +83% YTD, AMAT +65% YTD
QRVO announced it has entered into a definitive agreement to divest its assembly and test facilities (for advanced cellular products) in Beijing and Dezhou, China, to Luxshare.

·     TSM said its board had recommended current CEO and Vice Chairman C.C. Wei succeed Mark Liu who will be retiring next year as chairman, offering continuity to the major Apple supplier.