Closing Recap

Thursday, March 07, 2024

Index	Up/Down	%	Last
DJ Industrials	130.30	0.34%	38,791
S&P 500	52.59	1.03%	5,157
Nasdaq	241.83	1.51%	16,273
Russell 2000	16.65	0.80%	2,084

 

 

 

 

 

 

 

 

 

Up, up, and away for U.S. stocks in another upside massive market move! U.S. stocks extended gains as the S&P 500 posted another all-time high today in broad-based rally yet again, but technology continues to be the biggest winner led be semiconductors. The Philly semi-index (SOX) rose as much as 3.5% to highs above 5,175 (up over 21% YTD) led by the face of AI growth NVDA, as well as AVGO ahead of its earnings tonight. Economic data today showed more strength in productivity, ahead of tomorrow’s Nonfarm Payrolls for February with est. at +200K (prior month was +353K), Private Payrolls est. 160K (prior +317K) and manufacturing Payrolls est. +10K. The unemployment rate expected to hold steady at 3.7% and averages wages M/M to rise +0.3% (vs. last month +0.6%). Note the last few weeks, good and bad economic data have been springboard for higher stocks as markets remain in goldilocks scenario (bad data means Fed can cut rates sooner – stronger data meaning the economy strong and either “soft” or “no” landing as recession fears all but gone. Most sectors were higher again in the S&P on the continued “melt-up” with 1% gains for Materials, Communications, and Technology, while Financials and REITS lagged. Treasury yields declined ahead of February’s employment report and after Chair Powell said in the U.S. Senate that the Fed is "not far" from gaining confidence to cut interest rates. Powell said at the end of his two-day hearing that rates are above neutral. Market sentiment remains overly Bullish as the bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was 29.9 vs 25.2 last week as Bulls rise to 51.7% from 46.5%, Neutrals fall to 26.5% from 32.2% and Bears rise to 21.8% from 21.3%. Also, the Crypto Fear and greed Index 82/100 = Extreme Greed and overall markets Fear and Greed Index: 75/100 = Extreme Greed. No fear at all as the CBOE Volatility index (VIX) remains depressed for months.

 

Some expected bullet points in tonight’s State of the Union address from President Biden: Biden will seek to use the address to point to progress on the economy, including declining rates of inflation and improving confidence. He will also include a consumer focus. Ahead of the speech, the White House outlined plans to cut credit-card late fees from an average of $32 down to $8 and target so-called "junk fees" across a range of goods and services. The President plans to propose raising taxes on large companies, reprising some previous plans such as raising the corporate tax rate to 28% and boosting taxes on U.S. companies’ foreign profits. He will also propose raising a corporate minimum tax, which took effect this past year, to 21% from 15%, and will call for imposing stiffer limits on companies’ ability to deduct the wages of their highest-paid workers, according to White House officials. – as per Dow Jones.

• Weekly Jobless Claims unchanged at 217,000 and vs. consensus 215,00, while the 4-week moving average fell to 212,250 from 213,000 the prior week and continued claims climbed to 1.906M from 1.898M prior week.
• The US January trade deficit (-$67.4B) vs. consensus (-$63.5B) and vs December deficit (-$64.2B); Jan exports +0.1% vs Dec +1.1%, imports +1.1% vs Dec +1.4%; Jan exports $257.19B vs Dec $256.86B, imports $324.63B vs Dec $321.03B. China Jan trade deficit $23.72B vs Dec deficit $22.09B.

 

Macro	Up/Down	Last
WTI Crude	-0.20	78.93
Brent	0.00	82.96
Gold	7.00	2,165.20
EUR/USD	0.0044	1.0942
JPY/USD	-1.31	148.05
10-Year Note	0.002	4.106%

 

• In Warehouse/Discount Stores: BIG posted a wider-than-expected Q4 EPS loss of (-$0.28) vs. est. loss (-$0.23) while Q4 sales fell (-7%) and comp sales down (-8.6%), which was in-line with ests, citing challenging weather in January, while noted they forecast Q1 comp sales improving vs Q4. BJ posted mixed Q4 results as EPS beat but revs fell short of consensus ($5.36B vs. $5.39B), while Total comparable club sales decreased by 0.4% compared with the prior year’s quarter; guided FY EPS $3.75-$4.00 vs. est. $4.00.
• Consumer Products: HNST shares jump following a surprise profit of $0.01 EPS vs. year ago loss of (-$0.14) while revs rose 10% y/y to $90.3M topping ests $84M and sees FY24 to benefit from its brand maximization, margin enhancement and operating discipline initiative.
• In Restaurants: SHAK was upgraded to Outperform and names #2 pick in restaurant space (DPZ remains #1) and raise price tgts on DRI tgt raised to $190 from $180, SG to $17 from $15, SHAK to $125 from $91, WING to $410 from $355 and YUM to $160 from $144 – top Picks in order: DPZ, SHAK & QSR; as notes investors continue to put a premium on stories with positive traffic, which is more common in fast casual than quick service & seems likely to persist due to quick service’s higher y/y price increases.
• In Food & Grocers: KR projected full year adjusted EPS of $4.30 to $4.50, largely above estimates of $4.34 and expects FY24 comp sales, excluding fuel, to increase to 1.75% from 0.25% and above est. for a 0.7% increase.

• In Autos: TSLA adds to weekly decline, on track for its worst weekly performance since January, losing more than 12% since Monday following recent news that its China sales saw a decline in February, likely due to a slowdown during the Lunar New Year Holidays and some cautious analyst commentary (MSCO slashed ests yesterday). RIVN shares surged midday after they announced after reveal of R2 event noting deliveries expected to start in 1H’26 and new R2 electric SUV will start around $45,000, announces R3 crossover EV and paused its plans for plant in Georgia, saying savings will be $2.25B, which boosted shares.

• In Chemicals: CC shares jumped following Internal Review results saying findings do not affect the prelim, unaudited estimates of operating results and other financial measures as of and for the year ended. In Research, PPG was downgraded to Neutral from Buy at UBS and cut tgt to $156 from $173 saying after its strategic review of NA arch. coatings (~10% of sales), UBS is less constructive on medium-term growth potential. UBS upgraded SHW to Buy from Neutral with a price target of $402, up from $312 saying with inflections in U.S. residential data starting to show, Sherwin-Williams is in the prime position to capture this growth.
• In Energy & Utilities: AGR said the Unaffiliated Committee of its Board of Directors received a non-binding proposal from Iberdrola to acquire all the issued and outstanding shares of common stock of Avangrid not owned for $34.25 in cash per share. Iberdrola, S.A. owns approximately 81.6% of Avangrid’s shares. CRC shares sunk late day after Roth MKM noted a California appellate court overturned a lower court’s decision to deem an existing environmental impact report covering parts of Kern County, CA suitable for the purpose of issuing new drilling permits in county.

• Zerohedge noted some concerning trends for FDIC: 1) Late payments on commercial properties that aren’t owner occupied are at the highest level since the first months of 2014, Gruenberg, the FDIC chairman, said in his remarks. 2) The FDIC now estimates $20.4 billion in losses arising from the failure of both SVB and New York-based Signature Bank, up 25% from its $16.3 billion November estimate. The industry’s net charge-off rate is 17 basis points above its pre-pandemic average. 3) Aggregate net income for the 4,587 FDIC-insured commercial banks and savings institutions declined $30 billion (43.9 percent) from the prior quarter to $38.4 billion. 4) The industry’s net charge-off rate increased 14 basis points from the prior quarter and 29 basis points from the prior year to 0.65 percent, 17 basis points above its pre-pandemic average. 5) Credit card loans led the annual increase in net charge-off balances. Delinquent credit cards haven’t been this high since the third quarter of 2011 https://tinyurl.com/4c8nmpn6

• NVO shares jumped after saying its experimental drug amycretin, which combines a GLP-1 medicine like its blockbuster Wegovy with another in a daily pill, helped patients in an early-stage test shed 13% of their weight in 12 weeks (shares of obese drug maker LLY dipped initially on headlines).
• VKTX, LLY, ALT shares volatile on competitor NVO obesity drug results: NVO’s oral amycretin data very strong with no new side effects 13.1% weight loss after 12 weeks looks strong in comparison to LLY’s oral orforglipron which showed 14.7% weight loss after 36 weeks at the high dose and roughly in line with Viking’s recent phase 2 data.

• In MedTech: SILK was upgraded to Buy with $24 tgt at Argus noting the company is expanding its commercial footprint by enlarging its sales force, extending patient access through broader CMS coverage, and extending to markets in China and Japan. Notes the addressable market for TCAR is large and underpenetrated. CDMO shares tumbled after announced a private offering of $160M 7% convertible bonds due 2029.
• Drug Pricing: President Biden has said he wants to significantly expand a new program that allows Medicare to negotiate certain drug prices, and he’s going to use tonight’s State of the Union address to make his case. As STAT News reported, the current program will eventually allow Medicare to negotiate the prices of up to 20 drugs per year, and Biden wants to push that number to 50, bringing more medicines into the negotiation process sooner.

• In social media: shares of META, SNAP saw some upside strength after the U.S. House Committee approves TikTok crackdown bill on 50-0 vote. GOOGL shares also benefitted (with its YouTube) as shares moved back above its 200-day MA $132.98.
• Earnings in software sector tonight: MDB, GWRE

• Earnings tonight in semis from AVGO and MRVL; Oppenheimer said for MRVL, the degree of the beat on the guide is the only things that matters here as AI expected to lead upside, offset by softness in carrier and enterprise and for AVGO, says it is all about the degree of the beat driven by AI. Mgmt. isn’t providing quarterly guidance but pins FY24 outlook at $50B, split $30B/$20B semi/software.
• MU was upgraded to Buy at Stifel and raised its price target to $120 saying channel checks confirm DRAM supply is tightening and, on a trajectory, to recover into the 90s by mid-year, and sees leverage returning and believes consensus estimates for 2025 are well wrong and too low.
• Mizuno raising ests/PTs for AMD (PT to $235 from $200), ARM (PT to $160 from $100), AVGO (PT to $1550 from $1450), NVDA (PT to $1000 from $850) noting accelerating Custom Silicon with Neoverse P3/V3 MSFT, AMZN, META and increased foundry collaboration with INTC/TSM could drive ARM’s Infrastructure market at a 57% CAGR (F25-28E), Mizuho estimate F25-28E Client (Mobile) growing at a ~34% CAGR with stronger v9 adoption, and overall driving upside F27E top line/EPS at $6.21B/$6.86, up 25%/41% y/y (WELL ABOVE cons 15%/19% y/y).

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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.