Closing Recap

Tuesday, March 19, 2024

U.S. stocks saw lackluster movement early in the trading day before slowly melting higher, as stocks finished at fresh record highs (vs ending at lows Monday) ahead of the potential catalyst driven FOMC policy meeting event tomorrow afternoon. Sector strength was broad based, led by Energy (XLE), Industrials (XLI), Utilities (XLU), and Consumer Discretionary all up +0.5% or more on the day. Technology rebounded sharply from morning declines, as large cap tech paced gains again (AAPL, MSFT) and semis rebounded off lows (NVDA). Stocks extended gains late afternoon following a better-than-expected 20-year bond auction ahead of tomorrow’s FOMC meeting. All eyes on the Fed tomorrow with the policy announcement at 2:00 PM and Fed Powell press conference afterwards at 2:30 PM. Market expectations for aggressive rate cuts for 2024 have eased the last 2-months, for calls initially of 6 cuts to now between 3-4 given recent inflation data. Powell’s comments about inflation and their outlook will be closely watched tomorrow, with major averages still hovering just below recent all-time highs. Treasury yields dipped for the first day in 7, gold dipped, the dollar rose, and oil rose. NVDA’s GTC chip event grabbed a lot of attention throughout the day in tech.

• In Beauty: Piper upgraded OLPX to Neutral from Underweight and SBH reit OW with $16 tgt following its quarterly salon survey to 165 hair stylists. Macro and competitive brands are still very much present in professional haircare, though Piper is not seeing these pressures intensify, and this marked another survey of stabilizing trends for OLPX.
• In Consumer: UL said it plans to spin off its ice-cream business as part of a restructuring that could affect around 7,500 jobs; KR said it had entered a definitive agreement for the sale of its specialty pharmacy business to CarelonRx, a unit of U.S. health insurer ELV. PEP announced it will become the exclusive beverage provider to Subway restaurants across the US starting in 2025. BYND filed a $250 million mixed securities shelf registration.

• In Casino/Gaming: DKNG CFO Jason Park taking on the new role of Chief Transformation Officer, and appointing Alan Ellingson as a replacement.
• In Fitness: PLNT shares fell -5% as social media accounts calling for a "Bud Light-type" boycott after an unconfirmed story concerning Planet Fitness’s locker room policies continues to pick up steam. Earlier PLNT was defended at Stifel, saying the shares were "likely overreacting" to the social media uproar.
• In Movie Theatres: NCMI shares rise as reported better-than-forecast 4Q adjusted Oibda and announced a $100 million share buyback program; Q4 NCIM saw a 43% increase in active national advertisers and record revenue per attendee; sees q1 revs $34.5M-$35.5M vs. est. $34M.

• In Industrials: MMM was upgraded at Barclay’s to Overweight from Equal Weight and raise tgt to $126 from $111 due to a higher target valuation multiple (to embed the higher potential for margin expansion as a CEO transition looms), and a lower estimate for MMM’s non-debt / environmental liabilities.
• In Materials: OLN shares weak initially after the EPA yesterday announced additional details for the ban on the use of chrysotile, a type of asbestos used in chlor-alkali production. The ban was first proposed back in 2022, and in its earlier 10K filing, OLN suggested such a decision would hinder its operations. IP shares rose after appointed Andrew Silvernail as new CEO, succeeding Mark Sutton, effective May 1; Sutton, who served as CEO since 2014, will continue as chairman of the board.
• In Metals & Mining: gold miners were weak (AEM, NEM), pulling back after recent bounce for gold prices to record highs of $2,200, as prices slipped ahead of the FOMC meeting tomorrow where no rate changes are expected; aluminum producers AA, CENX sharply underperformed.
• In Aerospace & Defense: RTX and TDG remain favorite Commercial Aftermarket cycle names at TDCowen saying the robust commercial aero aftermarket upswing is likely to extend through 2026 with above-guide gains in 2024-25. RTX tgt raised to $115 from $106; Airbus (EADSY) upgraded to Outperform at RBC Capital and raised tgt to EUR192 from EUR145 as believes the recent positive shift in sentiment has room to run as recent NB share gains could expand further and investor confidence in the mid-decade targets improves.

• In Banks: Stephens downgraded FITB from Overweight to Equal Weight with $41 tgt following outperformance vs. peers and now trades at a healthy premium following the successful re-rating of valuation while TFC was upgraded from Equal Weight to Overweight and raise tgt to $43 arguing that its recent sale of Truist Insurance Holdings adds about 230 basis points of CET1 capital should reinvigorate the growth.
• In Business Services: DLO shares fall after results; Q4 EPS $0.10 vs. est. $0.15; Q4 revs $188M vs. est. $173.69M; forecasts 2024 adjusted EBITDA between $220-$260M; forecasts 2024 TPV growth of 40% to 50%.
• In FinTech: STNE shares fall as co-founder Street won’t seek reelection at the next shareholder meeting in April; posted 4Q adjusted Ebitda that missed the average analyst estimate.

• CRNX said its oral drug paltusotine met the main goal in a late-stage study, evaluating it as treatment for acromegaly, a disorder that occurs when the body makes too much growth hormone. CRNX says 56% of patients were able to maintain growth-factor levels on the drug, compared to 5% receiving placebo.
• MDGL 750K share Spot Secondary priced at $260.00, raising $600 million in an upsized public offering after shares have risen 16% since winning the first FDA approval of a drug to treat a fatty liver disease known as NASH.
• PTCT announced the submission of a BLA to the U.S. FDA for Upstaza (eladocagene exuparvovec), a gene therapy for the treatment of aromatic L-amino acid decarboxylase (AADC) deficiency.

• SMCI shares stumbled after raising cash thru stock offering, saying it would sell 2Mm shares (price closed at $1,000.68 on Monday night); said to use net offering proceeds to support operations, including purchase of inventory, manufacturing capacity expansions, increased R&D as per filing.
• ANSS, CDNS, SNPS among companies mentioned by NVDA last night at GTC Keynote as partners.
• INTC and TSM – The Nikkei reported overnight at least five suppliers to TSMC (TSMC) and Intel (INTC) have delayed construction of facilities in Arizona.
• In Semi equipment: KLAC announced last night strategic decision to exit the company’s flat panel display business & lowers Q3 adj. EPS forecast to $4.23-$5.43 vs prior $4.66-$5.86 & adj GM 57.7-59.7% vs. prior 60.5-62.5%; said decision to exit flat panel biz has no effect on revenue expectations for the March 2024 quarter and the Company reaffirms its revenue guidance range of $2.3B, plus or minus $125M.