Closing Recap

Wednesday, March 27, 2024

U.S. stocks finished higher amid strong market breadth (nearly 5:1 advancers leading decliners), led by strength in Smallcap Stocks as the Russell 2000 jumped over 2.1% while the Nasdaq rose +0.5% late and the S&P 500 gained +0.85%, snapping its 3-day losing streak and avoiding its first 4-day losing streak since the first week of January. No major U.S. economic data to move the needle today, but key data coming up tomorrow (Q4 final GDP, Q4 PCE, jobless claims, Chicago PMI, University of Michigan Confidence) and Friday (Feb PCE, core PCE and Personal income while U.S. markets are closed for holiday). Sector strength was broad based, led by interest rate sensitive sectors such as Utilities (XLU +2.7%) and REITs (XLRE +2.5%), and more than 1% gains for Materials (XLB), Industrials (XLI), and Healthcare (XLV). Even on a slow week, with low volumes and news flow, major averages remain near record highs, ahead of key inflation data (no fear). Heading into the final day of the month/quarter, the S&P is +9% YTD, the Nasdaq +8.6% YTD, the Dow +4.2% YTD and the Russell 2000 +2% YTD. Just how strong have the last 5 months been? Well, @RyanDetrick noted “the S&P 500 has a shot at being up 10% or more in back-to-back quarters for the first time since Q4 ’11 and Q1 ’12.” This move from December came after the Fed “pivot” calling for rate cuts in 2024 after halting hikes mid-2023 and has continued to press on despite signs of inflation picking up and fed futures calling for less cuts – time will tell.

• Treasury prices added to gains following a government auction, pushing yields lower after the US Treasury sold $43B in 7-year notes at a yield of 4.185% vs. 4.193% when issued prior as the bid-to-cover ratio 2.61 vs. 2.58 previous) and primary dealers take 12.86% of U.S. 7-year notes sale, direct 17.41% and indirect 69.73%. The auction concluded a week that saw $176B of U.S. government debt.

• In Consumer Products: KMB said it plans to reorganize its operations into three business segments, targets more than $3B in gross productivity savings and approximately $500M in working capital savings, forecasts approximately $1.5B in one-time restructuring and reorganization costs and sees long-term growth & return algorithm with organic net sales growth ahead of market growth & adj EPS growth in mid-to-high single digits.
• In Beverages: Jefferies analyzed the weakness in at-home coffee and believes the trends could be secular. Said while at-home coffee spend is 18% higher today vs 2020, believes this implies an additional 15% decline should the category continue to revert. Jefferies lowers estimate for KDP and flag risk for SJM, NSRGY and JDEP NA and said withing energy, continues to favor CELH and MNST.

• In Cruise Lines: CCL Q2 revenue grew 22% to $5.41B, mostly in-line with $5.41B estimate as passenger ticket revenue rose 26% to $3.62B and onboard and other revenue increased 14.5% to $1.79B while bookings for the quarter were at record levels but said sees Baltimore bridge collapse resulting in a $10M hit to 2024 income.
• In Casinos/Gaming: DKNG, FLUT and other online betting stocks (MGM, PENN, CZR) saw weakness after the NCAA has requested they ban college player prop bets; DKNG was added to Conviction List, PT raised from $54 to $58, maintains Buy at Needham saying they now have greater confidence in its estimates and the upside in the Bull case as it switches its modeling methodology.

• In Metals & Mining: CLF announces price increase for hot rolled, cold rolled and coated steel products as the minimum base price for hot rolled steel is now $900 per net ton and raises current spot market base prices by $60/net ton for all carbon hot rolled, cold rolled and coated steel products. Gold miners and precious metals another big boost on day with gold prices closing back above 42,200 an ounce.
• In Solar: the sector was strong after a Reuters headline that U.S. solar factories strike deal to produce ‘made in USA’ panels, boosting shares of SEDG, ENPH, SPWR, FSLR. Solar manufacturers Suniva and Heliene enter $400 mln deal to produce "Made in USA" panels – solar project builders that use panels containing American-made cells will be able to claim a 10% tax credit for using domestic content. Also Wells Fargo noted they hosted their 2nd annual Clean Energy Symposium in NYC. Said solar companies reaffirmed Q1 outlooks and still expect an H2’24 recovery with stronger demand in Europe vs US. Cash/liquidity was a focus vs. growth for most companies. They noted ENPH reaffirmed its Q1 outlook and pointed to the US resi market bottoming out. Also said both ENPH and SEDG were relatively upbeat on Europe and view most EU countries to be in recovery.

• In Crypto: COIN shares slide after the Court denies Defendants’ motion for judgment on the pleadings insofar as the Court finds the SEC has sufficiently pleaded that Coinbase operates as an exchange, as a broker, and as a clearing agency under the federal securities laws, and, through its Staking Program, engages in the unregistered offer and sale of securities (shares fell as case not dismissed which was the hope). MSTR hit new all-time highs of $1,999.99 before pairing gains.
• In Credit Cards/Finance: HOOD launched a new credit card only for its Gold customers for now but expected to be rolled out broadly later this year; gold Card to have no annual fee, no foreign transaction fees and have cash back offers via reward points and bookings on Co’s travel portal. PAYS shares jump on results as Q4 EPS $0.10 vs. est. $0.02; Q4 revs $13.7M vs. est. $12.62M/expects FY revenue of $54.5M-$56.7M above consensus of $52.2M.
• In Asset Managers: Piper notes based on Morningstar data, February long-term AUM was up 4% MoM to $27.7T. Long-term AUM is defined as assets of open-end mutual funds (MFs) and exchange-traded funds (ETFs) but excludes money market funds (MMFs). Long-term strategies saw 3% annualized organic growth ($60B of net inflows) and money market funds saw 9% organic growth ($43B of net inflows) to drive industry inflows in the month. Money market funds AUM increased 1% to another record of $6.1T (+25% YoY). Industry wide AUM (MFs + ETFs + MMFs) ended the month at a record $33.8T (+3% MoM, +19% YoY)

• MDXG announced receipt of a letter from the FDA indicating the agency’s position that AXIOFILL does not meet the requirements under Section 361; MDXG affirmed guidance for 2024.
• MRK won FDA approval of Winrevair (sotatercept) for the treatment of adults with pulmonary arterial hypertension (PAH) to increase exercise capacity, improve WHO functional class, and reduce the risk of clinical worsening events. Winrevair’s list price is $14,000 per vial, and most patients use a single vial every 3-weeks.
• MRNA announced that Blackstone Life Sciences will invest up to $750M to support its mRNA-based flu vaccine programs.
• NVCR shares jumped after its METIS phase III clinical trial met primary endpoint, demonstrating a statistically significant extension in time to intracranial progression for patients with brain metastases from non-small cell lung cancer.
• ROIV will replace RUN in the S&P MidCap 400, and Sunrun will replace PGTI in the S&P SmallCap 600 effective prior to the opening of trading on Monday, April 1.
• THC was upgraded to Outperform with $122 tgt after saying they confirmed that MI has increased its Provider Tax program by ~$2B for state fiscal year 2024 (Oct 1 2023 thru Sept 30 2024) and most importantly its analysis of state info and THC SEC filings points to potential for ~$150M to $200M benefit to the bottom line.
• VKTX tgt was raised to Street high $138 at Oppenheimer after the company reported positive topline results from the Ph1 trial of oral VK2735, supporting advancement into Ph2 and expanding an already impressive opportunity for the company’s obesity program.

• In Internet/Advertising/Marketing: DRCT shares fall, missing quarterly consensus revenue by $25M (albeit still growing 35% y/y) while FY24 revenue guidance of $170-190M was also $60M below the Street at the mid-point. Raymond James resumed coverage on GDDY strong buy, SQSP, WIX Outperform, and market perform ratings on LZ, YELP, and ZIP saying the SMB internet space has been circled as a group exposed to GenAI disruption given early consumer/prosumer text/image gen use cases.
• In Semiconductors: MRVL shares mentioned positively at Citigroup, opening a “positive catalyst watch” on shares into the company’s artificial intelligence investor event on April 11; also notes stock’s recent underperformance following Marvell’s weaker than expected April quarter guidance. Little end of quarter pullback in some of the biggest semi chip “AI plays like NVDA, AVGO, SMCI and ARM.
• In Equipment & Parts: OUST reported Q4 FY23 revenue that was above consensus estimates, while guiding Q1 FY24 revenues in-line on record sensor sales across all end-markets, especially robotics and smart infrastructure verticals; booked $27M of business in Q4, bringing FY23 total bookings to $142M vs. $70M booked in FY22. GPRO intends to reduce its global workforce by approximately 4%; restructuring of the company’s business will result in estimated aggregate costs of approximately $7.5M.
• In Software: NCNO reported better Q4 RPO while subscription revenue of $107.5mn, short term bookings growth of +22% y/y, and operating margin of 15.6% were all ahead of expectations; FY25 guide of ~13-15% subscription growth includes ~2 points from DocFox, a function of FY24 bookings/churn, but should re-accelerate in FY26. PRGS delivered a mixed Q1, beating consensus estimates behind robust demand for its product portfolio and strong cost management, but 2Q revenue guidance missed estimates reflecting a tough YoY comparison. AMZN spends $2.75 billion on AI startup Anthropic in its largest venture investment yet.