Closing Recap

Friday, November 01, 2024

U.S. stocks were steadily higher most of Friday before a little late day pullback left major averages off their best levels, but still sporting solid gains to kick off the new month heading into a crucial week of market moving catalysts. Stocks got off to a good start behind better Amazon earnings, which offset mixed results/guidance from Apple overnight. Today’s top headlines included the October jobs report, which came in way uglier than Wall Street had expected, but investors took the data in stride given the lack of clarity considering the Boeing labor strike and the impact from Hurricanes Helene and Milton on overall figures. Energy prices advanced after a report that Iran could be preparing to attack Israel from Iraqi territory in the coming days, but also finished off the best levels (down 3% on the week). Wall street wrapped up the busiest earnings week for the S&P of the quarter with some big swings in large caps as the Nasdaq and S&P 500 each finished down over 1% on the week. The biggest sector decliners were Utilities (XLU -2.8%) amid a spike in Treasury yields (the 10-yr yield up about 13 bps on week to 4.36%, its 7^th week in a row of higher yields), REITs (XLRE -3.02% as well on yields) and Technology (XLK -2.77%) as MSFT, META, AMD and AAPL results sent shares lower. Communications (XLC) and Financials (XLF) were the only S&P sectors higher in the week. Big week coming up, will major averages manage to hold near their all-time highs?

• Average hourly earnings for October increased 0.4% for the month, slightly higher than the +0.3% estimate, though the 4% 12-month gain was in line. The average work week held steady at 34.3 hours
• U.S. ISM manufacturing activity slumped to a 15-month low in October, falling to 46.5 last month, the lowest level since July 2023, from 47.2 in September. The ISM survey’s forward-looking new orders sub-index increased to 47.1 last month from 46.1 in September. The production index fell to 46.2 from 49.8 in September. The survey’s measure of prices paid (inflation component) by manufacturers jumped to 54.8 from 48.3 in September, which was the lowest level since December 2023. Its gauge of supplier deliveries dipped to 52.0 from 52.2 in the prior month.
• US Sept construction spending +0.1% (vs. consensus unchanged) to $2.149 trln, vs Aug +0.1% (prev -0.1%); US Sept private construction spending unchanged, public spending +0.5%.
• S&P Global October final manufacturing PMI at 48.5 (vs flash 47.8).

• A day after tumbling off recent record highs above $2,800 an ounce, gold prices were little changed on Friday following weak job growth data and upside momentum from safe-haven demand were offset by rising Treasury yields. December gold settles -$0.10/oz, or -0.01% to $2,749.20 after prices fell 1.5% on Thursday as some traders took profit after bullion hit a record high above $2,800.
• Benchmark 10-year U.S. Treasury yields rebounded from an earlier drop after the jobs data, rising over 7 bps back near weekly highs above 4.35% and highest since July (off lows of day around 4.22%). The volatility in yields comes ahead of next week’s presidential election and FOMC policy meeting on Thursday. Economists see a 98% chance of a 25-basis point cut by the Federal Reserve next week. The dollar erased earlier losses and gained 0.4%.

• LI said it delivered 51,443 vehicles in October 2024, up 27.3% year over year. As of October 31, 2024, Li Auto had delivered a total of 393,255 vehicles in 2024, with cumulative deliveries reaching 1,026,619.
• NIO said it delivered 20,976 vehicles in October 2024, representing an increase of 30.5% y/y. The deliveries consisted of 16,657 vehicles from the Company’s premium smart electric vehicle brand NIO, and 4,319 vehicles from the Company’s family-oriented smart electric vehicle brand ONVO.
• XPEV said it delivered 23,917 Smart EVs in October 2024, setting a record for its monthly deliveries and representing growth of 20% y/y and 12% over the prior month. For the second straight month, deliveries of XPENG MONA M03 exceeded 10,000 units. For the first ten months of 2024, XPENG delivered 122,478 Smart EVs, a 21% increase y/y.
• In Auto/Motorcycle part suppliers: FOXF shares slumped following another disappointing quarter and downward guidance revision; guided FY24 EPS $1.27-$1.42 below consensus $1.57 and sees FY24 revenue $1.34B-$1.38B below consensus $1.43B.

• In Home Improvement/Furnishings Retail: Wayfair (W) shares rose initially as Q3 EPS and revs topped consensus views, but shares reversed lower after guiding on its c/c that sees Q4 revenue down low single digits and sees Q4 gross margin at lower end of 30%-31% range.
• In Restaurants: BJRI Q3 rev rose 2% y/y to ~$326M, in-line with consensus but posted a surprise Q3 adj EPS loss of (-$0.13) vs. est. for profit of $0.02; Restaurant level operating margin in qtr was 11.7%, down from 11.9% y/y.
• In Retail: KTB was downgraded from Buy to Hold at Stifel but raised PT to $93 from $89 saying execution has been solid against an uneven backdrop and estimates for FY24 move modestly higher. The stock has been nicely rewarded for earnings progress with shares up +84.3% y/y vs SPX +36.0%.

• In Utility: Utilities (XLU) prices were down around -2% late day given the spike in Treasury yields; Dominion (D) operating revenue $3.94B, +3.4% y/y missed ests. $4.22B while reaffirmed its full-year 2025 operating earnings guidance range; PPL Q3 results were in-line for earnings and better on revs and narrowed FY ongoing EPS $1.67-$1.73, from $1.63-$1.75 (est. $1.71); AES shares fall on earnings as EPS beat but revs of $3.29B missed the $3.46B estimate.

• In Lending: TREE Q3 results came in above Street expectations on the top and bottom line, as robust demand within the insurance segment is driving significant improvement in growth and profitability; despite results, shares rolled on the open, erasing initial gains and off earlier highs $59.31.

• CUBE reported 3Q results that were in line with consensus and at the midpoint of management’s own quarterly guidance; management tightened both the high and low ends of the FY24 FFO guidance range by $0.01 but maintained the midpoint and affirmed all the assumptions underlying its FY24 outlook.
• SBRA reported in-line 3Q results with improving rent coverage, a new acquisition within senior housing operating, and moderating leverage; management increased NFFO guidance by over 1% at the midpoint, which is ~1% above consensus, but maintained its mid- to high-teens SSNOI growth for its Senior Housing Managed portfolio.
• VICI reported a 3Q AFFO beat vs. consensus and management raised its FY24 AFFO guidance 0.2% at the midpoint by lifting the low end of the AFFO guidance range by $0.01/sh. Despite the beat and slight raise, however, consensus is at the high end of management’s FY24 guidance range.

• ARGX reported Q3 revenue ahead of consensus estimates at $573MM and provided a business update, highlighting the continued early success of CIDP VYVGART Hytrulo launch.
• EPIX tumbles over -60% after saying it was throwing ending its Phase 2 study of masofaniten in prostate cancer after determining the study was unlikely to meet its primary endpoint.
• HALO rises after raising FY24 revenue forecast to $970M-$1.02B from prior view $935M-$1.02B, driven by increase in royalty revenue and product sales, while also boosted its FY 24 adj EPS view after quarterly beat.
• LXRX shares slid after the FDA voted 11-3 against recommending Lexicon’s add-on treatment to insulin therapy for managing blood glucose levels in adults with type 1 diabetes and chronic kidney disease.

• CAH raised its FY25 adj EPS forecast to $7.75-$7.90 from prior $7.55-$7.70 which followed a both top and bottom line beat for Q1 results; pharmaceutical and specialty solutions business revs were down 5% at $48B, but would’ve increased 16% were it not for the expiration of Cardinal’s distribution contracts with OptumRx earlier this year
• MYGN shares dropped due to UNH coverage update according to Stephens. starting Jan. 1, 2025, $UNH will no longer cover multi-panel genetic tests for behavioral health diagnoses. The announcement lists codes that will be denied as unproven and not medically necessary and 0345U for GeneSight is included in the list.
• WAT shares hit its best levels since Sept 2021 after Q3 top and bottom-line beats and raised FY adj EPS view to $11.67-$11.87, from prior $11.55-$11.65 and guides sales at constant exchange rates -0.3% to -0.9%.

• In Chemicals: EMN reported 3Q24 EPS of $2.26, above consensus of $2.14 and EBITDA $493M vs. est. $483M as beat in all segments except Advanced Materials as the weakness was largely driven by lower performance films volumes due to the auto market, as well as higher costs and lower sales from the Kingsport recycling project. Q4 guidance is an incremental negative, although full-year result is in line due to Q3 beat. LYB Q3 missed profit estimates of $1.88 EPS vs. est. $1.98 after Q3 adj. core loss of $23M in its refining segment compared to year-ago core profit of $105M.
• In the E&C Sector: MTZ reported 3Q adjusted EPS of $1.63, above consensus as margins outpaced management’s guidance; EBITDA margin of 9.4% was 70 bps higher, leading to an EBITDA of $306M, 4% higher than guided. Book-to-Bill was 1.2x, and co provided 4Q and updated 2024 guidance that flows through the 3Q beat.
• In Industrials: IR shares declined after Q3 revs $1.86B missed the $1.87B estimate and lowered its FY forecast for revenue growth to be between 5%-7% from the prior view 6%-8% on sluggish demand for its air compressors.

• TEAM shares surged as delivered a strong beat to kick off FY25, driven by significant upside in Cloud growth and continued strength in Datacenter growth; Q1 results as cloud growth of +31% y/y meaningfully outperformed, leading to raised guidance

• MBLY a nice bounce after the co reported better-than-expected Q3 rev, signaling a recovery in demand as revs rose 8% y/y to $486M vs. est. $472M
• SMCI shares fell sharply for a 3^rd day since Ernst & Young resigned as the company’s auditor, citing concerns about governance and transparency (shares were down -45% on the week into earnings Tuesday).