Closing Recap

Monday, November 11, 2024

U.S. stocks advanced early, with record all-time highs for the S&P 500 (50^th record this year), the Nasdaq Composite (before pulling back), the Dow Jones Industrial Average and the Dow Jones Transport Average before pulling back off highs to finish the day little changed for the S&P and Nasdaq. What hasn’t slowed down is Smallcaps, as the Russell 2000 outperformed today (52-week high), extending its monthly gains so far above 10% with the sector expected to be a key beneficiary of Trump’s proposed tax cuts and expectations of an easier regulatory environment. S&P sector leaders included Consumer Discretionary (XLY) as the top sector in S&P helped by TSLA strength, Financials (XLF) for 2nd best mover (among top gainers YTD +32.75%), and Industrials (XLI) leading. Several stocks that gained following the U.S. election results continued their upward trajectory. Tesla shares jumped after touching $1 trillion in market value on Friday for the first time since 2022. A truly remarkable run over the last few months for U.S. stocks as the S&P 500 was able to settle above 6,000 and the Dow first close above 44,000! Bond markets were closed today and there was no economic data for Veteran’s Day; next key data point CPI on Wednesday.

Interesting stats/data: @SethCL tweeted “Through the first 217 trading days of the year, S&P 500 $SPX is up greater than 20%. Of the prior 11 occurrences, the absolute worst the market did by year-end was gain another +.5%. In other words, history suggests SPX will closeout 2025 above 6,000. If the median gain is achieved, above 6,200.” Also, as per FactSet, On November 7, the forward 12-month P/E ratio for the S&P 500 was 22.2, which marked the second straight day the P/E ratio for the index was above 22.0. The forward 12-month P/E ratio of 22.2 on November 7 was above the five most recent historical averages for the S&P 500: 5-year (19.6), 10-year (18.1), 15-year (16.4), 20-year (15.8), and 25-year (16.4). In fact, prior to the past two days, the last time the forward 12-month P/E ratio was above 22.0 was April 27, 2021 (22.2). However, it is important to note that even at 22.2, the forward 12-month P/E ratio is still below the peak P/E ratio of the past 25 years for the index of 24.4 recorded on March 23, 2000.

• Bitcoin prices gained as much as 13%, topping $87,000 for the first time, extending a rally fueled by crypto optimism following Donald Trump’s election; crypto rallied all morning and early afternoon.
• Gold slumps to one-month lows, as prices fell -$77.10 or over 2.8% to settle at $2,617.70 an ounce as the dollar index (DXY) rises over 0.5% and Euro falls to over 6-month lows.  The dollar’s ascent reflects economic optimism fueled by Donald Trump’s victory in the presidential election and drawing away haven investors. All eyes now turn to inflation data, including the Consumer Price Index release on Wednesday, and PPI on Thursday.
• Brent crude futures settled at $71.83 a barrel, down$2.04 or 2.76% and West Texas Intermediate crude futures finished at $68.04 a barrel, down $2.34, or 3.32% after both benchmarks fell more than 2% on Friday. A soft outlook in top importer China continued to plague the market as well as a spike in the U.S. dollar as investors worried about possible U.S. tariffs that would hurt the euro area’s economy.
• The dollar index (DXY) rose +0.5% above 105.55, its highest since July 3. Last week, it jumped more than 1.5% to 105.44, after U.S. presidential election results showed Trump’s victory. The euro was off by 0.6% at $1.06, the Japanese yen was off by 0.8% at 153.93 yen to the dollar. The Mexican peso was still facing heavy pressure.

• In Online Services: NRDY was downgraded to Underweight at JP Morgan and lower Q4 outlook for both consumer and VTS noting Nerdy continues to invest toward growth initiatives, product investments, & modernizing its platform infrastructure (some of which are taking longer to implement).

• NOV was downgraded to Neutral from Buy at Citigroup and cut tgt to $18 from $21 saying the global drilling slowdown has intensified over the past few months.
• SMR shares fell after filed for offering of up to $200M shares of Class A common stock late Friday
• TDW was downgraded from Strong Buy to Outperform at Raymond James and cut tgt to $102 from $131 saying quarterly results were generally in line with prior expectations as utilization suffered through increased idle time, drydocking, and project startup delays while dayrates advanced again.

• CBOE was upgraded to Buy from Hold at Deutsche Bank driven by a revised view that Cboe will maintain "healthy" revenue growth in at least 2025, supported by a belief that the equity markets may remain volatile over the intermediate term post the U.S. election results, driving greater use of index and volatility options.
• MQ shares advanced following a report that private equity names are looking at it  https://tinyurl.com/r2vnk7kw
• UPST was upgraded to Neutral from Sell at BTIG as acknowledges that the company’s volumes are likely to accelerate further from here, which it says is the key catalyst for the shares into 2025.
• VLY was upgraded to Overweight at JP Morgan as the firm walked away more encouraged by the progress Valley National has made on reducing its commercial real estate concentration as well as a path to continue building capital with its CET1 ratio increasing from 9.55% to 9.73% in Q3.

• CI shares jumped after confirming it isn’t pursuing a combination with HUM; CI reaffirming previously provided outlook for full-year 2024, and adjusted eps growth of at least 10% in 2025.
• EVO shares jumped after Bloomberg News reported Triton Partners is considering a takeover bid for Germany’s Evotec SE after the private equity firm emerged as one of the drug developer’s largest shareholders. Triton now holds a 9.99% stake in Evotec, making it its biggest shareholder, the companies told Reuters.
• MRNA shares fell to the lowest levels in over 4-years.
• NVAX shares advanced after the FDA removes clinical hold on co’s covid-19-influenza combination and stand-alone influenza late-stage trial.
• RDNT shares jumped following quarterly results and entered a collaboration with GEHC.
• XERS was downgraded to Neutral from Overweight with an unchanged price target of $3 at Piper following Q3 results saying the company’s path to significant EBITDA generation "remains gradual," in part a function of a cost structure that is seemingly out of proportion to its endocrinology and rare disease-focused commercial model.

• In Metals & Mining: TECK was downgraded to Neutral from Buy at UBS with an unchanged price target of C$76 noting shares are up 40% over the past 12 months, in line with other high quality copper stocks, despite the operational issues at QB and no tangible progress with the near-term growth projects. VALE was also downgraded to Neutral from Buy at UBS as remains concerned about iron ore fundamentals medium-term and sees downside to the spot price. China steel exports are vulnerable to global restrictions. Gold miners NEM, AUY, GOLD, AEM tumbled along the decline in gold prices as the US dollar spiked.

• WBD upgraded to Peer Perform from Underperform at Wolfe Research its Max’s leverage to the industry’s re-bundling and partnership trends create a plausible path to stable total company EBITDA.

• CSCO was upgraded to Overweight from Neutral at JP Morgan and raised tgt to $66 from $55 saying they see further headroom for upside in the medium term despite the recent rally in the shares. It sees earnings upgrades for Cisco from the recovery cycle in enterprise networking demand.
• MNDY shares slumped as reported Q3 EPS/revs beat and raised guidance for the full year for both profit and sales, but investors cautioned on in-line Q4 guidance.
• SMCI shares added to recent weakness as the company nears the deadline for providing its annual report for the fiscal year ended June 30, 2024, in order to regain compliance with Nasdaq’s listing rules (reminder Ernst and Young stepped down as SMCI’s auditor last month).
• SPNS shares tumbled after cutting FY24 revenue view to $541M-$546M from $550M-$555M saying revs fell short of their targets in Q3, and the challenges we encountered are expected to impact revenue in the fourth quarter. However, they expect their non-GAAP operating margin to be within our guidance range at 18.2%.
• TEM was downgraded to Hold from Buy at Stifel after the run-up in shares noting since the IPO in June, the stock is up ~100% since its debut.

• SMCI shares fell as much as -13% before paring losses; The stock has dropped 25% this month and is on track for its worst year since 2018. After delaying the filing of its 10-K for the fiscal year ended June 30, Super Micro has until Nov. 16 to submit a plan to the Nasdaq Stock Exchange to regain compliance with listing rules.
• TSM shares slipped after Reuters reported this weekend that the U.S. ordered the company to halt AI chip shipments to China. The Department of Commerce sent a letter to TSMC imposing export restrictions on certain sophisticated chips, destined for China that power AI accelerator and graphics processing units (GPU).
• Keybanc said for Semis, October Notebook ODM Analysis – Oct Shipments Slightly Below Expectations. Oct unit shipments were -16% m/m, +7% y/y, slightly lower than their original expectations. PC NB unit shipments of 14.0M (-16% m/m) were below our estimate of 14.3M (-14% m/m) due to weaker than expected demand. Quanta shipped 3.2M, lower than our estimates of 3.4M, due to the weak demand from HP’s consumer notebook and the weak demand from Acer. Compal shipped 2.8M, weaker than the original expectation of 3.1M, due to the continued weak demand from Dell’s consumer notebook; Wistron shipped 1.8M, higher than our estimate of 1.5M, due to new project demand from Dell and Lenovo. Inventec shipped 1.7M, better than our estimate of 1.6M, due to the stable demand from Asustek’s Gaming notebook. Pegatron shipped 575K, weaker than our estimate of 825K, due to the shipment back to normal level and the slowdown in demand from AsusTek.