Closing Recap

Tuesday, November 12, 2024

U.S. stocks snapped their 5-day winning streaks, as the S&P, Nasdaq, Dow Jones Industrials and Dow Transports all pulled back from record highs as investors lightened up on positions ahead of key inflation data tomorrow morning (CPI), but markets finished well off the lows as investors continue to use any pullback as a buying opportunity. The rally came amid buying strength in Mag7 stocks with MSFT, GOOGL, NFLX, AMZN, NVDA rising. There has been a massive rally for U.S. stocks since last week, buoyed behind another Fed rate cut (with more expected) and high hopes of a booming economy under Donald Trump as President on hopes of reduced regulation and lower taxes. Several sectors have hit record highs this year (Discretionary, Financials) but today saw a little selling pressure with NYSE breadth roughly 4:1 decliners leading advancers and nearly all eleven sectors finished “red”. U.S. listed China stocks declined after a few possible names were mentioned in the upcoming Trump administration that are seen as “tough” on China. Reports last week indicated that former Trump trade chief Robert Lighthizer was asked to fill that post again. Reports indicate that Senator Marco Rubio is expected to be named as Secretary of State and Mike Waltz was confirmed today by Trump as national security advisor. In data today, ahead of tomorrow’s CPI inflation reading, a New York Fed survey showed in October, median one-year-ahead inflation expectations fell by 0.1% to 2.9%, three-year-ahead by 0.2% to 2.5%, and five-year-ahead by 0.1% to 2.8%. For tomorrow, estimates are for headline Consumer Price Index (CPI) M/M for October to rise est. +0.2% (prior +0.2%) and Y/Y est. +2.6% (prior +2.4%). On a core reading or CPI (ex: food & energy) M/M for October is est. to rise +0.3% (prior +0.3%) and Y/Y to rise +3.3% (prior +3.3%). Treasury yields and the dollar advanced again into CPI tomorrow.

• The Euro falls 0.5% to $1.0599 against the U.S. dollar, its lowest level in over a year.
• Treasury 10-year yield climbs as much as 13 basis points on day above 4.44%.
• December gold prices slide -$11.40 to settle at $2,606.30 an ounce.
• Brent Crude futures settled at $71.89/bbl, up 6 cents, 0.08%.
• U.S. crude oil futures settled at $68.12/bbl, up 8 cents, 0.12 pct

• In Footwear: ONON reported Q3 adjusted EPS of CHF 0.16, missing estimate of CHF 0.20; Q3 sales were CHF$635.8M vs. est. CHF$617.3M; raises FY sales forecast to at least CHF 2.29B ($2.60B) vs CHF 2.26B projected earlier; Quarterly selling, general and administrative expenses rise 36% to CHF 312.7M. Bernstein noted NKE and ADDYY biggest China wholesale partner, Pou Sheng, reported a +4.7% increase in monthly retail sales in October, the first increase since February 2024. 80% of Pou Sheng’s China sales are from Nike and Adidas products.
• In Apparel: CRI was upgraded to Neutral at Citigroup on more balanced risk/reward as believes the market better accounts for the sales/margin pressures CRI will likely face in F25. ROST downgraded to Neutral from Buy at Citigroup (lower tgt to $152 from $179) saying the combination of a management change that brings increased uncertainty to the story and the stock’s relatively high multiple create a less favorable risk/reward.
• In Food: THS shares fall as Q3 sales of $839M miss the $880M estimate on weak margins 15.6% vs. est. 18.4% and guides FY net sales $3.37B-$3.4B below consensus $3.46B; said results impacted by a recent recall of frozen griddle products and disruptions from Hurricane Helene. TSN Q4 net sales rose 1.6% to $13.57B above the $13.39B estimate, adj EPS of $0.92 topped ests $0.69, Tyson’s pork segment reported a 3.2% rise in Q4 volumes, while prices fell 6.9%; Volumes in the beef segment rose 3.7%; posted an adj operating margin of 3.8% in Q4, compared with 1.8% y/y; expects fiscal 2025 revenue to be between flat and down 1% vs. ests. 1.8% growth to $54.09 billion.

• Homebuilders BZH, DHI, LEN, KBH, MTH, TOL and others were under pressure as bond markets reopened from holiday, with yields surging over 10-bps on the 10-yr to 4.44%, raising mortgage rate concerns.

• In Autos: HTZ posted a wider-than-expected Q3 loss of (-$0.68) vs. est. loss (-$0.50) and missed revenue estimates 9falling -5% to $2.58B vs. est. $2.7B), hurt by depreciation charges from its fleet vehicles; also recorded a $1 bln non-cash asset impairment charge in Q3, citing a decline in fleet residual values. In EV space (TSLA, RIVN, LCID), Barron’s noted Environmental regulations are set to take an about-face under President-elect Donald Trump and the incoming head of the Environmental Protection Agency. That could spell trouble for some electric-vehicle makers and the companies that manufacture components for them.
• In Online Services: IAC reported revenues of $938.7.5M (-16% Y/Y reported) in 3Q, slightly ahead of (FactSet) consensus of $922.6M, while Adj. EBITDA was $107.4M, also above expectations. The company disclosed that it is considering a spin-off of its 85% ownership stake in ANGI.
• In Media: IHRT was upgraded from Underperform to Neutral at Bank America and raised tgt to $3 based on ~5.8x (from ~5.4x previously) its revised CY25 EBITDA forecast; views risk/reward from current levels as more balanced. TME Q3 revs rose 6.8% y/y to 7.02B yuan vs. est. 7.04B yuan, as revenue from the company’s social entertainment services business fell 23.9% in the third quarter. SE shares jumped on better Q3 results as Q3 EPS $0.24 vs $0.24 Est. and revenue rose 31% y/y to $4.33B vs $4.08B Estimate; Q3 Ebitda $531.3M vs. est. $491M.

• In Aerospace: AVAV was downgraded to Hold from Buy at Jefferies with an unchanged price target of $240 saying the recent runup in shares, which are now up 87% ytd, likely limits valuation upside on improving fundamentals as shares seem to be factoring in a bull case scenario. BA reports 335 orders net of cancellations/conversions through Oct 31; Boeing delivered 305 airplanes year to date through Oct 31, including 234 737 max jets
• In Chemicals: IFF was upgraded to Overweight at Morgan Stanley saying they see an opportunity to buy the shares post a -12% share price pullback following the Q3 conference call – where IFF provided muted comments on the Q4/FY25; MOS reported Q3 EPS of $0.34 below consensus $0.54 citing production issues and said its CFO would retire while issuing cautious guidance sending shares lower.
• In Truckers/Logistics: Citigroup downgraded shares of KNX, SNDR to Sell, and RXO downgraded to Neutral, while upgraded CHRW and railroad CNI to Buy saying caution now warranted following results and post-election Transports rally. The firm noted sentiment appears to have rapidly improved since that time, with the TRAN Index up +10.7% versus S&P 500 +4.4%. This strength has come despite mixed Q3 earnings and generally cautious Q4 outlooks but now worries that investors are chasing stocks that have already risen considerably. In another note, ODFL was downgraded to Hold from Buy at Argus noting ODFL has been hurt by unfavorable market conditions that have lowered volumes, revenue, and EPS growth.

• UPST shares dropped after announced a proposed 6-year convert private offering of $425M as plans to use net proceeds for general purposes, including to pay down debt.
• Visa (V) is partnering with AFRM to roll out a card in the U.S. that customers can use for both debit transactions and buy now, pay later purchases. The company is also launching the feature in the United Arab Emirates via a partnership with Liv Bank and plans to expand into Europe in the coming months.

• BEN reported preliminary month-end assets under management (AUM) of $1.63 trillion at October 31, 2024, compared to $1.68 trillion at September 30, 2024. This month’s decrease in AUM reflected the impact of negative markets and long-term net outflows of $18.5B
• CNS reported preliminary assets under management of $89.7 billion as of October 31, 2024, a decrease of $2.0 billion from assets under management of $91.8 billion at September 30, 2024. The decrease was due to market depreciation of $2.3 billion and distributions of $150 million.
• IVZ preliminary month-end assets under management (AUM) of $1,772.0B, a decrease of 1.3% versus the previous month-end. The firm delivered net long-term inflows of $2.0B in the month. Non-management fee earning net outflows were $0.2B and money market net outflows were $1.8B. AUM was negatively impacted by unfavorable market returns which decreased AUM by $13B.
• TROW reported preliminary month-end assets under management of $1.61 trillion as of October 31, 2024. Preliminary net outflows for October 2024 were $2.0 billion.
• VCTR Assets Under Management (AUM) of $172.3 billion, Other Assets of $4.2 billion, and Total Client Assets of $176.5 billion, as of October 31, 2024. For the month of October, average Total AUM was $175.0 billion, average Other Assets was $4.6 billion, and average Total Client Assets was $179.6 billion

• AMGN shares tumbled after Cantor noted they just came across a new piece of information from MariTide’s Ph1 and found a big surprise; that the supplemental appendix file seems to show bone mineral density (BMD) data for MariTide (AMG-133) – which was a big unknown and risk given its mechanism (GIPR antagonism).
• AZN reported a top and bottom line beat and raise with guidance which now looks for high teens CER revenue and EPS growth in 2024 vs mid-teens previously.
• BAYRY shares fall following 3Q’24 miss and cautious commentary; said weak agricultural markets mean its earnings are likely to fall further next year; the company said it expected "a muted outlook on top and bottom-line next year with likely declining earnings".
• NGNE shares tumbled after NGN-401 initial efficacy data suggested real clinical effect at low-dose; safety the question/debate as shares of rival Rett Syndrome drug company TSHA advanced in reaction.
• NVAX shares slip as reported smaller Q3 loss of $121M vs. est. loss $133M, but cuts 2024 revenue forecast for its COVID-19 vaccines to $175M-$225M from prior $275M-$375M; guides overall FY revs to $650M-$700M below estimates of $761.5M.
• SNDX shares fell after reports mid-stage study results from its cancer therapy that showed a 23% complete remission with partial hematological recovery rate; said 11% of patients in the trial experienced severe treatment-related adverse events, while 2% experienced a potentially life-threatening event.
• SWTX shares fall as 3Q product revenues of $49.3M, misses $53.4M estimate; net loss narrows to $53.5 million, or 72 cents per share, from $79.4 million, or $1.27 per share a year ago; expects to report initial data from mid-stage trial evaluating nirogacestat as a monotherapy in patients with a type of ovarian tumors in H1 2025.

• CAH said late Monday it has agreed to acquire a 71% stake in GI Alliance for about $2.8B, as well as acquire Advanced Diabetes Supply Group for $1.1B.
• NVRO delivered a Q3’24 beat on sales and EPS by a wide margin while reiterated 2024 sales guide ($400-405MM, down 5-6% y/y), but raised Adj. EBITDA by $2MM to a loss of $16-18MM.
• SDGR shares rose after saying it enters collaboration pact with NVS under which it will receive a $150M upfront payment and be eligible for up to about $2.3B in milestone payments and royalties.

• Software sector: Wells Fargo with several changes as TWLO upgraded to Overweight from EW, FIVN downgraded to EW from Overweight and CXM cut to UW from EW; raise NOW PT to $1,150 from $1,050. Said view TWLO as a derivative call on AI agents, front office, and dig. transf. given positioning as a pick-and-shovel in the build cycle; Downgrading FIVN, CXM as see smaller vendors, point solutions, and those leaning on contact center as a key growth vector as those most at-risk.

• Citigroup defended semiconductor sector, Buy-rated on ADI, AMD, AVGO, MCHP, MU, TXN, NVDA, and KLAC noting ests declined 11% during earnings and the SOX sold off 9%, driven mostly by downside from MCHP, NXPI and INTC; however, believe the downside/sell-off is almost over and attention will shift to 2025; estimate global semi sales to be up another 9% YoY in 2025, following 17% YoY growth in 2024
• In Memory/DRAM, TD Cowen said their field work is favorable in the near-term for STX , while slightly negative for MU Tactically, the firm said it prefers HDD exposure where demand continues to be resilient amid a disciplined supply environment. DRAM supply remains uncertain, especially given the puts and takes around HBM qualification at Samsung. Flash supply continues to be disciplined, while the demand is lukewarm. Supply chain feedback suggests that MU is likely to remain a secondary source for NVDA’s Blackwell chips in the near-term.