Closing Recap

Thursday, November 14, 2024

U.S. stocks slumped on Thursday, giving back some recent gains as the latest inflation report out of Washington showed a bounce in prices, paring expectations about aggressive rate cut expectations by the Fed. Selling was broad based for a change as ten of eleven sectors in the S&P were lower, led by hefty declines in Industrials amid weakness in defense/IT gov’t consulting companies on fears of deep cuts in fiscal spending, as well as Healthcare (on report out of Politico that RFK will be names head of HHS – also hit food companies) and Consumer Discretionary. Electric vehicles saw weakness after reports Donald Trump’s transition team is planning to kill the $7,500 consumer tax credit for electric-vehicle purchases as part of broader tax-reform legislation. Media giant and Dow component Disney (DIS) advanced following better earnings while Apple (AAPL) was strong helping limit broader market losses.

The big story since the election has been the resurgence of the US dollar and Treasury yields on expectations of tariffs, tax cuts and cuts in spending, along with big gains in Bitcoin prices. Stocks sunk in the final hour of trading as the Fed Chairman threw a curve ball late day after Jerome Powell said the economy is not sending signals that U.S. Central bank needs to be in a hurry to lower interest rates. Powell said moving policy over time toward neutral, policy path is not preset and notes expects inflation to continue to come down toward 2% goal, on a ‘sometimes-bumpy’ path. Said the Fed is committed to finishing the job on inflation. Stocks pushed to lows in the final hour following Powell’s commentary. Traders of rate futures trim bets on Fed rate cuts after Powell’s remarks; Fed December rate cut still seen as more likely than not. Little profit taking setting in as @bespokeinvest noted “the small-cap Russell 2,000 ETF $IWM is now down 4% since Monday’s close, erasing more than half of its post-election jump of 7.8%.”

• Jobless Claims fell to 217,000 in the latest week vs. consensus 223,000 and from 221,000 prior week; the 4-week moving average fell to 221,000 from 227,250 prior week; continued claims fell to 1.873M from 1.884M prior week and the insured unemployment rate unchanged at 1.2%.
• U.S. 30-yr fixed rate mortgages 6.78% Nov 14-week vs 6.79% prior week, first decline since Sept 26 2024 week -Freddie Mac.

• December gold prices slide -$13.60 to settle at $2,572.90 an ounce, down a 5th straight day as the dollar remains strong. The benchmark 10-year Treasury yield hit 4.483% on Thursday, its highest since July following a somewhat “hotter” PPI inflation report, but then bonds rallied, sending yields lower below 4.4%. However, following Fed Chair Powell comments that the Fed may not be in a hurry to cut rates lifted the 10-yr back above 4.45%.  
• U.S. WTI crude oil futures settle at $68.70/bbl, up 27 cents, 0.39% and Brent Crude futures settle at $72.56/bbl, up 28 cents, 0.39%. Weekly energy inventory data was mixed as gasoline data was bullish, and crude oil bearish. U.S. gasoline inventories fell to their lowest levels in two years as fuel supplies drew down unexpectedly last week amid strong demand, while crude oil stockpiles rose by more than expected, the Energy Information Administration (EIA) said. Gasoline stocks fell 4.4 million barrels in the week to Nov. 8 to 206.9 million barrels, their lowest since November 2022. Crude inventories rose by 2.1 million barrels to 429.7 million barrels.

• In Auto Retail: AAP shares declined initially on weak results and guidance as Q3 net sales fell -21% y/y to $2.15B vs. est. $2.67B and EPS loss (-$0.04) vs. est. $0.49; sharply lowers FY24 and Fy25 adj EPS and sales outlook; also plans to close about 500 stores and cut jobs under a restructuring plan. (shares bounced on kitchen sink qtr)
• In Food: GIS to buy pet brands’ business from NXMH for $1.45B; NOMD cuts FY24 EPS view to EUR 1.72-EUR 1.77 from EUR 1.75-EUR 1.80 and lowers FY24 adjusted EBITDA view to up 3%-5% from up 4%-6%. CPB was upgraded from Neutral to Overweight at Piper on better long-term growth expectations with its Rao’s brand and sees attractive risk/reward here.
• In Restaurants: PZZA downgraded at Keybanc as its industry conversations suggest a recovery in sales trends and store-level profitability metrics could take longer than previously expected.
• In Online Services: IBTA shares tumbled as posted quarterly beat and lower quarter as annual consumer packaged goods budgets were exhausted by robust coupon inventory growth earlier in the year, said JMP Securities.

• In Casino: WYNN shares jumped after a 13G filing late yesterday; CNBC’s David Faber said this morning filing showed Tilman Fertitta reports 9.9% passive stake in Wynn Resorts. Tilman Fertitta later noted he is unhappy with Wynn Resorts’ performance.
• In Autos: Reuters reported the Trump transition plans to kill $7,500 consumer tax credit for EVs as EV subsidy viewed by Trump transition as easy target for elimination with broad support in new Republican Congress; shares of RIVN, GM, Ford (F), LCID declined on the headlines. The headlines also impacted auto lenders as shares of ALLY also declined on the headlines.

• In Nuclear: TLN swung to a profit in Q3 with net income of $168M vs. -$77M loss y/y, as certain investments improved with stronger equity markets and declining interest rates; Q3 revs rose to $650M vs. est. $522M. OKLO signs a letter of intent to buy Atomic Alchemy, a U.S.-based company specializing in the production of radioisotopes, for $25 mln in an all-stock transaction.
• In Energy: HP shares tumbled after Q4 results disappointed, as EPS of $0.76 missed the $0.81 estimate and said its North America Solutions unit’s operating income was $155.7M, lower than $163.4M in the previous quarter and its International Solutions unit posted operating loss of $5.1M, compared with a loss of $4.8M in Q3.
• In Industrials: TTEK Q4 EPS of $0.38 was $0.01 above consensus, driven by an operating margin of 13.3% and rev growth in line while FY25 guidance comes in modestly below the Street.
• In Transports: AAL upgraded to Equal Weight from Underweight at Barclays with a price target of $16, up from $10 as sees airline fundamentals turning sharply positive in 2025 and raised estimates and price targets for ALK, DAL, JBLU, ULCC, UAL and SNCY.

• In Insurance: UNM upgraded to OP from In-line, PRU upgraded to In-line from underperform and downgraded JXN to underperform from in-line in global insurance at Evercore ISI saying a strong case can be made for a higher re-rating of the life insurance sector as the investor base broadens. Also notes the life insurance sector currently trades at 8.5x on forward earnings estimates, in line with its 10-year average and a modest premium to its 5-year average, and a discount to P&C insurers, banks, traditional asset managers, and alt managers.

• ACIU said its experimental immunotherapy to treat early Parkinson’s disease was well tolerated with no clinically relevant safety issues, it says citing interim data from a mid-stage study.
• DOCS upgraded to EW from UW at Morgan Stanley with $53 PT saying Doximity is seeing renewed momentum in its business and conservative Q4 guidance suggests room for upward revisions to estimates.
• GSK announced positive headline overall survival (OS) results from a planned interim analysis of Blenrep’s DREAMM-7 Phase 3 trial.
• HIMS shares dropped after AMZN expanded its telehealth services with pay-per-visit options for over 30 common health concerns, including men’s hair loss and anti-aging — starting as low as $16/month, plus 24/7 clinical support & same-day medication delivery in major cities.
• MRK enters exclusive global license for LM-299 from LaNova Medicines; LaNova will receive an upfront payment of $588M. LaNova is also eligible to receive up to $2.7B in milestone payments associated with the technology transfer, development, regulatory approval and commercialization of LM-299 across multiple indications.
• OPRX reported Q324 results, with revenue of $21.3M falling below consensus $25M.
• OSCR shares rose after Officer/Dir Kushner Buys 1,055,478 Of Oscar Health between 11/11-11/13 @ $13.67 in total transaction valued at $14.42M as per filing.
• PTCT said the FDA approved PTCT’s gene therapy, Kebilidi, to treat a potentially fatal enzyme deficiency disorder called aromatic L-amino acid decarboxylase (AADC) deficiency.

• In Networking: CSCO posted modest beat and raise, better than expected artificial intelligence orders, and promising trends in core networking orders were offset by only a slightly raised fiscal 2025 growth outlook and an unchanged AI guide.
• In Software: CYBR reported better-than-expected FQ324 ARR (+31%-Y/Y; $4M beat above consensus), revenue (+26%-Y/Y above consensus of +22%-Y/Y), profitability, and CFFO/FCF. MSFT shares slipped after the Financial Times reported the FTC is planning to launch a probe into Microsoft’s cloud computing business and will examine allegations that Microsoft is abusing its market power in productivity software by imposing punitive licensing terms to prevent customers from moving their data from its Azure cloud service to competitors’ platforms.
• In Semis: group gets a bounce after ASML said it expects its sales to grow to between 44 billion euros and 60 billion ($46.4 billion-$63.3 billion) by 2030, suggesting an average annual increase of 8%-14%, driven by strong demand for its most advanced tools. SMCI shares declined early for a 5^th straight day after having delayed yet another filing as it continues to search for a new accounting firm. SYNA announces private offering of $400M convertible senior notes due 2031.