Closing Recap

Monday, September 09, 2024

U.S. stocks finished higher, with Bespoke Investment noting today was one of the best market breadth days of the year for the S&P 500, as all eleven S&P sectors finished higher ahead of a busy week of potential market moving catalysts ahead. In a generally quiet day, attention this afternoon was on Apple (AAPL) as it introduced the new iPhone 16, new AirPods, and new Apple watch information (details below), as shares finished flat following the presentation. Overall, stocks got a good start to the week after the S&P 500 fell -4.25%, the Nasdaq declined -5.77%, and the Dow fell -2.93% last week for biggest weekly% drop since March 2023 (Silicon Valley bank crisis) for the S&P and Dow, awaiting key items this week.

There are several potential market moving catalysts this week including: ORCL earnings tonight and ADBE on Thursday in the software sector; 2) the first Presidential debate is expected tomorrow night (9/10 at 9:00 PM) between Donald Trump and Kamala Harris in Philadelphia; 3) No major economic data to move the needle until Wednesday morning with August consumer prices (CPI) and then Producer Prices (PPI) on Thursday; 4) the European Central Bank (ECB) rate policy decision is Thursday morning (25bps rate cut expected); 5) This week also brings a slew of Chinese indicators including the August CPI (out last night, softer), trade balance, industrial production, fixed asset investment and retail sales.

There were lots of stock movers following S&P index announcements late last Friday: S&P index changes announced late Friday effective prior to the open of trading on Monday, September 23, to coincide with the quarterly rebalance: PLTR, DELL, ERIE will replace AAL, ETSY, BIO in the S&P 500. AAL will replace TGNA in the S&P MidCap 400; TGNA will replace DBI in the S&P Smallcap 600; ETSY will replace HVT in the S&P Smallcap 600 and BIO will replace ERIE in the S&P MidCap 400. CNHI, WAL, PSN, HLNE, VNOM, FN will replace MP, PGNY, ADNT, WOLF, HELE and ZD in the S&P MidCap 400 respectively. MP Materials, Progyny, Adient, Wolfspeed, Helen of Troy, and Ziff Davis will replace CVGW, EHAB, MERC, CMP, DDD and FN in the S&P Smallcap 600 respectively. ZWS, YOU, TGTX, INSP, CSWI, ADMA and PI will replace CHCT, VREX, DIN, NUS, AMCX, ZEUS and RILY in the S&P Smallcap 600.

• In its latest Survey of Consumer Expectations, the regional Fed bank found that in August respondents saw inflation a year and five years from now at 3% and 2.8%, respectively, unchanged from July. Three years from now, survey respondents expected inflation to be 2.5%, from 2.3% in July. The report also found that the expected change in house prices rose to 3.1% in August, from 3% in the prior month.
• Aug headline China CPI inflation edged up to 0.6% yoy from 0.5% in July, slightly trailing market expectations at 0.7%. Sequentially, CPI inflation increased by 0.4% mom (vs. +0.5% in July). The improvement was once again driven by higher food prices. In fact, excluding food and energy, core CPI inflation declined by 0.2% m/m. Meanwhile PPI deflation widened more than expected, to -1.8% y/y from -0.8% previously. The deterioration in PPI deflation was in part driven by the fading impact from of a low base.

• December gold prices rise $8.10 to settle at $2,532.70 an ounce.
• Treasury prices rallied as yield extended recent decline with the 10-year dropping below 3.7% as markets await the FOMC policy meeting next week where either a 25-bps or 50-bps interest rate cut is widely expected.
• Bitcoin prices jumped around 7% to $56,550 after tumbling the last 2-weeks.
• The dollar index (DXY) advanced +0.35% to 101.55, while the yen gained.

• In Retail: BIG files for bankruptcy, will sell assets to buyout firm Nexus Capital Management saying that high inflation and interest rates have hurt its business as consumers have pulled back on their home and seasonal product purchases. Reuters reported that the US FTC’s bid to block TPR merger went to trial today in NYC. Tapestry will argue that the FTC’s anti-merger argument misunderstands the handbag marketplace and the way consumers shop, and that "accessible luxury" is a notional concept. Tapestry has said it May sell its small & struggling shoemaker Stuart Weitzman to help fund the Capri deal.
• In the Protein Sector: Barclay’s raised tgt on PPC to $45 from $43 and keeps an Equal Weight rating and raised TSN tgt to $76 from $72 but is Overweight rated saying they continues to see a weak U.S. beef market halfway through the year but says the Australian cattle cycle has begun to emerge from its lows seen in the early 2020s.

• In Used car monthly data (CVNA, KMX): Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) were higher in August compared to July. The Manheim Used Vehicle Value Index (MUVVI) rose to 203.9, a decline of 3.9% from a year ago. The seasonal adjustment to the index mitigated the impact on the month, resulting in values that rose 1.2% month over month. The non-adjusted price in August increased by 2.2% compared to July
• In Leisure Products/Marine: HZO was upgraded to Buy from Neutral at Citigroup and raised tgt to $44 from $40 saying the company is a strong play on the Fed pivot, as boat affordability has been hit hard by the higher for longer interest rate environment and stands to benefit mightily in a soft-landing scenario.

• In Aerospace & Defense: BA agreed to increase wages by 25% in a four-year deal with its largest workers union days before a potential walkout. The decision will be voted on this week by the members of IAM Districts 751 & W24. NASA selects companies for commercial SmallSat Services Award worth up to $476M including BKSY, PL, and SATL announced late Friday. PLTR will join the S&P 500 index before the open on Monday, Sept. 23, to coincide with the quarterly rebalance.
• In Steel Sector: JP Morgan upgraded NUE to Overweight from Neutral with a price target of $174, STLD to Neutral from underweight (tgt to $131 from $120) and U.S. Steel (X) to Overweight from neutral (tgt to $42 from $40) following a period of underperformance amid weakening fundamentals, as the firm thinks the risk/reward is more favorable for North American steel equities as investors will begin to positively discount an improved rate environment.
• Iron ore futures prices dropped for the seventh straight session on Monday as tepid Chinese economic data continued to weigh on the key consumer’s demand outlook for steel; Reuters noted the most-traded January iron ore contract on China’s Dalian Commodity Exchange ended morning trade 1.32% lower ($94.70) a metric ton (lowest in a year).

• In REITs: NSA was downgraded to Sector Weight from Overweight at Keybanc and Reiterate Overweight on EXR (raise tgt to $178) and SW ratings on CUBE, PSA in Self Storage. CPT was downgraded to Sector Perform from Outperform at RBC Capital saying their recent leasing spreads have given them pause and thinks CPT is likely to miss guidance for 2H24, and this May be another long fall/winter for the Sun Belt. INVH also downgraded to Sector Perform at RBC saying Q3 leasing spreads show further deceleration, and RBC thinks renewals show a higher level of tenant push back on rate increases.

• Managed care stocks CVS, ELV, HUM, UNH were weak after Leerink the Medicare Advantage backdrop remains challenged with 62% of the 2025 cut points increasing. Leerink obtained a look at the soon-to-be published cut points that drive the performance for plans’ Star ratings. 62% of the cut points moved higher, which, if plans don’t see similar movement higher in their performance, could elevate the risk that Star ratings could decline.
• Cannabis stocks rallied early (MSOS, CRON, TLRY) after Republican presidential candidate Donald Trump expresses support for reclassification of marijuana at the federal level. Trump said he will vote "yes" over an amendment in Florida that will legalize recreational marijuana and recommended Congress to pass the SAFE banking act and other reforms, according to his post on Truth Social.
• Sleep apnea equipment stocks (RMD, INSP) advanced after Apple (AAPL) said it is adding a sleep apnea detection feature to the Apple Watch Series 10, 9 and Ultra 2. To detect sleep apnea, the supported models use the accelerometer to monitor a new metric during sleep called “breathing disturbances,” and will notify users if it finds signs of moderate to severe sleep apnea.
• FULC upgraded from Underperform to Neutral at Bank America and raised tgt to $10 from $5 ahead of the company’s phase 3 losmapimod readout (expected by end of October) to treat facioscapulohumeral muscular dystrophy (FSHD).
• LLY appoints insider Lucas Montarce as chief financial officer (CFO); Montarce, who joined Lilly in 2001, has held a range of finance leadership roles within the company, including head of finance for Lilly Research Laboratories.
• NUVL announced data from abstracts to be presented at the European Society for Medical Oncology, or ESMO, Congress 2024 in Barcelona, Spain, including updates from the Phase 1 portions of the ongoing ALKOVE-1 Phase 1/2 clinical trial of ALK-selective inhibitor NVL-655 and ARROS-1 Phase 1/2 clinical trial of ROS1-selective inhibitor zidesamtinib.
• RLAY said its experimental breast cancer treatment, RLY-2608 in combo with AZN’s Faslodex, meaningfully extended the time patients lived without their disease worsening in an early-stage trial. The therapy helped 52 patients live for an average of 9.2 months without the disease worsening after treatment in the study.
• ROIV provides update on Graves’ disease development program; reports positive phase 2a results for batoclimab in GD.
• RZLT said the FDA has removed the partial clinical hold on its late-stage study testing its experimental treatment for low blood sugar.
• RVPH announces new vocal biomarker data from Phase 3 RECOVER Trial of Brilaroxazine in Schizophrenia. Statistically significant vocal biomarker speech latency data reinforce the strong efficacy of brilaroxazine for negative symptoms and other key symptom domains of schizophrenia.
• SMMT shares jumped after saying its cancer drug beat MRK’s Keytruda in a head-to-head trial as Ivonescimab, an antibody treatment, reduced the risk of disease progression or death by 49%, compared with Keytruda. The late-stage trial under the name HARMONi-2 was conducted in China on lung cancer patients.
• TERN said an early-stage trial of its obesity pill achieved statistically significant weight loss of up to 5.5% over 28 days and said it would launch a mid-stage trial.

• GOOGL shares fell as Google’s antitrust trial over online advertising set to begin; shares fell for the 7th time in last 9-days after breaking below 200dma support last week around $156.75.

• DELL will join the S&P 500 index before the open on Monday, Sept. 23, to coincide with the quarterly rebalance.
• PRGS agreed to buy AI-powered content-sharing platform ShareFile from Cloud Software Group for about $875 million and suspended its quarterly dividend.
• SQSP rises after PE firm Permira agrees to increase its offer price to take SQSP private, now valuing the deal at $7.2 billion – Cos; Permira to offer $46.50 per share in cash to SQSP stockholders vs earlier proposal of $44 apiece
• In EMS Sector: CLS was upgraded from Hold to Buy at Stifel with $58 tgt noting the EMS company’s stock fell ~10.6% last Friday (vs. -1.7% for the S&P500) and is down 35.2% since July 16 (vs. -4.6% for the S&P500). Stifel attributes the sell-off to concerns of slowing AI investments from hyperscale customers following key supplier earnings reports (NVDA).
• In IT Service: Jefferies upgraded shares of EXLS to Buy from Hold (raise tgt to $42) on industry leading growth and, counter intuitively, it being an AI beneficiary, while they say they see value in EPAM (Buy rated tgt raised to $250), and the BPO focused companies, but risk in ACN. Overall, they say they are incrementally more positive on the group.