Mid-Morning Look

Friday, April 05, 2024

U.S. stocks are up, the dollar is up and oil is up, while bonds are down (yields rise) following a generally strong nonfarm payrolls report across the board this morning, making the Fed’s interest rate cut decision going forward a bit more complicated as the economy is showing no signs of slowing/weakness, at least when it pertains to the jobs sector after a strong payroll figure (nonfarm/private), a drop in unemployment, and wages staying strong! Still, zero fear as investors rotate back into large cap technology, communications names after yesterday’s sharp sell-off after Fed comments and geopolitical fears (Iran/Israel possible increased conflict) while the Smallcap Russell 2000 lags on fears the Fed rate cut cycle will continue to get pushed out. The dollar was up on Friday after data showed that U.S. job growth in March beat expectations, with nonfarm payrolls increasing by 303,000 jobs last month above views of 200,000 while unemployment rate fell to 3.8% and wages rose again, in-line with expectations. The dollar index (DXY) was last up 0.44% at 104.58 after a turbulent week, falling from a five-month high to a two-week low after an unexpected slowdown in U.S. services growth this week. In an interesting and unusual event, a magnitude 4.8 earthquake struck the greater New York area, NJ Region this morning around 10:23 AM. Next week we get another look at inflation with march consumer prices (CPI) and producer prices (PPI) on 4/9 and 4/10 after hotter readings in Jan/Feb.

• In Solar & Alternative Power: ENPH downgraded along with PLUG at Citigroup; ENPH cut to neutral from buy after reaching its full valuation, while Plug Power cut to sell from neutral on dilution and elusive profitability. NOVA, SEDG, SPWR price tgts cut at Susquehanna saying the expected rebound in residential solar equipment demand is taking longer than expected to materialize, driven mostly by the NEM 3.0 transition weighing on CA volumes so lowered its ’24 U.S. resi installation growth forecast to 15% from -10%.
• In Software: SNOW was upgraded to Buy from Neutral at Rosenblatt with $185 tgt as came away from recent presentations in Toronto, and its customer discussions encouraged; WDC upgraded to Buy from Neutral at Rosenblatt as well and raise tgt to $115 from $65 saying industry data points are suggesting that Q224 NAND Flash average contract prices will increase by 15%+ sequentially. In Security Software: Wells Fargo said they collected feedback from 35 resellers in Q124 and noted strong net results for NET (+28%) FTNT (+28%), and CHKP (+24%) while results for TENB (+3% net) downticked.

• CNK +3%; upgraded to Overweight at Wells Fargo on better tentpole performance, the de-risking of ’24 and growing conviction on and said consumer demand is driving enduring results/sees more films being announced.
• DNUT +5%; upgraded to Overweight from Neutral at Piper Sandler and raised tgt to $20 from $14, following last week’s announcement of a national partnership with MCD.
• ETN +2%; upgraded to outperform at RBC Capital and raise tgt to $371 from $286 as they see ETN shares as the best large-cap way to play the current electrical supercycle (2^nd analyst upgrade this week).
• KRUS +10%; after results as Q2 EPS loss (-$0.09) vs. est. loss (-$0.03); Q2 revs $57.3M vs. est. $56.6M; raises FY24 revenue view from $239M-$244M to $243M-$246M (est. $242.9M).
• SWAV +1%; agreed to be acquired by JNJ for $335 per share (vs. Thursday close $319.99) in deal that has an enterprise value of about $13.1B including cash acquired. https://tinyurl.com/nzcurh2f
• WDC +1%; upgraded to Buy from Neutral at Rosenblatt and raised tgt to $115 from $65 saying industry data points are suggesting that Q224 NAND Flash average contract prices will increase by 15%+ sequentially.

• ENPH -5%; downgraded along with PLUG at Citigroup; ENPH cut to neutral from buy after reaching its full valuation, while Plug Power cut to sell from neutral on dilution and elusive profitability.
• HSY -1%; defensive food stocks seeing early weakness (LW, CPB, KHC) as investors rotate back into riskier, high growth sectors.
• INTC -2%; on track for weekly loss of -8% after shares tumbled on foundry revenue outlook earlier this week; breaks below 200-day MA support $39.70.