Mid-Morning Look

Monday, April 08, 2024

U.S. stocks little changed, as markets await key inflation data later this week with the consumer price index (CPI) on Wednesday 4/10 and producer price index (PPI) on Thursday 4/11 and the start of earnings season this Friday with big bank earnings. Note both the CPI and PPI had “hotter’ reading for January and February, but markets have remained unphased with expectations the Fed will stay the course with their 3-rate cuts expected in 2024 (including as soon as June with first cut). Recent jobs data showed an economy that is strong, leading to some expectations of maybe less rate cuts this year (Fed officials last week downplayed aggressive cuts). Will a third month in a row of higher inflation push stock markets lower? Or will a resumption of price deceleration push markets to new all-time highs? Treasury yields are showing concern with the 10-yr yield at its highest levels since last November above 4.44% after an 18-bps move higher last week. note the S&P (SPY) was trading around 4,550 the last time yields were here (vs. 5,200 today). Smallcaps early leaders with Russell 2000 outperforming large cap S&P 500. In geopolitical news this weekend, the U.S. and China agreed to hold formal talks aimed at addressing Washington’s concern with Beijing’s excess manufacturing capacity according to reports from Bloomberg. Also, Treasury Secretary Yellen warned China of “significant consequences” if its companies provide support for Putin’s war in Ukraine. New flow quiet overnight to kick off the week. Bitcoin prices jump over 6% around the $72,000 level as crypto strong, commodity prices slide (oil and gold) after surging in recent weeks.

• In Asset Managers: AMG replaces AB as top Traditional Manager at TD Cowen ahead of earnings season while upgraded TROW to Hold vs Sell and downgrade VRTS to Hold vs Buy in Asset managers. TDCowen said they see interesting set-ups into Q1 print as continue to favor the Alts, but they have had big runs into earnings season & the firm revised ’24-25 earnings are generally at/below consensus. Conversely, sentiment on Traditionals remains tepid generally; yet, TDCowen sharply raises estimates & see the biggest upside revisions brewing.
• In Aerospace & Defense: SAVE reached an agreement with Airbus (EADSY) to defer all aircraft on order that are scheduled to be delivered in the second quarter of 2025 through the end of 2026 to 2030-2031; the FAA said Sunday they would investigate after an engine cowling on a LUV airline, Boeing (BA) 737-800 fell off during takeoff in Denver and struck the wing flap; DCO received an unsolicited, non-binding takeover interest from private investment firm Albion River for $60 per share in cash.

• DCO +15%; after confirming the board received an unsolicited non-binding indication of interest from Albion River to buy all outstanding shares for $60 per share in cash.
• GEV +6%; after being upgraded to Overweight from Neutral at JP Morgan noting the stock has pulled back 14% since the April 2 spin and the firm believes largely owing to technical/flowback selling and is now trading at a discount to its YE24 price target of $141 introduced in its recent initiation.
• MODN +10%; said it has entered into an agreement to be acquired by investment firm Vista Equity Partners for about $1.25 billion, as shareholders to receive $30 per share, representing a premium of 10.7% to the company’s last close. https://tinyurl.com/ysk9fntc .
• MSTR +5%; shares rose as Bitcoin rallies back over the $72,000 mark, with the largest cryptocurrency gaining for a third consecutive session – shares of COIN, MARA, RIOT, CLSK also move in reaction.
• TSLA +3%; after CEO Elon Musk said the EV maker will unveil its long-promised robotaxi on Aug. 8.
• TSM +2%; said the U.S. Commerce Department awards a TSMC’s U.S. unit $6.6B subsidy for advanced semiconductor production in Phoenix, Arizona; the company also gets up to $5B in low-cost government loans.
• TTWO +1%; was upgraded to Buy at Citigroup and raises tgt to $200 from $170 saying at prevailing levels the firm sees a Bull case of $235 and a Bear case of $130, akin to a favorable 4:1 risk-reward.

• PARA -5%; as the Skydance saga/headlines continued over the weekend.
• PERI -37%; cuts FY24 revenue view to $590M-$610M from $860M-$880M (below consensus $868.39M) and cuts FY24 adjusted EBITDA view to $78M-82M from $178M-$182M.
• SUPN -2%; shares slide after saying the FDA declined to approve its application for its experimental apomorphine infusion device for the continuous treatment of motor fluctuations in Parkinson’s disease; letter says the application is not ready for approval in its present form.
• SWKS -1%; downgraded from Overweight to Sector Weight at KeyBanc and trimming its estimates slightly as sees a fair value of $105, which is based on 13x its 2025 EPS estimate of $7.83.
• UBER -3%; after TSLA CEO Elon Musk said the maker of electric cars and trucks will unveil its long-promised robotaxi on Aug. 8^th.