Mid-Morning Look

Tuesday, April 09, 2024

U.S. stocks are flat to up slightly in similar trading action to Monday, with markets holding not far off record highs ahead of key inflation data tomorrow and Thursday and awaiting the start of earnings Friday. Treasury yields eased up slightly after a big run the last 2-weeks to highest levels since October as better jobs data shows the economy remains on solid footing. Gold prices making new highs day-after-day, approaching $2,400 an ounce now as silver also surges. Investors await the March Consumer Price Index (CPI) report tomorrow morning 4/10), which is expected to show a slight cooldown in monthly price growth and a nominal decrease in the annual core number, which excludes volatile food and energy items. Year-on-year headline CPI is expected to gain some heat, rising to 3.4% from 3.2% in February. Fed members have remained mixed on the future rate outlook in recent weeks, but stock markets are still holding with view of 3 cuts by end of 2024, with strong probability of the first cut coming in June. However, a third straight month in a row of hotter CPI (and PPI Thursday), could derail hopes of near-term cuts. Financials and Industrials are the only S&P sectors in the “red” early, with NYSE breadth over 2:1 advancers are leading decliners.

• In Metals and Mining: Bank America with several research rating changes as they upgraded HBM from Neutral to Buy, upgraded FCX to Buy with $59 tgt and raise price tgt on TECK saying tight copper mine supply is increasingly constraining refined production and copper demand is steady, driven by energy transition tail winds. BofA see copper rising to $12,000/t or $5.44/lb for 2026E. Bank America also upgraded AGI from Neutral to Buy after the recent strategic acquisition of Argonaut Gold in an all-share transaction and downgrade VALE to neutral saying the iron ore recovery looks distant and struggles to see short-term upside potential for the commodity. Wolfe Research downgraded CLF to Underperform from Peer Perform after shares spiked 16% over the past two months, despite earnings estimates falling and upgraded US Steel (X) to Outperform from Peer Perform as it looks relatively cheap on a standalone basis, using ests well below its forecasts listed in the proxy.
• In Mortgage Finance: UWMC upgraded from Underperform to Market Perform at KBW Inc. and now see limited downside to total return estimates while recommend a long UWMC-short RKT pair trade into 1Q earnings and upgraded PFSI to Outperform from Market Perform as think strong servicing earnings should continue to benefit from the “higher for longer” environment that seems to once again be the base case. KBW remains Outperform on COOP as it thinks the company’s servicing book will also continue to benefit from higher interest rates. Barclays said they favor COOP, PFSI, NMIH, and ESNT vs FAF, FNF, RKT, and UWMC saying seasonally lower Q1 volumes plus a 30Y mortgage rate that is ~7% for the quarter should present challenges for volumes and margins in Q1 for the stocks more levered to originations.

• ALKS +2%; announces positive topline results from phase 1B study of ALKS 2680 demonstrating improved wakefulness in patients with narcolepsy type 2/idiopathic hypersomnia; was generally well tolerated at all doses.
• BB +7%; shares rose after announcing a collaboration with AMD designed to revolutionize next-generation robotic systems by enabling new levels of low latency and jitter, and repeatable determinism.
• CC +2%; upgraded to Outperform with $34 tgt at BMO Capital and raised its target price to $34 saying while Q1 guide was well below expectations and communication around 2024 was limited, BMO is at/near the inflection point in several of CC’s businesses.
• FCX +2%; Bank America with several research rating changes as they upgraded HBM from Neutral to Buy, upgraded FCX to Buy with $59 tgt and raise price tgt on TECK saying tight copper mine supply is increasingly constraining refined production and copper demand is steady.
• GOOGL +2%; unveils arm-based data center processor, new AI chip.
• MRNA +8%; Piper noted Moderna presented Phase I KEYNOTE-603 Part C data showing mRNA-4157 + Keytruda achieved 2 CRs and 4 PRs for an ORR of 27.3% (6/22) and DCR of 63.6% (14/22) in HPV-negative HNSCC.
• NEM +2%; as gold miners extend gains with gold prices hitting new all-time highs several times in the last few weeks amid rate cut expectations by the Fed.

• MAXN -3%; res tumbled after guiding prelim Q4 revs $229 vs. consensus $236.8M saying decision to ramp down all Maxeon 6 capacity faster than expected, resulting in higher than initially planned restructuring costs in Q4; sees Q1 revs about $186M below consensus $241.5M.
• MSTR -6%; as Bitcoin prices remain volatile, falling back to $70,000 after topping $72,000 the day prior.
• NEOG -5%; following earnings after cuts FY24 revenue view to $910M-$920M from $935M-$955M and lowers FY24 adjusted EBITDA view to $210M-$215M from $230M-$240M.
• TLRY -20%; after saying they no longer expect to generate adj. positive free cash flow for fiscal year 2024 due to delayed cash collection on various asset sales as forecasts 2024 adj. core earnings in the range of $60M-$63M vs. et. $66.7M and as Q3 revs $188.3M miss the $198.5M estimate.