Mid-Morning Look

Monday, April 22, 2024

U.S. stocks with a nice move higher to kick off the week, though have faded off the highs as the S&P 500 and Nasdaq look to snap their 6-day losing streaks. The CBOE Volatility index (VIX) however remains weak (-4% below 18). After leading tech lower last week, the semiconductor index (SOX) rebounds early over 1% (fell -8 last week alone after ASML, TSM results and commentary, but has also pared gains. With no escalations of tensions over the weekend in the Middle East, gold, oil, and yen are all weaker, while Treasury yields in US slightly elevated. As expected, the U.S. House passed a $95 billion Ukraine & Israel aid package over the weekend which is to be sent to Senate. The US House on Saturday put legislation forcing TikTok’s Chinese parent ByteDance Ltd. to divest its ownership stake on a fast track to become law, tying it to a crucial aid package for Ukraine and Israel. Bitcoin prices rose 3% back above $66,000 after “halving” event completed last Friday. Attention turns this week to earnings, as nearly 40% of the S&P 500 report this week, while markets get big economic data points late week with GDP on Thursday and PCE inflation on Friday. Fed speakers quiet, in “blackout period” ahead of FOMC meeting next week where no changes are expected. Eight of eleven S&P sectors higher to start, with modest weakness in Communications, Materials, and Consumer Discretionary early.

• In Metals & Mining: AA was upgraded to Equal Weight from Underweight at Morgan Stanley as thinks the operational concerns that persisted throughout 2023 have largely been de-risked and it now sees a more balanced risk-reward. Precious metals declined overnight amid no escalation of tensions in Middle East this weekend, ushing gold and silver miners lower, dampening demand for safe havens as traders turn their attention to the outlook for monetary policy (shares of NEM, AEM, GOLD, KGC, PAAS were all lower).
• In Solar: Piper said expects ENPH/SEDG (90% of mkt resi market) to indicate continued soft US solar sell-thru in 1H’24 (+constructive storage commentary) while RUN/NOVA highlight favorable demand associated with upfront savings on lease/PPA products. Canaccord notes higher-for-longer interest rate environment in the U.S. continues to be a pacing challenge for the rooftop solar industry (ENPH, SEDG). The firm said given the challenges such an environment poses for a recovery in consumer demand for the residential solar equipment industry (including inverters, panels, power optimizers and home batteries). To be approved for loans Canaccord found, borrowers had to have a minimum credit score of 622. Among the home project/upgrade loans Canaccord identified, the avg. interest rate was ~20.09%, which comprised an average rate of 8.77% for those with good credit and an avg. rate of 31.41% for those with poor credit.

• MLEC +68%; said the Animal and Plant Health Inspection Service of the U.S. Department of Agriculture has concluded its Regulatory Status Review for Moolec’s genetically engineered soybean, Piggy Sooy.
• MSTR +9%; after Bitcoin bounces 3% back above $66K after “halving” event on Friday.
• MTTR +180%; CSGP agreed to acquire all outstanding shares of MTTR in a cash and stock transaction valued at $5.50 per share reflecting an estimated $1.6B of enterprise value (cash and stock).
• RHI +2%; was upgraded to Hold from Sell at Truist saying forward earnings estimates for the company should bottom in the coming quarters.
• SE +8%; upgraded to Buy at Bank America and raise tgt to $70 from $62 saying the latest data points from SE Asian mkts indicate SEA’s online platform, Shopee, and other platforms have gradually raised take-rates avg 3-7% to 5-10%.
• VSTO +5%; said it is engaging in discussions with investment firm MNC Capital for a better deal than its all-cash offer to acquire the company for $3 billion (the co had received an improved bid from MNC Capital in March to acquire the company for $3 billion after it turned down MNC’s earlier offer of $2.90B).

• CNHI -5%; was downgraded to Neutral from Buy at Bank America following the "surprising" CEO change announced on Sunday which they say adds uncertainty around the company’s transformation.
• HEPA -37%; after saying late Friday it ends Phase 2 study for Ascend-Nash drug due to resource constraints.
• INFA -8%; said this morning that it is not currently engaged in any discussions to be acquired, the company said Monday after media reports of takeover interest from CRM. Overnight, the WSJ reported talks between the two fizzled after the companies couldn’t agree on terms https://tinyurl.com/yy2y6u55
• LI -6%; matched TSLA price cuts by around 5% on four of its five models and said it would refund owners who had bought those models earlier this year.
• TSLA -3%; cut the starting price of the revamped Model 3 in China by 14,000 yuan ($1,930) to 231,900 yuan ($32,000), its official website showed on Sunday. In Germany, the price of the Model 3 rear-wheel-drive was trimmed to 40,990 euros ($43,670.75) from 42,990 euros (shares on track for 7^th straight day of losses).
• VZ -3%; reported EPS beat on mostly in-line revs, while lost fewer-than-expected net postpaid phone subscribers, but shares appeared to weaken, with Evercore/ISI noting the free cash flow (FCF) came in below expectations.