Mid-Morning Look

Tuesday, December 03, 2024

U.S. stocks a little weaker to start the day ahead of a busy week of job-related economic data and Fed speakers. U.S. equity market action similar to yesterday as large cap tech gains (AAPL new record highs, AMZN, NVDA, META) are helping support the S&P 500 and Nasdaq early despite negative market breadth, as decliners lead advancers by about 1.5:1 margin. Dow Transports underperform, down -1.5% to 17,300, led by weakness in CAR -3.3%, FDX -2.7% on Bernstein downgrade and UPS -2.1%. Lone piece of U.S. economic data today, U.S. job openings rise to 7.744 million in October from 7.443M prior month and vs. consensus of 7.475M while markets await comments from several Fed speakers ahead of FOMC policy meeting next week. yesterday, Fed Governor Waller said that he was leaning towards a December rate cut, absent data surprises. Waller is seen as modestly hawkish, so his comments were market moving. Some crazy stuff going on in South Korea and France the last few days as South Korea President Yoon Suk Yeol declares martial law in an unannounced late night address broadcast live on YTN television saying opposition parties have taken the parliamentary process hostage to throw the country into a crisis and he had no choice but to resort to such a measure to safeguard free and constitutional order (iShares MSCI South Korea ETF was down more than 5% along with weakness in CPNG and Samsung). Recall yesterday in France a vote of no confidence was made against current government. Strength again in crypto as Bitcoin bounces off early weakness back above $96,000, bond yields rebounded following the JOLTs job data with the 10-yr back to 4.2% while oil prices rise and the dollar is flat.

• In Industrial Metals: CENX was upgraded to Outperform at Wolfe despite strong performance YTD on higher commodity price forecasts for aluminum, in addition to the increasingly likely sale of a 500MW power connection at its idled Hawesville smelter. VALE said ahead of its Investor Day that it expects to produce between 325M-335M metric tons of iron ore in 2025, following an output of about 328M tons this year; also said it expects to produce 340K-370K tons of copper in 2025, after output of about 345K this year.
• In FinTech/Consumer Finance: SYF was upgraded to Overweight from Equal Weight at Wells Fargo and raised PT to $85 from $60 saying they recognizes the stock has run around the election, but it believes clarity on the CFPB late fee & better credit can take the shares higher. SQ said Square, AfterPay, and cash app surpass records this black Friday and cyber-Monday with 144M transactions. UPST was upgraded to Buy at Redburn and raised PT to $95 from $37 at Redburn noting the co has now delivered two quarters that have been ahead of expectations, with forward guidance an incremental positive.

• JANX +71%; after data from an early-stage trial shows all 16 patients with a type of prostate cancer that used co’s experimental drug JANX007 achieved declines in levels of prostate-specific antigens; the drug also had a well-tolerated safety profile.
• MP +11%; after China said it has banned rare material exports to the U.S. of items related to the minerals gallium, germanium and antimony that have potential military applications, a day after Washington’s latest crackdown on China’s chip sector.
• SHO +11%; after Bloomberg reported last night that Trinity Investments has expressed interest in acquiring Sunstone Hotel Investors, and discussed paying about $13 per share for Sunstone – though notes talks between the two Co’s are not currently active https://tinyurl.com/mrxzvvcn
• T +4%; announces long-term capital allocation plan and long-term targets at Investor Day; authorizes repurchase of about $10B in shares; raises FY adjusted EPS $2.20 to $2.25, from prior $2.15 to $2.25; sees capital expenditure high end of $21B to $22B, vs. prior $21B to $22B; still sees free cash flow $17B to $18B.

• LYV -3%; announces launch of $1B in convertible senior notes due 2030.
• MCHP -4%; negatively preannounced results, indicating Q3 revenue is expected to be at the low end of prior guidance at $1.02B, as compared to $1.06B prior, as anticipated turns orders have been weaker than expected
• PLCE -19%; after reported Q3 net income of $20.1M, down from $38.5M y/y and sales fell -19% to $390.2M citing an expected decline in e-commerce revenue and comparable retail sales decreased -17% for the quarter.
• STX -3%; said production output for Seagate’s fiscal third quarter ending March 28, 2025 will be lower than previously expected with an associated revenue impact of up to $200M for the fiscal third quarter.
• TMDX -12%; narrows FY24 revenue view to $428M-$432M, from prior $425M-$445M (est. $432.37M) and announces new CFO as Gerardo Hernandez succeeds Stephen Gordon.
• X -8%; shares fell after President-elect Donald Trump said a series of tax incentives and tariffs will revive U.S. Steel, as he reiterated his opposition to Nippon Steel’s planned $15 bln purchase of co.
• ZS -8%; results and guidance overshadowed by CFO retirement; ZS modestly beat billings estimates for the October quarter and raised its FY25 guide by the amount of the billings beat.