Mid-Morning Look

Wednesday, November 27, 2024

U.S. stocks mixed with strength in Smallcaps after the Russell 2000 snapped its 6-day win streak on Tuesday while other averages are down slightly as Wall Street digests a flurry of economic data reports this morning. Coming into the day, the S&P 500 is up 7-straight days (record highs), the Dow Jones Industrial Average up 5-straight days (record highs) and the Nasdaq Composite up 4-straight days as momentum continues to push higher into year end. The key news today was the October PCE reading at 10:00 AM, the Fed’s preferred inflation data point which showed results slightly above the prior month, but in-line with consensus expectations. Treasury yields edged higher while the dollar remained weak as October 12-month PCE price index rose 2.3%, compared to 2.1% in September and matching consensus. Core PCE was 2.8%, in line with forecasts, rising from September’s 2.7%. The 10-year yield is at 4.269% and the two-year at 4.222%. The WSJ Dollar Index falls 0.5% while the Dollar/yen fell to its lowest in about five weeks, standing 1.18% lower at 151.3 while the euro climbed.  Outside of the data, technology stocks weak as semiconductors (SOX) fell over 2%, Mag 7 stocks are down slightly and a handful of stock dropped on disappointing results overnight (DELL, ADSK, CRWD, HPQ, WDAY). Reminder stock markets are closed tomorrow for Thanksgiving and closed early on Friday at 1:00 PM.

• Personal Income for October rose +0.6% above consensus +0.3% and vs. September +0.3% while Oct. Personal Spending climbs 0.4% m/m vs. est. +0.4% (vs. +0.6% in September).
• U.S. Q3 GDP (second estimate) rose +2.8% Q/Q vs. advance estimate of +2.8% and +3.0% in Q2; Q3 Personal Consumption Expenditures rose +3.5% vs. prior estimate of +3.7% and +2.8% in prior quarter; prelim Q3 core PCE +2.1% vs. consensus +2.2%; Q3 GDP Price Index 1.9% vs. est. 1.8%.
• Weekly Jobless Claims fell to 213,000 from 215,000 in prior week and vs. consensus 216,000; the 4-week moving average fell to 217,000 from 218,250 prior week; continued claims climbed to 1.907M from 1.898M prior (downwardly revised from 1.908M) and US Insured Unemployment rate unchanged at 1.3%.
• Oct Durables ex-transportation orders +0.1% (cons +0.2%) vs Sept +0.4%; Oct Durables ex-defense orders +0.4% vs Sept -0.9% (prev -1.1%); Oct Gen Machinery orders +0.3%, electrical equipment +1.3%, defense aircraft/parts +16.6%; nondefense cap orders ex-aircraft -0.2%, (cons +0.1%) vs Sept +0.3% (prev +0.7%)
• Chicago PMI index at 40.2 below consensus 45.0 (lowest since May of 2024 when was below 40).
• Oct Pending Home sales index +2.0% (consensus -2.0%) to 77.4; U.S. Oct Pending Home sales +5.4% from Oct 2023
• October Advance goods trade deficit was (-$99.1B) vs. est. (-$102.7B).

• CRVO +13%; after announces FDA orphan drug designation granted to neflamapimod for the treatment of frontotemporal dementia.
• DKS +4%; was upgraded to Buy from Neutral at UBS and raised tgt to $260 after earnings saying the company will generate more sustainable earnings growth moving forward than it has in the past, and this has not been fully reflected in the stock.
• MSTR +8% as Bitcoin prices rebound back above $94,000 lifting crypto stocks.
• SEDG +6%; said it will reduce its total workforce by about 12% and primarily affect workers in manufacturing positions in South Korea, that it is discontinuing its energy storage business and focusing on its core solar activities and expects to incur $81 million to $99 million in charges.
• URBN +15%; reported Q3 EPS of $1.10, beating $0.85 estimates on better gross margins while sales rose 6.3% to $1.36 billion, topping Wall Street’s estimates of $1.34 billion. Urban Outfitter sales and traffic improved in Oct. as the brand focuses on driving quality full priced sales through targeted investments.

• DELL -13%; as revenue generated by its PC business declined 1% to $12.1B in Q3, falling short of estimates while guided revs/EPS for $24.5B/$2.50, compared to the Street’s $25.5B/$2.64 as the PC recovery continues to get pushed out while Blackwell delays pressure near-term revenues, though backlog/orders continue to grow.
• GES -5%; lowered its FY25 sales view to between 7.1% and 8.1% growth from previously expected 9.5% and 11.0% after reporting downbeat Q3 results amid slow customer traffic into direct-to-consumer channels; also lowered annual adjusted EPS to $1.85 to $2.00 from between $2.42 and $2.70 previously
• GRFS -5%; following a Bloomberg report overnight that Brookfield is preparing to drop its 6.45B-euro ($6.77B) bid to acquire Grifols after failing to reach an agreement with its board on price. https://tinyurl.com/2s4aahmj
• HPQ -12%; Q4 EPS was in line with Street estimates while the outlook missed due to ongoing softness in the PC market and higher variable comp expenses in the Jan ’25 Q; FY25 EPS outlook midpoint was in line as F2H25 weighted PC growth and solid profitability in the Print business is driving ~MSD% EPS growth.
• OTLK -75%; after saying it will resubmit a biologics license application for its ophthalmic formulation of bevacizumab early next year after the second of two clinical trials missed a key target.
• SYM -38%; after saying the company was unable to file annual report on form 10-K for fiscal year ended Sept. 28 before the due date as it needs additional time to assess financial impacts of correcting error related to system revenue recognition; also lowered its Q1 revenue forecast to $480M-$500M from prior view $495M-$515M.
• WDAY -7%; delivered solid FQ3 results slightly exceeding both subscription revenue and backlog estimates. However, management lowered the FY25 subscription revenue growth guide to 16.6% Y/Y (from 16.8%) given some revenue slippage that won’t be realized until FY26.