Mid-Morning Look: October 15, 2024

Mid-Morning Look

Tuesday, October 15, 2024

Index

Up/Down

%

Last

DJ Industrials

-178.04

0.41%

42,889

S&P 500

-21.00

0.36%

5,838

Nasdaq

-174.48

0.95%

18,326

Russell 2000

8.18

0.36%

2,256

 

 

U.S. stock markets are lower, with the S&P 500 pulling back from record highs and the Nasdaq seeing profit taking after its run and he Dow Jones Industrial Average pulls below its 43,000-record closing high, pressured by shares of UNH after earnings results/guidance disappointed and weighed on managed care stocks (ELV, HUM). Smallcaps are seeing strength early as the Russell 2000 outperforms. The big story of the morning outside of earnings season getting underway with banks (GS, C, BAC) and healthcare names (JNJ, UNH) was the sharp decline in energy prices, weighing on the energy complex (XLE -2.8%). U.S. crude futures tumbled over -5% back below $70 per barrel on media reports saying that Israel will not strike Iran’s nuclear or oil facilities in retaliation for an earlier missile attack. The reports from multiple outlets cite anonymous Israeli government officials. The headlines ease fears of a supply disruption pushing oil prices lower. Both Brent and WTI crude oil prices had settled about 2% lower on Monday but are now down about $5 so far this week. Apple (AAPL) shares hit new all-time highs today, but broader tech trade (XLK) pulled back early, led by semiconductors after a lower outlook from ASML pressured the sector. US listed China stocks underperform again (BABA, BIDU, PDD, JD) after lack of further stimulus details this past Saturday. Treasury trade resumes after Columbus Day and yields decline, while the dollar weakens. Fed Governor Waller yesterday reinforced expectations that a 25-basis-point cut is the most likely outcome for the November 6 & 7 meeting, unless labor and inflation data strays too far from expectations. Bitcoin prices are spiking over +2% topping $67,000, its highest level since July.

Economic Data

  • NY Fed’s Empire State current business conditions index declines to -11.9 in October vs +11.5 in September and below the consensus +3.85; segment breakdown showed: new orders index -10.2 in October vs +9.4 in September, while prices paid index (inflation) rose to +29.0 in October vs +23.2 in September and state employment index at +4.1 in October vs -5.7 in September; six-month business conditions index +38.7 (best since 10/21) vs +30.6 in September.

 

 

Macro

Up/Down

Last

WTI Crude

-3.70

70.13

Brent

-3.48

73.98

Gold

9.40

2,675.00

EUR/USD

-0.0006

1.0903

JPY/USD

-0.62

149.14

10-Year Note

-0.026

4.047%

 

Sector Movers Today

  • In Banks: BAC Q3 results beat estimates, as EPS of $0.81 tops the $0.77 estimate, driven by strong activity in investment banking and trading; Q3 investment banking fees jumped 18% y/y to $1.4B; Citigroup (C) Q3 EPS of $1.51 topped consensus of $1.31 as revs rose 1% y/y to $20.3B, topping $19.84B estimate; GS reported Q3 net revenue rose 7% y/y to $12.70B above consensus $11.77B on better earnings of $8.40 vs. est. $6.89 as profit rose 45% y/y; PNC Q3 EPS $3.49 topped consensus $3.30 (profit dropped -4% y/y) and revs $5.43B above ests $5.39B.
  • In Utilities: AWK was downgraded to Neutral from Buy at Mizuho following the resolution of two major rate case decisions this year in Pennsylvania (~25%) and New Jersey (~30%), and it believes there are minimal catalysts to take shares higher as the company executes on their 7-9% EPS growth. DUK was upgraded to Outperform at Mizuho and raised tgt to $121 PT saying they view the selloff related to the recent storms in the Southeast as a great buying opportunity. ED was upgraded to Buy from Neutral at Citigroup on the view that the upcoming O&R and CECONY will result in favorable EPS accretion of ~2.7% in ’26 due to regulatory priorities, datacenter noise in staff calculation.
  • In Restaurants/Casual dining: CAVA shares slipped after CMG said it is making a minority investment in Brassica, a fast-casual restaurant concept. Truist said fast food chains including CMG (tgt to $71 from $69), MCD (tgt to $350 from $295) and others are poised for near-term growth following new menu innovations and promotions, while saying expects WEN to miss quarterly results as sales growth decelerated in September due to a quiet promotional quarter.
  • In Insurance: AIG was downgraded to Market Perform from Outperform at BMO Capital and cut tgt to $84 from $90 saying insurance pricing power within the large employer marketplace remains “soft” and most large employers do not expect their pricing costs to meaningfully accelerate in the coming six months. PGR reported Q3 net premiums written rose 25% y/y to $19.46B topping views, on better EPS of $3.97 vs. est. $3.74; noted net premiums earned $18.30B, +23% y/y and the combined ratio reported 89% vs. 92.4% y/y.

 

Stock GAINERS

  • ERIC +10%; earnings beat expectations, as adjusted Ebitda margin increased 530 bps to 12.6%, 280 bps above expectations; free cash flow (FCF) of 12.9 billion kroner compares to the 2.8 billion kronor expected; Q3 core earnings and sales above expectations as demand for 5G gear rebounded in North America
  • SCHW +6%; as Q3 net income rose about 25% driven by a jump in asset management fees and client assets hitting a record high; total client assets rose 27% to a record $9.92 trillion in Q3, net interest revenue fell about 0.7% to $2.22 billion, and Net revenue rose 5% to $4.85 billion.
  • UAL +2%; strength in airline stocks (DAL, AAL, LUV) as oil prices fall as much as 5% overnight.
  • WBA +14%; reported Q4 profit and sales that topped consensus ($0.39/$37.55B vs. $0.36/$35.76B) and said plans to close 1,200 stores as new CEO Wentworth pursues turnaround strategy (includes 500 closures in fiscal 2025 alone); said it surpassed its target of slashing $1 billion in costs during fiscal 2024.
  • WOLF +24%; as the company is in line to win $750m in US government grants as well as $750m in financing led by Apollo Global Management Inc. to support its factory expansion plans.

 

Stock LAGGARDS

  • APPF -5%; downgraded to Underperform at KBW on the heels of lower revised estimates; lower PT to $193 from $255. KBW’s revised estimates are significantly below consensus, representing Street-lows across most metrics.
  • ASML -15%; after guiding Q3 bookings EU2.63B, below est. EU5.39B; forecasts 2025 gross margin 51% to 53%, forecast about 54% to 56% which sunk the semiconductor index (SOX) over 4.75% – NVDA, AMD others slide.
  • CAVA -4%; after CMG said it is making a minority investment in Brassica, a fast-casual restaurant concept.
  • CDNA -18%; after issuing preliminary guidance.
  • COTY -11%; after pre-announced Q1 sales grew approximately +4-5% on an LFL basis, lower than prior guidance of +6% LFL and versus consensus of +6.0%; reiterates FY25 adj EBITDA outlook for +9-11% YoY growth.
  • ENPH -5%; was downgraded to Sector Perform from Outperform at RBC Capital and PT cut to $100 from $125 as believes competitive mkt will result in a slower pace of growth next year not reflected in current consensus estimates.
  • UNH -7%; Q3 adj EPS $7.15 tops consensus $7.00 on revs $100.82B vs. est. $99.28B; but its medical cost ratio, the share of premiums paid out to cover expenses, came in at 85.2%, compared with estimates of 84.4%; narrows FY24 adjusted EPS view to $27.50-$27.75 from $27.50-$28.00 vs. est. $27.70 (ELV, HUM fall in sympathy).

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.