Mid-Morning Look: October 31, 2024

Mid-Morning Look

Thursday, October 31, 2024

Index

Up/Down

%

Last

DJ Industrials

-211.94

0.51%

41,928

S&P 500

-63.69

1.09%

5,750

Nasdaq

-326.71

1.75%

18,282

Russell 2000

-13.28

0.59%

2,219

 

 

U.S. stocks stumbling out of the gate on this final trading day of October, as Halloween looking more like a trick than a treat so far for Wall Street, still trying to hang on to monthly gains, but the sharp drop in technology (XLK -2.4%) after key earnings results weighing on markets early. Weakness in mega cap tech names MSFT and META after earnings results taking toll on the Nasdaq which is down over -1.8% and falling ahead of big earnings reports from AAPL and AMZN tonight in tech/retail. Lots of economic data as well, but the September PCE inflation, the Fed’s preferred inflation measure was the key data point showing headline PCE falls to 2.1% y/y, in-line with expectations of 2.1% (down from 2.3% prior month) while core PCE inflation was unchanged, at 2.7%, above expectations of 2.6% (both m/m results were in-line with estimates). Treasury yields extend their monthly gains in choppy trade after U.S. data show inflation slowing, as expected, while labor markets remain resilient. The 10-year yield trades at 4.32% and the two-year at 4.2%, both on track for massive monthly gains. The Dow Jones Industrial Average also went down on the MSFT results and after pharma giant MRK cut its annual outlook. Some massive movers both to the upside and downside with early big winners including BAND, BKNG, CFLT, CMCSA, CVNA, ETSY IP, NCLH NXT, PTON and RBLX while some top decliners include COIN, EBAY, EL, HOOD, MET, MGM, MPWR, MRK, MSFT, ROKU and UBER. Major averages (if levels hold) on track for worst day since early September and the Dow on track to snap 5-month winning streak, while Nasdaq on track for 3rd month of gains in a row.

Economic Data

  • Sept Personal Income rises +0.3% (vs. consensus +0.3%) and vs Aug +0.2% while Sept Personal Spending rises +0.5% (vs. consensus +0.4%) and above Aug +0.3%; Sept real consumer spending +0.4% vs Aug +0.2%.
  • Inflation readings show: Sept overall PCE price index +0.2% vs Aug +0.1% and headline Y/Y PCE price index +2.1% vs Aug +2.3% (prev +2.2%). The Sept core PCE price index M/M rises +0.3% (+0.3% est.) and above Aug +0.2% while the Sept year-over year core +2.7% (above consensus +2.6%) and in-line vs Aug +2.7%.
  • Weekly Jobless Claims fell to 216,000 in the latest week vs consensus 230,000 and from 228,000 prior week; the 4-week moving average fell to 236,500 from 238,750 prior week; continued claims fell to 1.862M from 1.888M and vs. consensus 1.885M; Insured Unemployment Rate unchanged at 1.2%.
  • Chicago PMI Index reported at 41.6 below est. 47.0; Production and order backlogs decreased over the month, as did new orders, spelling weak demand and further lackluster activity in the months ahead. Employment also dropped, pointing to some softening in the labor market.
  • US employers announced 55,597 job cuts in October 2024, below 72,821 in September, but above 50.9% from 36,836 in October 2023.

 

 

Macro

Up/Down

Last

WTI Crude

0.93

69.56

Brent

0.74

73.32

Gold

-34.80

2,766.00

EUR/USD

0.000

1.0855

JPY/USD

-0.61

152.79

10-Year Note

0.051

4.315%

 

Sector Movers Today

  • In Crypto: RIOT reported poor Q324 earnings results with REV/ADJ. EBITDA coming in below and lowered its 2024 YE hash rate target slightly by 1.4 EH/s (35 EH/s year-end) and its 2025 target from 56.6 EH/s to 46.7 EH/s attributed to permitting delays in Kentucky, potential supply-chain constraints for transformers at Corsicana. COIN Q3 revenue $1.2B vs. est. $1.25B; Q3 transaction revenue fell -27% q/q to $573M while average native units grew Q/Q for staking, custody, and on-platform USDC, subscription and services revenue declined 7% Q/Q to $556M. MSTR reported earnings and plans to raise $42B over the next three years ($21B equity/$21B fixed income) to purchase more bitcoin.
  • In Paper &Packaging: IP announces review of strategic options for global cellulose fibers business and closure of Georgetown, S.C. pulp and paper mill; 674 employees to be impacted by Georgetown mill closure (maybe a positive for PKG); also reported Q3 EPS $0.44 vs. est. $0.26 on in-line revs of $4.69B; SW upgraded to Outperform, raise PT to $58 (from $52) at RBC Capital saying SW checked three key boxes for US with its updates at the quarter: (1) it demonstrated a good pace of execution on integration; (2) it de-risked the near-term outlook for CAPEX; (3) it confirmed that management sees significant upside to its initial synergy target (an incremental $400MM+ in benefits).
  • In Autos: CVNA reported Q3 retail unit growth accelerating sequentially to 34% y/y, beating estimates of 32% y/y. Revenue came in ~6% ahead of consensus while non-GAAP GPU also beat expectations by nearly 12% as CVNA continues to execute its strategy of driving fundamental improvements and operational efficiencies. Adj. EBITDA margin of 11.7% came in well above estimates of 9.5% and above the midpoint of LT target of 8%-13.5%. STLA Q3 revenue in North America missed expectations as total revenue per unit was 41,555 euros, 6% below expectations. LI shares fell as reported a decline in third-quarter profit even as revenue jumped 24%. Ford Motor (F) said it will halt production of F-150 Lightning electric vehicle pickup trucks for six weeks. The Dearborn automaker will suspend production of the EV trucks on Nov. 18 and resume it on Jan 6. In auto suppliers, APTV lowers outlook, BWA raises.

 

Stock GAINERS

  • AVDL +18%; after a court ruled in favor of the U.S. FDA in a suit brought by JAZZ regarding the agency’s approval of narcolepsy drug Lumryz. With this ruling, the approval of Avadel’s Lumryz is upheld based on the FDA’s determination that Lumryz is clinically superior to Jazz’s twice nightly oxybate products, Avadel said
  • BKNG +7%; shares reach new record highs on good results as 3Q gross bookings at $43.4bn were above Street at $41.4bn on an improvement in EU travel and an expanding booking window. Revenue/EBITDA at $8.0bn/$3.7bn beat Street at $7.6bn/$3.3bn, with EBITDA margins at 45.8% above 43.7% expected.
  • BMY +4%; boosted its 2024 outlook on the back of strong quarterly sales of both legacy and newer drugs, despite generic competition and loss of exclusivity for some of its medicines; followed beat on Q3 EPS and sales.
  • CFLT +20%; reported better 3Q24 results as optimization headwinds with digital-native customers started to ease; saw strong new customers adds (+15.7% YoY to 5,680 total customers) and a recovery in cloud growth QoQ.
  • CMCSA +2%; Q3 results topped ests driven by strong box office performance for its studio, higher ad sales during the 2024 Paris Olympics and a smaller-than-expected decline in broadband subscribers; also said considering spinning out its cable networks business into a new company.
  • CVNA +18%; reported Q3 retail unit growth accelerating sequentially to 34% y/y, beating estimates of 32% y/y. Revenue came in ~6% ahead of consensus while non-GAAP GPU also beat expectations by nearly 12% as CVNA continues to execute its strategy of driving fundamental improvements and operational efficiencies.
  • IP +13%; announces review of strategic options for global cellulose fibers business and closure of Georgetown, S.C. pulp and paper mill; 674 employees to be impacted by Georgetown mill closure (maybe a positive for PKG); also reported Q3 EPS $0.44 vs. est. $0.26 on in-line revs of $4.69B.
  • MDGL +13%; said it achieved its coverage goal for its recently approved liver disease drug, Rezdiffra, one quarter ahead of schedule.
  • NXT +21%; reported strong fiscal 2Q results ahead of expectations and raised 2025 EBITDA and EPS guidance. Quarterly results benefited from strong demand, NXT’s discipline around pricing and costs, and a favorable sales mix.
  • RBLX +15%; shares jumped as Q3 bookings $1.13B topped the $1.03B estimate on a narrower earnings loss and guided Q4 bookings above views to $1.35B.

 

Stock LAGGARDS

  • ARM -7%; downgraded from Market Perform to Underperform at Bernstein with $100 tgt saying they worry about the revenues outside of AI, given the cyclical headwinds its analog names are facing, especially ex-memory.
  • EL -18%; cuts dividend to 35c per share from 66c; withdraws FY 25 guidance amid a slowdown in demand for luxury beauty products in major markets such as China; Q1 sales $3.36B vs. est. $3.37B; outlook q2 reported & organic net sales to decrease between 8% and 6%.
  • ENVX 14%; after 10.4M share stock offering priced at $9.60 and Janney downgraded to Neutral with $10 PT.
  • HOOD -13%; posted Q324 results (revenue, adj. EBITDA) below the Street as both transaction-based and net interest revenue were light while opex was in line; the lower revenue was a function of lighter than anticipated option contract/ crypto volume and yield on equities trading volume (mix driven).
  • MET -6%; as operating EPS and normalized EPS missed Street’s estimates due to weaker results in most segments, but especially in Group Benefits, Retirement Income Solutions, and Asia on a normalized basis.
  • MSFT -5%; quarter beat across-the-board, with 100bps of Azure upside (34% Y/Y-CC, somewhat driven by higher in-period rev-rec), but shares fell as management’s Q2 Azure guide calls for 200-300 bps of Q/Q deceleration and OpenAI losses are expected to increase by over $1B Q/Q.
  • ROKU -14%; shares slumped as Q3 Platform revenue 5% above the Street, with ~300bps tailwind from one-time factors, while Q4 guided 3% above, with ~100bps political benefit, but mgmt comments for slower 2H25 revenue growth and mid-single digit FY25 opex growth weighed on sentiment.
  • SMCI -14%; adds to yesterday’s declines as Argus downgraded to Hold from Buy as auditor exits. Notes shares declined 33% on 10/30/24 following the release of a company 8K filing that indicated loss of a key accounting partner
  • UBER -7%; Q3 gross bookings rose 16.1% to $40.97B, vs. est. $41.24B and sees Q4 gross bookings of $42.75-$44.25B, with midpoint of $43.5B below estimates of $43.66B and sees Q4 adjusted EBITDA of $1.78-$1.88B, below analysts’ estimates of $1.84B.

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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.