Mid-Morning Look

Monday, September 11, 2023

U.S. stocks off to a good start to kick off the trading week, as the Nasdaq rallies behind gains in Tesla (TSLA) after an analyst upgrade and price tgt hike boosted shares, leading U.S. stocks ahead of a busy week of key economic data. Stocks have pared gains since the open, but still higher (9 of 11 S&P sectors in the “green”). A sharp pullback in the dollar (-0.6% below 104.50) has helped boost sentiment, while Treasury yields remain high (10-yr 4.28%), and Bitcoin falls 2% to $25,400 ahead of key inflation data this week. The coming days will bring data on consumer prices, producer prices and retail sales that will help investors gauge the Federal Reserve’s likely next steps in its campaign to tame inflation. The Fed’s rate-setting committee is set to meet next week. Overseas, Japan’s central bank chief Kazuo Ueda signaled over the weekend that he could end its negative-interest rate policy. No major US economic data was released this morning and the only earnings report of note is Oracle (ORCL) after the close tonight. On Tuesday 9/12, Apple (AAPL) reveals its latest product launch and Wednesday is the CPI data. One notable M&A deal is JM Smucker acquires Twinkies maker TWNK in $5.6B deal.

Sector Movers Today

·     In Aerospace & Defense: RTX shares pressured after warning it will take a roughly $3B charge in Q3 to reflect the costs of fixing a “rare condition in powder metal” used to make engine parts on its geared turbofan that powers Airbus A320 jets; now sees FY sales $67.5B-$68.5B, down from prior $73.0B-$74.0B view. AIR mentioned positively in Barron’s saying this airplane parts company isn’t a household name, but every airline knows it because it sells used, repaired, and overhauled engine/airframe parts. BA shares active on reports this weekend that Vietnam Airlines JSC will sign an initial agreement to buy about 50 Boeing (BA) 737 Max jets in a deal valued at $10B – Bloomberg reported.

·     In Food sector: TWNK to be acquired by SJM, confirming a report overnight in the WSJ, in a cash and stock deal valued at $5.6B as Hostess shareholders will receive $30.00 in cash and 0.03002 J.M. Smucker shares valuing TWNK at $34.25 each. https://tinyurl.com/5b8t5ys7 ; Kellogg (K) board of directors approves separation into two companies, Kellanova and WK Kellogg Co; USFD announced $B private offering of senior unsecured notes.

Stock GAINERS

·     BLRX +5%; after the FDA approved Aphexda motixafortide in combination with filgrastim to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma.

·     CRNX +77%; said its oral, once-daily investigational compound Paltusotine achieved positive results by meeting the primary endpoint and all secondary endpoints of the Phase 3 study.

·     IMTX +6%; said formed a collaboration with MRNA to develop new therapies for cancer patients.

·     META +2%; WSJ reported the company was working on a more powerful artificial-intelligence system; said Meta’s new AI could be as capable as ChatGPT’s most advanced offering GPT-4.

·     QCOM +4%; after disclosed a three-year deal to supply AAPL with the modem chips for smartphone launches in 2024, 2025 and 2026.

·     TSLA +5%; after being upgraded to Overweight from Equal-Weight at Morgan Stanley and raised its price target by 60% to $400 per share from $250 calling it their “Top Pick” as believe that Dojo can add up to $500B to Tesla’s enterprise value.

·     TWNK +18%; to be acquired by SJM, confirming a report overnight in the WSJ, in a cash and stock deal valued at $5.6B as Hostess shareholders will receive $30.00 in cash and 0.03002 J.M. Smucker shares valuing TWNK at $34.25 each. https://tinyurl.com/5b8t5ys7

Stock LAGGARDS

·     AMD -2%; broad weakness in semiconductors early, paring Nasdaq gains (NVDA, STX, LRCX, TER among worst performers in S&P early).

·     BABA -1%; former chairman Daniel Zhang stepped down as head of the Chinese tech giant’s cloud computing arm, less than three months after he said he would relinquish the company’s top jobs to focus on the unit.

·     BC -2%; downgraded to Neutral from Overweight at JPMorgan and cut tgt to $79 from $109 as expects flattish retail boat demand in FY24 and says is cautious due to high interest rates.

·     OVV -2%; as 15M share Spot Secondary priced at $45.65.

·     RTX -5%; after warning it will take a roughly $3B charge in Q3 to reflect the costs of fixing a “rare condition in powder metal” used to make engine parts on its geared turbofan that powers Airbus A320 jets; now sees FY sales $67.5B-$68.5B, down from prior $73.0B-$74.0B view.

·     SJM -7%; after agreeing to acquire TWNK in a $5.6B deal.