Mid-Morning Look

Monday, September 30, 2024

U.S. stocks with a choppy open on this final trading day of the month, as both the Dow Jones Industrial Average and S&P 500 on track for their 10^th winning month in the last eleven and on track for its first positive September since 2019. There were several top stories today including: the devastating impact from Hurricane Helene in the Carolinas, Georgia, and Tennessee (on homes, businesses), as well as increased tensions in the Middle East as Israel claimed to take out Hezbollah’s leader. Longshoremen at ports on the US East Coast and Gulf Coast will go on strike at midnight for the first time since 1977, potentially costing billions to the US economy. Asian markets mixed with China markets surging 8% while Japan markets tumbled 4.8% (more below). A few economic data points today (see below), but the expected impact of jobs data later this week (JOLTs on Tuesday, ADP Payrolls Wednesday, Jobless Claims Thursday and the Nonfarm payroll report on Friday) likely to carry more weight. The CBOE Volatility index (VIX) edges higher ahead of potentially higher volatility this week. It is also month-end/quarter-end.

Asian markets mixed as China’s Shanghai Index jumped over 8% for a massive rally after China’s government announced several changes Sunday intended to stabilize the real estate market. Mortgage rates for first and second home buyers are required to be reduced by no more than 30bp below the LPR by Oct. 31. The minimum downpayment for an individual’s commercial housing mortgage is to be lowered by up to 15%. The PBOC also released detailed guidelines enhancing the mortgage framework. New borrowers have the option of taking fixed or floating rate loans. Guangzhou became the first tier-1 city on Sunday to remove all restrictions, saying it will stop reviewing homebuyer eligibility and no longer limit the number of homes owned. The Nikkei Index tumbled 1,910 points or 4.8% to settle at 37,919, after surging last week, while the Shanghai Index surged 248 points, or over 8% to 3,336, and the Hang Seng Index jumped 501 points to 21,133.

• Auto sector under pressure as STLA marks the 4^th major auto to warn on annual outlook in the last 2-weeks. Stellantis shares fell after the owner of Chrysler, Jeep and Fiat warned about lower-than-expected profit, citing higher costs to overhaul U.S. business, Chinese competition on electric vehicles and worsening trends in the auto industry. Stellantis joins rivals BMW, Mercedes, and Volkswagen which all lowered guidance the last week. Stellantis said it was dropping expectations for positive free cash flow, and now expected to burn through 5B and 10B euros.
• Solar/Alt Energy: U.S. trade officials this week may impose new tariffs on solar panels from four Southeast Asian nations that American manufacturers have complained employ unfair subsidies that make U.S. products uncompetitive. The announcement, due on Tuesday, is the first of two preliminary decisions the Commerce Department will make this year in a trade case brought by Korea’s Hanwha Qcells, FSLR, and several smaller companies seeking to protect billions of dollars in investments in U.S. solar manufacturing. In Renewable Energy. UBS upgraded BEP to Buy from Hold and Reiterate Buy on CWEN as preferred renewables yield exposure. UBS said it continues to see the YieldCo group as offering an attractive way for investors to gain low-beta exposure to the ongoing energy transition theme.
• Railroads (CSX, NSC, UNP), as well as freight and logistics companies (JBHT, CHRW, WERN, KNX, ODFL, etc.) under watch as a dockworkers’ strike threatening to close ports on the East and Gulf coasts beginning this week. The 45,000 members of the International Longshoremen’s Association have threatened to strike this week which could shut down 36 ports from Maine to Texas that handle about half the goods shipped into and out of the United States. The union is demanding significantly higher wages and a total ban on the automation of cranes, gates and moving containers in the loading and unloading of freight. (West Coast dockworkers belong to a different union and aren’t involved in the strike).

• CVS +2%; shares rose on reports Hedge fund Glenview Capital has taken a large position in the company, pushing for changes. The slated meeting, between CVS and hedge fund Glenview Capital Management, comes amid signs investors are turning restless with the company – WSJ https://tinyurl.com/2jc2z5yn
• GOGO +3%; says will acquire Satcom Direct for $375M in cash, and 5M shares of Gogo stock at closing. The agreement also provides for potential additional consideration, capped at $225M, based on retaining and growing broadband customers above certain performance thresholds
• NIO +12%; after NIO China secured a $2 billion investment from its parent company and state-backed investors.
• PRME +30%; said it signed a research collaboration and license agreement with BMY, where the drugmaker will invest $55M in PRME’s equity while PRME will also receive $55M upfront payment, with potential for over $3.5B in milestones.
• SMCI +2%; will commence a 10-for-1 stock split after the stock market closes on Monday and begin trading on a post-split basis Oct. 1.
• TTEC +30%; as announced that its Board of Directors has received an unsolicited, preliminary, non-binding proposal letter, dated September 27, 2024, from TTEC founder, Chairman and CEO Kenneth Tuchman, to take the Company private at a proposed purchase price of $6.85 per share.

• BAX -2%; after saying late Sunday that its North Cove facility in Marion, North Carolina, was affected by flooding following Hurricane Helene and is currently closed.
• CCL -2%; as Q3 EPS and revs topped consensus but provided a downbeat outlook for yields in Q4; Q3 revs rose 15.2% to $7.896B topping ests $7.819B, as passenger ticket revenue increased 15.2% to $5.34B; said sees Q4 net yields in constant currency up about 5%, which is below the current FactSet consensus of 5.8%.
• DG -3%; along with weakness in rival dollar store DLTR
• HRTG -12%; shares tumbled after being named in 60 minutes segment last night; Whistleblowers claim insurance companies shortchanged some Florida homeowners after Hurricane Ian https://tinyurl.com/5n84dfmz
• NFE -15%; after announces delay to previously planned dividend.
• NVDA -2%; after Bloomberg reported on Friday, citing people familiar with the matter, that Chinese regulators have been discouraging companies from purchasing Nvidia’s H20 chips.
• STLA -12%; marks the 4^th major auto to warn on annual outlook in the last 2-weeks. Stellantis shares fell after the owner of Chrysler, Jeep and Fiat warned about lower-than-expected profit, citing higher costs to overhaul U.S. business, Chinese competition on electric vehicles and worsening trends in the auto industry