2023 Dec 12, US Market
Wall Street saw only minor movements in the run-up to the Federal Reserve decision, with disappointing inflation data reinforcing speculation that policymakers will be slow to declare victory.
While markets remain confident that officials will remain on hold on Wednesday, the latest data calls into question the aggressive pricing of a dovish pivot. Traders have slightly reduced their bets on rate cuts in 2024, with the first still expected in May. The data also fueled speculation that Fed Chairman Jerome Powell will try to deflate the Fed's easing buoyancy.
Following the last Fed decision, Powell reminded investors that inflation will "come in lumps and be bumpy." The fact that Tuesday's consumer price index was roughly in line with expectations - and ticked up slightly - highlighted the choppy nature of returning prices to the 2% target, particularly in the service sector, which the Fed has targeted as the final mile in its inflation fight.
After spiking in the aftermath of the CPI report, two-year yields have stabilised above 4.7%. Long-term Treasuries rose slightly after a $21 billion sale of 30-year bonds drew strong demand. The S&P 500 rose marginally to its highest level since January 2022. The VIX, Wall Street's "fear gauge," fell to a four-year low.
Oracle (ORCL) reported mixed Q2 results, with Cloud revenue up 24% year-over-year in constant currency
Icosavax (ICVX) agreed to be acquired by AstraZeneca (AZN) for $15 per share in cash at closing plus a non-tradable contingent value right
Hasbro (HAS) confirmed that it plans to eliminate an additional 900 positions starting in Q4
Wyndham (WH) has confirmed receipt of a "highly conditional" offer from Choice Hotels (CHH)
Rumble (RUM) CEO Chris Pavlovski confirmed the company has experienced a cyberattack
Volkswagen (VWAGY) is building a team of 3,000 Chinese engineers in Hefei, China, NY Times reports
Jury finds Google (GOOGL) has illegal monopoly in Epic app store dispute, The Verge reports
KKR (KKR) is in advanced talks over a $3.8B deal for the U.K.'s Iris Software, Bloomberg reports
Apple (AAPL) is announcing security changes to protect user accounts from theft, WSJ reports
Walgreens (WBA) is in early talks to separate its Boots chain, Bloomberg says
Nokia (NOK) rises in New York after revising its 2026 operating margin target and announcing it began to deploy multi-vendor Open RAN network in Germany with Deutsche Telekom (DTEGY)
Seagen (SGEN) gains after Pfizer (PFE) announced its acquisition of the company has received all regulatory approvals
Cassava Sciences (SAVA) higher after announcing a dividend distribution of warrants to shareholders
Lucid Group (LCID) falls after announcing CFO Sherry House will depart the company
GoPro (GPRO) down after Morgan Stanley downgraded the shares to Underweight
Johnson Controls (JCI) reported Q4 results and provided guidance for Q1 and FY24
Centene (CNC) backed its FY23 outlook and provided guidance for FY24
Agrify (AGFY) reported Q2 results, with EPS higher year-over-year
Essa Pharma (EPIX) reported Q4 EPS that beat consensus, with CEO David Parkinson commenting, "We are pleased with the progress made in 2023 with masofaniten"
Ligand (LGND) provided upbeat FY24 earnings guidance
JMP Securities upgraded Zillow Group (ZG) to Outperform from Market Perform with a $60 price target. The firm believes consensus estimates for Zillow are too low for 2025 and 2026 given building pent-up demand and increasing expectations that rates will begin to come down in the second half of 2024.
Argus upgraded Humana (HUM) to Buy from Hold with a $550 price target. Argus views reports that Cigna (CI) and Humana have called off merger talks as positive for Humana, which has solid growth opportunities in Medicare Advantage, Medicaid and healthcare services.
RBC Capital upgraded Amgen (AMGN) to Outperform from Sector Perform with a price target of $300, up from $256. The 2024 catalyst set-up coupled with emerging clarity on out-year growth drivers is deserving of new credit as a diversifying commercial portfolio, new growth opportunities in the market, and pipeline optionality are better harmonized for sustainable share appreciation, the firm tells investors in a research note.
Piper Sandler upgraded HubSpot (HUBS) to Overweight from Neutral with a price target of $610, up from $515. The firm is also raising estimates by $60M for 2024, assuming 19.4% growth based on the combination of improving data from its 2024 CIO survey coupled with a recovery in website traffic.
Macquarie upgraded Zscaler (ZS) to Outperform from Neutral with a price target of $231, up from $166. The firm's bullish thesis is supported by Zscaler's Risk360 solution and its positioning "at the nexus of cyber threat and SEC reporting requirements trends."
Barclays downgraded Airbnb (ABNB) to Underweight from Equal Weight with a price target of $100, down from $135. The firm thinks online travel growth slows from here as eventually the "pent-up" travel demand will get exhausted - particularly as consumers' wallets are increasingly under pressure. Barclays also downgraded Expedia (EXPE) to Equal Weight from Overweight.
Citi downgraded Macy's (M) to Sell from Neutral with a $14 price target. The stock was up 20% on a Wall Street Journal report of a $21 per share bid made for the company, seemingly with a real estate angle, the firm notes, adding that "others have gone down this path before" and that is unsure how advanced the talks are.
BofA downgraded Illumina (ILMN) to Underperform from Neutral with a price target of $100, down from $140. While Illumina maintains its role as the dominant market leader in DNA sequencing, with management's outlook of "roughly similar" sales in 2024 vs. 2023, Illumina will now have gone through four years of essentially no revenue growth in its core business, despite the launch of the NovaSeqX platform, the firm tells investors in a research note.
Wells Fargo downgraded Public Storage (PSA) to Equal Weight from Overweight with a price target of $280, up from $270. The firm notes that Public Storage has challenging comps into 2024, with Street rate declines ahead of peers and large rent roll-downs.
Seaport Research downgraded AMC Networks (AMCX) to Neutral from Buy without a price target. The firm cites valuation for the downgrade with shares having achieved the firm's previous $18 price target.
William Blair initiated coverage of Boeing (BA), Heico (HEI) and TransDigm (TDG) with Outperform ratings. Depressed aircraft production for the past three years, combined with "revenge travel," will result in an aftermarket "supercycle" for the next decade, the firm says.
Cantor Fitzgerald initiated coverage of FuboTV (FUBO) with an Overweight rating and $5 price target. FuboTV is one of the best pure-play ways to play cord-cutting and the associated shift of advertising dollars away from linear TV and to connected-TV, the firm says, adding that the market is overlooking FuboTV's growing importance to TV network owners as traditional Pay-TV continues to lose subscribers as well as its ability to pass through additional price increases to its subscriber base.
Morgan Stanley resumed coverage of Tapestry (TPR) with an Equal Weight rating and $38 price target. Despite a low valuation, the shares could be range-bound pending the Capri Holdings (CPRI) deal closure and integration, the firm says.
BofA initiated coverage of Crocs (CROX) with a Buy rating and $128 price target. The Crocs business has strong momentum but has been obscured by the lackluster performance and market challenges facing the HeyDude brand, the firm tells investors in a research note.
TD Cowen initiated coverage of Addus HomeCare (ADUS) with an Outperform rating and $105 price target. The firm notes management has a successful track record of growing revenues and EBITDA while generating increasing positive free cash flow.
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