2023 Dec 6, US Market
The global bond rally gathered pace, with dismal economic data in both the US and Europe stoking anticipation that major central banks may lower rates in the next year.
Just two days before the US jobs report, data showed the gradual cooling in the labor market that the Fed would like to see. Private payrolls increased 103,000 last month, trailing estimates and lending credence to Wall Street's dovish stance. Germany's factory orders unexpectedly fell, highlighting how manufacturing in Europe's largest economy remains stuck in a rut.
US 10-year yields fell further to 4.12%, while two-year bond rates edged slightly higher - a healthy sign, according to some traders, after a massive repricing of Fed bets by the front end of the US curve. Oil fell below $70 a barrel as concerns about excess supplies overshadowed a report showing shrinking US inventories.
Fed policymakers meet next week for the final time in 2023. While no change in the federal funds rate target is expected, they are scheduled to release quarterly forecasts that could alter market- implied expectations, which have been leaning towards more easing next year in response to weaker-than-expected economic data.
Earlier on Wednesday, markets fully priced six quarter-point rate cuts by the European Central Bank in 2024, bringing the key rate down to 2.5%. Although bets were pared slightly later in the day, Deutsche Bank AG helped stoke the dovish sentiment by revising its outlook to also forecast 150 basis points of cuts.
McDonald's (MCD) provided its 2024 and long-term outlook and targets at its investor day meeting
ExxonMobil (XOM) also gave an update to its corporate plan through 2027, reporting that it is increasing its pace of share repurchases to $20B per year through 2025
MasterCard (MA) authorized up to $11B in stock repurchases and raised its quarterly dividend 16%
Campbell Soup (CPB) reported higher-than-expected Q1 adjusted earnings and backed its FY24 adjusted EPS view
Apple (AAPL) readies new iPads, M3 MacBook Air for early next year, Bloomberg says
Nio (NIO) is planning to spin off its battery manufacturing unit, Reuters says
Nvidia (NVDA) is still planning to sell its high-end chips to China, WSJ says
Amazon (AMZN) is planning to cut seller fees on clothing items in a bid to compete with Shein, Bloomberg says
Ares Management (ARES), Sportsology in talks to buy stake in MLB's Rangers, Bloomberg says
Allete (ALE) is working with JPMorgan (JPM) to explore a possible sale, Reuters says
Blackstone Mortgage (BXMT) slides after Carson Block's Muddy Waters announces short position
SentinelOne (S) increases after reporting quarterly results and raising its FY24 guidance
Dave & Buster's (PLAY) gains after reporting quarterly results
Yext (YEXT) declines after reporting quarterly results
Fluence (FLNC) falls after announcing an 18M share offering
Asana (ASAN) reported Q4 results, provided guidance for Q4, and raised its FY24 outlook
United Natural Foods (UNFI) reported Q1 results and backed its FY24 guidance, with CEO Sandy Douglas commenting that performance "exceeded our expectations"
Stitch Fix (SFIX) announced Q1 results and provided guidance for Q2 and FY24, with CEO Matt Baer commenting, "This quarter's results are encouraging, and I'm pleased with the progress we have made to date"
Rent The Runway (RENT) reported Q3 results, with EPS and revenue missing consensus
AeroVironment (AVAV) reported Q2 results and raised its guidance for FY24, with CEO Wahid Nawabi commenting that "results exceeded expectations, underscored by the highest second quarter revenue in company history combined with strong bottom-line performance"
Raymond James upgraded AutoZone (AZO) to Strong Buy from Outperform with a price target of $3,100, up from $2,850. The firm expects the company's fiscal 2024 results to support the firm's favorable long-term thesis of market share gains driven by improved parts coverage and availability following more mega hub openings.
Raymond James upgraded Shake Shack (SHAK) to Strong Buy from Outperform with an unchanged price target of $78. The firm sees "idiosyncratic opportunities" for Shake Shack into 2024 to increase margins and potentially stimulate traffic, which could create upside to consensus 2024 expectations.
BofA upgraded Discover (DFS) and Capital One (COF) to Buy from Neutral with price targets of $116 and $129, up from $94 and $112, respectively. The firm thinks peak delinquencies could come into view in the next 3-6 months and so believes it is "time to get incrementally more bullish on the credit card stocks."
Citi upgraded Signet Jewelers (SIG) to Buy from Neutral with a price target of $119, up from $93. The company's Q3 was "fairly uneventful on the surface" but there were several things that make Citi more positive on the stock, the firm says.
Wolfe Research upgraded Realty Income (O) to Outperform from Peer Perform with a $66 price target. The stock represents a "value opportunity" as shares have fallen 13% this year due to "transient events", the firm tells investors in a research note.
Wedbush downgraded Shopify (SHOP) to Neutral from Outperform with a price target of $68, up from $66, citing valuation. While the firm continues to hold a favorable view of Shopify's overall strategy and competitive positioning within e-commerce, it notes the shares have risen 53% since the company reported Q3 results on November 2.
BofA downgraded PayPal (PYPL) to Neutral from Buy with a price target of $66, down from $77. Following a modest Q3 beat and new CEO Alex Chriss' fresh messaging around profitable growth and increased urgency around execution, shares have traded up from their lows, but the firm sees 2024 as a transition year.
BofA downgraded Toast (TOST) to Neutral from Buy with a price target of $16, down from $22. While the shares have lagged significantly since the Q3 print, the firm still sees risks that could inhibit re-rating higher in the near-term.
HSBC downgraded Asana (ASAN) to Reduce from Hold with an unchanged price target of $18. While margin expansion drove a narrower Q3 loss, the company's macroeconomic challenges continue, the firm says.
Morgan Stanley downgraded Plug Power (PLUG) to Underweight from Equal Weight with a price target of $3, down from $3.50. Rising interest rates and renewable electricity prices leave green hydrogen economics increasingly reliant on subsidies, where visibility remains poor, the firm says.
Redburn Atlantic initiated coverage of Shift4 Payments (FOUR) with a Sell rating and $49 price target. The firm anticipates Shift4's earnings may fall short of consensus' expectations. Redburn says the company is buying some of its fast growth.
Morgan Stanley resumed coverage of J.M. Smucker (SJM) with an Equal Weight rating and $122 price target. The firm has "several concerns" following the recent Hostess acquisition including integration risk, soft retail sales, GLP-1 risk, and higher leverage.
BMO Capital reinstated coverage of Blackstone (BX) with a Market Perform rating and $95 price target. The firm is positive on the company's track record for investment return, strategy breadth across asset classes, and distribution channel diversification, but also sees its valuation fully reflecting expectations for mid-teens fee-related earnings growth while offering a balanced risk-reward on the stock.
BMO Capital reinstated coverage of Apollo Global (APO) with an Outperform rating and $108 price target. With its AUM overweight to credit strategies, distribution channel diversification, and operating leverage, Apollo offers "peer-leading earnings growth prospects," the firm says.
KeyBanc initiated coverage of Equinix (EQIX) with a Sector Weight rating, with positive factors balanced by premium valuation. The firm believes Equinix warrants a premium valuation though it sees better relative value in Towers.