>>> Up
* Adyen Raised to Outperform at Evercore ISI; PT 1,850 euros
* A.G. Barr PT Raised to 700 pence from 600 pence at Peel Hunt
* Aker Carbon Capture Raised to Neutral at SpareBank; PT 10 kroner
* Barclays PT Raised to 330 pence from 220 pence at Jefferies
* BE Semiconductor Raised to Overweight at Barclays; PT 175 euros
* ConvaTec Raised to Buy at HSBC; PT 350 pence
* Duell Raised to Buy at Evli Bank; PT 4 euro cents
* Eli Lilly PT Raised to $895 from $675 at Citi
* Embracer Raised to Buy at ABG; PT 29 kronor
* Krones Raised to Buy at Berenberg; PT 154 euros
* TechnipFMC PT Raised to $30 from $25 at Benchmark
>>> Down
* Aixtron Cut to Equal-Weight at Barclays; PT 30 euros
* Munters Downgraded to Hold at Berenberg on Inflated Valuation
* Rational Cut to Equal-Weight at Barclays; PT 834 euros
* Tethys Oil Cut to Neutral at SpareBank; PT 45 kronor
>>> Initiation
* Caledonia Mining Reinstated Buy at Liberum; PT 1,163 pence
* Crocs Rated New Overweight at Barclays; PT $167
* Deckers Outdoor Reinstated Overweight at Barclays; PT $1,110
* GE Vernova Rated New Neutral at JPMorgan; PT $141
* GE Vernova Rated New Outperform at RBC; PT $160
* Glanbia Rated New Buy at Mizuho Securities; PT 26 euros
* On Holding Rated New Overweight at Barclays; PT $38
* Skechers USA Rated New Overweight at Barclays; PT $71
>>> Call
* Barclays PT Now a Street-High at Jefferies on Returns Potential
* BofA Stock Indicator Says Sentiment Is ‘Nowhere Near Euphoria’
* Barclays Expands Footwear Coverage, Bullish on Crocs, Skechers
* Goldman Takes S&P 500 Valuations Off of Worry List: Taking Stock
* Krones Backlog Brings Stability, Berenberg Upgrades to Buy
Hong Kong stocks outperformed in an otherwise muted Asian market, while bonds in the region fell as traders recalibrated their bets on the Federal Reserve’s easing. Shares in Hong Kong jumped after a two-session holiday, tracking Monday’s gains in their mainland counterparts. Xiaomi Corp. contributed the most to the advance in the city’s benchmark following its debut electric vehicle. A rally in Chinese shares took a breather. Japanese shares erased morning gains as the yen steadied after weakening on Monday against the dollar to around the lowest levels of the year. The decline has increased the risk that Japanese officials may intervene in the market. Equity bulls in Asia appear to have hit a wall at the beginning of the second quarter after stocks recorded their best start to the year since 2019. Doubts over the quantum of rate cuts by the Fed and caution ahead of key economic data releases later this week are weighing on sentiment. US equity futures saw mild losses after the S&P 500 fell 0.2% Monday while the Nasdaq rose by the same margin. In the bond market, Australian and New Zealand yields climbed, echoing moves in Treasuries. US bonds steadied in Asian trading after falling across the curve Monday — with 10-year yields rising over 10 basis points — as manufacturing unexpectedly expanded for the first time since September 2022 and input costs climbed. Following the report, the amount of Fed easing priced into swap contracts for this year slid to around 65 basis points — less than forecast by policymakers. While the market appears “content” to point toward the manufacturing release as the trigger for the move in Treasuries, there was already a bond selloff underway prior to the headlines, said Ian Lyngen and Vail Hartman at BMO Capital Markets. The Institute for Supply Management’s manufacturing gauge rose to 50.3 last month. While barely above the level of 50 that separates expansion and contraction, it halted 16 straight months of shrinking activity. At the same time, the group’s index of prices paid rose to 55.8, the highest since July 2022. Later this week, data is expected to show employment gains continued in March while wage growth moderated. Fed Chair Jerome Powell — who is set to speak Wednesday — said Friday that officials are awaiting more evidence prices are contained, adding that it wouldn’t be appropriate to lower rates until officials are sure inflation is in check. In Australia, the central bank will switch to a new system for the implementation of monetary policy as passive quantitative tightening leads to a decline in reserves in the banking system, RBA Assistant Governor Christopher Kent said on Tuesday. Elsewhere, Indonesia’s rupiah slumped to its weakest against the dollar since 2020 amid foreign funds continuously selling local bonds on worries over the incoming administration’s pledges to boost spending. In commodities, oil held near a five-month high with heightened geopolitical risks in the Middle East and tighter supply from Mexico helping to buoy prices. Gold was steady after hitting an all-time high in the previous session. US After Hours NGS +2.5% up mildly on earnings; PVH -19.2% plummeting on quarterly results; health insurers sinking on MA rate update.
Nikkei +0.05% Hang Seng +2.20% CSI -0.54%% Shanghai -0.29% Shenzen -0.66%
Eur$ 1.0731 CNH 7.2644 CNY 7.2347 JPY 151.77 GBP 1.2548 CHF 0.9064 RUB 92.4250 TRY 32.2655 WTI$ 84.15 +0.53% Gold 2,254 +0.12% BTC 66,560 -4.60% ETH 3,359 -3.94%
S&P -0.16% Nasdaq -0.18% EuroStoxx +0.06% FTSE +0.02% Dax -0.02% SMI
Macro :
- Hedge Funds Bet on Europe in Hunt for Next Leg of Stock Rally
- ECB’s Holzmann Won’t Seek 2nd Term as Austrian Bank Governor
- BOJ’s Next Hike Likely in October at Earliest, Ex-Official Says
- Japan & EU to Develop Materials for Chips & EVs: Nikkei
- London Is Losing Out on New Job Listings for Head Office Staff
- Gold Jumps to Record as Favored Fed Inflation Gauge Stokes Rally
- Erdogan Suffers Historic Loss in Turkey Municipal Elections
Keep an eye on :
- AIR FP : Mahindra Unit Inks $100 Million Deal With Airbus to Supply Parts
- AFP SW : Constantia Offers to buy Aluflexpack for CHF15 to CHF18.75/Shr
- AML LN : Abu Dhabi’s CYVN Said to Weigh Backing Sports Car Maker McLaren
- ALATA FP : ATARI: Atari Buys Rollercoaster Tycoon 3 From Frontier
- ATO FP : Atos Says Refinancing Talks Could Result in Dilution for Holders
- BMW GY : Tata Tech, BMW Group Form Joint Venture for Automotive Software
- BA US : US Considering New Military Sales to Israel: Politico
- DE SS : Ellevio Offers SEK90/Share in Cash for Dala Energi AB
- ECV GY : LyondellBasell, Encavis Sign 208 MW Power Purchase Agreement
- EDF FP : EDF Names New Head of Nuclear Plant Projects Amid Cost Overruns
- ELAN US : Activist Ancora Is Said to Win Two Board Seats at Elanco
- ENEL IM : Value: Exclusive: Silveira says Enel 'crossed the line' and asks Aneel to consider all forms of punishment
- EQT SS : *EQT IS SAID TO NEAR $3B DEAL FOR COMPLIANCE RISK FIRM AVETTA
- RACE IM : Abu Dhabi’s CYVN Said to Weigh Backing Sports Car Maker McLaren
- FIVE LI : Russia Moving to Forcibly Redomicile Supermarket Operator X5
- GRTS US : Gritstone bio Announces Positive Preliminary Progression-free Survival and Long-term Circulating Tumor DNA (ctDNA) Data from
- HNSA SS : Hansa Biopharma Prelim 1Q Net Revenue Beats Estimates
- INCH LN : AutoNation Considers Offer for Inchcape’s UK Operations: Sky
- INTRUM SS : Cerberus Mulls Bigger Intrum Partnership as Company Tackles Debt
- IOS GY : Ionos Gets Up to €410M Contract From German Administration: DPA
- IPN FP : Ipsen, Sutro Biopharma in Global Licensing Pact for STRO-003
- IRE IM : Iren to Buy 50% of New Company Holding EGEA Operating Branches
- FWONA US : Liberty Media to Buy Commercial Rightsholder of Motogp
- LONN SW : Lonza Hires Siegfried’s Wolfgang Wienand as CEO (1)
- MSFT US : Microsoft to Separate Sale of Teams, Office Globally: Reuters
- MONC IM : Moncler Store Density May Lift Its Edge, Margin vs. Canada Goose
- NEOEN FP : Neoen taps Bank of America to sell $1.6b stake in local renewables biz
- NIO US : NIO Inc. Provides March and First Quarter 2024 Delivery Update
- PSH NA : Pershing Square Holdings March Net Performance +3.2%
- PVH US : Calvin Klein Owner PVH Tumbles 20% on Warning of Europe Weakness
- RNO FP : French New Car Sales Decline 1.5% in March, PFA Association Says
- REP SM : Repsol Nears Deal to Buy 100% of Ibereolica Chile: Expansion
- ROVI SM : Rovi Gets FDA’s Approval for Risvan as Schizophrenia Treatment
- SFZN SW : Siegfried CEO Wienand to Step Down, Suter Named Interim CEO
- GLE FP : SocGen and AllianceBernstein Start Bernstein Equities JV
- STLAM IM : Chrysler Files Recall of 223 Vehicles: NHTSA
- STLA% IM : Stellantis to Sell New Electric Jeep SUV in Korea in Second Half
- UHRN SW : Swatch CEO Says Take-Private Risks ‘Massive Debt,’ NZZ Reports
- TLGO SM : Spain’s Renfe Speeds up €166m Claim Against Talgo: Cinco Dias
- TIT IM : Bluebell Is Said to Present Candidates For Telecom Italia Board
- TRN IM : Greece Signs Egnatia Odos Concession Deal With Gek Terna-Egis
- 2303 TT : UMC Gets New Orders to Make Chips for Apple’s New iPhones: EDN
- X US : Japan’s Amari Says US Steel Deal Would Help Counter China Risks
- UBSG SW : UBS Boosts Investor Returns With $2 Billion 2024 Buyback Plan
- VWS DC : Vestas’s 1Q Order Intake Was a Modest €1.9 Billion, Sydbank Says
- VLTSA FP : Voltalia FY Normalized Ebitda Beats Estimates
Momentum vs sentiment
Market rule number one: be fearful when others are greedy. Market rule number two: don’t bet against momentum. Good rules to follow, but right now they conflict.
We’ve discussed sunny sentiment several times lately. Our go-to measure, the net bullishness among investors surveyed weekly by the American Association of Individual Investors, has been consistently positive all year:
In the past week, moreover, Citi’s Levkovich index has moved into “euphoria” territory, which has historically preceded periods of subpar returns. This is a broad measure of sentiment, pulling together indicators from across several markets. What tipped the index euphoric, notes Scott Chronert at Citi, was limited options hedging and rising margin debt:
Next, momentum. There are many sophisticated indicators of momentum, but delving too far into technical analysis is treacherous (for us, anyway). We prefer keeping it simple, by comparing an index’s recent performance to its 200-day moving average, which is supposed to capture how concentrated buying or selling has been. As of Monday, the S&P 500 was 14 per cent above its 200-day average:
This is high. The chart below visualises the strength of recent momentum against 80 years of S&P 500 performance, though using weekly rather than daily data. For the past two months, the S&P 500 has traded about 15 per cent above its 52-week moving average. That is in the top decile of historical momentum, as you can see in the chart:
Euphoric sentiment urges caution, but strong momentum suggests investors should let it ride. Which to believe?
The equity strategists we follow have seemed mostly unworried about sentiment. As Chris Verrone of Strategas noted yesterday, rising breadth helps make market euphoria look a bit less scary:
The immediate risk we see is sentiment (i.e., the bar of expectations is high), but so far fatigue in the market’s most pronounced momentum corners has been met with strength elsewhere. Last week was a good example of this . . . the Momentum Factor ETF (MTUM) has stalled, reflecting some modest relative weakening from Tech, but the % of stocks above the 200-day moving average closed at its highest level in about 3 years (85%). In equally-weighted terms, Energy, Industrials, Financials, and Materials actually all outperformed Tech in 1Q — you could probably win a bar bet with that fact.
Remember the backdrop: consistently surprising economic strength. The Citi US Economic Surprise index, which measures how much data beats analyst expectations, has been well into positive territory all year. We got a fresh reminder of this yesterday, with an above-expectations ISM survey showing US manufacturing expanding for the first time in a year and a half. And as Chronert points out, S&P 500 performance this year has been notably correlated with economic surprises (his chart):
The simultaneously strong market momentum and delirious sentiment doesn’t worry us so much — so long as underlying economic growth keeps surprising to the upside. When growth slows, we’ll pick one to follow.
Apple the formerly magnificent
Only five of the Magnificent 7 tech stocks are performing magnificently in 2024. Amazon, Alphabet, Meta, Microsoft and Nvidia are all beating the market to a greater (Nvidia) or a lesser (Alphabet) degree. But Apple has performed very badly (down 8 per cent to the market’s 11 per cent gain) and Tesla horrendously (down 30 per cent):
Tesla’s performance may be worse, but it is not as worrying as Apple’s, from the point of view of the market. Tesla’s stock has always been highly speculative and volatile, and its valuation something of a mystery. Apple, on the other hand, was until recently the largest company by market cap (now it’s Microsoft), and it is still almost 6 per cent of the S&P 500. It is a symbol of what a tech company can be: hyper-profitable, highly stable and ever-expanding. That the stock is faltering makes one wonder whether something significant has changed in the market.
There are six plausible explanations we can think of for what is going on with Apple’s stock. Several are intertwined:
- It became overvalued. Back in December, the shares hit 32 times trailing earnings, a peak only touched a few times in the past 10 years and only surpassed in the post-pandemic giddiness of 2021. The multiple is 26 times now. For a stock that is expected to increase earnings below the S&P 500’s average pace this year and next, that’s still a lot. And at such a high share price, Apple’s dividend and its share buyback programme provide less punch.
- Sales growth is set to stay soft because of both the smartphone replacement cycle and weak sales in China. A recent report from UBS estimated that iPhone sales fell 4 per cent in February from a year ago, driven by a 9 per cent decline in the US and a 16 per cent decline in China. While Wall Street revenue estimates have been stable recently, the tone has not been great.
- The market narrative changed. The big-tech-and-falling-rates story gave way in recent months to the big-tech-and-AI narrative, and AI is an area where Apple is considered to lag Google and Microsoft.
- There has been a shift in investor preferences. For a while, many pundits — including Unhedged — talked about Apple as a “defensive growth” stock, with high barriers to entry and a big services business to carry it through the economic cycle. But with the US economy continuing to outperform expectations and fear subsiding, defensiveness may be getting less of a premium.
- As the US election approaches, China risks become more acute. Economic nationalism is on the rise in both countries. This has already hurt Apple’s sales in China, and tariffs may hit margins in the US before long.
- Legal trouble. The list is long here, but the most recent and relevant challenge comes from the Department of Justice, which thinks Apple is a monopolist and will try to force the company to tear down some of its barriers to entry.
The last threat strikes us as the least important, based on the history of legal challenges against US tech giants. We’re willing to bet that once the case has been resolved, the industry will have changed enough that the points of dispute will be less relevant to Apple’s future. Nor are we too impressed with the sales growth explanation. Revenues have been flattish at Apple for a while, but the sell-off is recent. Similarly China risk — it’s just not a new story. Valuation is never much of an explanation on its own. That leaves the rise of the AI narrative and the decline in the appeal of “defensive tech”. If those two explain the bulk of the Apple drawdown, then the stock’s relative performance may only improve when the AI hype fades a bit and the economic backdrop degrades. We are keen to hear readers’ views on this.
After Hours Summary: NGS +2.5% up mildly on earnings; PVH -19.2% plummeting on quarterly results; health insurers sinking on MA rate update
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: NGS +2.5%
Companies trading higher in after hours in reaction to news: PIK +58.6% (enters into merger agreement with Nina Footwear), CGC +2.3% (FL Supreme Court allowing marijuana vote on ballot, according to Orlando Sentinel), RIG +2% (contract extension worth $195 mln), TNDM +2% (FDA clears 510(k) application for insulin pump), ANGO +1.2% (settle litigation with Becton, Dickinson and Company), SIGA +0.7% (amends agreement with Meridian Medical Technologies), RKLB +0.5% (sets launch window for next launch), LDOS +0.5% (awarded $631 mln U.S. Army contract), ACB +0.2% (FL Supreme Court allowing marijuana vote on ballot, according to Orlando Sentinel), MJ +0.2% (FL Supreme Court allowing marijuana vote on ballot, according to Orlando Sentinel), TLRY +0.2% (FL Supreme Court allowing marijuana vote on ballot, according to Orlando Sentinel), AMPX +0.2% (updates CO facility progress), TFII +0.1% (closes acquisition of DSKE), DHR +0.1% (files mixed shelf), NOK +0.1% (completes sale of platform businesses to Lumine Group)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: PVH -19.2%, ASTS -0.4%
Companies trading lower in after hours in reaction to news: GRTS -39.6% (positive data from Phase 2 study; public offering), GOEV -22.2% (identifies doubt about continuing as a going concern), CVS -5.8% (Medicare Advantage rate update), UNH -4.9% (Medicare Advantage rate update), ELV -4.6% (Medicare Advantage rate update), CNC -2.9% (Medicare Advantage rate update), MOH -2.4% (Medicare Advantage rate update), AGCO -2.3% (closing JV with Trimble), MSGS -1.7% (COO departing), CRON -1.1% (FL Supreme Court allowing marijuana vote on ballot, according to Orlando Sentinel), TKR -0.8% (CEO to retire), VNO -0.5% (files mixed shelf), SPR -0.2% (Steadfast Capital Management discloses 5.5% passive stake), LECO -0.1% (acquires RedViking), UMH -0.1% (increases dividend)
Person Tests Positive for Bird Flu in Texas After Exposure to Cattle
It is the second known human case of H5N1 infection in the U.S.
A person in Texas tested positive for avian influenza after exposure to dairy cattle presumed to be infected with the H5N1 bird flu, the Centers for Disease Control and Prevention said Monday.
The case marks the second known instance that a person in the U.S. has been infected with H5N1 bird flu. The person reported eye redness as their only symptom and is being treated with an antiviral drug. The human health risk of the bird flu remains low for the U.S. general public, the CDC said, but people with close, prolonged exposures to infected animals or their environments are at higher risk.
“At this point, there’s nothing that suggests that there is any serious risk of a larger human outbreak,” said Dr. Tom Inglesby, director of the Johns Hopkins Center for Health Security. “I’m trying to understand why the cows are getting infected. That’s a really important scientific question right now.”
The previous human case was reported in Colorado in 2022. Human infections are rare, but the agency said it has been monitoring for infections among people exposed to infected birds after reported outbreaks in U.S. poultry and wild birds began in late 2021.
Human illnesses with the virus typically have occurred through exposure to infected poultry or wild birds. The disease in humans ranges from mild infections, which include upper-respiratory and eye-related symptoms, to severe pneumonia. Since 1997, some 890 human cases have been reported across the globe, with a case-fatality rate of roughly 50%, the CDC said.
“It’s still a very uncommon illness in humans,” Inglesby said. “It is a very serious infection, but it’s possible there are cases that are occurring that we’re not detecting that are much milder.”
The U.S. Agriculture Department reported the avian influenza in dairy cows in Texas and Kansas in late March this year. Unpasteurized milk from sick cattle at two dairy farms in Kansas and one in Texas, as well as a throat swab from a cow in Texas, tested positive for the same strain of the virus that is currently widespread among birds.
A few days later, the virus was also confirmed among a Michigan dairy herd that had recently added cows from Texas. This is the first time the H5N1 influenza virus has been detected in cattle in the U.S., according to the Texas Department of State Health Services. There was little or no mortality among affected dairy herds, Agriculture Department officials said.
Bird flu has historically been a problem for the poultry industry in the U.S. The current outbreak is the deadliest on record for the U.S. agricultural industry, and has led to the death of tens of millions of chickens, turkeys and other birds since it began in early 2022. Industry officials have attributed the disease’s rapid spread to wild birds carrying it to farms during the birds’ migration.
The disease is usually fatal in chickens that contract it, the CDC has said, and is contagious enough that wild-bird droppings blown on the wind near barn vents can trigger an outbreak. To curb further spread, poultry farms often destroy entire flocks after a single case is detected.
People should avoid unprotected exposures to sick or dead animals as well as raw milk, feces or other contaminated materials, the CDC said. People also shouldn’t prepare or eat uncooked or undercooked food, including raw milk, from animals with a confirmed or suspected infection, the agency said.
There are no concerns with the safety of the commercial milk supply right now because products on store shelves are pasteurized, according to the USDA and the Food and Drug Administration. Dairies must send milk from only healthy animals to processing, and milk must be pasteurized for it to enter interstate commerce for human consumption. Milk from infected animals is being diverted or destroyed, the CDC said.
Closing Stock Market Summary
Today's session featured a mostly negative bias. It was the first trading day of the new quarter following a stellar start to the year for many stocks, which contributed to the overall negative vibe. Declining issues outpaced advancing issues by a roughly 2-to-1 margin at both the NYSE and at the Nasdaq.
The Russell 2000, which outperformed other major indices last week, dropped 1.0% today. The S&P 500 and Dow Jones Industrial Average fell 0.2% and 0.6%, respectively. The Nasdaq Composite, meanwhile, eked out a 0.1% gain thanks to gains some mega caps and relative strength in the semiconductor space. The PHLX Semiconductor Index (SOX) jumped 1.2%.
The downside pressure seen elsewhere in the stock market was in response to a sharp increase in market rates. The 10-yr note yield jumped 12 basis points to 4.33% and the 2-yr note yield rose 10 basis points to 4.72%.
Treasuries were reacting to some economic data that didn't exactly corroborate the market's thinking in terms of rate cuts by the FOMC. The February Personal Spending and Income report, released Friday when markets were closed, showed some sticky inflation figures and this morning's ISM Manufacturing data was stronger than expected.
Eight of the 11 S&P 500 sectors settled with losses, but only one sector fell more than 1.0%. The rate-sensitive real estate sector was the top laggard, dropping 1.8% in response to the activity in Treasuries. Meanwhile, gains in Meta Platforms (META 491.35, +5.77, +1.2%) and Alphabet (GOOG 156.50, +4.24, +2.8%) helped propel the communication services sector to a 1.5% gain.
The energy sector was another top performer today, gaining 0.8%. It benefitted from positive action in Chevron (CVX 159.08, +1.34, +0.9%) and Exxon Mobil (XOM 116.99, +0.75, +0.7%), along with commodity prices. WTI crude oil futures settled 0.8% higher at $83.94/bbl and natural gas futures jumped 5.1% to $1.85/mmbtu.
- S&P 500:+9.9% YTD
- Nasdaq Composite: +9.2% YTD
- S&P Midcap 400: +8.8% YTD
- Dow Jones Industrial Average: +5.6% YTD
- Russell 2000: +3.7% YTD
Reviewing today's economic data:
- The S&P Global US Manufacturing Index dropped to 51.9 in the final March reading from 52.2.
- The March ISM Manufacturing Index checked in at 50.3% (consensus 48.5%), up from 47.8% in February. That is the first reading above 50.0% since September 2022, which equates to a manufacturing sector operating in an expansion mode.
- The key takeaway from the report is that it contained all the reasons why the Fed believes it can be patient before cutting rates: business activity is expanding, prices are sticking at higher levels, and employment conditions remain reasonably good.
- Total construction spending decreased 0.3% month-over-month in February (consensus 0.6%) following an unrevised 0.2% decline in January. Total private construction was flat month-over-month while total public construction was down 1.2% month-over-month. On a year-over-year basis, total construction spending was up 10.7%.
- The key takeaway from the report is that new single-family construction remains an important prop for overall construction spending, but the pickup there in February wasn't enough to offset a decent-sized decline in nonresidential spending in both the private and public sectors.
Looking ahead, Tuesday's economic calendar features February Factory Orders and the February JOLTS - Job Openings at 10:00 ET.