>>> Closing Stock Market Summary

Closing Stock Market Summary
Today's index-level price action was fairly limited. The S&P 500 (+0.2%) and Nasdaq Composite (+0.4%) spent most of the session trading near yesterday's closing levels while the Russell 2000 continued its recent outperformance, climbing 1.3%.
Meanwhile, the price-weighted Dow Jones Industrial Average declined 0.3% due in part to a loss in its heaviest component, UnitedHealth (UNH 513.42, -11.90, -2.3%), on news that the Department of Justice has launched an antitrust investigation into the company, according to The Wall Street Journal.
The overall vibe in the market was positive, but there wasn't a lot of conviction on the part of buyers. Importantly, though, there wasn't a lot of conviction on the part of sellers either, which acted as a positive catalyst for the market.
A turnaround in shares of Apple (AAPL 182.63, +1.47, +0.8%) also supported market today, propelling the S&P 500 and Nasdaq Composite to session highs in the afternoon trade. Apple had been down as much as 0.9%, but settled 0.8% higher after news that it's cancelling efforts to build an electric car and will focus on generative artificial intelligence, according to Bloomberg.
The indices were already heading slightly higher in front of the Apple news, though, in response to today's solid $42 billion 7-yr note offering. This followed yesterday's weak sales of 2- and 5-yr notes. The Treasury market didn't react much to today's auction results. The 2-yr note yield declined two basis points today to 4.71% and the 10-yr note yield rose two basis points to 4.32%.
Many stocks participated in the afternoon climb, leaving seven of the 11 S&P 500 sectors higher. The utilities sector saw the biggest gain, 1.9%, thanks to a big earnings-related rise in shares of Constellation Energy (CEG 155.76, +22.54, +16.9%).
Constellation Energy was one of the top performing stocks in the S&P 500 today, trailing only Norwegian Cruise Line (NCLH 19.09, +3.16, +19.8%), which also traded higher following pleasing earnings news.
Macy's (M 19.92, +0.65, +3.4%) and Lowe's (LOW 235.39, +4.07, +1.9%) were also notable names that reported earnings since yesterday's close, receiving positive reactions from investors.
  • Nasdaq Composite: +6.8% YTD
  • S&P 500: +6.5% YTD
  • Dow Jones Industrial Average: +3.4% YTD
  • S&P Midcap 400: +3.1% YTD
  • Russell 2000: +1.4% YTD
Reviewing today's economic data:
  • January Durable Orders -6.1% (consensus -4.4%); Prior was revised to -0.3% from 0.0%; January Durable Goods - ex transportation -0.3% (consensus 0.3%); Prior was revised to -0.1% from 0.6%
    • The key takeaway from the report is that it sends a poor signal about the state of business spending, as nondefense capital goods orders were down 19.4%.
  • January FHFA Housing Price Index 0.1%; Prior was revised to 0.4% from 0.3%
  • December S&P Case-Shiller Home Price Index 6.1% (consensus 6.0%); Prior 5.4%
  • February Consumer Confidence 106.7 (consensus 114.6); Prior was revised to 110.9 from 114.8
    • The key takeaway from the report is that consumers have become a bit more pessimistic about the short-term outlook for business and the labor market, but their view of short-term income prospects improved slightly.
Looking ahead, Wednesday's economic calendar features:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -10.6%)
  • 8:30 ET: Q4 GDP -- second estimate (consensus 3.2%; prior 3.3%), Q4 GDP Deflator -- second estimate (consensus 1.5%; prior 1.5%), advance January goods trade balance (prior -$88.5 bln), advance January Retail Inventories (prior 0.8%), and advance January Wholesale Inventories (prior 0.4%)
  • 10:30 ET: Weekly crude oil inventories (prior +3.51 mln)

>>> Cytokinetics misses by $0.42, misses on revs; guides FY24 revs below consens

Cytokinetics misses by $0.42, misses on revs; guides FY24 revs below consensus (80.99 +1.99)
  • Reports Q4 (Dec) loss of $1.38 per share, $0.42 worse than the FactSet Consensus of ($0.96); revenues fell 10.5% year/year to $1.7 mln vs the $7.62 mln FactSet Consensus.
  • Co issues downside guidance for FY24, sees FY24 revs of $3-$5 mln vs. $25.90 mln FactSet Consensus. Operating expenses will be in the range of $420 to 450 million, and net cash utilization will be approximately $390 to $420 million.

WSJ : U.S. Launches Antitrust Investigation of Healthcare Giant UnitedHealth

U.S. Launches Antitrust Investigation of Healthcare Giant UnitedHealth
Investigators have been interviewing healthcare industry officials who compete with UnitedHealth

The Justice Department has launched an antitrust investigation into UnitedHealth Group, owner of the nation’s biggest health insurer, a leading manager of drug benefits and a sprawling network of doctor groups.

The investigators have in recent weeks been interviewing healthcare industry representatives in sectors where UnitedHealth competes, including doctor groups, according to people with knowledge of the meetings.

During their interviews, investigators have asked about issues including certain relationships between the company’s UnitedHealthcare insurance unit and its Optum health-services-arm, which owns physician groups, among other assets.

Investigators have asked about possible impacts of the company’s doctor-group acquisitions on rivals and consumers, the people said.

Spokespeople for UnitedHealth Group and the Justice Department declined to comment. UnitedHealth executives have said that Optum and UnitedHealthcare don’t favor one another, and routinely work with competitors.

The probe comes as the Biden administration’s antitrust enforcers have stepped up investigations of some of the country’s biggest companies, such as Apple, Alphabet’s Google unit, Amazon and Live Nation. The DOJ’s top antitrust official, Jonathan Kanter, has pushed to revive enforcement of laws that restrain monopolies in the U.S. The department has had mixed results on merger enforcement, but its challenges to monopolies are ongoing.

The administration has signaled the healthcare industry is a priority in its antitrust efforts.

The UnitedHealth investigation is taking aim at a healthcare giant that has been a previous antitrust target, though the company was able to beat back a Justice Department challenge to an acquisition two years ago.

UnitedHealth, based in Minnetonka, Minn., had $372 billion in revenue last year. Its insurance unit covers about 53 million people, across a range of plans including employer, Medicaid and Medicare coverage.

After years of acquisitions, Optum includes about 90,000 physicians, as well as surgery centers, an array of health data and technology units, and one of the largest pharmacy-benefit managers.

FT : Viking Therapeutics shares more than double on ‘statistically significant’

Viking Therapeutics shares more than double on ‘statistically significant’ weight-loss trial results
US biotech group’s data suggests dominance of Novo Nordisk and Eli Lilly in the anti-obesity segment could be challenged in a few years

US biotech Viking Therapeutics’ shares more than doubled after trial data for the company’s weight loss drug outperformed existing treatments from drugmakers Novo Nordisk and Eli Lilly.

Viking said its weight-loss drug had led to “statistically significant reductions in body weight”, with 13 per cent weight loss relative to a placebo, in a 13-week, mid-stage trial.

San Diego-based Viking’s shares jumped above $77 per share in Tuesday morning trading. The results weighed on shares in Copenhagen-listed Novo Nordisk, which dipped as much as 5 per cent after the results before recovering to trade down 1.7 per cent. Eli Lilly’s share price fell as much as 2.4 per cent in early US trading before later recovering its losses.

Viking said as many as 88 per cent of patients who received the drug achieved at least 10 per cent weight loss, compared with just 4 per cent for the placebo group. Weight loss also did not plateau at the end of the trial “suggesting further weight loss might be achieved by extended dosing period”, Viking added.

Eli Lilly’s tirzepatide drug had less than 10 per cent absolute weight reduction at all doses after its late-stage trial, noted Thomas Smith, an analyst at Leerink Partners.

While trial results are not directly comparable, Smith said the results were ahead of investors’ expectations and a “clear win for Viking Therapeutics”, with the data appearing “to compare favourably” with Lilly’s drug.

High demand for weight-loss drugs have helped Novo Nordisk become Europe’s largest company by market capitalisation, while Eli Lilly overtook Johnson & Johnson as the world’s largest pharmaceutical company last year.

While competitors to Novo Nordisk and Eli Lilly are far from bringing their drugs to market, Viking’s results show that the dominance of the two drugmakers in the sector could be challenged in the years ahead.

Brian Lian, Viking’s chief executive, said the company would meet regulators at the US Food and Drug Administration to assess next steps by the middle of the year. Lian said it “seems more than likely” that Viking will launch a further trial specifically to study the drug’s efficacy.

Approval for Viking’s weight loss drug is at least three years away, as the FDA will require at least two more trials, noted Evan Seigerman, an analyst at BMO Capital Markets.

On Monday, German company Boehringer Ingelheim announced results showing that its weight-loss treatment delivered strong results for patients suffering from a liver disease, in a sign of how therapies can also be used to treat conditions associated with obesity.

Carinne Brouillon, Boehringer Ingelheim’s head of human pharma, said she expected to bring the drug to market in 2027 or 2028, making it the third drugmaker to commercialise the new kind of weight-loss drug.

Like Novo Nordisk’s Wegovy and Ozempic, Viking’s VK2735 mimics the GLP-1 hormone that can suppress appetite. VK2735 also mimics another hormone, the glucose-dependent insulinotropic peptide receptor, like Eli Lilly’s tirzepatide, which is thought to enhance the effect of the GLP-1 benefits.

Other drugmakers are also hoping to enter the lucrative weight-loss drug market, which is expected by Goldman Sachs analysts to exceed $100bn in value by the end of the decade.

AstraZeneca has signed a licensing agreement with Chinese company Eccogene, which is developing a weight-loss pill, while Swiss pharma group Roche bought obesity drug developer Carmot Therapeutics for $2.7bn in December.

FT : ‘Sell Apple’

‘Sell Apple’
To justify its current valuation, everyone everywhere needs to spend $800 a year on Apple products, says UBS

Let’s be clear from the off. UBS isn’t predicting that Apple will fall nearly 30 per cent and destroy $800bn of shareholder value. It’s just putting forward some reasons why it might.

The note’s from Andrew Garthwaite, UBS head of global equity strategy, whose team has (belatedly) published its 10 potential surprises for 2024. None represents the bank’s core views. For Apple, the analysts call for the stock to ascend gently to a $190-per-share price target to justify their “neutral” recommendation.

The more bearish $130-per-share valuation on Apple is a hypothetical exercise. Here’s how they got there:

1. The valuation looks a bit nutty:

80% of revenue is [Apple’s] hardware yet the stock trades on a software multiple; UBS, even in 2027, forecasts just 4.3% FCF yield. The P/E relative of the stock on UBS 2026E EPS (against the market) goes to a record high of 152% on the UBS forecast of earnings.


2. Earnings forecast upgrades are meek, at least relative to its peer group. Among the Mag7, only Tesla (whose shares are down 20 per cent so far this year) has weaker EPS momentum than Apple:


3. How many iGadgets can the world afford?

With just 1.2bn people having an income above $12K a year, Apple is valued on an EV per pop of c$2,300, which requires c$800pp of annual spend, on the global equity strategy team’s calculations.

4. And how many does it really need?

The smartphone cycle is mature (at 70% penetration rate globally, US 82%, and even India now at a penetration rate of 62%).

5. Apple already sells TV and music streaming, cloud storage, gaming, payments, advertising, etc. What worlds are left to conquer?

The profit margin of the service sector (which accounts for 20% of revenue) has, in the opinion of our analyst, peaked at 70% as Apple needs to find incremental services with large TAMs, with much of the core service growth (such as cloud, warranty) tied to the installed base and is thus only growing by mid-single digits.

6. Where’s Apple’s ChatGPT? Where’s its . . . uh, Motorola StarTAC?

Apple has no product in foldables (1% of market, used to be 20%), and there appears to be no obvious AI strategy.

7. Where’s its Galaxy S24 Ultra?

The upgrade to Gen AI smartphones may not only disappoint, but Samsung Electronic seems to have stolen a lead with its smartphone. (Indeed, SEC GS24’s Gen AI applications took centre stage at the Unpacked launch in January with a multiyear partnership with Google).

8. Antitrust. Google reportedly pays Apple between $18bn to $20bn annually to be the iPhone’s default search engine. If that deal is picked apart by the US Department of Justice, it could knock about 8 per cent off Apple’s EPS, UBS says.

9. Politics:

There is a clear China risk (with China accounting for 20% of its revenue and its market share of 20% vulnerable to both geopolitical tensions and local competition) and 90% of its sourcing comes from China. Any sharp risk to China (be it political or economic) is thus bad for Apple.

10. The AI bubble. UBS’s research directs readers to a separate section on technological change where it argues that most preconditions of an early-cycle bubble are already present.

Productivity-hype bubbles are usually separated by at least 25 years and usually form at the end of a secular bull market, when aggregate profits are coming under pressure, say Garthwaite et al. Market breadth suffers as weakening earnings mean investors crowd into a few perceived winners, pushing their valuations to extreme levels.

A bubble, at least by the UBS definition, also needs central bank money printing and heavy retail involvement in equities. Neither of those are present yet. The former is a near-term likelihood in China, however, and not implausible in the US as the Federal Reserve winds down quantitative tightening. And while institutions have been the dominant buyers of equities over the past year, there’s $6tn of dry powder sitting in money market funds that could be dislodged by lower interest rates:

The S&P 500’s last 20-per-cent drawdown was less than two years ago, which goes against the historical trend that bubbles are bull markets gone stale. The exception is the Nifty 50 bubble of the early 1970s, which compressed a crash, a peak and another crash into roughly three years. Something similar might be happening now, UBS argues.

As we’ve noted previously, sellside analysts at big investment banks don’t often advise selling their clients’ most popular stocks . . . 
. . . so having dissenting voices pop up elsewhere in the building is a very welcome trend.

FT : Germany rebuffs Macron on troops in Ukraine and tells Paris to ‘supply more

Germany rebuffs Macron on troops in Ukraine and tells Paris to ‘supply more weapons’
Berlin and central European countries reject French president’s comments on deploying forces

Germany’s deputy chancellor said there was “no chance” of sending ground troops to Ukraine and, in a rebuff to France, told Paris it should instead supply Kyiv with more weapons.

Robert Habeck rejected French President Emmanuel Macron’s suggestion that a troop deployment to Ukraine should not be ruled out, as Nato leaders also rounded on the idea.

“I’m pleased that France is thinking about how to increase its support for Ukraine, but if I could give it a word of advice — supply more weapons,” Habeck said on Tuesday.

The Franco-German spat came as western powers hunt for ways to increase support for Kyiv, which is running short of ammunition, while avoiding a wider escalation in the war with Russia.

Moscow warned on Tuesday that deploying troops would make a full-scale war against Nato inevitable.

Asked whether German troops could be sent to Ukraine, Habeck said “there is no chance of that” and called on France to “do what you can now and give Ukraine the munitions and the tanks that can be supplied now”.

Macron made his suggestion at a meeting of European leaders in Paris on Monday where he said the option of sending western troops to Ukraine had been discussed.

While acknowledging that the summit had not reached consensus “for sending in ground troops, in an official and declared way”, the French president added: “Nothing should be excluded. We will do whatever it takes to ensure that Russia cannot win this war.”

But German Chancellor Olaf Scholz said western powers had agreed “that there would be no ground troops on Ukrainian soil, no soldiers sent there from European states or Nato states”, comments that were echoed by his counterparts in Poland, Italy and the Czech Republic.

Germany is by far Europe’s biggest provider of military support to Ukraine and has long been critical of France’s more modest contribution, despite the two countries’ similar-sized defence budgets.

France said it did not keep large stockpiles of old weapons that it could offload to Ukraine and has instead supplied more sophisticated arms, notably its Scalp cruise missile.

A Nato official said there were no plans for the alliance to put combat troops on the ground: “Ukraine has the right to self-defence, and we have the right to support them.”

But a senior European defence official said Macron’s statement was about creating deterrence and ambiguity towards Russia, adding: “Everyone knows there are western special forces in Ukraine — they’ve just not acknowledged it officially.”

French officials maintained that Macron was not suggesting western troops should be sent en masse to the front lines, but that it was no longer a taboo to rule out involvement.

They also said western troops could potentially be involved through limited missions such as demining, maintaining and repairing weapons systems, or helping to secure the borders of other countries threatened by Russia, such as Moldova.

A voice of support for Macron came from Lithuania, where an adviser to the country’s president said the government was “openly” discussing whether to send troops to help train soldiers in Ukraine.

Lithuanian foreign minister Gabrielius Landsbergis added: “Times like these require political leadership, ambition and courage to think out of the box. The initiative behind the Paris meeting yesterday is well worth considering.”

But Dmitry Peskov, Russian President Vladimir Putin’s spokesman, told reporters that if Nato sent troops to fight in Ukraine, war with the alliance “wouldn’t be likely, but inevitable”.

Worries about the risks of escalation with Russia are at the heart of a domestic dispute in Germany over whether to send long-range precision Taurus missiles to Ukraine.

Ukraine has said it urgently needs long-range weapons to try to degrade Russia’s military logistics and buy urgently needed time.

But Scholz said on Monday that his country might find itself “a participant in the war” if it sent the Taurus missiles. He added: “German soldiers must at no point and in no place be linked to targets this system reaches” — either in Ukraine or Germany itself.

In a thinly veiled barb at Berlin on Monday night, Macron said some allies kept saying “never” to tanks, fighter jets and long-range missiles for Ukraine and had merely offered to send “sleeping bags and helmets” at the onset of the full-blown war two years ago.

“Today, [we all realise that] we have to do more, faster and harder, to send missiles and tanks,” the French president said.