{"id":23331,"date":"2024-05-17T15:10:51","date_gmt":"2024-05-17T20:10:51","guid":{"rendered":"https:\/\/www.eoption.com\/market-review-may-17-2024\/"},"modified":"2024-05-17T15:10:51","modified_gmt":"2024-05-17T20:10:51","slug":"market-review-may-17-2024","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-17-2024\/","title":{"rendered":"Market Review: May 17, 2024"},"content":{"rendered":"\n
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Closing Recap<\/span><\/b><\/p>\n

Friday, May 17, 2024<\/span><\/b><\/p>\n\n\n\n\n\n\n\n
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Index<\/span><\/p>\n<\/td>\n

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Up\/Down<\/span><\/p>\n<\/td>\n

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%<\/span><\/p>\n<\/td>\n

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Last<\/span><\/p>\n<\/td>\n<\/tr>\n

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DJ Industrials<\/span><\/b><\/p>\n<\/td>\n

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134.21<\/span><\/p>\n<\/td>\n

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0.34%<\/span><\/p>\n<\/td>\n

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40,003<\/span><\/p>\n<\/td>\n<\/tr>\n

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S&P 500<\/span><\/b><\/p>\n<\/td>\n

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6.17<\/span><\/p>\n<\/td>\n

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0.12%<\/span><\/p>\n<\/td>\n

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5,303<\/span><\/p>\n<\/td>\n<\/tr>\n

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Nasdaq<\/span><\/b><\/p>\n<\/td>\n

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-12.36<\/span><\/p>\n<\/td>\n

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0.07%<\/span><\/p>\n<\/td>\n

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16,685<\/span><\/p>\n<\/td>\n<\/tr>\n

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Russell 2000<\/span><\/b><\/p>\n<\/td>\n

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-0.74<\/span><\/p>\n<\/td>\n

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0.04%<\/span><\/p>\n<\/td>\n

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2,095<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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After a strong start to the week, with stocks pushing to new all-time high Wednesday following tamer inflation readings and softer growth data, raising prospects for a more accommodative Fed on rates, stocks cooled the last two days, holding near those record bests. Today was a very slow, lackluster trading day considering an options expiration day, with no big sector movers outside of Energy (XLE) to the upside as commodity prices jumped. Commodities with continued big gains for likes of oil, gold, copper, and silver on low rate cut environment expectations. Are investors\/stocks celebrating inflation too soon? Seeing lots of interest rate sensitive sectors moving higher this month\/YTD with Utilities, Financials among the biggest winners (though 10 of 11 sectors higher YTD). The quarterly earnings season is mostly in the rear-view window, but there are still some notable reports in the coming weeks with NVDA, TGT, LOW, PANW and several retailers among expected. This week, AAII reported Bullish sentiment, or expectations that stock prices will rise over the next six months, was flat at 40.9%. Bullish sentiment is above its historical average of 37.5% for the 27th time in 28 weeks. AAII reported that bearish sentiment, or expectations that stock prices will fall over the next six months, edged down 0.6 percentage points to 23.3%. CBOE Volatility Index (VIX) continues to crumble at new 2024 lows below 12. Lots of sideways trading throughout Friday with the S&P holding around 5,300 and the Dow pushing back above 40,000 with a late push. For the week, the S&P 500 gained 1.54%, the Nasdaq climbed 2.11%, and the Dow climbed 1.24%. <\/p>\n

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Economic Data<\/p>\n

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  • The Conference Board said its U.S. Leading Economic Index fell in April, driven by a deterioration in consumers’ outlook on business conditions, weaker new orders, a negative yield spread, and a drop in new building permits, pointing to weaker economic growth ahead. The business research group’s index declined 0.6% in April to 101.8. <\/li>\n<\/ul>\n<\/div>\n
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    • China April Retail Sales rises 2.3% vs 3.7% consensus; China April Industrial Output rises 6.7% y\/y vs. 5.5% consensus and China Jan-April Fixed Investment rises 4.2% y\/y vs 4.6% consensus.<\/li>\n
    • China\u2019s existing home prices fell -0.94% MoM in April to be -6.79% YoY, a further annual decline from -5.9% in March. While new home prices fell -0.58% MoM to be -3.5% YoY, a further annual decline from -2.65% in March.<\/li>\n<\/ul>\n
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      Commodities, Currencies and Treasuries<\/p>\n

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      • Gold prices jumped +$31.90, or +1.34%, to settle at $2,417.40 an ounce while Silver closes above $30 an ounce for the first time since 2013, settling at $31.047 after a 9.8% rise this week. Precious metals have been rising in recent weeks amid Fed interest rate cut expectations and helped overnight by China’s stimulus measures as announced steps to stabilize the crisis-hit property sector. Copper futures trading on the NYMEX rose 3.5% to $5.057 a pound (up 7.74% this week) the first-time copper futures have finished above the $5 mark. Bitcoin prices posted a strong day Friday, up over 2% around $66,750 after hitting above $67K and now up over 11% in the month; Treasury yields edge higher all day with the 10-year up around 4 bps to 4.41%, but down over 8bps on week.<\/li>\n<\/ul>\n<\/div>\n
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        • U.S. WTI crude oil futures settle at $80.06\/bbl, up 83 cents, 1.05%, while Brent Crude futures settle at $83.98\/bbl, up 71 cents, 0.85%. Baker Hughes (BKR) said energy firms this week added oil and natural gas rigs for the first time in four weeks, as the oil and gas rig count, an early indicator of future output, rose by one to 604 in the week to May 17, though the total count was still down 116, or 16% below this time last year. Natural gas futures extend gains triggered by yesterday’s lower-than-expected U.S. inventory build. The U.S. awarded contracts for the purchase of 3.3M barrels of oil to help replenish the Strategic Petroleum Reserve after a massive sale from the stockpile in 2022, the Department of Energy said on Friday. The oil is being bought at an average price of $79.38, the DOE said.<\/li>\n<\/ul>\n

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          Macro<\/span><\/p>\n<\/td>\n

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          Up\/Down<\/span><\/p>\n<\/td>\n

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          Last<\/span><\/p>\n<\/td>\n<\/tr>\n

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          WTI Crude<\/span><\/b><\/p>\n<\/td>\n

          		\n

          0.83<\/span><\/p>\n<\/td>\n

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          80.06<\/span><\/p>\n<\/td>\n<\/tr>\n

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          Brent<\/span><\/b><\/p>\n<\/td>\n

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          0.71<\/span><\/p>\n<\/td>\n

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          83.98<\/span><\/p>\n<\/td>\n<\/tr>\n

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          Gold<\/span><\/b><\/p>\n<\/td>\n

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          31.90<\/span><\/p>\n<\/td>\n

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          2,417.40<\/span><\/p>\n<\/td>\n<\/tr>\n

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          EUR\/USD<\/span><\/b><\/p>\n<\/td>\n

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          0.0008<\/span><\/p>\n<\/td>\n

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          1.0873<\/span><\/p>\n<\/td>\n<\/tr>\n

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          JPY\/USD<\/span><\/b><\/p>\n<\/td>\n

          		\n

          0.27<\/span><\/p>\n<\/td>\n

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          155.65<\/span><\/p>\n<\/td>\n<\/tr>\n

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          10-Year Note<\/span><\/b><\/p>\n<\/td>\n

          		\n

          0.043<\/span><\/p>\n<\/td>\n

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          4.419%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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          Sector News Breakdown<\/p>\n

          Retail, Consumer Staples & Restaurants:<\/p>\n

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          • CBRL <\/b>shares tumbled after cuts quarterly dividend to $0.25 from $1.30 a share in February; revised its long-term fiscal outlook, saying it expects adj earnings next fiscal year to be flat or slightly below this year’s levels before increasing in 2026 and 2027; said sees Q3 and Q4 financial results below previous expectations.<\/li>\n<\/ul>\n<\/div>\n
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            • GME <\/b>shares tumbled as files to sell 45M shares of Class A common stock; after guided Q1 sales to $872M-$892M below the $1.237B a year ago though narrows Q1 net loss to range from $27M-$37M from $50.5M loss y\/y; said expects selling, general and administrative costs to range from $290M-$300M, down from $345.7M y\/y.<\/li>\n
            • In Retail Research: TD Cowen said trade-down, and dept.\/specialty store closures should continue to play to Off-Price Retail’s favor (BURL, TJX, ROST<\/b>) and views the biggest competitive threats to the channel coming from SHEIN and TEMU. JP Morgan upgraded BBWI<\/b> to Neutral from Underperform, placed ANF<\/b> on positive catalyst watch while raising comp sales ests and said off-Price names (TJX, BURL, ROST<\/b>) a buying opportunity pointing to favorable 1H May\/2QTD momentum across all 3 Off-Pricers on Spring weather inflection & spending catalyst at Mother’s Day.<\/li>\n
            • In Food\/Grocers: Asda, Britain’s third largest supermarket group said its underlying sales rose 1.4% in the first quarter – a slowdown from growth of 2.2% in the previous quarter and an underperformance versus its bigger rivals.<\/li>\n
            • In Online Travel: DESP<\/b> posted Q1 gross bookings\/net revenue coming in 0.4%\/1.9% ahead of ests as top-line outperformance and expense discipline led to a meaningful beat on adj EBITDA\/net income, on record adj EBITDA margin of 22.4%; reiterated FY revenue guidance of "at least $820m," and raised its adj EBITDA guidance to at least $155m (up from at least $150m). <\/li>\n<\/ul>\n
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              Energy<\/p>\n

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              • In E&C Sector: UBS raised its price targets for PWR<\/b> ($313 from $270), MTZ<\/b> ($129 from $110), and DY<\/b> ($175 from $150), and reiterate its Buy ratings given recent market developments in renewables, grid, and telecom investment. For grid investment, the federal gov’t has acted to speed\/reform transmission permitting and planning. In telecom, BEAD spending in 2025 is coming into focus, and private fiber development continues to grow. Data center momentum is adding incremental demand for both electric power and fiber lines.<\/li>\n<\/ul>\n<\/div>\n
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                • In Materials: Iron ore prices rose +3% overnight, following a -0.3% w\/w decline due to a slower-than-expected recovery in Chinese steel demand, coupled with stable supply and reduced speculative buying says RBC. The uptick in iron ore prices can be attributed to an announcement made by the local government in Hangzhou’s Linana district yesterday, which specified a plan to purchase up to 100,000 sq. ft. of housing at market prices and lease them at affordable rates<\/li>\n
                • In Airlines: Wolfe Research upgraded UAL<\/b> from Peer Perform to Outperform w\/ $76 PT saying while shares have already outperformed YTD, they see more to go for the stock given strong fundamentals for legacy airlines and its expectation for improving domestic main cabin trends in 2H. Wolfe also upgraded ALK<\/b> from Peer Perform to Outperform w\/ $55 PT saying while they prefer fundamentals for the legacy airlines right now, ALK is facing several emerging tailwinds on the West Coast with an accelerating corporate recovery, improving competitive capacity and lower regional jet fuel prices.<\/li>\n
                • In Industrials: RBC<\/b> posted higher Q1 sales, rising 4.9% y\/y to $413.7M vs. the prior $394.4M and vs. est. $414M in its latest quarter with growth coming from its aerospace-defense segment and EPS $2.47 topped $2.34 est.; said sales in its industrial segment decreased 0.4%, while sales for the aerospace-defense segment jumped nearly 17%.<\/li>\n
                • In Chemicals: DD <\/b>was upgraded to Buy at Jefferies with $101 tgt as expect DD\u2019s end markets to start to exit trough conditions in 2H24, with upturns in demand and a tailwind from inventory restocking likely driving volume gains \u201925. Lanxess (LNXSF<\/b>) downgraded to Underperform at Jefferies, reducing average EBITDA by 4% (FY24F below the low end of guidance, FY25F 23% below cons) as believes the risk surrounding its sustainability would imply financial risk.<\/li>\n
                • In Metals: Gold and Silver miners rise amid another pop in precious metal prices on improved interest rate cut expectations after eco data this week; shares of NEM, GOLD, AEM, GFI, PAAS, WPM, CDE<\/b> among movers. Copper names also surged FCX, SCCO, VALE<\/b> as copper prices topped $5 per pound.<\/li>\n
                • In Utilities & Solar: Spanish utility Iberdrola said it is acquiring the remaining 18.4% stake in its U.S. subsidiary Avangrid (AGR<\/b>) that it does not already own for about $2.6 billion, to pay $35.75 per share above its previous offer of $34.25 per share, which it unveiled in March. Utilities +extend gains, up 8.5% on month and +14.4% YTD – only two down days in May as investors rotate to dividend paying\/defensive names given low-rate outlook for year.<\/li>\n<\/ul>\n
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                  Banks, Brokers, Asset Managers:<\/p>\n

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                  • In Brokers & Banks: HOOD<\/b> upgraded from Underperform to Buy at Bank America and raise tgt to $24 from $14 saying they have monitored a rebound in multiple metrics, including organic growth, margin loan utilization, and year over year trading activity and payment for order flow, and expects this to continue through 2026. FULT<\/b> announced the sale of 40 branches to Blue Owl for a $20.4mm pre-tax gain, wholly offset by a similar loss on a $345mm bond restructuring. <\/li>\n<\/ul>\n<\/div>\n
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                    • In Financial Services: RDDT<\/b> announced a newly formed partnership with OpenAI that includes the monetization and licensing of Reddit’s data as demand is growing for the company’s massive and unique data.<\/li>\n
                    • In Crypto: Bitcoin rises +2.85% to $67,175 as crypto names with big gains; COIN<\/b> rises on analyst upgrade and MSTR<\/b> +8% above $1,550 (well off May 1st lows $1,010), with most of the gains this week. COIN<\/b> upgraded to Neutral at Bank America following its updated view that the current macro environment has been a positive for Cryptocurrency market cap appreciation and trading volumes; COlN’s expense discipline and ability to benefit from operating leverage following large expense cuts in 2022 will help it maintain profitability going forward; increased diversification of revenue sources less correlated with overall volumes should dampen earnings volatility. <\/li>\n<\/ul>\n
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                      Biotech & Pharma:<\/p>\n

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                      • AZN <\/b>said that a new long-acting antibody reduced immunocompromised patients\u2019 risks of contracting symptomatic COVID-19 infections in a large Phase 3 prevention trial.<\/li>\n<\/ul>\n<\/div>\n
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                        • MRNA<\/b> won a case at the European Patent Office in its dispute with Pfizer and BioNTech over its COVID-19 vaccine, the company said on Friday.<\/li>\n
                        • NUVL <\/b>said the FDA granted NVL-655 Breakthrough Therapy designation (BTD) for the treatment of 3L+ ALK-positive NSCLC, allowing for an NDA submission based on results of the ongoing Ph 2 AKLOVE-1 study.<\/li>\n<\/ul>\n
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                          Technology<\/p>\n

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                          • In U.S. listed China technology stocks: Morgan Stanley downgraded WB<\/b> to Underweight due to limited upside to its advertising business (two thirds is consumption related) and amid market share losses. BIDU <\/b>was downgraded to EW from OW at Morgan Stanley and cut tgt to $125 saying Baidu Q1 ads showed soft growth +3% YoY, in line with MSCO’s expectations., while firm expects weak growth to continue in coming quarters. BABA <\/b>shares hit 2024 highs, recovering all its losses following earnings this week ($10 bounce off lows of week). <\/li>\n<\/ul>\n<\/div>\n
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                            • In IT Services\/Consulting: DXC <\/b>shares tumble as quarter was above guidance, except for FCF, while FY25 guidance was weaker than expected across the board and notably in FCF; sees FY revs $12.67-12.95B vs est. $13.191B, and adj EPS $2.50-3.00 vs est. $3.49; GLOB<\/b> reported strong 1\/CY24 results, while adjusting CY24 guidance (from at least 16% YOY C\/C revenue growth to a range of 14.7%-16.4%) on continued macro-related spending uncertainty.<\/li>\n
                            • In Software: Video game maker TTWO<\/b> cut its FY25 bookings forecast to between $5.55B-$5.65B, down from its prior forecast of just over $7B and set the release of "Grand Theft Auto VI" in the fall of calendar 2025; Q4 bookings fell 3% to $1.35 billion but beat analysts’ average estimate of $1.30 billion. SNOW<\/b> is in talks to buy Reka AI for $1B, according to a Bloomberg report overnight. <\/li>\n
                            • In Semiconductors: for a second straight day, the sector started higher and faded late day, with shares of NVDA<\/b> moving lower ahead of earnings next week *still not far from all-time highs); equipment maker AMAT<\/b> reported April Q results near the high end of the guidance range ($6.65B\/$2.09 vs. cons $6.54B\/$1.99), followed by July Q guide modestly above consensus ($6.65B\/$2.01 vs. cons $6.59B\/$1.97). Looking to 2HCY24, mgmt wouldn\u2019t offer specific guide but did discuss an expected slowdown in domestic China DRAM, growth in domestic China ICAPS, accelerating spend in HBM DRAM.<\/li>\n<\/ul>\n<\/div>\n

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