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23/11/23 Thanksgiving


The stock market went into Thursday's Thanksgiving Day holiday giving investors more for which to be thankful. Fortified by yet another impressive earnings report from NVIDIA (NVDA 487.16, -12.28, -2.5%), which fell prone to a sell-the-news response, an encouraging initial jobless claims report, Israel and Hamas agreeing to a four day pause in fighting as part of a hostage release deal, and the lingering fear of missing out on further gains, the major indices padded their gains for the month.

The gains were modest but ultimately underpinned by broad-based buying interest and a general lack of selling interest at the index level. Advancers led decliners by a workmanlike 9-to-5 margin at the NYSE and by a 13-to-8 margin at the Nasdaq. The Invesco S&P 500 Equal-Weight ETF (RSP) gained 0.5%, as did the Vanguard Mega-Cap Growth ETF (MGK).

Deere (DE 370.74, -11.91, -3.1%), Guess? (GES 20.81, -2.91, -12.3%), Urban Outfitters (URBN 31.82, -4.49, -12.4%), Nordstrom (JWN 14.21, -0.69, -4.6%), and Autodesk (ADSK 202.66, -15.01, -6.9%) were some individual laggards of note following their earnings reports. Tesla (TSLA 234.21, -6.99, -2.9%), meanwhile, broke down below its 50-day moving average (237.99).

Otherwise, the market had a predominately positive disposition, holding its line in the afternoon trade following the news that Rainbow Bridge at Niagara Falls had been closed after a vehicle traveling to the U.S. from Canada had exploded. A follow-up report from NBC News said law enforcement officials were not calling this an act of terrorism.

Every sector finished the session higher with the exception of the energy sector (-0.1%). Gains for the other sectors ranged from 0.1% to 0.9%.

The energy sector trailed all day amid a roller-coaster session for oil prices, which traded as low as $73.90 per barrel before settling the session at $77.05 per barrel, down just 0.7%. A report that OPEC+ is delaying its weekend meeting until November 30 triggered the initial sell-off as Bloomberg suggested the delay was due to Saudi Arabia's dissatisfaction with the oil production levels of other members.

The implication was that the other members have been overproducing. Prices likely rebounded on a sense that Saudi Arabia will aim to get that overproduction in check.

Today's trading volume was certainly held in check. It was light, which was no surprise ahead of the holiday. As a reminder, the stock market will be closed on Thursday and will end trading early at 1:00 p.m. ET on Friday.

Happy Thanksgiving!

  • Nasdaq Composite: +36.3% YTD

  • S&P 500: +18.7% YTD

  • Dow Jones Industrial Average: +6.4% YTD

  • S&P Midcap 400: +4.9% YTD

  • Russell 2000: +1.9% YTD

Reviewing today's economic data:

  • Initial jobless claims for the week ending November 18 decreased by 24,000 to 209,000 (Briefing.com consensus 227,000) while continuing jobless claims for the week ending November 11 decreased by 22,000 to 1.840 million.

    • The key takeaway from the report is that this report covers the period in which the survey for the November employment report is conducted, so the low level of initial jobless claims should support expectations for some decent growth -- certainly at this point in the Fed's tightening cycle -- for nonfarm payrolls.


  • Durable goods orders for October declined 5.4% month-over-month (Briefing.com consensus -3.1%) following a downwardly revised 4.0% increase (from 4.7%) in September. Excluding transportation, durable goods orders were flat month-over-month (Briefing.com consensus 0.2%) following a downwardly revised 0.2% increase (from 0.5%) in September.

    • The key takeaway from the report rests in the recognition that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- dipped 0.1% month-over-month following a 0.2% decline in September. That isn't a major drop-off by any means, but it does fit with a softening environment in the manufacturing space.


  • The final reading for the University of Michigan Consumer Sentiment Index for November came in at 61.3 (Briefing.com consensus 60.9), versus the preliminary reading of 60.4 and October's final reading of 63.8. In the same period a year ago, the index stood at 56.7. November marks the fourth straight month that consumer sentiment has declined.

    • The key takeaway from the report is the jump in inflation expectations, which is not what the Fed wants to see following 525 basis points worth of tightening already. It is the type of indication that will keep the Fed entertaining the thought that further tightening may still be necessary.


  • The MBA Mortgage Applications Index was up 3.0% week-over-week with refinance applications up 2% and purchase applications up 3%

Friday's economic calendar features:

  • 09:45 ET: Preliminary November S&P Global US Manufacturing PMI (Prior 50.0)

  • 09:45 ET: Preliminary November S&P Global US Services PMI (Prior 50.6)

Overseas:

  • Europe: DAX +0.4%, FTSE -0.2%, CAC +0.4%

  • Asia: Nikkei +0.2%, Hang Seng +0.1%, Shanghai -0.8%

Commodities:

  • Crude Oil -0.66 @ 77.05

  • Nat Gas +0.04 @ 3.03

  • Gold -9.20 @ 1993.20

  • Silver -0.22 @ 23.68

  • Copper -0.05 @ 3.76

Spotlight Comment: Autodesk's designs on updated business model creating near-term headwinds

Computer-aided software provider Autodesk (

ADSK 6.85%

202.66, -1501, -6.9%) benefitted from larger-than-expected expansions of enterprise business agreements (EBAs) in Q3, fueling a top and bottom-line beat, but tepid guidance for Q1 and FY25 is weighing on the stock.


  • Despite the high interest rate environment, ADSK saw growing momentum in its construction end market, especially among its larger customers. In fact, ADSK secured its largest ever EBA during the quarter and received record contributions from its construction and water verticals.

  • However, when excluding the impact of that record-setting EBA, ADSK's underlying results don't look as strong. While remaining performance obligations (RPO) were up by 12% yr/yr, to $3.5 bln, RPO actually slightly decelerated from last quarter if that EBA is excluded.

    • The qtr/qtr decrease is mainly due to a lower mix of multi-year contracts in FY24 compared to FY23 -- a trend that has been slowly building over the past couple of quarters.


  • Relatedly, ADSK is in the process of transitioning from upfront to annual billings for multi-year contracts, thereby eliminating the upfront discount that it previously offered. This shift is negatively affecting ADSK's RPO and billings growth rates, as well as its free cash flow.

    • Specifically, billings decreased by 11% to $1.2 bln, following a decline of 8% last quarter, while free cash flow plunged to $13 mln from $128 mln last quarter.

    • Although this transition is creating a significant short-term headwind, ADSK believes that in the long run it will create more predictable and sustainable recurring revenue and cash flow.


  • As this transition plays out, ADSK is also implementing a new transaction model for its indirect business across all of its major markets. In this new model, ADSK's partners will now provide a quote to customers, while the actual transaction still occurs directly between ADSK and the customer.

    • This shift will add another layer to the near-term headwinds that are impacting ADSK's financials, but the optimization created by this transition is expected to boost revenue, operating income, and free cash flow over time.


  • Beyond these business model shifts, macroeconomic headwinds are another factor behind ADSK's downside Q4 EPS guidance and tepid FY25 revenue growth forecast of about 9%+. In particular, demand from medium-sized customers is softening, while momentum in the media and entertainment vertical has also deteriorated.

Overall, there are many moving parts to consider, making for a complex story that market participants are trying to digest. The bottom line is that these changes to ADSK's business model will have a significant impact on its financials in the near-term, while at the same time, macroeconomic pressures are taking a toll on its smaller and medium-sized customers.

Today's News Summary:

For a full rundown of today's market and after hours developments, see Live In Play

  • Earnings/Guidance (Full Earnings Calendar):

    • Autodesk (ADSK) beats by $0.08, beats on revs; guides Q4 EPS below consensus, revs in-line

    • Banco BBVA Argentina S.A. (BBAR) reports Q3 results

    • Baozun (BZUN) beats by $2.64, reports revs in-line

    • Deere (DE) beats by $0.80, beats on revs; provides FY24 guidance

    • dLocal Limited (DLO) misses by $0.02, reports revs in-line; reaffirms FY23 revs guidance

    • Emeren Group (SOL) misses by $0.24, misses on revs

    • GDS Holdings (GDS) beats by $2.27, reports revs in-line; reaffirms FY23 revs guidance

    • Guess? (GES) misses by $0.12, reports revs in-line; guides Q4 EPS below consensus

    • HP Inc. (HPQ) reports EPS in-line, revs in-line; mid-point of JanQ EPS guidance below consensus; reaffirms FY24 EPS guidance

    • Inter Parfums (IPAR) initiates FY24 guidance; reiterates FY23 outlook

    • Jack In The Box (JACK) misses by $0.05, reports revs in-line; guides FY24 EPS below consensus; authorizes share repurchase program for up to $250 mln

    • Nordstrom beats by $0.13 (JWN), misses on revs; guides FY24 EPS in-line, reaffirms FY24 revs guidance

    • NVIDIA (NVDA) beats by $0.65, beats on revs; guides JanQ revs above consensus; next waves of AI are starting to build

    • Raymond James (RJF) reports October operating data; investment banking pipeline remains healthy, however, closings across the industry remain challenged

    • Stifel Financial (SF) reports operating results for October 31, 2023; total client assets increased 6% yr/yr to $404.05 bln

    • Urban Outfitters (URBN) beats by $0.06, beats on revs, Comparable Retail segment net sales increased 5.6%


  • General News

    • China government advisors call for more stimulus in 2024, according to Reuters

    • Israel and Hamas agree to hostage release deal with four day pause in fighting, according to CNN

    • White House issues statement from President Joe Biden on the hostage release in Gaza

    • OPEC meeting scheduled for this weekend might be delayed as Saudi Arabia expressed dissatisfaction with other members' oil production levels, according to Bloomberg

    • Israeli prime minister Netanyahu says 'we continue until we have achieved complete victory', according to The Guardian

    • Air Lease (AL) delivers the first of 25 new Boeing 737-8 aircraft delivered to Malaysia Airlines Berhad from ALC's order book with Boeing (BA)

    • Alibaba (BABA): Jack Ma ends plans to lower stake in Alibaba, according to Bloomberg

    • Allegiant Travel (ALGT) reports October traffic; total systems passengers 12.7% yr/yr, ASMs 10.7

    • AngloGold Ashanti (AU) reports silicon discovery

    • Apple (AAPL): CEO Tim Cook determined his successor will come from within the co, according to AppleInsider

    • Apple (AAPL): National Labor Relations Board claimed that Apple withheld benefits from union workers, according to Bloomberg

    • Apple (AAPL): NLRB confirms complaint against Apple

    • Arcturus Therapeutics (ARCT) treatment of cystic fibrosis granted orphan status

    • B2Gold (BTG) announces positive exploration drilling results from its inaugural drilling campaign at the Back River Gold District in Nunavut and provides an update on construction and mining at the Goose Project

    • Boeing (BA) hackers took advantage of Citrix software flaw, according to Bloomberg

    • Boeing (BA): FAA approves 737 Max 10 aircraft for test flights, according to WSJ

    • Bridger Aerospace Group (BAER) has entered into a joint venture partnership with Marathon Asset Management L.P. and Avenue Capital's Sustainable Solutions Fund

    • Cal-Maine Foods, Inc. (CALM) issues statement on recent court decision

    • Caribou Biosciences (CRBU): FDA grants orphan drug designation to CRBU's treatment of Multiple Myeloma

    • Cencora (COR) and Sapphiros enter into distribution agreement; Cencora will distribute the Sapphiros GoToKnow COVID-19 Antigen Rapid Tests to pharmacies across the United States

    • Citigroup (C) in discussions to start a private credit strategy next year, according to Bloomberg

    • Corporacin Amrica Airports (CAAP) reports a 14.5% yr/yr increase in passenger traffic in October 2023, exceeding October 2019 levels by 1.2%

    • CrowdStrike's (CRWD) CrowdStrike Falcon Go is now officially available on Amazon (AMZN) Business

    • CTO Realty Growth (CTO) announces sale of Eastern Commons, a community shopping center in Henderson, NV, for $18.2 mln

    • Docebo (DCBO) announces CEO succession plan and approves a issuer bid under which the company will repurchase up to $100 mln of common stock

    • Entrada Therapeutics (TRDA) Announces Updates on ENTR-601-44 in Duchenne Muscular Dystrophy

    • Fresenius Medical Care (FMS) resolves a legal dispute with the U.S. government, for accounts receivable in legal dispute, and entered into a final and legally binding settlement agreement today, whereby the company will receive a payment from the U.S. government

    • Infosys (INFY) and TK Elevator extend strategic collaboration

    • Intel (INTC): Court ruling in Germany could cost INTC billions in subsidies, according to Reuters

    • Keysight (KEYS) and MediaTek (MDTKF) have successfully completed 5G New Radio and 5G reduced capability interoperability development testing based on the 3GPP Release 17 standard

    • MDU Resources (MDU) announces five-year capital investment plan; targeting 15% increase in planned spending compared to previous five years

    • MGM Resorts (MGM): Thousands of Culinary Union members employed at MGM Resorts have voted by 99% YES to ratify their new 5-year contract

    • Microsoft (MSFT): OpenAI posts on X "We have reached an agreement in principle for Sam Altman to return to OpenAI as CEO with a new initial board of Bret Taylor (Chair), Larry Summers, and Adam D'Angelo. We are collaborating to figure out the details. Thank you so much for your patience through this"

    • Morgan Stanley (MS) co-president Andy Saperstein was diagnosed with cancer, according to Financial Times

    • NatWest Group plc (NWG): UK Chancellor of the Exchequer Jeremy Hunt says government considering sale of NWG shares, according to Bloomberg

    • Perion Network (PERI) announces the appointment of CEO Tal Jacobson to the Board of Directors, replacing former CEO Doron Gerstel

    • ProKidney Corp. (PROK) files $500 mln mixed securities shelf offering

    • Rio Tinto (RIO) reaches court approved settlement with SEC regarding 2017 suit over the disclosure of impairment of Rio Tinto Coal Mozambique in 2012 year-end accounts

    • Scilex Holding (SCLX) announces that the key product attributes of ELYXYB meet the high unmet needs of clinicians treating patients with acute migraine, with and without aura, in adults, based on the results from a recent market research study

    • Starbucks (SBUX) Organizing center nominates three candidates to Starbucks Board of Directors

    • Stellantis (STLA) repurchases 934 million in shares from Dongfeng, in accordance with pre-existing share repurchase framework

    • Sutro Biopharma (STRO) promotes Jane Chung as President and COO, effective Dec 1

    • Tesla (TSLA) CEO Elon Musk says he will discuss partnership between TSLA and xAI with Board

    • Tesla (TSLA): NYC investment chief wants Tesla to sanction Elon Musk unless he apologizes for his controversial comments, according to Reuters

    • Textron (TXT) announces agreement to purchase 48 Cessna Skyhawks to support BAA training

    • United Airlines (UAL) mulling use of passenger data to sell personalized ads, according to WSJ

    • Volkswagen AG (VWAGY) offers 11% pay raise for Chattanooga production employees


(see Upgrades/Downgrades calendar for full list):

  • Upgrades:

    • Applied Materials (AMAT) upgraded to Buy from Neutral at Redburn Atlantic; tgt $175

    • ASM Intl NV (ASMIY) upgraded to Buy from Neutral at Redburn Atlantic

    • Baidu (BIDU) upgraded to Buy from Neutral at Nomura; tgt $145

    • Clorox (CLX) upgraded to Neutral from Underweight at JP Morgan; tgt raised to $145

    • GoDaddy (GDDY) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $124

    • Moog (MOG.A) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt raised to $141

    • Ovintiv (OVV) upgraded to Buy from Neutral at Citigroup; tgt raised to $52

    • Southwestern Energy (SWN) upgraded to Equal Weight from Underweight at Wells Fargo


  • Downgrades:

    • APA Corp. (APA) downgraded to Neutral from Buy at Citigroup; tgt lowered to $37

    • Autodesk (ADSK) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $215

    • Foot Locker (FL) downgraded to Sell from Hold at Williams Trading

    • HSBC Holdings (HSBC) downgraded to Sector Perform from Outperform at RBC Capital Mkts

    • iQIYI (IQ) downgraded to Neutral from Overweight at JP Morgan

    • Jacobs Engineering (J) downgraded to Mkt Perform from Outperform at Raymond James

    • Reynolds Consumer Products (REYN) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $28

    • Virgin Galactic (SPCE) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt lowered to $1.75


  • Others:

    • AmBev (ABEV) initiated with a Hold at Jefferies

    • American Fincl (AFG) initiated with a Buy at Citigroup; tgt $125

    • Arch Capital (ACGL) initiated with a Neutral at Citigroup; tgt $91

    • Calidi Biotherapeutics (CLDI) initiated with a Buy at H.C. Wainwright; tgt $11

    • Cincinnati Fincl (CINF) initiated with a Neutral at Citigroup; tgt $110

    • Compania Cervecerias Unidas (CCU) initiated with a Buy at Jefferies

    • Dianthus Therapeutics (DNTH) initiated with an Outperform at Wedbush; tgt $23

    • GitLab (GTLB) initiated with an Overweight at Cantor Fitzgerald; tgt $55

    • KLA Corporation (KLAC) initiated with a Neutral at Redburn Atlantic; tgt $550

    • Lam Research (LRCX) initiated with a Buy at Redburn Atlantic; tgt $800

    • Markel Group (MKL) initiated with a Sell at Citigroup; tgt $1275

    • RenaissanceRe (RNR) initiated with a Buy at Citigroup; tgt $251

    • Saia (SAIA) initiated with a Market Perform at BMO Capital Markets; tgt $450

    • TD Synnex (SNX) initiated with a Neutral at UBS; tgt $105


  • Econ Data (Days Ahead):

    • Thursday: Bond and equity markets closed for Thanksgiving

    • Friday: Flash November S&P Global U.S. Manufacturing PMI (prior 50.0) and flash November S&P Global U.S. Services PMI (prior 50.6) at 9:45 ET; NYSE to close early at 13:00 ET and Treasury Market to close early at 14:00 ET


  • Earnings:

  • Monday (Nov 20)

    • Pre-Market: LEGN

    • After-Hours: A BRBR KEYS ZM


  • Tuesday (Nov 21)

    • Pre-Market: ANF ADI BIDU BBY BURL CAL DKS DY EMBC HIBB J KC KSS LOW MDT NJR

    • After-Hours: ADSK DLO GES HPQ JACK JWN NVDA URBN

    • Unspecified: AEO


  • Wednesday (Nov 22)

    • Pre-Market: DE

    • After-Hours: BZUN


  • Thursday (Nov 23)

    • Closed for Thanksgiving Day


  • Friday (Nov 24)

    • Pre-Market: None

    • After-Hours: None



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