2023 Oct 23, US Market

Investors have been waiting for the right moment to jump back in the frigid bond market. On Monday, some of them took the plunge.

A monthslong bond selloff helped push the 10-year U.S. Treasury yield above 5% on Monday morning for the first time since 2007. Some investors saw the milestone as a buying opportunity, quickly pushing yields back to 4.836%. Yields rise as prices fall.

The stock market’s response to Monday’s reversal was mixed. The Dow Jones Industrial Average fell 0.6%, or 191 points. The S&P 500 ticked down 0.2%, while the tech-heavy Nasdaq Composite rose 0.3%.

Stocks have stagnated in the second half as investors grapple with the possibility that the Federal Reserve will keep interest rates higher for longer, meaning bigger borrowing costs on everything from homes and cars to companies’ capital projects. Last week, Federal Reserve Chair Jerome Powell said the central bank could tighten monetary policy further if inflation doesn’t continue to cool. 

That message has helped fuel the grinding run-up in benchmark yields in recent months. For investors, the question is when yields will peak, allowing bondholders to cement safe returns and ride out price gains that could come if central bankers lower rates for lending in the future.

It is too early to say whether the 10-year yield’s decline on Monday was signal or noise. Fresh federal data on economic growth is due Thursday, while earnings season is set to kick off in earnest with closely watched forecasts that could offer snapshots of different sectors’ outlooks.

Any change would be good news for the tech firms that powered the stock market in the first half with the promise of huge future profits. As bond yields dropped Monday, shares climbed in each of the so-called “Magnificent Seven” companies.

Stifel upgraded Pinterest (PINS) to Buy from Hold with a price target of $32, up from $27. Channel checks "skew more positive" and there is "still plenty of room" for growth outside the company's domestic market, the firm tells investors in a research note.

JPMorgan upgraded Walgreens Boots Alliance (WAB) to Overweight from Neutral with a price target of $30, up from $27. The firm says "today commences a new era" for the shares as Tim Wentworth assumes the CEO role.

Bernstein upgraded Spirit AeroSystems (SPR) to Outperform from Market Perform with a price target of $29, up from $25. The firm notes that the Boeing (BA) infusion of cash outlined in last week and new leadership should bring more operational expertise.

Bernstein upgraded BioMarin (BMRN) to Market Perform from Underperform with an unchanged price target of $82. The firm's short thesis was that Roctavian numbers needed to come down, and this has now largely played out.

Piper Sandler upgraded DigitalOcean (DOCN) to Neutral from Underweight with a price target of $22, down from $30. With consensus estimates now reset, the shares offer a more balanced risk/reward profile, the firm tells investors in a research note.

Piper Sandler downgraded Salesforce (CRM) to Neutral from Overweight with a price target of $232, down from $268. While sector valuations and growth could be nearing a bottom, Piper has less confidence in growth acceleration potential.

Odeon Capital downgraded Morgan Stanley (MS) to Hold from Buy with a $79.15 price target after the company reported third quarter results that the firm said "were disappointing."

Rosenblatt downgraded RingCentral (RNG) to Neutral from Buy with a price target of $35, down from $52. The firm believes the recent change in leadership could lead to a resetting of revenue expectations, "while the fiercely competitive landscape adds further concern."

Piper Sandler downgraded Unity (U) to Neutral from Overweight with a price target of $30, down from $48. The firm "proactively" reduced 2024 growth estimates and price targets across the cloud applications and analytics group saying near-term demand stabilization may not support "overly optimistic" consensus growth rates.

BofA downgraded Alcoa (AA) to Neutral from Buy with a price target of $25, down from $35. While the BofA commodities team is bullish on Alcoa's primary product, aluminum, for 2024, they are cautious in the more immediate term.

TD Cowen initiated coverage of Spotify (SPOT) with a Market Perform rating and $129 price target. The firm expects Spotify to continue to grow revenue at double-digits and sees margin improvement over time, but thinks the stock's current valuation already discounts in a "fairly optimistic financial trajectory."

Guggenheim initiated coverage of Datadog (DDOG) with a Neutral rating and no price target. Like other consumption-based businesses, Datadog has not been able to escape macro-related pressures culminating in "cloud optimization," the firm tells investors in a research note.

HSBC initiated coverage of Booking Holdings (BKNG) with a Buy rating and $3,650 price target. The firm says innovation and digital commerce are driving "operating model convergence and a broadening of the competitive landscape." HSBC also started coverage of Expedia (EXPE) with a Hold rating and $114 price target.

HSBC initiated coverage of MGM Resorts (MGM) with a Buy rating and $49 price target as the pandemic accelerated shifts in lifestyle, technology, and behaviors that are shaping travel and leisure and fueling growth. The firm also started coverage of Wynn Resorts (WYNN) with a Buy rating and $111 price target, and Royal Caribbean (RCL) with a Buy rating and $115 price target.

Guggenheim initiated coverage of Dynatrace (DT) with a Buy rating and $58 price target, implying 26% potential upside. The firm says Dynatrace "has been a mainstay" in the observability market.

Chevron (CVX) agreed to acquire Hess Corp. (HES) for $171 per share in an all-stock transaction

Textainer (TGH) agreed to be acquired by Stonepeak for $7.4B

EngageSmart (ESMT) will be acquired by Vista Equity for $23 per share in cash

The UAW said that 6,800 auto workers have joined their strike at Stellantis' (STLA) Sterling plant, Additionally, the UAW said members in Michigan, Ohio, and Pennsylvania reached a tentative agreement with General Dynamics (GD)

Lockheed Martin (LMT) has decided to withdraw from the U.S. Air Force's competition to build at least 75 refueling tankers, Reuters says

Reliance Industries is nearing a multibillion dollar cash and stock deal to buy Disney's (DIS) India operations, Bloomberg reports

Japan is probing Google (GOOG) over alleged antitrust violations, Bloomberg says

Off-duty Alaska Airlines (ALK) pilot charged with trying to disrupt operation of engines on a flight, CNBC reports

Nvidia (NVDA) is coming after Intel's (INTC) "stronghold" in personal computers, Reuters reports

Farfetch (FTCH) higher in New York after receiving EU clearance for a 47.5% stake in YNAP

Spirit AeroSystems (SPR) increases after Bernstein upgraded the stock to Outperform

ImmunityBio (IBRX) gains after announcing the resubmission of its BLA to the U.S. FDA for N-803 Anktiva

Ambrx Biopharma (AMAM) falls after reporting data from its Phase 1/2 APEX-01 study of ARX517

Roivant Sciences (ROIV) slides after agreeing to sell Telavant to Roche (RHHBY) for $7.1B upfront

FMC Corporation (FMC) cut its Q3 and Q4 guidance

iSpecimen (ISPC) provided guidance for Q3

Bank of Hawaii (BOH) reported Q3 results, with CEO Peter Ho commenting, "Bank of Hawai'i delivered another quarter of solid financial results"

Philips (PHG) reported Q3 results and provided guidance for FY23

Hope Bancorp (HOPE) reported Q3 results and announced a strategic reorganization

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