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China-linked Salt Typhoon gained access to some broadband networks. (0:17) Goldman sees little stock upside in ’25 (1:24) Morgan Stanley slashes U.S. auto sector. (1:50)
This is an abridged transcript of the podcast.
Our top story so far. Chinese government-linked hackers have gained access to a handful of U.S. internet service providers in recent months trying to gather sensitive information.
The Wall Street Journal said a new group called Salt Typhoon was behind the hacking campaign.
Through Salt Typhoon’s campaign, actors linked to China burrowed into America’s broadband networks and aimed to establish a foothold within the infrastructure of cable and broadband providers that would allow them to access data stored by telecom companies or launch a damaging cyberattack.
On the economic front, U.S. new home sales dipped 4.7% to 716,000 in August, stronger than the 699,000 expected and fewer than July’s 751,000. Sales of new single-family homes climbed 9.8%.
Wells Fargo economists said: “Despite the dip, the pace of new home sales continues to be relatively sturdy on account of builder pricing incentives and a scarcity of available homes in the existing market.”
“Looking ahead, lower mortgage rates should eventually provide a boost to new home sales, but affordability challenges and a softer labor market will likely limit the rebound.”
Looking to stocks, Goldman Sachs equity strategist David Kostin isn’t expecting much in the way of equity next year, with an S&P target of around 6,000 for the end of 2025. That would be just 5% higher from current levels.
Kostin says he sees near-term pressure on equities going into the election with some rallying after that, but is still looking for the S&P to be down around 5,600 when we wrap up 2024.
Among active stocks today, Morgan Stanley downgraded the entire U.S. auto industry view to an In-Line rating after having the broad sector set at Attractive.
Influential analyst Adam Jonas said: “At a high level, our downgrade is driven by a combination of international, domestic, and strategic factors that we believe may not be fully appreciated by investors.”
He also highlighted that China’s two-decade-long growth engine has reversed in terms of China profits flipping to losses and China producing nearly 9 million units more than it sells locally, which is a figure equal to 15% of non-China global volume.
Jonas and his team also said the optimism around auto stocks getting credit for being AI enablers and beneficiaries is being countered by concerns over the significant capital commitment required to follow through on large-scale AI development, AI infrastructure, and building out AI cloud/datacenter hyperscalers.
As part of the auto industry reset, Morgan Stanley downgraded Ford Motor (F) to Equal Weight from Overweight, General Motors (GM) to Underweight from Equal Weight, Rivian Automotive (RIVN) to Equal Weight from Overweight, Phinia (PHIN) to Equal Weight from Overweight, and Magna International (MGA) to Equal Weight from Overweight.
Tesla (TSLA), Ferrari (RACE), CarMax (KMX), and AutoNation (AN) kept Overweight ratings, while Adient (ADNT), Aptiv (APTV), QuantumScape (QS), and Lucid Motor (LCID) were kept with Underweight ratings.
Oppenheimer started coverage of KLA (KLAC) Perform rating and $750 price target.
“KLA is by far the dominant provider of semiconductor process control tools that enhance manufacturing yields, one of the top five wafer fab equipment companies that make up 80% of total industry revenue,” analyst Edward Yang wrote in an investor note.
Merck (MRK) said a Phase 3 trial designed to test its anti-PD-1 therapy Keytruda as part of a combination regimen in patients with a type of colorectal cancer didn’t reach the primary endpoint.
The study tested Keytruda with monoclonal antibody therapy as a late-line option in patients with PD-L1 positive microsatellite stable metastatic colorectal cancer. The 441-patient trial failed to achieve the main goal as the experimental therapy compared to standard of care didn’t extend the survival of patients.
And Piper Sandler said shares of Okta (OKTA) and ServiceNow (NYSE:NOW) could see volatility after the FBI raided the Reston, Va., headquarters of IT giant Carahsoft.
Carahsoft is one of the largest IT solution providers to the U.S. government, and given the timing of the raid, there is the potential for disruption to deals in the pipeline, Piper Sandler said. Additionally, ServiceNow and Okta are believed to have a large percentage of their federal contract dollars coming through Carahsoft.
In other news of note, WeRide and Uber Technologies (UBER) announced a strategic partnership to bring WeRide’s autonomous vehicles onto the Uber platform, beginning in the United Arab Emirates.
The partnership is expected to launch first in Abu Dhabi later this year.
A dedicated number of WeRide vehicles will be made available to consumers using the Uber app, the companies said, adding that when a rider requests a qualifying ride on the Uber app, they may be presented with the option to have their trip fulfilled by a WeRide autonomous vehicle.
The partnership does not contemplate any launches in the United States or China.
And in the Wall Street Research Corner, Citi is out with a list of the most crowded long and short trades.
Stocks can see large swings when the market has a consistent view of a stock. Citi says that’s a “risk factor” that often happens “in the latter stages of the life cycle of a stock.”
Among the crowded longs are Roblox (RBLX), Philip Morris International (PMI), Baker Hughes (BKR), RxSight (RXST), Uber (UBER), Shopify (SHOP), Newmark Group (NMRK), and Edison International (EIX).
Most crowded shorts include Bumble (BMBL), Cracker Barrel (CBRL), Hershey (HSY), Core Labs (CLB), Evertec (EVTC), Zimmer Biomet (ZBH), Hertz (HTZ), Xerox (XRX), Albemarle (ALB), Apple Hospitality REIT (APLE), and American Water Works (AWK).
