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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Morgan Stanley continues to tout network security stock Palo Alto Networks Inc. (PANW-Q) as extremely well positioned, according to the firm’s morning research summary,

“MS Research Analyst Hamza Fodderwala highlights solid checks against more favorable positioning for PANW (OW [’overweight’], $255 PT). He notes that demand for vendor consolidation in security is higher than ever and PANW is a leading beneficiary. While positioning is certainly a factor, he thinks investors are slightly more cautious chasing the stock into the FQ3 [third fiscal quarter] print. This creates a more favorable setup, in his view. Once past the FQ3 hump, Hamza sees multiple positive catalysts over the next couple quarters, including: 1) S&P 500 inclusion likely in early summer, 2) a more favorable estimates setup in FQ4, and 3) an Analyst Day likely this fall with a new 3-year target for FY26. Bottom line, he likes the near-term setup in PANW and remains confident in his bull thesis for $100 billion market cap ($300+ stock) within 2 years.”


Wells Fargo equity analyst Christopher Harvey believes credit markets and liquidity are driving the U.S. stock market,

“Funding and liquidity, not earnings/fundamentals, are the year-to-date drivers of the SPX rally… Risk of a market reversal appears elevated on the back of wider credit spreads and/or a shrinking Fed balance sheet … 1Q23 earnings have been widely described as “better[1]than-feared,” with EPS beats outnumbering misses by the customary 4:1 ratio. However, earnings season unofficially kicked off on April 14th (with several large-cap banks), and since then the SPX price return is unimpressive. From the close on April 13 until the close on May 16, the SPX’s price return was negative (0.9 per cent) … If credit markets/liquidity (not fundamentals) drove the YTD stock rally, recent trends are not as bullish: (1) the cost of capital is rising, with Treasury yields lifting and spreads widening; (2) liquidity has been reduced, with the Fed’s balance sheet contracting $230-billion in recent weeks; and (3) the Fed’s pivot may be delayed as the labor market refuses to crack and inflation may be stickier than expected”

“WF: “If credit markets/liquidity (not fundamentals) drove the YTD stock rally, recent trends are not as bullish:”” – (research excerpt) Twitter


Citi economist Jack Shang follows Chinese demand for cement and steel as a means to follow the country’s economic re-opening. Numerous commodity prices are dependent on China’s recovery,

“According to Century Construction website, cement shipment recorded 5.869mt, down by 15 per cent year-over-year but up by 3.5 per cent week-over-week during the week of May 10th to 16th and national concrete utilization rate recorded 13.37 per cent, up by 0.33ppt WoW as the weather turned better… According to the Century Construction website, as of May 17th, national aggregate shipment recorded 17.65mt, up by 3.22 per
cent WoW and national capacity utilization rate was 42.38 per cent, up by 1.32ppt WoW. Cement shipment recorded 5.869mt, down by 15 per cent YoY but up by 3. per cent WoW during the week of May 10th to 16th … According to Mysteel, as of May 18th, rebar weekly apparent consumption decreased by 6 per cent WoW and was flat YoY based on the 16th week after CNY, and HRC weekly apparent consumption was up by 3.3 per cent WoW and flat YoY based on the 16th week after CNY. Total steel weekly apparent consumption dropped by 1 per cent WoW and was flat YoY.”


Diversion: “Elizabeth Holmes’ no good, very bad day: Bail denied and a bill for $452 million” – Gizmodo

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