Market Review: December 23, 2020

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Closing Recap

Wednesday, December 23, 2020






DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·      Stocks are higher as the reflation trade is again rallying value and SmallCap names, with the Russell 2000 topping the 2,000 level for the first time ever, while the Dow rises behind strength in financials (AXP, JPM, GS) and industrials. The U.S. dollar weakened as investors pile into riskier assets into year end, while Treasury yields jump (helping the banks). Oil erased earlier losses on economic recovery hopes (which is boosting travel, leisure, retail names along with energy), despite mixed inventory data. Trade and transport links between the UK and its neighbors look set to resume amid ongoing Brexit negotiations after the two sides reportedly came to an agreement on the outline of a new trade deal, which is expected to be finalized by the UK tonight, though other European governments still need to accept the agreement. Stimulus relief news back in the headlines after President Trump called the $892B package a "disgrace" and demanded changes to the bipartisan legislation approved by Congress. The President said, "I am asking Congress to amend this bill and increase the ridiculously low $600 to $2,000, or $4,000 for a couple," Trump declared. "I’m also asking Congress to immediately get rid of the wasteful and unnecessary items from this legislation." The new coronavirus strain continues to generate concerns that it is more contagious than older variants though no signs it causes more severe disease or cannot be addressed with recently approved vaccines. Nymex WTI crude rises $1.10 or 2.3% to settle at $48.12 per barrel, gold rises $7.80 or 0.4% to settle at $1,878.10, snapping its 3-day losing streak. The 10-year Treasury rose to its highest level in the week at 0.95% while the dollar remained weak again.

Economic Data

·      Weekly jobless claims fell to 803,000 in the latest week (better than the 885K estimate), from 892,000 prior week (revised from 885,000); the 4-week moving average rose to 818,250 from 814,250 prior week (previous 812,500); continued claims fell to 5.337 mln vs. 5.558 mln estimate and down from 5.507 mln in the prior week; insured unemployment rate fell to 3.6% from 3.8%

·      Personal Income for Nov fell -1.1% MoM vs. -0.3% consensus and -0.6% prior (revised from +-0.7%), while Consumer spending fell -0.4% MoM vs. est. -0.3%; the PCE Price Index was flat vs. +0.2% prior and core PCE Price Index +0.0% vs. +0.1% consensus and +0.2% prior

·      Durable Goods for November rose +0.9% vs. +0.6% est. and upwardly revised +1.8% (from +1.3%), now rising for seven straight months; Core Durable Goods rose +0.4% vs. +0.5% estimate and upwardly revised +1.9% (from +1.3%); shipments of manufactured goods increased $0.7B, or 0.3%, in November to $250.1B

·      University of Michigan Survey final for Dec was 80.7 (vs. est. 81.3) and vs. preliminary Dec 81.4 and final Nov 76.9; the current conditions index final Dec 90.0 vs. prelim Dec 91.8 and final Nov 87.0 and the expectations index final Dec 74.6 vs. prelim Dec 74.7 and final Nov 70.5

·      New Home Sales for November fell -11% YoY to 841K annual rate vs. 989K expected and 945K prior (but rises 20.8% YoY); the median sales price of new houses sold was $335,300 up from $330,600 in October; seasonally adjusted estimate of new houses for sale at the end of October was 286K, representing a supply of 4.1 months at the current sale rate, flat from a 3.3-month supply at the end of October






WTI Crude















10-Year Note





Sector News Breakdown


·      Retailers; DDS tgt raised to $60 from $46 at Wedbush and issuing a POSITIVE data signal as proprietary data shows Dillard’s running above-consensus gross margin, & net sales through the fourth quarter-to-date; HELE announces agreement to extend REV license for hair care appliances and tools; Hedgeye named BBY as a Best Short Idea and added GME was reiterated as a Best Long Idea; Cowen saw a significant acceleration in digital trends in November and sees LULU, ROST, BURL, RL, YETI, DECK, DKS, and VFC as having the most conservative consensus 2021 estimates, and raised their estimates on DECK and P/E-based price targets on Puma (OTC: PUMSY)SKX, DECK, YETI, and DKS

·      Auto sector; NKLA shares fell after the company and Republic Services (RSG) have discontinued their collaboration on refuse truck development; MGA rises after the automotive supplier and LG Electronics announced they are launching a joint venture that will make key components for electric cars, the companies announced; DDAIF is considering an IPO for its truck unit, according to German publication Handelsblatt; LMPX receives $192M financing for Stage 1 acquisition; RBC said they were aggressive buyers on the recent pullback in KMX, saying the lower used unit sales (Q3 used comps down (0.8%)) creates one of the most bullish estimate reduction scenarios they have seen in a long time; XL, which started trading yesterday after completing its SPAC merger, surged after Citron says it is long with a $60 target (closed yesterday $17.52)

·      Leisure and Gaming; DKNG active as online and retail sportsbooks in Colorado took in a record $231.2M in November wagers, according to the state’s Department of Revenue’s Division of Gaming. The tally was 9.7% higher from the prior record in October; CNK sues its insurer for refusing to cover $400M in losses and legal expenses linked to the coronavirus pandemic – Bloomberg; Rosenblatt Securities increases its price target on PENN to $115 from $90 off the thesis that Barstool will continue to grow as more and more states legalize sports betting

·      Housing and Home Furnishing; Bank of America lowered their 2H estimates on BBBY as comps could be pressured on a recent slowdown in overall home goods spending, tight inventory, and the company’s longer holiday promotions, though the stock was maintained at Buy and is expected to outperform the industry along with WSM, RH, and HOME as the analyst expects spending on home furnishings to continue growing in early 2021, but at a slower rate than the high point of late summer-early fall of this year; IZEA set a Managed Services bookings record for the best ever Q4; bookings surged 40% Y/Y despite pandemic impacting customer base



·      Inventory data; the API showed an unexpected build of 2.7M barrels oil for the week ending Dec. 18; gasoline inventories show a draw of 224K barrels, distillate inventories show a build of 1.03M barrels and Cushing inventories show a build of 341K barrels; The EIA reported that U.S. crude inventories fell by 562k barrels last week to 499.5M, gas stocks fell by 1.1M to 237.8M (vs est. 1.2M build), and distillate stockpiles fell by 2.3M barrels to 148.9M, all of which reflect continued improvement in demand. The Baker Hughes U.S. gas rig count increased 2 to 83 and the oil rig count increased by 1 to 264, as the total rig count was 348.

·      Alternative Energy; shares of CLNE, FCEL, PLUG, FTEK rallied as U.S. Congress passes an alternative fuel tax credit which will continue to support the expansion of renewable natural gas; legislation includes the Alternative Fuels Tax Credit, which extends the $0.50 per gal fuel credit/payment for the use of RNG as a transportation fuel, and the Alternative Fuel Vehicle Refueling Property Credit, which extends the 30% per $30K investment tax credit for alternative vehicle refueling property

·      Solar sector: JPMorgan increasing estimates for companies in our coverage with exposure to solar and wind (ARRY, CSIQ, ENPH, FSLR, HASI, SEDG, NOVA, SPWR) to reflect increased government policy support in the US and potentially China. The US stimulus bill recently passed by Congress includes a two-year extension to the solar Investment Tax Credit and a one-year extension to the wind Production Tax Credit; SOL rises after selling two ground-mounted solar parks in Romania with a combined capacity of 15.4 MW to Alternus Energy; HASI disclosed an investment in a 1.6 GW onshore wind and solar portfolio and its pt was raised to $68 from $57 at JPMorgan as its exposure to alternative energy and diversified portfolio position the company to deliver continued earnings and dividend growth, and to a street-high $80 from $56 at FBR



·      Bank movers; banks among top gainers in the S&P along with rest of “reopen” trade (energy, retail, travel, leisure) on economic recovery play, as well as another boost on higher Treasury yields; banks already among top gainers on the week after last week’s Fed street tests opened up the door for banks to resume share buybacks and dividend hikes (WFC, BAC, C, GS, JPM)

·      Consumer Finance; RBC includes “buy now, pay later” and digital banking as key 2021 themes and says their top 3 picks are FISV which should generate mod-to-high single-digit rev growth, NCR given their likely pivot back to growth modeand FOUR which could see an additional $1.5B in revs from conversion to end-to-end processing, and also names V (Visa) and MA as ways to play the pivot to e-commerce and broader recovery in global consumption and payments volumes. RBC additionally lifts their price targets on PYPL, FOCS, QTWO, SQ, and SSNC; Compass Point raised their price targets on ADS to $90 from $66 and on SYF to $44 from $33, keeping both stocks rated as Buys; Baird initiated SQ at Neutral with a $245 price target

·      REITs; IIPR was downgraded to Neutral from Buy at Ladenburg on valuation after its recent price appreciation, though they still see execution driving strong per share growth combining with potential continued narrative upside; BMO resumed their coverage on HPP at Market Perform with a $27 pt as its tech/media focus and West Coast portfolio places it at the epicenter of the future of the office debate and makes it susceptible to tech firms’ recent shift to work-from-home, and also initiated DEA at Outperform with a $26 target saying that while it is not the flashiest REIT, it is efficient, dependable, and has characteristics of a hybrid office-net lease REIT and offers the opportunity and cost of capital to exceed its acquisition guidance and outperform its recent lackluster growth



·      STAT news notes: since January, 33 health care-focused SPACs have gone public, raising $6.3 billion from investors. That’s more than the roughly $4 billion drug companies raised through traditional IPOs in all of 2019, and there are another eight health care SPACs lined up to go public, potentially adding another $1.4 billion to the year’s tally.

·      Vaccine movers; U.S. government orders 100 million additional doses of the PFE/BNTX COVID-19 Vaccine bringing total doses for U.S. to 200 million; MRK has reached a deal with the U.S. to manufacture and supply MK-7110, a recombinant fusion protein, as a treatment for people with severe or critical Covid-19; SRNE submitted Emergency Use Authorization application to the FDA for its COVI-STIX rapid diagnostic test for the detection of SARS-CoV-2 virus nucleocapsid antigen in nasal samples of patients; DVAX and partner Serum Institute of India (SIIPL) have dosed the first participant in the Phase 1 part of the Phase 1/2 clinical trial evaluating SIIPL’s vaccine candidate adjuvanted with CpG 1018 to prevent COVID-19

·      Pharma movers; SUPN said a phase III study for its SPN-812 met the primary endpoint in improving the symptoms of ADHD from baseline to end of study as measured by ADHD Investigator Symptom Rating Scale, and phase 3 study met the key secondary efficacy endpoint; BMY said its cancer drug Opdivo failed a Phase 3 clinical trial for patients with a type of newly diagnosed glioblastoma. An independent data monitoring committee said there were no safety concerns but the study would not meet its primary endpoint of survival.

·      Biotech movers; SPPI Cohort 3 of the ZENITH20 trial (1L NSCLC patients with EGFR exon 20 insertion mutations treated at 16 mg QD) failed to meet its primary endpoint, but preliminary data from Cohort 5 indicated that the 8 mg BID dosing strategy improved tolerability


Industrials & Materials

·      Industrial &Transports; HON price target was raised to $225 from $182 at Credit Suisse who expects recent software acquisitions (Sine and Sparta) to act as digital multipliers; Stifel initiated LAC at Buy with a $13.25 target; AAL has started its phased return of furloughed workers after $15B was set aside in the recent stimulus bill for airline payroll support; Citi sees soft pricing and little demand improvement for airlines in January and February, saying international long-haul and business travel are in the worst shape while leisure and visiting family/friends trends are looking better, supporting their Buy rating on SAVE


Technology, Media & Telecom

·      Semiconductors & Software; TSM has received government approval to go ahead with the first phase of a new plant in the U.S. state of Arizona with an initial investment of $3.5 billion; CLDR said it sealed a credit agreement with a syndicate of lenders providing for a 7-year senior secured institutional term loan of $500 mln

·      Media & Telecom movers; IAC confirmed plans for a 2Q21 Vimeo spin, likely be completed in the second quarter of 2021, with IAC shareholders receiving a proportionate amount of Vimeo stock (price tgt raised by many analysts – though was expected); BMO Capital downgraded FUBO to Market Perform following recent outperformance as raise valuation and target again owing to higher streaming comp set valuation and expanded distribution opportunitiesDIS tgt raised to $201 from $182 at Wells Fargo post the investor day and revise our estimates for the DTC ramp


Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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