Closing Recap

Thursday, January 28, 2021

Index	Up/Down	%	Last
DJ Industrials	300.75	0.99%	30,603
S&P 500	36.49	0.97%	3,787
Nasdaq	66.56	0.50%	13,337
Russell 2000	-2.10	0.10%	2,106

 

Equity Market Recap

·     Stocks on Wall Street bounced back after yesterday’s declines, as the Dow Jones Industrial Average snapped its longest losing streak since last February (5-day stretch) and tech outperformed behind a recovery in semiconductors. A day after the CBOE Volatility index (VIX) surges to its highest levels since the Presidential election, fear was all but gone with the VIX sliding. Large cap earnings have been generally stronger, though shares of AMD, AAPL are just some of the few to pullback despite better results, while TSLA earnings missed as shares slipped. Record trading volumes continue – note yesterday cash equity volumes 24.5B shares, U.S. equity options 57.1B contracts, both a record (and rising again today). In politics, U.S. senate democratic leader Schumer says the Senate will begin debate of robust covid-19 bill next week, while late day stocks fell from highs on reports the Senate Panel to hold a hearing on current state of stock market and as Sen. Elizabeth Warren said in a CNBC interview that the stock market has turned into a "casino” and commenting on recent stock market volatility after short war with GameStop.

·     The air came out of the “short-squeeze” game for stocks that have made astronomical moves amid herd mentality buying from the likes of Reddit and WallStreetBets (WBS) for some of the most highly shorted names on Wall Street, as some online trading brokers instituted trading restrictions on certain securities. This morning, Robinhood restricted transactions for certain securities to position closing only, including AMC, BB, BBY, EXPR, GME, KOSS, NAKD and NOK and raised margin requirements for certain securities. Interactive Brokers put AMC, BB, EXPR, GME, and KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice (several other securities were added to the lists throughout the day and more actions from other brokers). The news hit shares of AMC, GME, KOSS, BBBY, EXPR, BB, NOK, GSX, M, FOSL, BBW, PETS, IRBT hard on the day (among others). Midday, RobinHood financial customers sue online brokerage in Chicago and New York over trade halts seeking damages for trading halts in several stocks according to court filings.

·     Yesterday’s broad market weakness was likely exacerbated by the continued focus on the retail-driven short squeeze and subsequent risk-off/forced selling pressure of various institutional market participants to cover shorts. Other factors included Fed confirmation of slower than expected recovery and ongoing US stimulus uncertainty.

Economic Data

·     US weekly jobless claims fell to 847,000 in latest week vs. est. 875K while prior week revised to 914,000 prior week from 900,000; the 4-week moving average rose to 868,000 from 851,750 prior week; continued claims fell to 4.771 mln in latest week vs. est. 5.054 mln and US insured unemployment rate fell to 3.4% from 3.5%

·     Q4 GDP data was mostly in-line with estimates, reported at +4.0% annualized vs. +4.1% estimate and +33.4% in Q3 as the economic recovery continues at a much slower rate as new restrictions were imposed when the virus resurged. PCE price index +1.5% vs. +2.4% consensus and 3.7% in previous quarter. Core PCE prices +1.4% vs. +1.5% consensus and 3.4% in previous quarter.

·     New Home Sales for Dec rose 1.6% MoM to 842K vs. 871K expected and 829K prior; single-family home sales +1.6 pct vs. Nov -12.6%; median sale price $355,900, +8.0% from Dec 2019; new home supply 4.3 months’ worth at current pace vs. Nov 4.2 months

 

Commodities

·     WTI crude oil slipped 51c or 0.96% to settle at $52.34 per barrel as commodity prices were generally lower, while Brent prices dropped 28c to $55.53 per barrel. February gold slides -$7.00 or 0.4% to settle at $1,837.90 an ounce while April gold declines -$7.70 or 0.4% to settle at $1,841.20 an ounce – a sharp reversal lower for the precious metal, erasing earlier gains as stocks surged to afternoon highs.

 

Currencies & Treasuries

·     U.S. Treasury yields rallied, rebounding along with the broader stock market after posting its worst day in 3-months Wednesday, following in-line GDP data and stronger weekly jobless claims. The Treasury’s record $62B 7-year auction was better than feared, supported by end-user demand midday. U.S. 10-year, 20-year, and 30-year yields were lower before the economic data this morning but ended the day higher. The 10-year traded up over 5 bps midday to above 1.06% while the 30-yr rose 5 bps to 1.834%. As risk was back on today, Bitcoin prices jumped as much as 6% late day to around $33K after falling below $30,000 overnight. The dollar slipped vs. some rival currencies as the euro rebounded after a bout of selling pressure recently.

 

 

Macro	Up/Down	Last
WTI Crude	-0.51	52.34
Brent	-0.28	55.53
Gold	-7.70	1,841.20
EUR/USD	0.0025	1.2131
JPY/USD	0.15	104.24
10-Year Note	0.041	1.055%

 

 

Sector News Breakdown

Consumer

·     Retailers; Trading in GME was restricted on several platforms, including RobinHood and Interactive Brokers; BBBY another high short interest name that has been moving with GME, was downgraded to Market Perform at Telsey and to Neutral at Bank of America; LEVI Q4 EPS 20c vs. est. 15c on revs $1.39B vs. est. $1.34B (-12% on a reported and constant-currency basis, a significant sequential improvement from Q3 net revenues decline of 27%); FLWS reported Q2 adj EPS $1.72 on net revs $877.3M, both widely beating the highest estimates (consensus $1.39 on $755.2M); TSCO reported Q4 EPS $1.64 (est. $1.51) on revs $2.88B (est. $2.72B), comp sales +27.3%, and sees FY21 EPS $6.50-$6.90 (est. $6.52), rev $10.7B-$11B (est. $10.53B), and guides FY21 comp sales to (2%)-1%; Loop downgraded BIG to Hold on Valuation; Loop additionally initiated ASO at Buy with a $30 tgt on category tailwinds in at-home fitness, road trips and outdoor activities, geographic tailwinds; Wells believes that UAA is poised to be the next big athletic turnaround story as they believe its comps increased mid-single digits in the DTC channel, which would mark the company’s best quarter in 4 years; Gordon Haskett downgraded WSM and Wayfair (W) to Hold

·     Auto sector; TSLA misses Q4 profit estimates (80c vs. $1.03 est.) and did not provide a clear 2021 vehicle delivery target weighing on shares overnight (after rising 22% to start the year – or 700% last year) – said over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries; GM said it will offer 30 all-electric models globally by mid-decade and 40% of the company’s U.S. models offered will be battery electric vehicles by the end of 2025; electric vehicle names pressured today after TSLA miss and pullback (BLNK, FSR, NKLA); UBER up on positive comments earlier from Morgan Stanley as reiterated OW and $68 tgt saying sees EBITDA breakeven ahead with a path for Uber to report positive EBITDA as soon as 3Q:21

·     Housing & Building Products; in homebuilders, MTH posted top and bottom line Q4 beat; TOL downgraded to neutral from outperform at Wedbush noting shares have appreciated by 24% this year as anticipate catalysts are well known by investors; NVR misses EPS by wide margin and also a miss on revenue; building products name EXP posts Q4 EPS/rev beat; SWK Q4 results beat and guides FY21 EPS above consensus; PHM 4Q adj EPS $1.49 vs. est. $1.40 on home sales revs $3.1B vs. est. $3.1B, qtrly net new orders +24% to 7,056 homes, order value +33% to $3.3B; WHR shares dropped despite a beat and raise quarter, falling on profit taking

·     Restaurants; MCD Q4 adjusted EPS $1.70 missed the estimate $1.77 as revs fell slightly YoY to $5.31B, also missing ests of $5.37B while overall comp sales fell -1.3% vs. est. -1.7% but US comps were better at up 5.5% vs. est. 5.2%; CAKE downgraded to hold from buy at Deutsche Bank; EAT upgrade from Sector Weight to Overweight at KeyBanc saying Chili’s has proven it can out-execute the competition during COVID-19 and believe it can continue to gain share; RRGB outperforms in casual dining, rising more than 10% early

·     Leisure and Gaming; LVS misses Q4 results – posted 67% drop in Q4 revenue to 41.15B 9est. $1.28b) and an operating loss of $211M/net income was $376M during the quarter vs. $783M a year ago on weaker total property EBITDA of $141M; BC raises FY21 adjusted EPS view to $6.00-$6.40 from $5.75-$6.25 after a Q4 beat in the boating sector as well as a Q4 beat for HZO and also raised its guidance – to $4.00-$4.20 from $3.70-$3.90 (est. $3.92); CCL gains as named a new best idea long at Hedgeye; DKNG rises after saying its real-money gaming apps Sportsbook and Casino will soon be available to download for android users on Google Play

 

Energy

·     Energy stock movers; MUR falls on wider loss and miss in revenue (Q4 revenue $330.2M vs. est. $490.72M); in refiners, VLO narrower Q4 adj EPS loss ($1.06) vs. est. loss ($1.42) on better revs $16.6B vs. est. $16.21B as refining segment reported a $377 mln operating loss for Q4 compared to operating income of $1.4B; CVE expects FY 2021 total production of 730K-780K boe/day, far above its 2020 production forecast of 432K-486K boe/day and planning C$2.3B-C$2.7B in capital spending compared with its 2020 spending forecast of C$750M-C$850M.

 

Financials

·     Bank movers; CATY Q4 EPS 89c vs. est. 76c, loan loss provision ($5.0M); RJF reported Q1 adj EPS $2.24 (est. $1.69) on revs $2.22B (est. $2.08B, $2B YoY); SLM Q4 core EPS $1.15 widely beat consensus $0.35 and they approved a new $1.25B share repurchase program; JPMorgan upgraded GWB to Neutral after their Q4 EPS beat consensus and their previous thesis of the company being more vulnerable to the upcoming credit cycle has faded with additional stimulus and positive vaccine developments; Piper upgraded CPF to Overweight on valuation as it currently trades at 95% of TBV vs a median of 140% for its peers; Wells upgraded UMBF to OW with a new $85 pt from $72 as its stronger loan growth outlook and fee income opportunities present catalysts to narrow the valuation gap against peers;

·     Services & Insurance; AFG sold its annuity business to MassMutual for $3.5B; MMC reported Q4 EPS $1.19 on revs $4.4B vs est. $1.12 on $4.26B; RLI Q4 EPS 75c (est. 65c) on revs $304.45M (est. $238.44M); AMP reported Q4 adj EPS $4.53 on sales $3.1B (vs. ests. $4.52 on $3.12B); SEIC reported Q4 EPS 86c on revs $443.7M, both topping estimates (80c, $436.7M); GATX posted Q4 EPS 50c, missing est. 95c, on revs $304.9M vs. est. $301.7M; Truist said incrementally negative on AJG, BRO based on our look at their stock price performance during the last two cycles.

·     Consumer Finance; MA Q3 adjusted EPS of $1.64 fell from $1.96 a year ago but above the $1.52 estimate as revenue of $4.1B fell 7% Y/Y, but exceeds the consensus estimate of $4.01B/cross-border volume fell 29% Y/Y on a local currency basis; ADS reported Q4 EPS $3.31 (est. $2.41) on in-lines revs $1.11B (-24% YoY), including card services $879M (-22% YoY) and the company sees FY21 total decreasing low single-digits vs 2020; MELI was downgraded to Neutral at Bradesco; SQ and PYPL outperformed after recent weakness

·     Asset managers; TROW posts strong Q4 revenue, earnings gains as AUM grows 12% helped by $2.2B of inflows and strong market gains, while Q4 adjusted EPS of $2.89 tops the consensus estimate of $2.63 and increased from $2.03 in the year-ago period; IVZ was upgraded to Buy at UBS who says pessimism is overdone given its growth opportunity with institutional clients

·     REITs; PSA was upgraded to Market Perform with a $240 target price at BMO after underperforming peers 4.0% YTD; SLG posted Q4 EPS $3.43 ($0.22 YoY), Q4 FFO $1.56 ($1.75 YoY) on sales $165.24M (est. $194.1M); DRE Q4 EPS 41c (est. 15c) on revs $248.67M (est. $238.29M) and sees FY21 core FFO $1.62-1.68; CCI reported Q4 adj FFO per share $2.33 vs est. $1.65 on revs $1.49B vs est. $1.51B, saying these results were impacted by spring cancellation and reduction in Q4 staffing, and the company maintained its FY21 outlook of adj FFO $.64-6.74 and expanded its strategic relationship with VZ for long-term 5G cell commitment; URI Q4 EPS 4.09 misses est. $4.23 though its revs $2.28B topped est. $2.17B and guided FY21 rev to $8.63-$9.03B, adj EBIDTA $3.93-$4.13B, FCF $1.65-1.85B; Scotiabank upgraded WRI to Sector Outperform with a $26 pt, downgraded FRT to Sector Perform with a $91 pt, and initiated Sector Perform ratings on HR with a $32 pt and HTA with a $30 pt

 

Healthcare

·     Vaccine news; note AZN is expected to report results of its U.S. COVID-19 vaccine trial in late-January, while JNJ this past Tuesday said it expected to report data on its COVID-19 vaccine early next week; PFE and BNTX announced results of an in vitro study of sera from individuals vaccinated with the PFE/BNTX COVID-19 vaccine, showing the sera neutralized SARS-CoV-2 with key mutations present in the UK and South African variants

·     Pharma; AGTC rose after additional data from its ongoing ACHMB3 and ACHMA3 clinical trials in patients with achromatopsia (ACHM), an inherited retinal disease; LLY and Asahi Kasei Pharma inks licensing pact for chronic pain drug candidate; ZYME shares fell after provided an initial update from the ongoing phase I dose escalation study evaluating ZW49 which we expect to be received with disappointment as per JPMorgan which cut tgt to $36 from $49; MNPR shares surge as Roth initiates with a buy and $49 tgt (closed at $6.60 day prior)

·     Biotech movers; AMGN’s drug designed to block the cancer protein known as KRAS shrank tumors in 37% of patients with advanced lung cancer and delayed tumor progression by just under seven months, according to results from a clinical trial announced Thursday as per STAT News; UTHR announced that its Tyvaso DPI (inhaled Treprostinil) met its primary objective of demonstrating safety and tolerability in patients with pulmonary arterial hypertension transitioning from Tyvaso (Treprostinil) inhalation solution; BGNE said tislelizumab shows survival benefit in esophageal cancer study; EYPT dosed first patient in an early-stage trial testing its treatment, EYP-1901, to treat wet age-related macular degeneration as a twice-yearly treatment (also initiated Overweight and $22 tgt at Cantor); PASG receives U.S. FDA clearance to begin human trials of its gene therapy, PBFT02, for treatment of Frontotemporal Dementia

·     MedTech and Equipment; SYK reported mixed Q4 results missing Street expectations on the topline though beating on the bottom, and provided an outlook for 2021 slightly shy of the Street; ABT upgraded from Neutral to Buy at BTIG and setting a $140 PT following a strong Q4 result, a blockbuster Diagnostics revenue result that beat consensus by more than $1B, and a bullish outlook for both 2021 and 2022 EPS; DHR Q4 EPS beat by 21c on higher revs as guides core sales growth at +High-single to low-double digit; EW reported 4Q revs $1.192B, in line with consensus and TAVR revenues were $776M, up 2% y/y, roughly in line with consensus; ABMD rises after EPS of $1.35 topped the $1.13 estimate and revs better at $231.7M vs. est. $225.5M – guidance for Q4 revs in-line with ests; HOLX posted another strong quarter driven by continued high levels of demand for COVID testing as they delivered 30mn COVID tests for $745mn

 

Industrials & Materials

·     Transports; airlines a big focus today given a slew of earnings, but AAL shares the big story, surges after reporting Q4 results ahead of expectations despite weaker Q1 rev growth (of -65% to -60% vs. -47.3% consensus and for capacity to be down 45%) – but the high short interest in shares helped boost sentiment; JBLU 4Q adj EPS ($1.53) vs. est. ($1.69), revs -67% vs. est. -68.8%, avg daily cash burn in 4Q was $6.7Mm (toward lower end of forecast range of $6-8Mm), qtrly rev passenger miles 4.45B, remain cautiously optimistic that demand trends will improve later this year, 2021 plan cuts total operating costs by over $1.2B; Brazilian airlines GOL, AZUL, CPA downgraded to hold from buy at Deutsche Bank; LSTR rises in trucking on earnings

·     Metals & Materials; in the steel space, NUE posted a Q4 EPS beat ($1.30 vs. $1.19 est.) on light sales ($5.26B vs. est. $5.4B) as average sales price per ton increased 5% Q/Q and 3% Y/Y; in chemicals, DOW solid beats for Q4 earnings and revenues, helped by higher prices and demand for its chemicals amid a recovery from the pandemic

·     Industrials; AOS shares jumped, among top gainers in the S&P after Q4 EPS of 74c beat the 58c est. on better revs of $834.5M vs. est. $769M amid higher residential water heater volumes in North America and higher sales in China

 

Technology, Media & Telecom

·     Apple (AAPL) crushed both the top and bottom-line last night as co beat across all segments, except Mac which was in line with expectations $8.68B) while iPhone growth was 17%, versus the Street at ~7% ($65.6B vs. est. $59.8b), while Greater China revs rose 57% YoY – shares however failed to rally with the better results, largely on fact shares surged into results

·     Internet; FB posted stronger than expected results (~7% revenue upside and >20% EPS upside), as advertising growth accelerated to +30% Y/Y – reported 2.6 billion (+15% Y/ Y) Daily Active People across its family of apps—and monetization improvements in the quarter; TWTR upgrade from to Overweight at KeyBanc saying execution is improving, and the combination of a cyclical ad recovery and new products creates potential for revenue to outpace our above-consensus revenue estimates in 2021 and 2022.

·     Semiconductors; positive quarterly results from AAPL a positive for iPhone supply chain QRVO, SWKS, CRUS and AVGO; STM posted Q4 net profit ahead of analysts’ expectations saying it climbed to $582M from $392M last quarter and above est. $547.2M; gross profit for the quarter rose to $1.25B from $1.08B with gm of 38.8%; LRCX posted a big F2Q beat and F3Q raise with strong demand noted in DRAM and foundry, along with continued layer growth in NAND; MKSI, CREE and XLNX among other chip makers moving on earnings results/guidance; TER reported a solid Q and guided next Q in line with a wide range which was a disappointment following the past few blow out guides; WDC earnings tonight

·     Software movers; TTD shares active after WMT announced a partnership to launch a first-of-its-kind demand-side platform for suppliers and their media and ad agencies in time for the 2021 holiday season; NOW reported strong 4Q20 results across multiple metrics and introduced FY21 guidance ahead of consensus for subscription revenue as continues to benefit from strong secular trends which include accelerating spending on digital transformation projects; PTC announced strong F1Q results with upside to revenue, EPS, and FCF, driven by strong large deal activity. Core (CAD/PLM) ARR grew an impressive 12% Y/Y CC (+17% reported). FY21 ARR guidance was raised only a little (RBC upgrades to Outperform & raises PT to $145); PLTR signed a multi-year enterprise agreement for its Foundry Platform with RIO; WDAY to acquire Peakon for $700M in cash; TEAM earnings tonight

·     Media & Telecom movers; VIAC downgraded to Underperform from Neutral at Credit Suisse on valuation with a higher price target of $37 up from $28; SIRI also downgraded at CSFB on valuation; CMCSA Q4 revenue of $27.7B topped estimates as broadband demand offset falls in theme park and filmed entertainment businesses as added 538,000 broadband subscribers in Q4, compared with analysts’ average estimate of 488,000 net additions/NBCUniversal segment’s Q4 revenue falls 18.1% to $7.5B; little pullback early in media names (VIAC, FOXA, DISCA) after those names have outperformed in recent days

·     Hardware & Component news; EXTR rises after providing upbeat prelim Q2 revenue guidance; GLW upgraded to outperform from Perform at Oppenheimer citing strengthening business outlook and compelling valuation; AVT Q4 results were above the high end of both revenue and EPS guidance, and F3Q guidance suggests a continuation of margin improvement; XM boosted the offering’s size to 50.4 million shares from a previous 49.2 million. It also raised the IPO’s price range to $27 to $29 a share, up from an earlier $22-to-$26 price range. Pricing an even larger offering at $30 a share values Qualtrics at some $15 billion (XM is SAP’s planned spinoff of its survey-software firm)