Market Review: June 18, 2021

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Closing Recap

Friday, June 18, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

Today’s quad-witching session saw elevated trading volume and stocks extending a dismal stretch that has seen the S&P fall for the past 4 days after Monday’s record close and the Dow in the red every day this week. These losing streaks are the worst for their respective indices in more than 4 months as markets have dealt with the fallout from the Fed bringing forward its projections for the next rate hike into 2023 on Wednesday. A majority of the 18 policymakers now forecast a hike that year and 7 see a hike in 2022, almost double from the 4 who previously saw a hike next year. The Nasdaq ended the week slightly lower as well, but it did set its two highest closes ever on Monday and Thursday as tech stocks continue to benefit from the 10-year yield remaining below 1.5%. Stocks were generally lower overnight, but today’s selloff intensified during a pre-market CNBC interview with St. Louis Fed President James Bullard. Bullard, who is a nonvoting FOMC member this year but who will have a vote in 2022, affirmed his hawkish stance and said the central bank must remain nimble as the overall economy recovers. He further stated that his dot represents a liftoff in late 2022 and that the FOMC has been surprised to the upside over the past 6 months, which has naturally shifted policymakers to lean more hawkish than before. Additionally, he said that Chairman Powell has formally started the taper conversation, though noted that it will take several meetings to get organized and will give markets plenty of time to act.

In stocks, NVDA hits a new all-time high again, outperforms a generally weak semi sector after Bank of America lifts its price target (follows Jefferies’ pt raise yesterday); SWBI spikes after reporting what Cowen called a blowout quarter, boosts RGR VSTO AOUT; ADBE ATH on its earnings beat; C extends its losing streak to 12 consecutive sessions as banks (JPM, WFC, BAC) slide again with the pullback in Treasury yields; LEN leads the S&P in a follow-through from its earnings Weds night and on a JPM upgrade to OW; ORPH was halved after the FDA did not approve its experimental treatment to treat Niemann-Pick disease type C; PYPL jumps in the afternoon after releasing changes to its payments rate for sellers



Gold prices slipped $5.80, or 0.3%, to settle at $1,769/oz, after Bullard’s comments about raising interest rates in 2022 pressured the metal. This is gold’s lowest settlement since April 30 and it ends the week with a 5.9% decline, its worst week since March 2020, after the Fed pushed their timeline of tighter monetary policy forward on Wednesday, pushing the dollar higher but weighing on precious metals as bond yields eased.

Oil prices rose with WTI crude gaining $0.60, or 0.84%, to settle at $71.64/bbl to recoup some of yesterday’s losses as the expected strength in demand continues to drive prices higher, and the Baker Hughes oil rig count increased by 8 to 373, the most in 60 weeks


Currencies & Treasuries

Sterling fell below the $1.39 level against the U.S. dollar today (hit lows around $1.385 this morning – weakest since first week of May), extended its recent fall following the FOMC hawkish surprise and an unexpected fall in Britain’s retail sales.





WTI Crude















10-Year Note





Sector News Breakdown


Retailers; for toy retailers (HAS, MAT), the NY Post noted shipping issues are impacting toy deliveries out of China again, which could create a toy shortage into holiday season; VSTO tgt raised to $53 from $42 at Cowen calling it an attractive entry as the ammo surge has legs, Remington’s ramp offers upside to F22 Street ests, & VSTO’s improved credit profile & new operating philosophy allows product introductions & channel enhancements; gun maker SWBI rises as Q4 GAAP EPS $1.71 easily topped the est. $1.02 on better revs ($322.9M vs. est. $259.8M) while raises dividend and buybacks stock

Auto sector; Bank of America remained positive on F (Ford) and GM after both raised EBIT outlooks this week and are investing in EVs and they also initiated MTOR with a Buy rating and $30 target as it is positioned to benefit from improved profitability and higher content EV adoption brings; RBC initiated FSK at Sector Perform, $23 target as the recent merger with FSKR gives it a strong foundation and competitive advantage, but they want to see a rotation out of legacy investments before getting more constructive

Casinos, Gaming, Lodging & Leisure sector; for gaming rooms (CZR, MGM), Truist said proprietary leisure Strip room rate survey shows sequential pricing improvements in Q2, turning into a strong Q3 outlook; Macquarie initiated CHDN at Outperform with a $254 pt due to the growth acceleration in Kentucky’s historical racing machines, and they also argue that the Kentucky Derby has few true comps and should garner a premium valuation multiple even to a comp set of luxury and unique brands across the globe; Morgan Stanley resumed coverage on MTCH at OW, $180 pt as they still see guidance as conservative given pent-up demand driving subscriber growth this year and a recovery in DAUs

Housing & Building Products; Following Weds’ earnings and yesterday’s conference call, LEN was upgraded at JPMorgan to OW as shares are currently trading at a discount to peers and its current levels do not reflect its business transformation or the value of its proposed spinoff, and its price target was raised at BTIG, Evercore, Goldman, and others; Loop said that the recent pullbacks in TREX and AZEK provide attractive entry points as their respective price targets imply returns of more than 25% and they think the selloff is overdone as they still see sustained demand for composite decking even as the price of lumber falls; Wells said the 6% month-to-date selloff in XHB (Homebuilders ETF) is overdone and upward revisions to 2022E should continue based on their checks, and list CCS, TMHC, MTH, and MDC as names trading below 6x PE on 2022e and are in historically low/value territory



Reuters reported this morning that OPEC technical meeting this week was told to expect U.S. oil output to rise by about 200,000 bpd this year and that U.S. supply could rise by 500,000 bpd to 1.3 million bpd in 2022

E&P and Majors; E&P and Majors; Morgan Stanley upgraded OXY to Overweight on a more compelling risk-reward against a backdrop of sustained higher oil prices, MRO to Equal-Weight on fading Dakota Access Pipeline risks and improved international cash flow, and downgraded DVN and XEC to EW after both stocks recently outperformed following respective mergers (DVN-COG, XEC-WPX); JPMorgan upgraded OEC to OW as they see favorable June quarter demand conditions for carbon black producers and they prefer this name to CBT (remains N) given the stock’s lower valuation and CBT’s exposure to China and its fickle pricing dynamic; TUSK files to sell 24.1M shares of common stock for holders; MGY 7.6M share Block Trade priced at $14.55

Refiners/Biofuels; Piper notes the past week in biofuels has seen a collapse in RIN pricing (-29%/-35% for D4/D6 RINs), soybean oil (-11%), and related equities (REGI/ DAR -8.0%/-14%) on the back of various news headlines suggesting risk to the forward RVO (and RINs) outlook – the firm says they believe the market is reading far too much into current headlines, and would be buyers of weakness in shares of DAR and REGI

Utilities & Solar; BIP revises takeover offer for Inter Pipeline (IPPLF), giving shareholders the option to receive as much as 100% of its current offer of C$19.50/share in cash, rather than a mix of cash and stock – says prepared to raise offer to as much as C$20.401 ; for ITRI, Piper says risk/reward is less favorable heading into Q2 earnings due to the ~20% upward move in the shares over the past month combined with supply chain challenges; XYL was initiated by Argus with a Buy rating and $140 target due to its clean balance sheet, experienced management team, and outlook for double-digit growth over the next 2 year; AQN priced its public offering for total gross proceed of $1B



Bank movers; rough week for financials with big banks tumbling as Treasury yields pulled back (C, WFC, BAC, JPM, GS among biggest decliners this week); BXS upgrade from Neutral to Buy at Davidson following steep underperformance in the shares

Insurance; RE downgraded to Neutral at Citigroup as still favor AON and AMP saying they expect the outlook for inflation will be a key area of focus for insurance investors in 2H21. In their view, P&C underwriters have more exposure to inflationary pressures due to higher claim costs vs. brokers / life insurers – but life’s current valuation appears to already reflect higher interest rates

Consumer Finance & Services; CAI announces to be acquired by Mitsubishi HC Capital Inc. in an all-cash transaction for $56.00 per share, which represents a total equity value of approximately $1.1B; PYPL changed its published rates in the U.S. from 2.9% + $0.30 per transaction and will now charge sellers 3.49% +$0.49 for transactions through its proprietary products, such as PayPal Checkout, Pay with Venmo, or Pay in 4, their new buy-now-pay-later offering, and will now charge sellers 2.59% + $0.49 to process online payments made with V/MA debit/credit cards, and will also reduce its costs for in-person purchases over $10 to 1.90% + $0.10 from 2.4% + $0.05 to compete with SQ

REITs; Stifel raising estimates and tgts for all Self-Storage REITs (NSA, EXR, PSA, CUBE, LSI) given the strong operating environment as believe the historically high occupancy level coupled with robust demand will continue to allow owners to push rental rates for existing and new customers; NHI upgraded to Market Perform from Underperform at BMO and maintain our $71 target price saying after cutting the dividend a conservative 18%, see a more balanced risk/reward with upside to the dividend from here; Janney initiated SACH at Buy with a $6 pt as a unique way to play robust trends in commercial and residential real estate with growth from its strong presence in Connecticut; RBC said the recovery in seniors housing (VTR, CTRE) remains encouraging with positive near- and long-term outlooks and they also said multi-family residential has seen the largest increase in positive sentiment, though investors are still favoring single-family (AMH, INVH); Wedbush initiated CXW at Neutral as its historical ability to generate high levels of FFO and FCF is offset by the headwinds of political pressure and declining prison populations, and also upped their pt on GEO to $8.25 from $7 as its recent rally opens the door for it to raise capital; GEO CEO reported a purchase of 166.6k shares of common stock for $1.12M



Pharma movers; ATHA shares fell as CEO Leen Kawas has been put on temporary leave as the board reviews actions stemming from doctoral research while at Washington State University; BMY announced this am that it entered into an exclusive global strategic collaboration with Eisai for the co-development and co-commercialization of MORAb-202, an antibody drug conjugate; ORPH shares tumble after disclosing its NDA for arimoclomol received a CRL from the FDA, given the need for additional qualitative and quantitative evidence for the application, potentially requiring additional trials.

Biotech movers; GERN rises after reporting positive data from a mid-stage study of blood cancer treatment imetelstat, which showed benefits including symptom response and overall survival in patients with myelofibrosis, a chronic blood cancer; CDXS raises 2021 revenue view to $89M-$93M from $82M-$85M (est. $83.74M) following the receipt of a binding purchase order for up to $13.9M of a proprietary high performance enzyme product from an undisclosed global pharmaceutical company; BIIB was upgraded to Overweight at Piper with $425 tgt; HC Wainwright initiated STRO at a Buy with a $35 tgt as they believe that STRO-002 holds the potential to become a best-in-class therapy for patients with platinum-resistant ovarian cancers (PROC), while STRO-001 is on track to become a first-in-class treatment to potentially overcome the previous challenges of resistance after recent data presentations; JPMorgan upgraded CRNX to OW on a favorable risk/reward ahead of its topline readout from the phase I SAD study of CRN04894 in mid-2021 and MAD data later this year

MedTech Equipment; ANPC says it has been granted a U.S. patent for its medical devices for both disease detection and treatment applications/the patent covers device structures and methods to modify biological samples for treatment purposes; SWAV downgraded to Equal Weight from Overweight at Wells Fargo due to valuation noting is trading at 32.9x and 20.4x consensus EV/sales in 2021E and 2022E respectively, which is the second highest multiple in our coverage universe after NVCR in both years; Deutsche initiated coverage on ABMD at a Buy with a $360 target as its revenue growth from $100M in 2011 to $847M in 2021 shows the underlying demand from physicians for its Impella pump despite a debate over how useful it is versus a standard balloon pump


Industrials & Materials

Industrial & Machinery; GE said it will proceed with the 1-for-8 reverse stock split previously approved by GE shareholders at the annual meeting of shareholders on May 4, 2021; TGI tgt raised to $30 at Truist as believe mgmt’s ongoing turnaround efforts to focus the business on TGI’s core operations, reduce debt, and generate FCF remain on track

Transports; for railroads (CSX, UNP, NSC, KSU), Bernstein says more than halfway through Q2, industry’s volume in the last 13 weeks has returned to pre-pandemic levels, lifted by robust Intermodal growth (up 7.5% v. 2019); in airlines, ALK, DAL both upgraded to Outperform from Peer Perform at Wolfe Research and raised UAL to Peer Perform from Underperform

Metals & Materials; U.S. Steel (X) the latest steel producer to issue upbeat guidance as sees Q3 adj EPS approx $3.08 vs. est. $2.67; Q2 adjusted Ebitda is expected to be approximately $1.2B; and Q2 adj net income is expected to be about $880M and excludes impacts primarily related to certain restructuring and asset impairment charges; to fully redeem senior notes due 2025; CMP was downgraded by JPMorgan, which says it will probably be difficult for the company’s growth to keep pace with its more cyclical peers; MT said it will sell its remaining 38.2M shares in CLF and use the proceeds for a new $750M share buyback program

Technology, Media & Telecom

Semiconductors; NVDA tgt raised to $900 at Bank America saying new DPU + CPU categories affectively double NVDA’s content to ~$7-8K/server (comes ahead of 4 for 1 stock split soon); Loop initiated CRUS at Buy, $111 price target given its product roadmap and best-in-class portfolio positions, along with an interdependency with Apple

Internet & Software movers; ADBE delivered a strong quarter, handily beating consensus estimates and guiding for Q3 above consensus – number of very positive metrics in the May Q, including net new ARR growth meaningfully above Street and very strong FCF, with 49% FCF margins (Q2 adj EPS $3.03 vs. est. $2.82: Q2 revs $3.84B vs. est. $3.73B); CURI downgraded at Bank America to Underperform from Buy citing valuation after the rally in shares; Needham initiated CDLX at Buy with a $135 target as its platform leverages data from about half of the debit/credit card swipes in the U.S. and positions it well for positive secular trends in areas such as digital payments and banking will serve as tailwinds to growth; Wedbush believes the Fed statement this week and messaging was very bullish for tech stocks with an "all clear for risk-on assets" led by tech stocks, predicated on the multi-year thesis that the digital transformation story across the consumer and enterprise ecosystem is still in the early innings of a $2 trillion market opportunity for the next decade

Hardware, Components & IT Services; SYKE to be acquired by Sitel Group® in all-cash transaction valued at $2.2B, with shareholders to receive $54 per share; MU was downgraded by Cleveland Research to Hold from Buy


Market commentary provided by Hammerstone Markets, Inc, 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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