Closing Recap

Wednesday, March 10, 2021

Index	Up/Down	%	Last
DJ Industrials	462.97	1.45%	32,295
S&P 500	23.29	0.60%	3,898
Nasdaq	-4.99	0.04%	13,068
Russell 2000	40.62	1.81%	2,285

 

Equity Market Recap

·     U.S. major averages end higher as industrials, materials and energy outperform pushing the Dow Jones Industrial Average to new closing record highs (and up a 4^th straight day), while high growth technology lagged. Stocks advanced following tame inflation data (CPI – see below) and despite a weaker 10-year Treasury auction that saw softer demand (though yields remained near lows late afternoon). The U.S. 10-year Treasury yield touched lows of 1.505% late day, well off last week highs above 1.6%. Bitcoin topped the $57K level, slowly approaching its record high of $58,356.27 as momentum trades still leading Wall Street. Economically sensitive cyclicals and Smallcaps outperformed, leading the Dow up 500 points (behind BA, MMM, HON, CAT) and Russell 2000 higher behind stimulus, stronger earnings and a spending rebound. With today’s gains, the S&P 500 posted its first back-to-back gains since Feb 23-24. The S&P 600 index posted its 4th straight day of gains and is now up more than 22% for the YTD.

·     Congress passed the latest economic stimulus plan for $1.9 trillion, which includes $1,400 payments for most Americans, expanded unemployment insurance, funding for schools and public health, and state and local government aid. President Joe Biden plans to sign the $1.9 trillion COVID-19 stimulus package into law on Friday, White House press secretary Jen Psaki said on Wednesday during a briefing. Biden’s next big priority, a massive transportation infrastructure package, could move through a key Senate committee by the end of May according to reports.

·     Madness ensued again in the Reddit, “meme” stocks that dominated trading action in January, grabbing headlines again today with massive surges early for the likes of GME, KOSS, AMC, BBBY, before astounding declines in just minutes, prompting trading halts. GME traded as high as $348.50, taking its prior all-time closing high of $347.51 but quickly fell as low as $180, down over 30% (literally within minutes and in between several trading halts) – before rising back around the $260 level midday…on no news (madness at its finest).

 

Economic Data

·     Inflation data in-line as February Consumer Prices (CPI) rose +0.4% MoM, in-line with consensus and up from +0.3% prior, while rises 1.7% YoY; Core CPI (ex food & energy) rose 0.1% vs. est. +0.2% and compared to prior unchanged (rose 1.3% YoY, slowing from 1.4%); gasoline index rose 6.4% in Feb, more than half of the seasonally adjusted increase in the all-items index

 

Commodities

·     Energy prices edged higher despite bearish inventory data as WTI crude gains 43c or 0.67% to settle at $64.44 per barrel and Brent rose 38c to $67.90 per barrel. Weekly inventory data was mostly bearish for crude as the API showed a build of 12.8M barrels of oil for the week ending March 5^th, while the EIA today posted a weekly build of +13.8M barrels, but down from last week build of +21.6M – however the EIA and API both posted large weekly drawdowns for gasoline and distillates. In the end, energy prices rose with broader stock markets.

·     Gold erased earlier losses to hit a one-week high on Wednesday, as April gold rose $4.90 to settle at $1,721.80 an ounce as U.S. Treasury yields eased after subdued inflation data (CPI). Ten-year U.S. Treasury yields slipped after data showed U.S. consumer prices increased in February, though underlying inflation remained tepid.

 

Currencies & Treasuries

·     All eyes fixated on inflation; the U.S. Treasury sold $38B in 10-year notes at a yield of 1.523% vs. 1.513% when issued prior, with a bid-to-cover (demand) at 2.38 vs. 2.47 prior and indirect bidders awarded 56.81% and directs awarded 17.78%. The 10-year auction not nearly as strong as the 3-year yesterday, as yields bounced off session lows (1.51%) after the results. Still, the February CPI inflation report earlier in the day eased some inflation concerns initially.

·     The U.S. dollar was little changed into the afternoon 10-year auction, recovering from earlier declines, but slipped after the results for the 10-year disappointed. U.S. consumer prices posted their biggest annual gain in a year, though underlying inflation remained tepid amid sluggish demand for services like airline travel, as per the CPI data. Riskier currencies such as Aussie and New Zealand dollars edged lower while the buck was little changed vs. euro/yen. 

 

 

Macro	Up/Down	Last
WTI Crude	0.43	64.44
Brent	0.38	67.90
Gold	4.90	1,721.80
EUR/USD	0.0021	1.1921
JPY/USD	-0.07	108.39
10-Year Note	-0.025	1.52%

 

 

Sector News Breakdown

Consumer

·     Retailers; BBW reported Q4 earnings that surpassed expectations as adj EPS 47c topped est. 16c and revs $93.7M also beat consensus $90.5M as e-commerce sales more than doubled; EXPR Q4 adj EPS (66c) loss was narrower than expected (83c) loss and sales $430.3M was above est. $424.5M, and the company said they expect sequential comp sales to improve throughout FY21, and the results sent shares higher along with other popular retail stocks on Reddit (GME, BBBY; VRA Q4 adj EPS 31c vs. estimate 38c on rev $142.4M (-9.3% YoY) vs. estimate $152.8M, comp sales -10.6%, retail comp sales -27.4%, and sees FY22 EPS 80-90c (est. 96c) and revs $550-575M (est. $533.5M); Telsey maintained PLCE at Outperform and raised its target to $100 from $80; Needham upped its pt on BNED to $9 from $5 after their earnings reports pre-market yesterday included revenue above their estimate and they anticipate revenue accelerating in FY22; Loop downgraded TPX to Hold from Buy as its share price has approached their $40 target and on the expectation that lockdown-driven shifts in consumer spending reverses back to vacations

·     Auto sector; electric vehicle stocks extend massive gains from Tuesday, as investors still piling into high growth sectors after last week’s sell-off (TSLA, LI, NIO); Guggenheim said they continue to favor auto dealer unique product growth stories that are less reliant on near-term volume trends, including BUY rated GNTX and VC as raise tgt on AN, KMX and LAD to $108, $143, and $462 (from $93, $117, and $390), but says this backdrop will continue to pose a headwind to wholesale auction volumes with a 2H recovery unlikely, which supports their sell rating on KAR; UBER shares outperform after Deutsche Bank upping tgt to $82 following mgmt coming away with stronger conviction in both the near/medium term outlook

·     Housing, Home Improvement & Building Products; mortgage applications under pressure as mortgage rates rise for 5th week to 3.26% from 3.23%; the refinance Index fell -5.0% vs. +0.1% the previous week as per the MBA weekly mortgage data; TUP Q4 EPS 14c missed est. 77c but sales $489.6M beat est. $449M

·     Consumer Staples; in food space, UNFI posted mixed Q2 results as EPS beat, but sales of $6.89B misses views, while said it expects its FY21 Ebitda to be at the upper end of its guidance, and affirmed its other outlook metrics; CAG in talks to sell Hebrew National brand to JBS in a deal that could be valued at around $700M according to the WSJ this morning; CPB posted in-line Q4 EPS while revs of $2.28B just fell short of consensus and sees 2021 EPS to be $3.03-$3.11 vs. consensus of $3.03, reflecting growth of 3% to 5% YoY; ELF upgraded to Overweight at Piper and raise tgt to $30, calling it one of the best ways to play stimulus to the lower to middle-income consumer given its value price positioning.

·     Leisure and Gaming; CHDN announces proposed offering of $200 million of senior notes due 2028; HGV acquires Diamond Resorts International from funds managed by Apollo Global Management (APO) in a stock-based deal with an equity value of around $1.4B; CWH announces planned acquisition of Utah-based Nielson RV; PENN rises early with Barstool going live in Illinois ahead of the March Madness college basketball tournament and MLB season; DKNG rises after several positive analyst comments following its investor day presentation Tuesday saying TAM, market share and long-term growth profile continue to exceed expectations

 

Energy

·     Energy stock movers; COP resumed its share repurchase program at an annualized level of $1.5B; Mizuho said they believe CVX is poised to be the fastest-growing major with production expected to increase 15-20% by 2025 after their analyst meeting highlighted the company’s superior FCF generation, growth, and capital efficiency, though Scotiabank downgraded the name to Sector Perform with a $115 target; MCF posted Q4 EPS (16c) loss vs ($1.32) loss YoY on revs $29.2M (vs $37.2M YoY) and produced 14.4k boe/d, and expects Q1 production 19-21k boe/d

·     Utilities & Solar; RUN was upgraded to Overweight from Equal-weight at Morgan Stanley with an $86 price target and to Neutral from Sell at UBS, both of which are on valuation after falling off of Jan 12’s high above $100, and Morgan Stanley also recommends AES, AY, SEDG, TPIC as stocks with strong growth and cash flow following the industry-wide stock price pullback; CLNE reported Q4 adj EPS loss (1c) vs. est. flat on revenue $75M vs. est. $71.3M, delivered 96M gallons (-7% YoY); ARRY posted Q4 adj EPS 93c incl items and 8c ex items vs. est. 6c on revs $180.6M vs. est. $164M, and guided FY21 revs $1.025-1.125B (est. $989.9M), and Roth, Barclays, and Guggenheim each reiterated their bullish view on the stock but lowered their price target after the results; Barclays upgraded CMS to OW with a $67 target as its valuation has been disproportionately impacted by sector outflows despite its upcoming growth drivers; BLDP said their fuel cell modules will be employed to provide 1.2 megawatts of electricity by CP for their pioneering Hydrogen Locomotive Program

 

Financials

·     Bank movers; Bitcoin prices topped the $56,000 level, rising over 3% early, prompting another jump in names that are leveraged to prices in cryptocurrency and blockchain-related firms; Bitcoin bank SI rises along with cryptocurrency miner RIOT and MARA, along with online retailer and blockchain tech investor OSTK and bitcoin buyer and business software firm MSTR; auto insurance stocks active (ALL, PGR) after Feb’s consumer price index report noted that the price index for motor vehicle insurance rose during the month

·     Asset Managers; WDR reported preliminary AUM of $75.5 bln for month ended Feb. 28, 2021, compared to $74.3 bln on Jan 31, 2021; LAZ reported assets under management of $260.68 billion vs. $226.8 billion YoY; AB prelim assets under management increased to $688 billion during February 2021 from $683 billion at the end of January; APAM assets under management as of February 28, 2021 totaled $161.5 billion and separate accounts accounted for $83.2 billion of total firm AUM; BEN reports preliminary AUM $1.5T as of February 28 compared to $1.49T at January 31; IVZ reported preliminary month-end assets under management (AUM) of $1,391.5 billion, an increase of 1.8% versus previous month-end; TROW prelim assets under management of $1.50T at Feb. 28, 2021 increased from$1.46T at Jan. 31.

·     Consumer Finance; GSKY posts Q4 EPS beat of 11c vs. est. 6c and said it remains optimistic about 2021 prospects, sees FY revenue at $584M, higher than 2020 and roughly in line with ests; MGI rises after BinanceP2P adds the company to its list of available payment methods for buying and selling crypto in Arab countries

·     Services; HRB reported a slow start to the 2021 tax season due to the IRS’ delay in accepting e-filings from late-January to Feb 12^th as earnings missed estimates; LPRO rises as Q4 EPS 12c (in-line w ests) and Q4 revenue $39.63M vs. est. $34.03M and facilitated 26,822 certified loans during Q4, compared to 22,559 certified loans in Q4 of 2019

 

Healthcare

·     Vaccine news; LLY antibody-based drugs reduced Covid-19-related hospitalizations and deaths among recently diagnosed patients when given at lower doses than previously tested, a new study found (bamlanivimab at 700 mgs together with 1,400 mgs of etesevimab cut hospitalizations and deaths by 87% compared with a placebo); BNTX and PFE said the European Commission enters into a deal with the two companies for supply of additional 4 mln COVID-19 vaccine doses to be delivered this month; PFE had previously committed to supply 500 mln doses to EU by end of 2021; President Biden today will announce a plan for the federal government to purchase an additional 100 million doses of JNJ’s Covid vaccine as per NBC News

·     Pharma movers; VRTX announces FDA Fast Track Designation and initiation of a phase 1/2 clinical trial for vx-880, a novel investigational cell therapy for the treatment of type 1 diabetes; NVS downgraded to Hold from Buy at Argus as the co is seeing slower revenue growth and its oncology portfolio faces competition from generics Novartis also expects flat revenue in its Sandoz segment this year; JNCE 5M share Spot Secondary priced at $11.25; XENE 4.32M share Spot Secondary priced at $18.50

·     Biotech movers; MNOV shares rise after saying it partnered with the Biomedical Advanced Research and Development Authority to repurpose its candidate MN-166 as a potential medical countermeasure (MCM) against chlorine gas-induced lung damage; BLUE said the case of AML that earlier forced the company to halt two clinical trials in sickle cell disease was unlikely due to BB305 lentiviral vector; ICPT announced its CFO was departing; AFMD rises on continued enrollment in the REDIRECT trial, which is evaluating AFM13 as a monotherapy for the treatment of relapsed or refractory CD30-positive peripheral T-cell lymphoma (PTCL)

·     Healthcare services and providers; PGNY upgraded to Buy from neutral at Bank America saying it remains the only pure play fertility and family planning company, with a high touch tech-based platform that improves the overall viability of pregnancies; CDXC rises after saying its healthy aging nutrient, Tru Niagen, will be available in 3,000 WMT stores beginning in June 2021; MPLN slides after swinging to a loss in Q4 of $182.4M vs. a profit of $11.8M YoY while revenue rose to $255.3M from $246.4M/didn’t provide annual or quarterly guidance due to Covid-19 uncertainty

·     MedTech and Equipment; QDEL shares tumbled after speaking at Barclay’s conference saying demand for testing has softened significantly, down 305-40% quarter-to-date from Q4; NARI reported Q4/20 revenue of $48.6M (+144% Y/Y), coming in on the higher side of its preannounced revenue range of $47.9-$48.9M and guided 2021 revenue guide of $225-$235M, which is ~65% YoY growth; LMNX applied for an Emergency Use Authorization from the FDA for a multi-analyte respiratory panel that combines Flu A/B and respiratory syncytial virus targets with the SARS-CoV-2 target.

 

Industrials & Materials

·     Industrial & Machinery; GE sells its aircraft-leasing unit in an over $30B deal to AER and will use proceed to reduce debt after closing in Q4 and allows it to focus on its industrial core — power, renewable energy, aviation and healthcare – reiterates 2021 forecast to generate $2.5B-44.5B in free cash flow and guides year EPS 15c-25c vs. est. 26c; CARR upgraded to Outperform at Cowen; industrials and materials outperform (cyclical trade), with CAT, MMM, HON, DOW among the top leaders in the Dow Jones average today

·     Transports; in airlines (AAL, DAL, JBLU, UAL), air fares in the U.S. fell 5.1% in February on a month-to-month comparison, according to data compiled by the Bureau of Transportation Statistics. Fares were down more than the 3.2% decline seen in January and 2.5% drop in December. Air fares were off 25.6% in February compared to a year ago on an unadjusted basis; Goldman Sachs downgraded LSTR to sell, downgraded KNX, WERN, SNDR to neutral and upgrade ODFL, CNI in transports saying as the US reopens, the service sector is likely to see a bigger surge in demand than goods – they see limited upside in Trucking stocks following a strong run for the group and as spot truck rates in 2021 face tough YoY comparisons

·     Aerospace & Defense; BA again leading the Dow Jones higher, follows strong monthly orders data the day prior; UAVS rises after announced the expansion of the Company’s business development team with the appointment of two highly experienced and accomplished drone industry veterans.

 

Technology, Media & Telecom

·     Semiconductors; COHR announced an amended buyout agreement with LITE valuing the cash-and-stock deal increase to $6.6 billion from about $5.7 billion; the terms come after IIVI’s unsolicited bid, valued at about $6.4 billion, or $260 a share was deemed by Coherent earlier this week to be "superior" to the original deal. https://on.mktw.net/2N6EhsU ;TSM announced revenues for February 2021 were approximately NT$106.53B, a decrease of 15.9% from January 2021 and an increase of 14.1% from February 2020; QCOM raises quarterly dividend by 4.6%

·     Software movers; TLND to be acquired by Thoma Bravo for $66.00 per ordinary share and ADS, or a 29% premium to its closing price of $51.30 on Tuesday; all-together, the proposed deal values Talend at ~$2.4B. https://bit.ly/3l39YQb; MDB reported strong 4Q results as revenue and guidance for FY22 were both well above consensus, continuing to execute against its large database market opportunity as the company maintained its near record levels of new customer adds and reported an acceleration of Atlas growth; Wedbush adding AAPL, SAIL and NUAN to Best ideas list given recent sell-off in names; RBLX opens for trading much higher ($64.50) after the NYSE set a reference price of $45 for shares of the U.S. gaming platform, implying a market value for the company of around $30 billion; AVID slips after EPS miss for Q4 and softer guidance as sees Q1 EPS 17c-24c vs. est. 20c; sees Q1 revenue $88M-$94M vs. est. $93.69M

·     Media movers; ANGI Feb revenue deceleration as CFO says expects 1Q ANGI revenue at ~8-9% and 1Q EBITDA lower than Street outlook on investments; IAC Vimeo run rate implies 1Q revenue +56% y/y vs. Street’s +51%; DotDash run rate implies 1Q revenue +49% y/y, vs. Street’s +37%; Search run rate implies 1Q revenue +8% y/y vs. Street’s +2% y/y; DISESPN nears deal for rights to NHL games, according to reports