Market Review: March 26, 2021

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Closing Recap

Friday, March 26, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     It was a wild afternoon on Wall Street as major averages end sharply higher, with the Dow Transport index touching record highs, the S&P 500 index jumping 1% along with big gains for the Dow Jones Industrials and the Smallcap Russell 2000 which rebounded after a dreadful week of selling pressure. However, the Nasdaq Composite lagged, falling mid-afternoon (before recovering and ending at highs), with bids disappearing for a handful of sectors that saw massive block trades. Media stocks (such as VIAC, DISCA, FOXA), which have absolutely surged over the last few weeks in unimaginable fashion, came crashing down late Friday, breaking below key technical levels. Chinese ADR related stocks saw extended weakness (BIDU, TAL, VIPS, IQ) also under tremendous pressure amid several ongoing concerns. Still, stocks overall were mostly higher (full run down of top sector movers below). Industrials and Financials helped the price weighted Dow stay strong. In tech, chip equipment stock dominates the list of the S&P’s best gainers while mega caps were down only modestly (outside of TSLA).

·     Economic data was favorable again (adding to positive weekly sentiment) as overall, enthusiasm for stock market gains is approaching levels seen before the pandemic, looking at the University of Michigan survey. One of the biggest stories of the week was efforts to dislodge the massive Ever Given container vessel blocking the Suez Canal, which will take until at least next Wednesday, longer than initially feared, raising the prospect that the incident will trigger disruptions across global supply chains from oil to grains to cars. Stocks were buoyed mid-week after several Fed members which reiterated their positive dovish outlook. Treasury yields ticked higher but didn’t have a massive impact on stock markets.

·     Sector Movers: media names bludgeoned after surging the last month as DISCK, VIAC, DISCA repeat as the worst performers in the S&P, each falling more than 20%, as VIAC shares were down more than 50% and $DISCA 46% off of Monday’s close at today’s lows; transports a bright spot as Dow Transport Index reaches record highs led by car rental, truckers, and freight; there was lots of action within several sub-sectors today; Wall Street Banks JPM, WFC, C, CMA post slight gains after the Fed said it will end buyback and dividend restrictions for most banks on June 30; EV space under pressure again as NIO slides after saying it would halt production at its plant due to the shortage in semiconductors, TSLA falls after Muddy Waters tweet, BLNK unchanged after mixed earnings; SPAC BOWX spikes after announcing it will be taking WeWork public in a deal that values the company at approximately $9B; in retail, LB surges to its highest levels since January 2017 after raising its Q1 EPS guidance; Chinese education names TAL, EDU, GSX plunge, while other Chinese stocks extend their losing streaks – BIDU down for the 4th straight day and IQ, TME down for the 3rd consecutive session as SEC recently began rollout of law aimed at delisting, compounding concerns of a widening domestic antitrust crackdown; semiconductors outperform with SOX index up over 2%; semiconductors outperformed, led by equipment names AMAT, KLAC, LRCX in follow through off better INTC capex spending comments this week.

Economic Data

·     Advance Trade Goods International Balance widens +2.5% to (-$86.7B) vs. (-$86.1B) consensus and -$84.6B prior; Wholesale inventories +0.5%, while inventories excluding autos +1.2%

·     Personal Income for February dropped (-7.1%) MoM vs. est. down (-7.2%) and the +10.1% prior (revised from +10.0%); consumer spending for February fell (-1.0%) MoM vs. the -0.7% consensus and +3.4% prior. Inflation readings showed: PCE Price Index: +0.2% vs. est. +0.3%, core PCE Price Index rises +0.1% (in-line with ests). Feb YoY PCE Index +1.6% vs. Jan +1.4%

·     University of Michigan surveys of consumers sentiment final March 84.9 (consensus 83.6) vs preliminary March 83.0 and final Feb 76.8; the consumers expectations index final march 79.7 vs prelim March 77.5 and final Feb 70.7 and the current conditions index final March 93.0 vs prelim march 91.5 and final Feb 86.2

·     Investments into U.S. money market funds surged to an 11-month high in the week to March 24, on concerns over rising coronavirus cases in Europe and the cost of infrastructure spending and potential tax increases to pay for the recent $1.9 trillion relief bill. U.S. money market funds secured a net $60.16 billion in the week, the highest since April 2020, data from Refinitiv Lipper showed. A retreat in U.S. bond yields lured money inflows into U.S. equity funds, which saw net purchases of $14.1 billion; however, it was 27% lower than in the previous week.


Commodities, Currencies & Treasury’s

·     Oil prices higher as WTI crude rose $2.41, or 4.12% to $60.97 per barrel, getting a boost on concerns it could take weeks to dislodge a giant container ship blocking the Suez Canal, which would squeeze supplies of crude and refined products. Still, prices end the week slightly lower, down -0.8% for its 3rd straight weekly decline. Crude swung between bullish and bearish several times this week – WTI closes up or down 4% or more on four of the week’s five trading days–as investors weighed European coronavirus lockdowns that are hurting demand against an accident in the Suez Canal that’s delaying supply. Of the 39.2 million barrels per day (bpd) of total seaborne crude in 2020, 1.74 million bpd went through the Suez Canal, according to data intelligence firm Kpler. Gold futures rise by $7.20 or 0.4% to settle at $1,732.30 an ounce, closing out the week with a modest decline of about -0.5% amid a surge in the U.S. dollar on better economic data and short-covering into quarter end for the currency.

·     It was a strong week for the U.S. dollar, as the dollar index (DXY) touched its best levels in 4-months (92.80), up roughly 1% for the week, and to its best levels since last June against the safe-haven Japanese yen (around 109.80). Yields on U.S. Treasuries rose but held below recent highs (10-year touched highs around 1.68% this morning before slipping to 1.66% late day – and off last week highs above 1.75%). The greenback strength was propelled by optimism over U.S. virus vaccines and the economy. The euro bounced off earlier 4-month lows below 1.18 but remains weak on renewed doubts over the slow pace of vaccinations and rising infections.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; LB rises after raising Q1 EPS view to 85c-$1.00 up from prior view of 55c-65c due to improved sales trends which co believes are mainly driven by unusual shifts in consumer spending patterns – said previously mentioned factors have led to a stronger forecast at Bath & Body Works and Victoria’s Secret; JWN, KSS receive POSITIVE data signal on shares of both at Wedbush, raising tgt on JWN to $40 from $35, and KSS to $65 from $29 given better-than-expected business quarter-to-date, according to our proprietary data; OXM mixed results as Q4 EPS loss ($0.13) vs. est. $0.21 and revs $221M beat est. $217M with margins missing; NKE upgrade to Outperform with $150 pt at Baird after being sidelined for 806 days despite their positive fundamental view of NKE’s transformation to a DTC/digital-led organization which has driven customer engagement, elevated brand positioning, and supported margin expansion

·     Leisure and recreational movers: gun makers and sporting goods retailers active (RGR, SWBI, SPWH) as the U.S. Supreme Court on Friday will discuss taking up a major new gun rights case involving a National Rifle Association-backed challenge to a New York state law that restricts the ability of residents to carry concealed handguns in public; in autos, NIO said it would halt production for five working days at its Hefei plant, due to a shortage in semiconductor chips; said it planned to suspend production from Monday; it also cut its first quarter delivery forecast to around 19,500 vehicles, compared to the 20,000 to 20,500 vehicles prior

·     Consumer Staples; in tobacco, MO upgraded to Buy from Hold at Jefferies and raise tgt to $58 from $40 saying with tobacco sentiment and value increasingly driven by RRP, they see near term data points at MO as favorable – firm also upgraded BTI to Buy; in food, PFGC tgt to $65 from $60 at Guggenheim as recent mgmt meetings was bullish and bolstered our already-strong confidence in a return to pre-COVID sales and EBITDA levels; SAM tgt raised to $1,600 from $1,425 – revising our estimates for Boston Beer to incorporate the planned launch of Truly Punch in May, the newest flavor innovation in the Truly brand family. We continue to think there is plenty of room for new, bolder flavor innovations to attract new consumers, including Hispanics and African Americans, and further expand the seltzer category. We see Truly, at the forefront of the pivot towards bolder seltzer flavors, as building a distinctive competitive advantage over the category leader, White Claw, to continue closing the gap among the top tier brands. Net, we are increasing our FY21 shipments estimate; CHD files mixed shelf of indeterminate amount; LW announces $250M capital investment in new French Fry processing facility in China



·     Energy stock movers; energy stocks buoyed by rising oil prices, rebounding on concerns it could take weeks to dislodge a giant container ship blocking the Suez Canal – Egypt’s Suez Canal Authority said on Friday operations to free the stranded container ship would resume after completing dredging operations, which are 87% complete. Baker Hughes (BKR) reported that the number of active U.S. rigs drilling for oil climbed by six to 324 this week. The total active U.S. rig count, which includes those drilling for natural gas, was also up by six at 417.

·     Energy movers; FLNG was downgraded to Neutral from Buy at BTIG as a recent rebound in Asian LNG spot prices has not been able to move LNG shipping spot prices as the market is over-supplied tonnage, and the company will be pressured to hit its guidance with spot prices at these levels heading into the seasonally weaker part of the year; TALO and Pemex was unable to reach a deal on the Zama oilfield offshore Mexico before yesterday’s deadline, though talks are continuing and Mexico’s Energy Ministry is now tasked with finalizing an agreement; CVE was upgraded to Buy from Hold at Desjardins; Morgan Stanley initiated MEG at Equal-Weight with a $46 target; NEXT executed a term sheet with an OXY subsidiary for the offtake and permanent geologic storage of CO2 captured from its planned Rio Grande LNG project in the Port of Brownsville, TX, and was upgraded to Equal-Weight at Morgan Stanley;

·     Alt Energy, Utilities & Solar; CLNE was named a new Market Perform with a $14 target at Cowen as the market has accounted for the growth from its transition to producing renewable gas from distributing it; Cowen also said the recent sell-off in REGI presents investors an attractive entry point and initiated the stock at Outperform with a $80 target as a Top Pick given its transition to renewable diesel and biodiesel, which should capture higher margins; Credit Suisse lowered its pt on REGI to $100 on what they say should be a tough Q1, but they kept their Buy rating as it is well positioned to benefit from growing demand for lower carbon fuels; Argus upgraded SPH to Buy with an $18 target as they say its disappointing Q1 results were a result of unusually warm weather but industry trends for propane are now improving, and its valuation is below its historical five-year historical average and peers, and its dividend yield of about 8% is attractive in a low-interest rate environment; SOL Q4 EPS 5c topped est. (1c) loss on revs $16.8M vs est. $24.64M and said they expect significant profit growth in 2021 vs 2020 and guided FY21 sales $90-100M (est. $161.4M) and gross margin over 25%



·     Bank movers; Bank stocks rise after the Federal Reserve signaled it plans to lift pandemic-era restrictions on bank dividends and share buybacks for most companies after June 30 (Treasury yields also back at week highs with the 10-year up over 5 bps to 1.66%); in research, Goldman downgraded AB to Neutral from Buy (follows recent downgrade at Citi) as they see organic growth moderating in coming quarters as rising long-term interest rates could potentially pressure fixed income flows; Wedbush added CUBI to its Best Ideas List as they say the stock is the most undervalued bank in its peer group (trading at 8.0x 2022 EPS forecast vs 12.1x peer median); Wells raised its price target on TFC to $74 from $58 and its 2022-23 estimates to about 20% above consensus, which they say fails to reflect the benefit from the recovery in credit costs, NII yield curve, and merger synergies; Raymond James upgraded MAIN to Outperform with a $41 target on attractive risk/reward at the levels even with one of the highest P/NAVs in industry; HBAN and TCF said that their shareholders approved the proposed merger

·     Insurance movers: ROOT rises after Citron’s Andrew Left said the stock is misunderstood and that shares are a bargain, calling it a "disruptive tech company" and added that its shares should not be trading below their IPO price of $27; Barclays upgraded PLMR to OW with a $94 pt and called the 42.3% selloff since Winter Storm Uri in Texas on negative sentiment for its Q1 catastrophe losses overblown

·     Consumer Finance: NLY agreed to sell its commercial real estate business to investment firm Slate Asset Management in a deal valued at $2.33 billion to sharpen its focus on its core residential mortgage finance business; Credit Suisse lowered estimates and price targets on mortgage originators COOP, HMPT, LDI, NRZ, PFSI, RKT, UWMC given the recent increase in interest rates, though they remain positive in the long-term given low valuations and PFSI remains their top picks among the group

·     REITs; WeWork announced they entered into a definitive merger agreement with the SPAC BOWX in a transaction that values WeWork at an initial enterprise value of approximately $9 billion and will provide WeWork with approximately $1.3 billion of cash; MAC cuts FY21 FFO view to $1.77-$1.97 from $2.05-$2.25; Wells downgraded ESRT to UW and lowered its pt to $10 from $11 as they see risk-reward skewed towards the downside given overall pressure on office fundamentals and valuation that is no longer compelling after the name outperformed peers



·     Pharma movers; PFE, BNTX active after a British study said one dose of their COVID-19 vaccine offers an immune response similar to that generated by infection and could also offer protection from variants to people who have previously had the virus, as per Reuters; JNJ’s Janssen Pharmaceutical unit said the European Medicines Agency’s CHMP recommended approval of Ponvory for adults with relapsing multiple sclerosis with active disease defined by clinical or imaging features; GSK and VIR announce the submission of an application to the FDA requesting the Emergency Use Authorization for VIR-7831, a SARS-CoV-2 monoclonal antibody

·     Biotech movers; biotech saw a rebound yesterday along with IBB recovering; few IPOs priced overnight – open for trading today as DSGN 12M share IPO priced at $20.00, EWTX 11M share IPO priced at $16.00 and IKNA 7.813M share IPO priced at $16.00

·     MedTech and Equipment; VRAY was upgraded from Neutral to Buy at BTIG with $7 tgt as they reflect on VRAY’s relatively solid performance on system orders throughout 2020, the recovery in hospitals’ capital equipment budgets, and positive management commentary during this week’s Fireside Chat; DVA was downgraded to underperform from neutral at Bank America


Industrials & Materials

·     Industrial & Machinery; in infrastructure, Jefferies said SUM and WSC have upside potential from Biden infrastructure plans, noting of Biden’s infrastructure plan have slowly been leaked, with price tags ranging from $2-4T, which could be split into two separate bills and is going to be centered around climate change, not traditional infrastructure (highways, bridges and tunnels). These initiatives will be less heavy materials intensive and could result in a longer path to see the uptick in demand with fewer shovel ready projects; AYI was upgraded to Outperform at William Blair and see 20% upside to shares after their lighting survey for the quarter ended February came in better than expected

·     Tanker stocks are active (FRO, NAT, NMM, TNK, TNP, EURN, GNK, SB, SBLK, STNG) as shipping rates are surging as the blockage of the Suez Canal is wreaking havoc in the global seaborne trade and making the long trip around Africa the only short-term alternative, said Bloomberg; about 12% of global trade goes through the canal. Bloomberg noted the cost to ship a 40-foot container from China to Europe has climbed to about $8,000, almost quadruple the figure a year ago. Suezmax vessels, which typically carry 1 million barrels of oil, are now getting about $17,000 a day, the most since June 2020.

·     Metals & Materials; HXL was downgrade to Sell at Goldman Sachs citing the company’s limited aftermarket, greater exposure to widebody than narrow body and challenges in Wind result in the least free cash flow per share growth through 2025 relative to comparable aerospace peers; OLN was upgraded to Outperform at RBC as believes the co is seeing quicker than expected success in implementing its new strategy to focus on maximizing ECU value by matching production to actual demand

Technology, Media & Telecom

·     Internet; Chinese ADR stocks remain weak (BIDU, BABA, JD, NTES, VIPS, GSK, IQ, SHOP, TCEHY) as the U.S. SEC recently began rollout of law aimed at delisting, compounding concerns of a widening domestic antitrust crackdown – Chinese ADRs crushed most of the trading day; ZH priced its IPO, at $9.50 per ADS, the low end of the expected range. The China-based online content company offered 55M ADS in the IPO to raise $522.5M; Chinese online education names hit hard (GSX, TAL, EDU) following report of new policies on on-line education.

·     Semiconductors; MX enters into definitive agreement with Wise Road cap in a take private transaction valued at $1.4B, with holders getting $29 per share ; LITE upgrade from Outperform to Strong Buy at Raymond James following its decision to walk from bidding on COHR and accepting the $218M break-up fee; MTSI was upgraded to Neutral from Underweight at JPMorgan given the YTD underperformance in the stock versus the group and a current price that is within 5% of our street low price target

·     Software movers; SNOW was rated Outperform and $311 tgt at Evercore saying there are few software firms over the last decade that have as large a growth opportunity as Snowflake and that upside opportunity offsets the near-term need to grow into the valuation; software names were mixed, with a few pockets of weakness (Internet security such as CRWD, FEYE, OKTA)

·     Telecom movers; tower stocks AMT, CCI, SBAC all upgraded to Overweight from Equal-weight at KeyBanc citing the improving macro 5G narrative which should produce accelerating capital spending and new leasing activity that would reach record highs in the next 2-3 years; tgt for SBAC $313, CCI $193 and AMT $275

·     Media movers: sell-off in media stocks continues this week (follows massive run to start the year), with VIAC, DISCA, FOXA among hardest hit; MSGE acquires MSGN in an all-stock, fixed exchange ratio of ~4% above the ratio of the unaffected closing stock prices of the two companies on March 10, 2021 as MSGN holders to receive 0.172 shares of MSGE Class A or Class B common stock; in research, Wells Fargo downgraded AMCX to Underweight saying they have ridden the momentum wave upwards but see it fading along with peers like DISCA and VIAC; Wells also downgraded VIAC to equal-weight after rising to a peak up +160% YTD before its capital raise and think marks the end of a remarkable volatility period with valuations resetting to more normalized levels; CRTO was upgraded to Outperform at JMP Securities as believe its retargeting business can stabilize(and possibly return to growth behind share gains in 2022

·     IT Services, Hardware & Component news; VUZI 4.146M share Spot Secondary priced at $20.50; SAIC sales guidance fell short for both FY21 and FY22, below expectations on a slower ramp-up of the recent seven new large contract wins as margins fell short; in 3D space, DM shares slipped after Lakestreet initiated with a sell and $11 tgt


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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