Mid-Morning Look: April 05, 2021

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Mid-Morning Look

Monday, April 05, 2021

Index

Up/Down

%

Last

 

DJ Industrials

359.28

1.08%

33,512

S&P 500

49.88

1.24%

4,069

Nasdaq

180.20

1.34%

13,660

Russell 2000

8.19

0.36%

2,261

 

 

New week, new quarter, leads to new record highs for major U.S. averages as the Dow Jones Industrials, Dow Transports, S&P 500, and even Philly semiconductor index (SOX) all eclipsing new record bests behind strong economic data and an extension of buying after last weeks +$2 trillion infrastructure bill was revealed by the White House. Economic data stronger for today’s trading – as jobs data on Friday as Non-farm payrolls came in above consensus expectations for the month of March, advancing 916K against expectations of a 660K rise – and employment gains for the prior two months were revised up by 156K. This morning, strong showing also for manufacturing as services as Markit said services PMI tops ests and prior view and services sector final input prices index for March at 72.7, highest since series began in Oct 2009, vs flash 72.7. Also, the ISM Non-manufacturing surged to a record high amid robust growth in new orders. Economic data remains a positive for stocks, while the Fed is expected to keep rates at zero for the duration of this year and next (as per Fed member comments recently), despite the resurgence of the global economy. Stocks on absolute cruise control again today, with energy the only sector showing weakness as oil prices slip.

 

Economic Data

·     Markit March final services PMI at 60.4 vs. flash 60.0, final composite PMI at 59.7 (vs. flash 59.1); the services sector final input prices index for March at 72.7, highest since series began in Oct 2009, vs flash 72.7 and final February 70.1; Composite PMI for March at 59.7 vs. flash reading 59.1 and final February 59.5; composite input prices index at 73.0 vs flash reading 73.0, highest since series began in oct 2009, vs final February 70.6.

·     Nonfarm payrolls surged by 916,000 jobs in March (Friday morning – when U.S. markets were closed), the biggest gain since last August and topping estimates of 647,000. Data for February was revised higher to show 468,000 jobs created instead of the previously reported 379,000.

·     ISM Non-manufacturing surged to a record high amid robust growth in new orders, as its overall activity index rebounded to a reading of 63.7 last month – the highest in the survey’s history and followed 55.3 in February. Prices paid index 74.0 in March vs 71.8 in February, new orders index 67.2 in March vs 51.9 in February and the employment index 57.2 in vs. 52.7 in February

·     U.S. Feb factory orders fell -0.8% vs. est. decline -0.5% and compared to +2.7% in January; Feb factory orders ex-defense -0.6% vs. Jan +2.1% and Factory orders ex-transportation fell -0.6% vs. Jan +1.8% and prior +1.7%

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.75

59.69

Brent

-1.69

63.18

Gold

1.60

1,730.00

EUR/USD

0.005

1.1812

JPY/USD

-0.72

109.98

10-Year Note

-0.00

1.72%

 

 

Sector Movers Today

·     Casinos, Gaming, Lodging & Leisure sector; cruise lines (CCL, RCL) rise early after NCLH said today it would require mandatory vaccinations for guests and crew when it restarts trips from U.S. ports starting July; in gaming, CZR and MGM both upgraded at Morgan Stanley saying channel checks suggest the Vegas (~50% of mix) recovery is occurring faster and stronger than expected and expect MGM’s Vegas EBITDA to outperform cons by 21%/8% in 2021/22, and expect CZR to achieve >$900m of targeted synergies and grow top line faster than peers as casino markets recover; movie theatre names rally as IMAX posted its biggest domestic opening weekend in more than a year as "Godzilla vs. Kong" earned $4.5 million on 284 screens; AMC was upgraded to Buy and tgt raised to $13 at FBR Riley as remain impressed with management’s ability to weather the pandemic headwinds

·     Energy stock movers; sector one of the few weak spots for broader markets as oil prices pulling back (OXY, MRO, EOG down); PXD will acquire privately held DoublePoint Energy for approximately $6.4B, including about 27M shares of PXD, $1B cash, and assumption of $900MM debt; SON closed on selling its Display and Packaging business in the U.S. to Hood Container Corporation for $80M in cash; Tudor Pickering upgraded VLO to Buy; SWS started MGY at a Buy with a $14 target; Seaport reinstated coverage on PDCE with a Buy rating and $45 target; Goldman sees robust supply growth potential from the Permian and Haynesville and prefer TRGP for exposure to these regions, are concerned on Appalachia producers and have a Buy rating on EQT and Neutral on COG for regional producers, and they also see favorable NGL near-term pricing and have Buy ratings on SWN, OVV in upstream and prefer TRGP, EPD in midstream for NGL exposure

·     Insurance; JPMorgan said their outlook on life insurance stocks is less upbeat after the group’s recent strong performance and expectation that long-term fundamentals will remain lackluster, but they are OW on GL given its superior long-term return profile and upbeat outlook for business trends and LNC as the top pick for investors seeking exposure to rising interest rates given its steady organic growth, strong free cash flow, accelerating share buybacks, and overly depressed valuation, and MET, and they downgraded ATH to Neutral as the discount to APO’s bid price is not attractive enough to remain OW on the stock

·     Transports; JBLU upgraded to outperform from market perform at Raymond James citing improving trends in JBLU’s core markets, including the recovery in international travel, as well as the potential for normalized margin expansion; SABR says gross air bookings were down about 70% and net air bookings were down about 68% in March 2021 versus march 2019; for airlines, (LUV, DAL, AAL) the TSA checkpoint data continues to show gradual improvement; ’21/’19 7-day avg now in the -30’s% vs -50’% early March

 

Stock GAINERS

·     AMC +6%; was upgraded to Buy and tgt raised to $13 at FBR Riley as remain impressed with management’s ability to weather the pandemic headwinds

·     BPTH +19%; after earlier announced the successful completion of the safety run-in of the Stage 2 of the Phase 2 clinical study of prexigebersen (BP1001)

·     MGM +6%; in gaming, CZR and MGM both upgraded at Morgan Stanley saying channel checks suggest the Vegas (~50% of mix) recovery is occurring faster and stronger than expected

·     NCLH +5%; cruise lines (CCL, RCL) rise early after NCLH said today it would require mandatory vaccinations for guests and crew when it restarts trips from U.S. ports starting July.

·     NNOX +38%; in reaction to the announcement that its single-source Nanox.ARC digital x-ray technology has received 510(k) clearance from the FDA, on April 2, 2021.

·     NVTA +9%; rises after the WSJ reported SoftBank Group Corp plans to lead an investment of nearly $1.2 billion into the genetic-testing provider in the form of convertible debt

·     TSLA +7%; posted record deliveries between January-March quarter with 184,800 deliveries topping estimates, and exceeding its previous record of 180,570 achieved last quarter

·     VALE +5%; after saying earlier it will repurchase up to 270 mln ordinary shares and American Depository Receipts, representing about 5.3% of its total shares

 

Stock LAGGARDS

·     ACAD -17%; after it announced this am that it received a Complete Response Letter (CRL) from the FDA for its sNDA of Nuplazid for the treatment of hallucinations and delusions associated with dementia-related psychosis (DRP)

·     DISCA -2%; more weakness in media names (VIAC also lower)

·     ETSY -4%; notable weakness in social media down with TWTR and SNAP also lower

·     GME -13%; filed a prospectus to sell up to a maximum of 3.5M shares of its common stock from time to time through an "at-the-market" equity offering program, sending shares lower

·     OXY -5%; energy sector one of the few weak spots for broader markets as oil prices pulling back (OXY, MRO, EOG down)

·     

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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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