Mid-Morning Look

Tuesday, December 07, 2021

Another astounding rebound for global stock markets, with U.S. stocks in cruise control higher for a second day (best daily move since March for major averages), as the Nasdaq rises nearly 3% with tech roaring back and market fears of variants, China tensions and Fed rate hikes all but forgotten in a matter of days. Technology firms leading on easing concerns around the Omicron variant (recent data showing it is likely more transmissible but not as severe), while Dow component Intel jumped after plans to take its self-driving car unit public. The CBOE Volatility index (VIX) tumbles to lows down over 19% approaching 22 level as stocks soar to highs – fear erased in three days for markets (VIX hit highs of 35.32 on Friday). The market gains are broad based for a second day with defensive sectors lagging (utilities, telecom, REITs). Pedal to the medal for U.S. stocks to start the day, as debt ceiling fears and upcoming CPI inflation data later this week not weighing on sentiment either, with oil, stocks surging. A truly remarkable rebound after stocks tumbled last week.

Economic Data

·     U.S. Q3 non-farm productivity revised to -5.2% from -5.0% and worse than the consensus -4.9%, while Q3 non-farm unit labor costs revised to +9.6% from +8.3%

·     Trade deficit for October narrowed to -$67.1B from -$81.4B in Sept (vs. est. -$66.8B) as Oct goods deficit $83.9B; exports rose +8.1% vs Sept -3.0% and imports +0.9% vs. Sept +0.6%; Oct exports $223.63B vs Sept $206.80B and imports $290.75B vs Sept $288.23B

Sector Movers Today

·     Semiconductors; INTC said it would be taking public its Mobileye self-driving-car unit. The IPO of Mobileye in the U.S. is planned for the middle of next year. The move, first reported by The Wall Street Journal, could value Mobileye at more than $50 billion; AVGO price tgt raised to $620 from $580 at Credit Suisse and to $650 from $640 at Susquehanna ahead of earnings later this week, anticipating a beat-and-raise quarter with constructive end demand for Networking; Loop Capital said they remain bullish on HDDs as well as STX saying things are getting “more-better” for them; Citigroup conducted channel checks throughout the supply chain for semiconductors, saying in 25 years of covering semis, they have not seen business conditions this strong since 1999-2000 as many companies are completely booked for 2022 – firms top pick remains MU (reit Buy and $120 tgt) followed by NXPI and ON

·     Restaurants &Consumer Staples; STZ is planning to build a new brewery in southeastern Mexico costing about $1.3B, a replacement for the Mexicali brewery which got scraped in 2020, the WSJ reported; SBUX upgraded to Buy from Neutral at MKM Partners and raise tgt to $130 from $114; QSR upgraded to Outperform from in-line at Evercore/ISI and raising price target to $75 from $72 and modestly increasing Tim Horton’s Canada comp store sales growth estimates to above consensus levels in 4Q21; UTZ reports October retail growth of 8.7% Y/Y and 9.7% on a two-year CAGR basis versus the same period in 2019, as measured by IRI MULO-C

·     Pharma movers; GSK and VIR said their Covid-19 antibody treatment was effective against all mutations of the new Omicron coronavirus variant; MRK slides after saying it would pause enrollment in Phase III clinical studies evaluating oral islatravir for pre-exposure prophylaxis in people at high risk of HIV-1 infection (shares downgraded to Neutral at Guggenheim and removed $98 price target saying does not see a path forward for islatravir in HIV); ACAD  reported positive top-line results from the Phase 3 LAVENDER trial of trofinetide in Rett syndrome, a rare neurodevelopmental disorder (several analysts raise tgt on news); TEVA loses appeals court bid to invalidate CORT patent

Stock GAINERS

·     ACAD +5%; reported positive top-line results from the Phase 3 LAVENDER trial of trofinetide in Rett syndrome, a rare neurodevelopmental disorder (several analysts raise tgt on news)

·     GEVO +10%; signs a supply agreement for renewable fuels with Kolmar Americas, a subsidiary of Kolmar Group AG valued at about $2.8B over 8-years

·     INTC +5%; said it would be taking public its Mobileye self-driving-car unit. The IPO of Mobileye in the U.S. is planned for the middle of next year. The move, first reported by The Wall Street Journal, could value Mobileye at more than $50 billion

·     JMIA +21%; said gross merchandise value hit $150M, up 30%, and orders reached 4.3 mln, up 39%, year-over-year, in its biggest Black Friday festival between Nov. 5 and Nov. 30

·     MDB +16%; analysts boosting tgts after the software company reported very strong F3Q results, as Atlas revenue accelerated slightly to 84% Y/Y growth, and now represents 58% of total revenue while also raised FY22 guidance again

·     MIME +6%; agreed be acquired by private equity firm Permira in a deal that values the email-security software company at about $5.8B, as Permira will pay $80.00, 6.7% above Monday’s closing price of $75.00. The deal https://bit.ly/3DqtE8k

·     NVAX +13%; as Reuters reported its COVID-19 vaccine could be approved very soon, citing EMA chief

·     TRUP +25%; CHWY expands into pet insurance, partners with TRUP as partnership to offer an exclusive suite of pet health insurance and wellness plans to more than 20 mln chewy customers

Stock LAGGARDS

·     AVAV -20%; after reporting mixed Q2 results with EPS beating but revs of $122M missing the $130.8m estimate and mixed guidance

·     COUP ; mixed results as company reported solid a 3QF22, but there was a notable deceleration in organic growth and F4Q billings guidance was below consensus

·     HQY 22%; after lowered guidance for FY22 due in part to disappointing Service and Interchange revenue results as service revs declined 1.7% y/y to $103M in F3Q22 below est. $105M reflecting a decline in COBRA fees

·     MRK -1%; after saying it would pause enrollment in Phase III clinical studies evaluating oral islatravir for pre-exposure prophylaxis in people at high risk of HIV-1 infection (shares downgraded to Neutral at Guggenheim on news)