Mid-Morning Look

Monday, November 08, 2021

U.S. stocks again adding to record highs, with the S&P boosted by strength in Industrial and Material stocks, supported by the passage of a $1 trillion infrastructure bill late Friday, while travel stocks rise (airlines, bookings, hotels) as U.S. lifts COVID-19 air and land travel restrictions, expecting a flurry of tourists. More strength in tech as the Nasdaq-100 (QQQ) looks for an 11^th straight day of gains as the Philly semi-index (SOX) another all-time high as chip stocks extend surge – an 8th straight day of gains for semi-index. Coming into this week, the S&P 500, Nasdaq, and Dow notched their fifth straight weekly advances Friday (longest streak for the S&P since Aug 2020). Cannabis stocks outperform (CURLF, TLRY, GTBIF) after late Friday, Marijuana Moment reported Republican Congresswoman Nancy Mace (R SC) is circulating her own version of a federal cannabis reform. Still no market fear on rising rates after St. Louis Federal Reserve Bank President James Bullard on Monday said he expects the Fed to raise interest rates twice in 2022 after it wraps up its bond-buying taper mid-year, though he said if needed the Fed could speed up that timeline to end the taper in the first quarter. No major economic data on calendar today (but a handful of Fed speakers), but plenty of inflation data later this week with consumer and producer prices on deck.

Sector Movers Today

·     Industrial & Machinery; among the busiest sectors today as the House passed the $1.2T infrastructure bill ($550B in new spending over 5-years) on Friday evening, which increases US infrastructure and total non-residential construction spend by an average of ~35% and ~15% at the midpoint, respectively according to Bernstein. The bill will: 1) Prioritize 21st century infrastructure needs such as electric grid & broadband (PWR); 2) Catalyze the adoption of digital/automated construction technology (TRMB); 3) Accelerate the shift from construction equipment ownership to rental (URI). In the E&C sector, KeyBanc said view ACM as a favorite play on the legislation, with the only tangible reasoning for the discount to peers being the unproven ability to grow top line (we believe this clearly alleviates that concern). We also highlight EME as an under-the-radar beneficiary, with an increasingly apparent ability to be nimble around key growth end markets. We also highlight DY, where the risk reward is now even more compelling (other names include J, TTEK, STRL, FLR, PWR, MTZ, MYRG, PRIM)

·     Auto sector; TSLA CEO Elon Musk on Saturday asked his 62.5 million followers on Twitter in a poll if he should sell 10% of his Tesla stock. He said he could face a “massive” tax bill this year as he must exercise many stock options coming due next year; RIVN raises IPO price range to $72.00-$74.00 from $57.00-$62.00. Separately, Barron’s noted Rivian is set to go public this coming week at a market value that could exceed that of Honda (HMC) despite having sold just a handful of vehicles, with a market cap around $64 billion; Ford (F) files for notes offering, size not disclosed; electric vehicle charging stocks rise (BLNK, CHPT, EVGO) as Infrastructure package passes- allows for $7.5 billion spending for building out a network of electric vehicle chargers and another $7.5 billion for low or zero-emission buses and ferries.

·     Bitcoin, FinTech & Payments; PYPL earnings after the close tonight; another day another surge for crypto assets as Bitcoin rises near $66K, Ethereum record highs up over 6% above $4,700, Litecoin tops $200, up over 5.75% as crypto assets surging again; BBIG said subsequent to its planned spinoff, co registers its blockchain tech unit, Cryptyde Inc, to be traded on Nasdaq; Mizuho lowered tgts for both FLT to reflect lower market multiples – FLT of $290 (vs. $310 previously) and FIS PT of $160 (vs. $170 prior)

·     Cannabis & Pharma movers; move higher continued in cannabis names (ahead of busy week of earnings for sector) after late Friday, Marijuana Moment reported Republican Congresswoman Nancy Mace (R SC) is circulating her own version of a federal cannabis reform. The States Reform Act led by Rep. Nancy Mace (R-SC) is still in the preliminary stage, and a final version is expected to be filed later this month (shares of CURLF, GTBIF, CRLBF); BMY said Phase 3 checkmate -816 trial met primary endpoint of improved EFS in patients with resectable stage Ib to IIAA NSCLC; LQDA said the FDA has granted tentative approval to its Yutrepia (Treprostinil) inhalation powder for the treatment of pulmonary arterial hypertension (PAH).

Stock GAINERS

·     AUTL +38%; after Blackstone Inc. is investing as much as $250M in the company to fund the final stages of development of a new therapy to treat a serious form of leukemia

·     BLNK, CHPT +8%; EV charging stocks rise as Infrastructure package passes- allows for $7.5 billion spending for building out a network of electric vehicle chargers and another $7.5 billion for low or zero-emission buses and ferries.

·     CAT +3%; among top gainers in the Dow early on infrastructure bill related strength; bill boosting sentiment in industrial and E&C stocks early (MTZ, PWR, AME)

·     COTY +11%; reported better-than-expected Q1 revenue and announced a deal to sell a 4.7% stake in Wella to KKR & Co. Inc. in exchange for the redemption of 56% of KKR’s remaining convertible preferred shares in Coty

·     CURLF +9%; move higher continued in cannabis names (ahead of busy week of earnings for sector) after late Friday, Marijuana Moment reported Republican Congresswoman Nancy Mace (R SC) is circulating her own version of a federal cannabis reform

·     NUE +5%; beneficiary of the infrastructure bill announcement as steel producers such as CLF, X, STLD, aluminium producer AA, CENX, copper producer FCX, cement maker CX are among those volatile on the day

·     THS +2%; reduced its outlook for 2021 adjusted earnings from continuing operations to $1.08-$1.28 from between $2.00-$2.50 prior, but shares bounce as company said it is exploring strategic alternatives

·     TTD +25%; reports Q3 revs of $301.1M topping ests of #283.5M on better EPS ($0.18 vs. est. $0.15) and guides Q4 revs of “at least” $388M topping ests $386.7M saying they are seeing growth across all channels

Stock LAGGARDS

·     EHTH -26%; after Q3 results missed estimates on both EPS and revenue and revised its full-year revenue guidance downward and its net loss upward (said net loss increased ~265% in the quarter and revenue fell 32.2% year over year to $63.9M)

·     JOBS -24%; after releasing an update on its going-private transaction saying the buyer consortium formed to buy firm has been consulting Chinese regulators on recent regulatory changes that may apply to the firm and the proposed transaction

·     PRPL -5%; downgraded to Underperform from Buy at Bank America, while taking a cautious view on TPX based on what they call weak online and wholesale trends into Q3 – also notes last week news that TPX is introducing a direct competitor to PRPL’s gel grid-based beds next year

·     PTON -6%; extends last week declines after freezes hiring after it slashes its forecast and shares drop 35% on Friday

·     TSLA -4%; CEO Elon Musk on Saturday asked his 62.5 million followers on Twitter in a poll if he should sell 10% of his Tesla stock. He said he could face a “massive” tax bill this year as he must exercise many stock options coming due next year