Mid-Morning Look: September 01, 2021

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Mid-Morning Look

Wednesday, September 01, 2021






DJ Industrials




S&P 500








Russell 2000






Stocks continue the ramp up, with major averages mostly higher (again the S&P 500 and Nasdaq leading) amid tech strength and more momentum plays, while Smallcaps lag large caps. The S&P 500 closed out August with its 7th straight month of gains, and is off to a good start to September, while the Dow Transports lag again behind weak airline travel statistics and M&A news in rail sector. Markets unphased initially by another disappointing economic data read, as the August ADP Employment figures missed estimates, pushing treasury yields lower as it extends the timeframe for the Fed to continue to purchase assets and keep rates lower for longer. Strength in AMBA in chip space and PLAN in software after better earnings and guidance overnight. Energy stocks slide with oil pullback while defensive assets (healthcare) see modest pullbacks. Commodities and metals also may be feeling impact of another weak China data point overnight as the Caixin/Markit manufacturing PMI for August came in at 49.2 vs. expectations of 50.2, prior 50.3; gauges for output, total new orders and new export orders all dropped into negative territory. With volumes light and markets in rip mode just about every day to new highs behind strength in mega cap tech (GOOGL, AMZN, NFLX, FB, MSFT, AAPL), we have also seen lots of volatility on a new round of “meme” reddit related short squeeze names moving higher over the last 2-weeks, with BBIG, SPRT, SKLZ among the latest rising on no particular-news other than social media comments. Stocks holding higher early as the path of least resistance remains to the upside.


Economic Data

·     Weaker monthly private payroll data (ahead of nonfarm report Friday) as the ADP national employment report shows U.S. private-sector jobs in August +374,000 well below the consensus +613,000 while prior month was revised lower from +330K to +326K. The Delta variant of COVID-19 appears to have dented the job market recovery. Job growth remains strong, but well off the pace of recent months.

·     U.S. IHS Markit August final manufacturing PMI at 61.1 vs flash 61.2 and final July 63.4; sector final output index for August at 56.7 vs flash reading 56.3 and final July 59.7; sector final input prices index for August at 87.5 vs flash reading 88.4 and final July 86.7

·     August ISM Manufacturing Index: 59.9 vs 59.0 expected and 59.5 prior; prices paid index 79.4 in August (consensus 83.8) vs 85.7 in July and at lowest since December; new orders index 66.7 in august vs 64.9 in July; the employment index 49.0 in august vs 52.9 in July

·     Construction Spending rose +0.3% in July, above consensus +0.2% vs June unchanged (previous +0.1 pct); July private construction spending +0.3%, public spending +0.7%







WTI Crude















10-Year Note





Sector Movers Today

·     Consumer Staples & Restaurants; The Mexican arm of Anheuser-Busch InBev has accused STZ in a lawsuit of a second breach of their deal allowing Constellation to sell Mexican beers in the United States; CPB Q4 adj EPS 55c vs est. 48c on revs $1.87B vs est. $1.81B and issued FY22 guidance for net sales -2% to 0% from FY21’s $8.48B, EPS $2.75-2.85 vs est. $2.85, adj EBIT down -8% to -4%, and also announced a $500M buyback program; BF reported Q1 EPS 40c vs est. 39c on revs $906M vs est. $827.7M and still sees mid-single digit growth in FY22 net sales and operating income; FAT purchased Twin Peaks restaurant chain for $300M from Garnett Station Partners; Piper upped their price target on SKIN to $33 from $27 as macro, industry, and company-specific data points keeps them optimistic on Q3 and more excited in the long-term; FARM upgraded to Buy and up tgt to $14 from $7 at Roth Capital predicated on improved operations through closure of Houston, expansion of North Lake and opening of Rialto

·     Utilities & Solar; JPMorgan added RUN to its Analyst Focus List as a growth idea given it is one of their top long-term picks and is also uniquely positioned in the near-term following its -17% performance since Q2 earnings (vs +2% for S&P) as they expect a strong rebound in profitability in Q3 and Q4; Wells upgraded PPL to OW with a $34 PT from $32 as an out-of-consensus relative value play trading at an excessive multiple discount to peers and downgraded DTE to EW on valuation while maintaining their $128 PT; HSBC downgraded AWK to Hold but raised their target to $190 from $181; Wolfe initiated Outperform ratings on ENPH ($222 PT), RUN ($62), PLUG ($34), SEDG ($361), and NOVA ($50), Peer-Perform on BE ($25), FSLR ($100), and UP on BLDP

·     Transports; in airlines (UAL, AAL, DAL), the TSA said U.S. screened 1.345 million airline passengers on Tuesday, lowest number since May 11; the railroad industry very active after news yesterday shaking up M&A in the space. The U.S. rail regulator on Tuesday (STB) rejected a voting trust structure that would have allowed CNI to proceed with its $29 bln proposed acquisition of U.S. peer KSU. In response, KSU confirms receipt of unsolicited proposal from CP with the identical terms to the proposal made on August 10, 2021, whereby holders of KCS common stock would receive 2.884 CP common shares and $90 in cash for each share of KCS common stock held. In addition, CP reiterated that holders of KCS preferred stock would receive $37.50 in cash for each share of KCS preferred stock held.



·     AMBA +18%; Q2 EPS $0.35 vs. est. $0.25; Q2 revs $79.33M vs. est. $75.68M; said IoT cameras, primarily security, and automotive, representing ~90% of total Q2 revenue; sees Q3 revenue $88M-$92M above est. $78.74M

·     AMZN +1%; rising for the 8th time in 9-days, recovering nearly all its losses from earnings guidance last month and pushes back above all key technical levels, leading major averages

·     CPB +3%; Q4 adj EPS 55c vs est. 48c on revs $1.87B vs est. $1.81B and issued FY22 guidance for net sales -2% to 0% from FY21’s $8.48B, EPS $2.75-2.85 vs est. $2.85

·     KSU +2%; The U.S. rail regulator on Tuesday (STB) rejected a voting trust structure that would have allowed CNI to proceed with its $29 bln proposed acquisition of U.S. peer KSU. In response, KSU confirms receipt of unsolicited proposal from CP

·     PLAN +11%; following Q2 beat and a raised full-year revenue forecast to $571.5M-$5735M from $555M-$560M prior (est. $558.9M) as IT spending improves during the economic reopening

·     PVH +15%; Q2 EPS $2.72 vs est. $1.20 and revs $2.31B vs consensus $2.14B while raises year outlook; constant currency revenue growth +40.4% – Calvin Klein +49.6% and Tommy Hilfiger +34.7%; GM 57.7% vs consensus 57.2%

·     WYNN +1%; casino stocks (WYNN, MLCO, MGM, LVS) with good news as Macau August gambling revenue soared 234% year-on-year to 4.4 bln patacas ($549.3 mln) with ests calling for around 176%. The GGR tally for the month was down 47.4% from the level in July



·     AA -2%; metals sector under pressure this morning with declines in steel (NUE), copper (FCX), aluminum (CENX) – weaker China data overnight may not be helping

·     DY -7%; Q2 adj EPS $0.60 misses the $0.73 estimate on light revs of $787.57M vs. est. $810.47M and said expects contract revenues to be in-line and non-Gaap adjusted Ebitda to decrease as a percentage of contract revenues for Q3

·     LCID -12%; on the lock-up expiry date that allows some shareholders to sell stock for the first time since the SPAC deal closed.

·     NIO -2%; the company lowers Q3 production view to 22,500-23,500 vehicles from 23,000-25,000 while also delivered 5,880 vehicles in August 2021, representing growth of 48.3% Y/Y but lower 25.9% from July deliveries of 7,931 units

·     VRA -15%; as reported weaker sales and adjusted earnings results than analysts expected for the second quarter and guides FY22 EPS and sales below views (revenues $550M-$565M, consensus $579.32M and EPS $0.80-$0.95 vs. est. $0.95)


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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