Early Look

Monday, October 4, 2021

U.S. equity futures are looking lower after a strong finish last Friday (though still fell on the week), as investors remain cautious heading into the week amid a series of headwinds to global growth that could test the Federal Reserve’s policy stance in the months ahead. Several issues overseas including China’s regulatory crackdown, and the ongoing crisis linked to indebted property developer Evergrande are among concerns. Oil prices have outperformed as the power crunch in Europe has led to a spike in energy costs around the world (bosting inflation concerns). European markets are trading 5% south of their August record highs, extending declines Monday from their worst week since February. Asian markets are struggling to find momentum amid the week-long Golden holiday closures in China. In Asian markets, The Nikkei Index fell -326 points to settle at 28,444, the Shanghai Index was closed and the Hang Seng Index dropped -539 points or over 2% to 24,036. In Europe, the German DAX is flat at 15,155, while the FTSE 100 is also up just a few points above 7,030. U.S. stocks surged to a higher close on Friday, entering the final quarter of 2021 in a buying mood boosted by positive economic data, progress in the battle against COVID following positive news out of Merck (MRK), and Washington developments on the potential passage of an infrastructure bill. Despite Friday’s massive rebound, for the week, the S&P fell 2.21%, the Dow lost 1.35%, the Nasdaq shed 3.2%.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 49.50 points, or 1.15%, to 4,357.04

·     The Dow Jones Industrial Average rose 482.54 points, or 1.43%, to 34,326.46

·     The Nasdaq Composite gained 118.12 points, or 0.82%, to 14,566.70

·     The Russell 2000 Index advanced 37.26 points, or 1.69% to 2,241.63

Events Calendar for Today

·     10:00 AM ET      Durable Goods Orders MoM for Aug

·     10:00 AM ET      Factory Orders MoM for Aug

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: CMTL, NAPA

Other Key Events:

·     Deutsche Bank Annual Leveraged Finance Conference (virtual), 10/4-10/6

·     Stifel 1st Annual ESG and Impact (virtual), 10/4

Sector News Breakdown

Consumer

·     Tesla (TSLA) said it produced 237,823 vehicles and delivered 241,300 in Q3 (est. around 233K); model S/X production was 8,941 and deliveries were 9,275. Model 3/Y production was 228,882 and deliveries were 232,025.

·     Electric vehicle maker Rivian Automotive (RIVN) has filed the S-1 for its initial public offering (IPO) – backed by Amazon.com (AMZN) and Ford Motor (F), the company is looking to raise up to $8 billion, which would mean a valuation of $80 billion, Reuters reported.

·     Meritor (MTOR) stock has dropped more than 23% this year according to Barron’s, a sign that investors are fretting not only about issues like inflation and the business cycle but also about the company’s future in a world that’s increasingly going electric, but says if investors can get over some of their fears, the stock could soar as the company works with more than 30 truck markers on electrification

Energy, Industrials and Materials

·     Crude futures finished higher on the day and the week, as oil and other energy commodities are in high demand around the world while supplies are strained. Markets also await outcomes for Monday’s expected decision by OPEC+ on crude production levels, with reports that the group is considering additional increases. WTI crude quarterly winning streak alive at six, the longest such streak since 2008

·     California continues the clean-up effort linked to a potentially catastrophic oil spill linked to a subsidiary of Houston-based Amplify Energy Corporation (AMPY) that has left more than 126,000 gallons of crude, and a thirteen square mile crude slick, off the coast of Los Angeles.

·     Canadian National Railway Co. (CNI) said it will hold a special shareholder meeting on March 22, 2022, amid a proxy contest with shareholder TCI Fund Management Ltd. TCI, which called for the shareholder meeting, owns about 5% of Canadian National.

·     Union Pacific (UNP) upgraded to Overweight from Equal Weight at Barclays and up tgt to $260 from $240.

·     Earthstone Energy (ESTE) agrees to acquire privately held operated assets located in the Midland Basin from two unnamed sellers for a combined $73.2M, consisting of $49.2M in cash and ~2.6M common shares

·     Maxar Technologies (MAXR) was granted an Option Year 2 contract renewal valued at $44M by the U.S. National Geospatial-Intelligence Agency for the Global Enhanced GEOINT Delivery program.

·     Nucor (NUE) and U.S. Steel (X) are among stocks to play steel industry revival according to Barron’s saying the steel industry is enjoying unprecedented prosperity, as steel prices have nearly quadrupled in the past year to $1,900 a ton. Yet steel stocks sport some of the market’s lowest valuations

·     Cimarex (XEC) and Marathon (MRO) positive mentions in Barron’s saying a surge in the price of natural gas-along with other fuel sources, like coal and propane-is forcing countries to reduce factory production, and could drive heating and electricity prices sky-high this winter

·     Roper Technologies (ROP) announced that it has reached a definitive agreement to divest its TransCore business to Singapore Technologies Engineering for $2.68 billion in cash.

·     SM Energy (SM) files automatic mixed securities shelf

Financials

·     Sun Life Financial (SLF) agrees to acquire oral health care company DentaQuest, the largest provider of Medicaid dental benefits in the U.S., for US$2.475B. Sun Life says DentaQuest, which has more than 33M members in 36 states and 2,400 employees

·     Credit Acceptance (CACC) said on Sept 28, board authorized repurchase of up to two mln shares of common stock in addition to board’s prior authorizations

Healthcare

·     BioNTech (BNTX) CEO said a new formulation is likely to be needed by the middle of next year to protect against the virus as it mutates, the Financial Times reported; said mutations will emerge that can evade the body’s immune defenses

·     The Public Health Agency of Canada says that the rates of heart inflammation rarely linked to messenger-RNA-based COVID-19 vaccines are higher following the administration of Moderna (MRNA) vaccine compared to that from Pfizer (PFE)/BioNTech (BNTX).

·     AnaptysBio, Inc. (ANAB) announced that week 16 data from the GPP GALLOP Phase 2 trial of imsidolimab, its investigational anti-interleukin-36 receptor (IL-36R) therapeutic antibody, was presented at the 2021 European Academy of Dermatology and Venereology (EADV) Congress.

·     Incyte (INCY) announces the full 24-week results from its Phase 3 TRuE-V clinical trial program investigating ruxolitinib cream (Opzelura) in adolescent and adult patients with nonsegmental vitiligo.

·     Sage Therapeutics (SAGE) and Biogen (BIIB) announce consistent clinically meaningful data for zuranolone across the LANDSCAPE and NEST clinical development programs presented at ECNP

Technology, Media & Telecom

·     A former product manager on the civic misinformation team at Facebook (FB), Frances Haugen, on Sunday accused the co of repeatedly prioritizing profit over clamping down on hate speech and misinformation. Haugen revealed her identity as the whistleblower who provided the documents that underpinned a Wall Street Journal investigation and a Senate hearing on Instagram’s harm to teen girls

·     Perion Network (PERI) raises FY21 revenue view to $430M-$445M from $415M-$430M and raises FY21 adjusted revenue view to $52M-$53M from $50M-$51M.

·     Akamai (AKAM) downgraded to Sector Weight from Overweight at KeyBanc

·     II-VI (IIVI) downgraded to Underweight from Equal Weight at Barclays and cut tgt to $56 from $65

·     Nokia (NOK) was chosen as the sole supplier by TDC NET to connect over a million homes and businesses in Denmark with PON fiber to ultra-broadband