Closing Recap

Friday, April 30, 2021

Equity Market Recap

·     Stocks may have finished the day lower, but major averages still finished the month roughly 5% higher, led by better quarterly earnings (over 85% EPS beat rate for at least 300 S&P company earnings), ever improving economic data, a non-stop dovish Fed (Powell reiterating support for the economy again this week at FOMC meeting) and another government stimulus proposal (Biden’s American Families Plan worth $1.8T that will be largely paid for by raising taxes on the wealthy). After the busiest week of earnings for the S&P (over 33% of components reported this week taking total to 301 as of today – with massive beats from AAPL, AMZN, MSFT, FB, GOOGL among them), next week is no slouch with ~28% of the SPX scheduled to report including AIG, APA, ATVI, BKNG, CERN, CI, EXPE, GM, GPN, HLT, HST, K, MCHP, NCLH, NWSA, PFE, REGN, TMUS, UA, VNO, WMB, WYNN, XLNX & ZTS.

·     As for today, stocks slipped despite stronger Personal income, Spending, Chicago PMI and UoM confidence data. Treasury yields were volatile early, impacting moves in gold and the dollar, but slipped into the close. U.S. consumer spending rebounded in March amid a surge in income as households received additional COVID-19 pandemic relief money from the government. After this months’ advance, the S&P 500 index and Dow make it a third straight month of gains and the Nasdaq rises for its six consecutive months of gains. Crypto currency markets strong today (Bitcoin, Litecoin), boosting names leveraged in that space.

·     Sector movers: Dow Transport index has been a beast, posts 13th consecutive week of gains, the index’s longest streak of weekly gains since it rose for 15 consecutive weeks ended in January 1899 – gains in transports led by UPS which posted blow out results midweek to record highs. AMZN surges to record highs on its strong results, though the stock pares some of its gains throughout the day as the weekly rally in the market loses steam; TWTR plunges, trades below $56 for the first time since Feb. 5 after providing weak Q2 guidance; CLX slides after missing on revenue and lower gross margin outlook; fellow staple CL moves higher after its beat; XOM, CVX, COG trade lower despite each posting EPS beats as broader energy sector XLE gives up some of its weekly gains (entered +6.5% on the week); FSLR slumps after missing on adj EPS and lowering the low end of its full-year margin guidance; in semi earnings, SWKS, KLAC drop sharply despite posting beat-and-raise quarters, CRUS plummets to its lowest level since early November after EPS, revs, and Q2 guidance all missed expectations

·     Europe’s Stoxx 600 was down 0.3%, up 1.8% in April, third straight month of gains; Germany’s DAX flat, and rises 1% in April; Britain’s FTSE 100 up 0.2% on day and 3.9% in April; France’s Cac 40 down 0.5%, Spain’s ibex down -0.2%; the Euro Stoxx index down 0.3%; euro zone blue chips down 0.5% – for the month, European retail stocks best performers up 6.8%, Autos worst down 4.7% – for the week, Euro banks best performers, up 6%.

Economic Data:

·     Personal income for March jumped +21.1%, above the +20.3% estimate after Feb declined -7.0%; Personal spending rose +4.2% in March, topping the 4.1% estimate; inflation readings show: March overall PCE price index +0.5%, core PCE price index +0.4% (est. +0.3%); the Q1 employment cost index (ECI) rose +0.9% vs. est. +0.7% and vs. Q4 +0.7%

·     Chicago PMI actual 72.1, the highest in almost four decades and handily topping the forecast 65.3 and prior reading of 66.3

·     University of Michigan surveys of consumers sentiment final April 88.3, topping the 87.4 estimate and vs. preliminary April 86.5 and final March 84.9; the consumers expectations index final April 82.7 vs prelim April 79.7 and final March 79.7 and the current conditions index final April 97.2 vs prelim April 97.2 and final March 93.0

Commodities

·     Oil prices edge lower as WTI crude drops -$1.43 or 2.2% to settle at $63.58 per barrel, but ended the month with a 7% advance, looking beyond the growing Covid cases in India and some other countries and focusing on the recovery in the U.S., amid bullish inventory data this week, improving economic data, and some bullish analyst reports this week led by Goldman Sachs who called for oil to hit $80 this year. 

·     Gold prices slip a marginal -$0.60 to settle at $1,767.70 an ounce, falling a 4^th straight session, but finished April with a 3% advance as the dollar tumbled over 2% and Treasury yields declined. Precious metals were mixed overall as palladium topped the $3,000-an-ounce mark for the first time, driven by concerns about a shortage (up more than 20% since March 16 when Russia’s Nornickel announced that flooding at two of its mines would reduce output, Reuters noted)

Currencies & Treasuries

·     The U.S. dollar advanced more than 0.6% midday as the dollar index (DXY) jumped back above the 91 level (91.28 highs), adding to early gains following upbeat data on U.S. personal income and spending as well as manufacturing. Still, despite today’s advance, the dollar was down 2.4% for the month of April, its worst monthly performance since July 2020 (erasing the 2.5% jump in March). The jump in consumer spending and income led to a 0.4% rise in the core personal consumption expenditures (PCE) index, compared with a gain of 0.3% the previous month. The buck has been pressured by a dovish Fed after Chairman Powell said midweek the Fed’s interest rate path and QE program will remain in place. After touching the highest levels in three weeks at 1.69% on Thursday, the 10-year yield traded to weekly lows around 1.62% on Friday.

Sector News Breakdown

Consumer

·     Retailers; AMZN reported a uniformly strong 1Q, with revenue growth acceleration across key profit centers: 3P Seller Services, AWS, and Other/Advertising; while revenue growth of +41% YY ex-FX decelerated by just 100 bps vs. 4Q20, while Op Margin expanded 290 bps YY to 8.2%; COLM reported strong 1Q21 earnings with revenue of $625.5mn (vs. our $596mn) and EPS of $0.84 (vs. our $0.35) both above expectations; HBI named catalyst call buy idea at Deutsche

·     Consumer Staples; CLX falls on mixed Q3 as EPS beat but sales of $1.78B missed the $1.87B estimate and said it now sees fy21 gross margin down due to higher commodity, manufacturing, logistics costs; CL posts better-than-expected Q1 results with organic sales growth of 5%, saying they delivered positive pricing in every division, helping drive growth in operating profit, net income and earnings per share (also warns of future cost pressures); NSRGY agreed to buy vitamin maker Bountiful Co. for $5.75 billion, becoming a world leader in the field of minerals and supplements; CHD downgraded to Sell from Hold by CFRA and cuts tgt by $5 to $80

·     Restaurants; QSR reports better-than-expected Q1 rev and profit with adj EPS 55c on revs $1.26B vs ests. 50c on $1.25B, as the company’s Burger King chain benefitted from a spending boost from the reopening U.S. economy and government stimulus checks; TXRH Q1 EPS 91c vs. est. 58c on revenue $800.63M vs. est. $741.14M, comp restaurant sales +18.5% vs 2020 and +8.6% vs 2019, and will pay a dividend to shareholders for first time since March 2020.

·     Autos & Leisure; NIO rises following results posted smaller Q1 loss (4c) on revs $1.13B vs. est. $1.02B as deliveries of 20,060 in Q1, representing an increase of 422.7% from Q1 of 2020 – seeing little bounce in other EV stocks; DASH, UBER, LYFT extend Thursday losses after Biden’s labor secretary said in a lot of cases, gig workers should be classified as employees.

Energy

·     Energy stock movers; major oils report with Dow components out: CVX Q1 EPS was in-line 90c on revs $32.03B vs est. $30.37B, and its production fell 4% YoY in the quarter to 3.12 Mboe/d as international operations struggled with the effects of asset sales, maintenance and entitlements, though its U.S. production increased by 1% due to an additional 210k bpd from the Noble Energy acquisition that offset a decrease related to its Appalachian asset sale and Winter Storm Uri; XOM reported Q1 adj EPS 65c vs est. 60c on revs $59.15B vs est. $56.38B, production 3.8 Mboe/d (+3% YoY), cash flow from ops $9.26B vs est. $6.27B

·     E&P and Majors; SLCA posted a net loss of $20.8M for Q1 compared with net income of $4.6M in Q4; in pipelines PSXP EPS misses by $0.91, misses on revenue; in refiners, PSX slips as its Q1 loss widened from the previous three months mainly due to severe winter storms in February; in solar, FSLR slides as beat estimates for quarterly profit, but said it is taking a little bit of a headwind around the impact of planned downtime; weekly Baker Hughes (BKR) rig count showed the total rig count rose 2 to 440 as gas rigs rose 2 to 96, oil rigs fell -1 to 342 and miscellaneous rigs down 1 to zero; Imperial Oil posts Q1 profit vs Q4 loss, helped by higher prices for crude, as well as improved refining and chemical margins

Financials

·     Bank, brokers and Exchange movers; news flow generally quiet in financials space with most bank earnings behind us, with focus now on FinTech and Payments names with likes of SQ reporting next week; CME downgraded to Hold from Buy as the stock has now surpassed our former target price of $200 at Argus; FISV 20M share Spot Secondary priced at $118.30; in services; TEDU enters into a merger agreement with Kidedu Holdings and its wholly-owned subsidiary in a transaction implying an equity value of ~$230.6M https://bit.ly/2Rh5ESU ; in crypto-currency, strength in BTCM, GBTC, MARA, RIO, OSTK (Bitcoin leveraged plays) as crypto space outperforms, with gains in Bitcoin, Bitcoin cash and Litecoin up 7% at $268

Healthcare

·     Pharma movers; AZN confirmed it plans to apply for U.S. emergency authorization of its Covid-19 vaccine in the first half of 2021 after it missed an original target this month that raised questions over whether the company would pursue the clearance at all; VRTX posted better-than-expected Q1 profit and revenue, helped by demand for cystic fibrosis drug Trikafta while reaffirmed 2021 product rev of $6.70B-$6.9B vs. est. $6.96B; PFE and BNTX said they had applied to the European health regulator to extend the marketing authorization for their coronavirus vaccine for use in adolescents aged 12 to 15; ABBV posts Q1 revenue ahead of estimates and raises FY profit forecast, helped by demand for its rheumatoid arthritis drug Humira and psoriasis treatment Skyrizi/Humira sales rose 3.5% to $4.87B, ahead est. $4.78B, and Skyrizi sales up 91% to $574M; BMY was downgraded at Morgan Stanley and cut tgt to $62 from $70 after earnings; ALXN posts better-than-expected Q1 profit and revenue, helped by demand for its rare blood disorder drug, Ultomiris as sales rose 56% to $346.9M

·     Biotech movers; GILD slides as reported Q1 revenue at $6.4B, below Wall Street estimates of $6.74B, as COVID-19 hurt sales of its flagship HIV and hepatitis C drug; SGEN announced a commercially frustrating Q1 with a slight top-line revenue miss vs. Street ($332M vs. Street’s $336M) driven by disappointing stagnating Adcetris and Padcev sales; ARDX shares fell after the FDA asked for additional analyses regarding tenapanor for certain kidney disease patients, resulting in the PDUFA date for tenapanor for the control of serum phosphorus in adult patients with chronic kidney disease on dialysis being extended.

·     MedTech Equipment; DXCM reported strong 1Q results, as revenue of $505M (+25% YOY) topped consensus by $21M and also raised its full year sales guidance by $50M to $2.260-2.360B (+17-22%) – shares fell as Canaccord notes there is enough in the results for shorts to pick at, namely plans to lower OUS pricing to drive further market access in the near term; CRY shares rise as 1Q revenues of $71.1M handily beat consensus estimates of $63.0M, up 7% y/y, bucking mid-February guide of down 5-8%, based on improved US, new launches

·     Healthcare Services; MDRX posted better-than-expected Q1 profit, helped by strength in bookings and also reaffirmed its 2021 revenue forecast of $1.5 billion; EHTH posted a strong first quarter beat driven by better-than-expected MA enrollment during OEP as it transitions from third-party broker utilization to a mostly internal sales force; OMCL reported 1Q21 results that were ahead of consensus as total revenue was $251.8 million (+9.6% y/y), which compares to company’s guidance of $243-248 million; ACHC had 1Q beat coupled with the continued pause of sequestration and raised 2021 adjusted EBITDA and EPS guidance by +2% and +4% at the midpoint; TRUP strong quarter, with enrolled pet and revenue growth both accelerating and coming in ahead of expectations; CYH upgraded at Credit Suisse after earnings beat

Industrials & Materials

·     Industrial & Machinery; JCI 2Q adj EPS beat at $0.52 on in-line sales $5.6B and guides FY adj EPS $2.58-2.65 vs. est. $2.59, and sees FY organic revs +MSD vs. est. +4.6%; CARR added to the list of strong HVAC sector results after LII and WSO already reported; GWW Q1 adj EPS $4.48 was better than expected $4.32 on net sales $3.08B vs est. $3.05B and sees FY21 EPS $19- $20.50 (est. $18.61) on net sales $12.7-13B (est. $12.37B); ITW reported Q1 EPS $2.11 vs est. $1.90 on revs $3.54B vs est. $3.44B and now sees FY organic rev. +10% to +12% vs. prior +7.00% to +10% range; TEX also posted Q1 EPS and revs that beat consensus with raised guidance, with EPS 56c vs est. 24c on revs $864.2M vs est. $814.8M and raised FY EPS view to $2.35-2.55 from $1.95-2.35 with revenue now expected to be about $3.7B from $3.45B

·     Transports; Dow Transport index has been a beast, remains on track to advance for a 13th consecutive week, which would be the index’s longest streak of weekly gains since it rose for 15 consecutive weeks ended in January 1899. Oppenheimer noted that number of passengers going through U.S. airports is down around 21% this year as of April 28 when compared with 2020; the Cass Freight Index of North American freight volumes climbed 3.4% from February to March on a seasonally adjusted basis; and traffic on U.S. railroads through the first 16 weeks is up 9.4% YoY

·     Metals & Materials; NWL posted Q1 normalized EPS 30c that topped estimated 13c on sales $2.29B vs est. $2.07B, and raised FY normalized EPS view to $1.63-1.73 from $1.55-1.65; in steel space, U.S. Steel (X) reports 1Q adjusted EBITDA of $551M, slightly better than the company’s guidance and analysts’ consensus estimate of $543M. Pre-tax profit from the flat-rolled steel business came in at $146M, up from a loss of $35M in the year-earlier quarter, but well below expectations; in paper space, WY shares slide as posted a jump in Q1 Sales and earnings helped by record prices for lumber and oriented strand board, but its results fell shy of expectations (48c/$2.06B well below the 91c/$2.52B estimate)

Technology, Media & Telecom

·     Internet; TWTR reported a disappointing quarter compared to peers who have been reporting upside across the board as revenue was at the high-end of guidance and 1% above consensus, earnings were better and users were in-line – mDAU were slightly below for the US but above for International, while Q2 guidance was slightly below estimates; rest of Internet group weaker, led by social media names; online travel down ahead of earnings next week (BKNG, EXPE, TRIP)

·     Semiconductors; WDC reported a good MarQ rev/EPS at $4.1B/$1.02 and 27.7% GMs, with NAND GMs up 290bps q/q and also guided to a SOLID JunQ at $4.5B/$1.45 (well above cons. $4.3B/$1.01) with strong NAND pricing and GM improvement; CRUS posts Q4 earnings and revenue well below expectations and forecasts Q1 revenue between $240M-$280M, below the midpoint of range below analysts’ est. of $277.35M saying supply constraints impacted Q4 revenue and Q1 outlook; KLAC produced F3Q results at the high end of guidance and provided F4Q guidance well above consensus as demand has improved over the past quarter; INTC is seeking 8 billion euros ($9.7 billion) in public subsidies towards building a semiconductor manufacturing site in Europe, its CEO said Friday; SWKS reported MarQ Rev/EPS/GM at $1.17B/$2.37/50.8% versus consensus ~$1.15B/ $2.35/50.9%, and guided to JunQ at $1.10B/$2.13, ~3% above $1.07B consensus and Mobile was up ~47% y/y

·     Software movers; FIVN rises as Q1 marked the firm’s best quarter ever in terms of new customer bookings as well as a record Q1 for bookings in the base, while also announced 45% growth (over the last four quarters, Five9’s growth has gone +29%, +34%, +39%, +45%); TEAM stronger FQ3 results which were consistent with the recent positive preannouncement as sub revenue reaccelerated to low 40s, driven mainly by the strong Data Center sales (+75% y/y) ahead of price increases, with steady mid-30s cloud growth; ZEN Q1 beat, raised guide and named a new CFO

·     Hardware, Components & Services; ROKU slides after Axios reported that Google’s YouTube TV has been removed from Roku’s channel store, after the companies failed to come to a distribution agreement amid accusations that the tech giant made anti-competitive demands; AVT was upgrade from Hold to Buy at Loop Capital following a stellar quarter with strong upside guidance as the Americas mix improved and we have higher confidence in the Farnell margin target achievement; NPTN tumbles on disappointing outlook

·     Media & Telecom movers; CHTR slow grind off lows after initially falling on mixed earnings as EPS miss $4.11 vs. est. $4.26 on in-line revs $12.5B; several analysts calls as CMCSA upgraded to Outperform at Oppenheimer saying the growth outlook is improving across each segment coming out of COVID and think now is an attractive entry point for investors; Today marks the grand reopening of Disneyland (DIS), which has been closed since March 2020; Macquarie upgraded shares of both VIAC and DISCA; CCOI upgraded to Outperform at Oppenheimer on improved growth outlook and attractive valuation