Market Review: July 01, 2021

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Closing Recap

Thursday, July 01, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

Stocks remain on fire this summer and the S&P set its record intraday high for the 6th consecutive day as the second half of the year looks poised to continue the market’s upwards momentum. Energy stocks paced the market today on strong demand data and with the OPEC+ meeting starting today. While talks were extended to tomorrow pending further consultations on policy, reports were that the group’s ministerial committee are considering proposing a 400k bpd supply increase for August-December and extending output curbs through the end of next year instead of ending management in April. The Nasdaq neared its own record high early, but tech stocks then spent much of the session in the red as the 10-year yield rallied from the 1.45 level towards the 1.5% level. The Dow, which was the only index to slide last month as investors rotated to higher growth names, was higher despite the negative reaction to Walgreen’s earnings print. Employment data topped expectations today with weekly jobless claims retreating to 364,000, the fewest claims since the pandemic took its toll in March 2020. Additionally, a Challenger, Gray & Christmas report said there were 20,476 planned job cuts in June, an 88% decrease from last year and the lowest total for a January-June month since 1995. For tomorrow’s nonfarm payrolls report, economists are expecting the data to show approximately 700,000 jobs being added last month and a strong report could force the Fed’s hand in undertaking a more hawkish policy after its accommodative approach during the pandemic. However, the report has missed consensus each of the past 2 months (April +266k vs est. +978k, May +559k vs est. +660k).

Sector/stock news; XLE Energy stocks soar with FANG, OXY, MRO, SLB, HAL leading the S&P after WTI Crude tops $75/barrel for the first time since Oct 2018 after OPEC+ committee reportedly considers adding 400k bpd from August-December; WBA plunges despite its beat-and-raise, MU also falls despite its beat-and-raise on higher capex guidance and Summit d/g based on pricing power from the semi shortage fading soon; DNUT opens at $16.30 vs IPO price $17 (original range $21-24) and moves higher once trading begins and ASTR rises more than 10% in its 1st day of trading after completing its SPAC; yesterday’s IPOs were mixed – DIDI YOU surge, IAS LZ S INTA slide, XMTR AVTE plummet; XPEV NIO rise early on record monthly deliveries, but both stock roll to red during the day; CVAC stumbles after Covid vaccine trial demonstrated 48% efficacy; HTZZ was extremely volatile after emerging from Chapter 11 bankruptcy as shares jumped +59% early, then were cut in half to trade as low -27% before rebounding; NVDA sets its ATH after BMO sets a $1,000 price target

Economic Data:

US weekly jobless claims fell to 364,000 (est. 390,000) from the prior week’s 415,000 (was revised up from original 411,000), bringing 4-week average to 392,750 from 398,750; continued claims rose to 3.469M (est. 3.382M) from 3.413M prior week, uninsured employment rate stayed steady at 2.5%

US Markit Manufacturing PMI Final Actual 62.1 (Forecast 62.6, Previous 62.6)

ISM U.S. Manufacturing Activity Index 60.6 in June (consensus 61.0, 61.2 in May), lowest since January; ISM Employment Index 49.9 in June, the first time in contraction territory since November



Oil prices jumped with WTI crude gaining $1.76, or 2.4%, to settle at $75.23/barrel as the OPEC+ ministerial committee reportedly proposed a 400k bpd increase from August-December and extending supply cuts from April 2022 to the end of that year at the group’s meeting. Additionally, strong demand data has pushed prices higher. Gold price rose $5.20, or 0.3%, to $1,776.80/oz. as the dollar index (DXY) pulled back from 2.5 month highs.





WTI Crude















10-Year Note





Sector News Breakdown


Retailers; WBA 3Q adj EPS $1.38 vs est $1.17 on sales $34B vs est $33.76B, US comps +6.4%; raises FY EPS guide to about +10% vs est -1%; FB Riley initiated BBBY at Buy with a $44 target due to the new management team’s recent progress; BSET Q2 EPS 60c vs est. 35c on revs $121.M vs est. $116M; Needham reiterated their Buy rating on BNED after its investor day as they believe a return to normal creates an opportunity for healthy margin upside from current levels and find shares attractive given the current discounted valuation

Auto sector sales data; XPEV reported a monthly record 6,565 Smart EV deliveries in June (+15% vs May, +617% YoY), bringing Q2 deliveries to a record 17,398 (+439% YoY) and 1H deliveries to 30,738 (+459% YoY); NIO delivered 8,083 vehicles in June (+116.1% YoY) and 21,896 in the quarter (+111.9% YoY); GM Q2 US sales 688,236 (+39.7% vs est. +40.5%); TM U.S. June 2021 sales 207,331 vehicles (+39.8%), including 46,074 alternative powered vehicles; VWAGY Q2 sales 120,520 vehicles (+72%); HMC Q2 US sales 486,419 units (+65.7%); TTM sold 43,704 vehicles domestically in June (+125% YoY)

Autos research; KeyBanc upgraded AXL to OW as it should benefit from a pro-cycle standpoint with notable earnings upside as investors’ perceptions about their EV positioning has neutralized near-term risk; RBC said that recent harsh weather will have an incremental positive effect on the core sales of the auto part retailers (AAP, AZO) and suspect that this effect may be amplified as consumers gradually return to their normal routines/commutes and miles driven climbs higher; The Karma Innovation and Customization Center revealed the first Club Car Current vehicles being produced under a contract manufacturing agreement with AYRO, which are light-duty EVs that fill the gap between full-sized trucks and small utility carts for low-speed logistics and cargo services in campus and urban environments; Into Q2, Wells is cautious on auto suppliers with high exposure to Ford, GM, and Nissan, bullish on suppliers with higher aftermarket & heavy truck exposure (BWA, TEN), and see risk for VC, LEA

Housing & Building Products; TTSH said it expects Q2 sales to be around $95M, which would be its record; BTIG lowered their pt on BLDR to $59 from $67 and trimmed their 2021 and 2022 EBITDA estimates with higher SG&A offsetting revenue from recently announced acquisitions;

Consumer Staples; MKC posted Q2 adj EPS 69c vs est 61c on revs $1.56B vs est $1.47B, ups FY21 adj EPS to $3.00-$3.05 from prev. $2.97-$3.02 and expects to FY21 sales growth 11-13; SMPL Q3 adj EPS 43c was above est. 28c on revs $284M that beat est. $2444M, adj EBITDA $67.5M vs est. $49.3M; Goldman initiated SKIN with a Buy rating and $31 target (85% upside) as its lead product HydraFacial has numerous first mover advantages driving a growing moat for its newly created skin health category, which is a fast growing market segment; PM bought nicotine gum maker Fertin for $820M; COTY relaunched Kylie Cosmetics With new and improved clean and vegan formulas, and its new Direct-to-Consumer website and select brick and mortar retailers ensure global availability of Kylie Cosmetics for the first time ever

Restaurants; Truist sees 35% upside in DIN as shares are -5% since the pandemic vs DRI +24% and TXRH +33%; FRGI sold its Taco Cabana for $95M to an affiliate of Yadav Enterprises; DNUT (Krispy Kreme debuted at $16.30 after its IPO was priced at $17, below original marketed range of $21-24, before trading above $20

Casinos, Gaming, Lodging & Leisure sector; Cowen raised their estimated on UBER and LYFT as both MAUs are now above their pre-pandemic highs; Truist raised their pt on PTON to $140 and their new quarterly rev est. of $973M is a street-high as their proprietary credit card data indicates the company’s revenues are ahead of estimates and guidance



Energy stock movers; Energy stocks paced the S&P (FANG, OXY, MRO, SLB, HAL, COP among leaders) after OPEC+’s reported proposal for a gradual output through year-end and crude hitting $75/barrel; XOM sees Q2 earnings gain of $0.6B-1B from higher oil price, $200M from higher gas prices, and $800M in chemical margins; Goldman upgraded ENB to Neutral; Credit Suisse initiated DTM at OP with a $52 target as it currently trades at a discount despite forecasted EBITDA growth that is more than twice the peer average; Tudor downgraded AR to Hold

Utilities & Solar; KeyBanc downgraded EIX as the upcoming wildfire season could be a negative catalyst and they don’t see the discount gap to peers closing



Bank movers; Wells upgraded FHB to EW as Hawaii’s tourism is rebounding faster than expected; MPB signed a deal to acquire RIVE in a $124.7M all-stock deal; PNC raised its dividend to $1.25 from $1.15

Insurance; Into Q2 earnings, JPMorgan downgraded GSHD to N on more balanced risk/reward and said ALL was their top pick on an improved risk profile following the sale of the annuity and life blocks

Consumer finance; Robinhood filed for IPO of up to $100M and a target valuation of at least $40B with the symbol HOOD, and reports 2020 net income $7M on total revs $959M (+245% YoY), total revs $522M in the quarter ending March 31, 2021 (+307% YoY), net cumulative funded accounts 18m, assets under custody $81B; IBKR reported 2.471M daily average revenue trades in June (+33% YoY, +10% vs May), ending client equity $363.5B in June (+79% YoY, +4% vs May); OpCo initiated OFS at Perform with a $10 pt

Bitcoin news; Mizuho warned that meager crypto volumes bodes poorly for COIN an even a Q2 beat might be coupled with downward revisions for Q3; FB Riley lifted their price targets on Buy-rated RIOT (to $51 from $44) and MARA (to $54 from $47)

REITs; Raymond James reiterated their Strong Buy rating on WELL (PT to $95 TP from $92) and Outperform rating on VTR ($65 TP) following WELL’s acquisition of a $1.6B portfolio operated by Holiday and VTR’s acquisition of SNR for $2.3B; Bank of America downgraded VTR to Neutral and lowered its target to $62 from $66; Citi raised their price targets on CUBE (to $51 from $44.50), , NSA ($55 from $48,50), and PSA ($325 from $296) in storage and MAC (to $17 from $11) in shopping where they also upgraded ROIC to Buy



Pharma movers; CVAC late stage vaccine trial showed 48% efficacy against Covid of any severity across all age groups and 15 variants, 53% against disease of any severity, and 77% against moderate and severe disease; NVAX Ph3 trial in the UK demonstrated high Covid vaccine efficacy; PFE invested $40M in SPRO and the companies also entered into a licensing agreement for SPRO’s polymyxin product candidate SPR206 for treating severe multi-drug resistant (MDR) Gram-negative infections in hospitals; Activist investor Elliott sees 45% upside in GSK ahead of its Consumer Health separation, but is skeptical about management’s execution and called for executives with pharmaceutical and consumer health expertise

Biotech movers; APLS and BEAM entered into an exclusive research collaboration to apply base editing to discover novel therapies for complement-driven diseases; Raymond James initiated coverage on PASG at Outperform with a $29 PT and Market Perform ratings on AGIO and VRTX; PBYI received FDA approval for dose escalation in its Phase 2 trial for HER2-Positive Early Stage and Metastatic Breast Cancer; AFMD Q1 EPS and revs beat consensus; Gugg initiated SEEL at Buy with an $8 pt given their positive view of its lead asset, SLS-002 (intranasal racemic ketamine), currently in development for the treatment of acute suicidal ideation and behavior (ASIB); Maxim initiated MITO at Buy with a $3 target; Berenberg downgraded BLUE to Hold

MedTech Equipment; Goldman downgraded BVS to Neutral since the stock is approaching their price target post-IPO and see relatively better buying alternatives elsewhere within small cap Medtech; Northland initiated BTCY at Outperform with a $7 target as a true tech company with a leverageable SaaS like platform and significant expansion opportunities, both in core cardiac testing and beyond; Stifel added COO to its Select List and raised its price target to $450 from $405 on an expected strong back-to-school season in the near-term and long-term opportunity in its leading role among optometrists to address pediatric myopia management

Industrials & Materials

Industrial & Machinery; FC reported Q3 EPS 90c vs est 7c on revs $58.7M vs est $51.6M, now sees FY21 adj EBITDA $24.5M-$26.5M from $20M-$22M; LNN Q3 EPS $1.61 topped est. $1.30 on revs $161.9M that was also above est. $146.43M; AYI posted Q3 adj EPS $2.77 on revs $899.7M that topped consensus views of $2.27 on $839.8M; Credit Suisse upgraded AGCO to OP as they see limited downside; HCW upgraded ASPN to Buy after the company said revenue could double every 2 years over the next decade given demand for its PyroThin thermal barriers that address thermal runaway problems in EV batteries and a rebound in energy infrastructure spending; OpCo initiated AQB at Outperform with a $7 target

Transports; JPMorgan upgraded HTLD into earnings due to being the only TL trading below its prior trough multiple; BMO was positive on MLLGF’s acquisition of QuadExpress as it is a unique entry point into the US market

Metals & Materials; Deutsche upgraded CE to Buy as it has proven its ability to deploy excess cash flows from its commodity acetyls business and utilize its underlevered balance sheet in a strategic and financially attractive manner to grow its high multiple Engineered Materials business; Loop upgraded CBT to Buy due to healthy near-term trends, strong financial position, attractive valuation, and a perceived hidden asset value in its carbon business that addresses the EV market; Macquarie upgraded AMCR to Outperform as they shift to a more defensive stance due to the belief that the growth cycle peaked, and this stock has performed well in periods of greater volatility and has a below market valuation unlike many other defensive names


Technology, Media & Telecom

Internet; Barclays initiated ZIP at OW due to its room to gain market share, available job openings that outstrip demand to give favorable dynamics, and its EBITDA profitability compared to other recent internet IPOs; BTIG upped their price target on UPWK to $76 from $65 after their survey showed the company’s new Project Catalog attracting adoption among freelancers, and even modest traction could have a meaningful impact on valuation; Piper raised their price target on EBAY to $81 from $71 as they see a simpler business after its non-core divestiture process

Semiconductors; MU reported Q3 adj eps $1.88 vs est. $1.72, gross margin 42.9% vs est. 42.0%, sees 4Q revs $8-8.4B (est. $7.85B), FY21 capex above $9.5B (est. $9.2B), and expects DRAM, NAND supply to remain tight into 2022; TXN purchased MU’s 300-mm semiconductor factory in Lehi, UT for $900M; COHU announced a $100 million debt prepayment that reduces outstanding principal of its term loan B facility to about $104M and is is expected to save about $0.8M in fiscal Q3 interest expense; QRVO was initiated at Buy with a $225 target at Argus given its strong growth record, strong balance sheets, experienced management team, and accelerating growth opportunities; BMO raised their target on NVDA to $1,000 as they see their data center business growing more than previously expected and software sales accelerating; STM will buyback $1.04B of its shares over the next 3 years

Software movers; Barclays said SPLK is a unique undervalued asset as it is growing nearly 40% on ARR and is the industry leader in the Security and Observability space, both of which are in a secular uptrend, and other companies (Tableau, ADBE, ADSK) have come out stronger after a cloud and billing transition; Daiwa initiated TWLO at Buy with a $463 pt; Goldman initiated LPSN at Neutral with a $71 target

Hardware, Components & Services; MKSI agreed to acquire ATC for $5.1 billion in cash and stock, paying $16.20 in cash and 0.0552 of a share of MKS for each ATC common share, equivalent to $26.02/share, a 1.9% premium; HPE acquired cloud company Zerto for $374M in cash in a deal that they say is expected to contribute more than $130 million in run-rate revenue at software gross margins and will be accretive to non-GAAP operating profit and earnings starting in FY23

Media & Telecom movers; SJR Q3 EPS $0.56 vs est $0.28 on revs $1.1B (+18.2% YoY); JMP initiated JMP at Market Outperform and a $17 target; Raymond James double-upgraded WOW to Strong Buy from Market Perform after yesterday’s deal to divest five legacy markets


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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