Market Review: July 16, 2021

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Closing Recap

Friday, July 16, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks finish the week at the lows, snapping their 3-day winning streak as inflation jitters, economic slowdowns and positioning ahead of the start of earnings season weighs on major averages. Concerns about the Covid variant also playing a factor after Los Angeles County said Thursday it would reimpose its mask mandate this weekend. On Friday, public health officials said U.S. coronavirus cases were up 70% over the previous week, with deaths up 26%. News weighed heavily on the reopen trade with casinos, restaurants, retailers, and travel names falling. Fed Chairman Powell did his best this week to ease investor concerns over the soaring prices consumers have witnessed the last few months, reiterating his stance in testimony to the House and Senate this week that prices are likely transitory. Defensive and high dividend paying sectors outperformed today/this week led by utilities, while the real estate index rose to a record high – each boosted as Treasury yields close the week out lower. Gold prices tumble behind a bounce in the dollar. Shares of DOW (downgraded at Bank America), GS (banks remain weak on low Treasury yields), and CVX (general oil stock weakness) were drags on the Dow Jones Industrial Average ahead of a busy week of earnings for the blue-chip index (expected earnings from: AXP, HON, KO, IBM, INTC, JNJ, MMM, TRV, VZ).


Economic Data:

·     June retail sales rose +0.6%, topping the 0.4% estimate, while retail sales ex-autos rose +1.3%, topping the 0.4% estimate; retail sales ex-autos/gasoline rises +1.1% vs. May -1.0%; June gasoline sales +2.5% vs May +0.2%

·     Business inventory for May rose 0.5%, in-line with consensus views (prior month revised to +0.1% from prior -0.2%); the May inventory/sales ratio 1.26 months’ worth vs April 1.25 months; May business sales fell -0.3% vs April +0.6%

·     University of Michigan consumers sentiment prelim July 80.8, well below consensus 86.5 and the June-Final reading of 85.5; current conditions index prelim July 84.5 below June-F 88.6 and the expectations index prelim July 78.4, below the June-F 83.5


Commodities, Currencies and Treasury’s

·     Oil prices edge higher as WTI crude rises $0.16 or 0.22% to settle at $71.81 per barrel, recovering off session (and 1-month) lows of $70.41. Despite the small gains, Brent drops about 2% for the week, its third week in a row of declines (first time since April 2020) while WTI crude slides 3.7% for its second consecutive weekly decline. With oil prices mostly rising over the last several months, the U.S. oil rig count continued its slow increase, gaining two rigs this week to 380 active units, their highest since April 2020. Prices have slid in recent weeks with weakness coming on the back of OPEC production uncertainty and on rising Covid cases.

·     Gold prices slide -$14.00 or 0.8% to settle at $1,815.00 an ounce, but still managed to eke out a small 0.2% gain for the week (4th straight week of gains) as Treasury yields declined, offsetting a bounce in the U.S. dollar. A dovish stance on monetary policy by the Federal Reserve continues to bolter prices of precious metals. This week, Fed Chair Jerome Powell reiterated that rising inflation is likely to be transitory and the U.S. central bank would continue to support the economy, which sent gold prices to a one-month high on Thursday.

·     U.S. Treasury yields rose from one-week lows after data showed that U.S. retail sales advanced in June, though doubts about the strength of the economic recovery and dovish Federal Reserve policy were seen as likely keep a cap on yields in the near-term. Benchmark 10-year notes were flat around the 1.30% level, holding just above five-month lows of 1.250% reached last week and are down from 1.776% in March. The U.S. dollar edged higher on Friday (rising on the week).






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; AOUT shares slide after Q4 revenues missed estimates while guides year EPS $2.02-$2.26 vs. est. $2.13; sees FY revs $280M-$295M vs. est. $284.9M; Piper said they remain positive on TPX and SNBR heading into Q2 following results from our June (and Q2) mattress retailer survey, which showed a strong Q2 overall and a favorable outlook for Q3

·     Auto sector; auto suppliers trade softer after ALV Q2 top and bottom line and cut its full-year outlook, citing the continued impact of the COVID-19 pandemic, the negative effect of the semiconductor shortage and continued rise in raw material prices; other auto parts suppliers (LEA, BWA, VNE, APTV) active on the miss and lower guidance; DIDI slips early after China sends state officials from at least seven departments to the ride-hailing giant for cybersecurity review, as regulatory pressure intensifies; Ford Motor (F) said it was recalling about 775,000 Ford Explorer SUVs worldwide for a steering issue linked to reports of six injuries in North America; RIDE said federal prosecutors in Manhattan are investigating its vehicle pre-orders and its merger with blank-check co DiamondPeak Holdings

·     Housing & Building Products; Truist said AZEK stock has underperformed close peer TREX in recent weeks due to exposure to higher-cost raw materials, saying this will most likely limit upside to estimates in 2H21 in comparison to TREX – but l-t story unchanged; building products initiated at Wells Fargo as they rated MAS and JELD at Overweight and EW rated on MHK, OC, FBHS, and BECN saying building products sector within Housing continues to benefit from solid tailwinds—spiking home equity values and Covid driven new lifestyle preferences are driving unexpected demand momentum

·     Consumer Staples; HNST was upgraded from Hold to Buy with $17 tgt at Loop Capital saying after the recent pullback in shares, we think potential destocking pressures in Q2 are more than adequately priced in at the current valuation of approximately 3x 2022 sales; OTLY shares defended by Bank America saying they spoke to OTLY investor relations following a short sale report released by Spruce Point Capital Management yesterday and said the company categorically denies the allegations in the report

·     Casinos, Gaming, Lodging & Leisure sector; cruise lines active (CCL, NCLH, RCL) after Canada says it will allow cruise ships back into its waters starting in November – notes ships will have to fully comply with public health requirements that have yet to be finalized; in online travel, RBC Capital said checks suggest likely 2Q21 bookings/2H21 revenue upside so raises estimates for both EXPE and to a lesser degree ABNB; in gaming, FUBO said its gaming segment completed market access for mobile sports betting in Pennsylvania through an agreement with The Cordish Companies; Truist notes Sports betting-related stocks continue to tumble, reflecting ongoing inflation concerns and some seasonality (said total May sports betting GGR was down -5% M/M, a continued tail-off since a strong March) – they continue to highlight omni-channel focused operators also benefiting from reopening, including Buy-rated BALY, PENN and CZR

·     Education and services; Chinese online education sector once again under pressure (TAL, EDU, GOTU), with the industry having been crushed in recent weeks on reports China to unveil tough new rules for private tutoring sector last month, which prompted several analyst downgrades during that period. Group falling again today amid fears of ADRs being delisted.



·     E&P and Majors; MKM upgraded MTDR to Buy and lifted their price target to $40 from $34 due to an increase in their oil price outlook and a modestly higher gas price realization (NGL pricing, two-stream reporting); Citi initiated CDEV at Neutral with a $7.50 target as its balance sheet outlook has improved with rising commodity prices and their focus on FCF generation, but the stock rising over 300% YTD means risk-reward is fairly balanced.

·     Equipment and Services; Baker Hughes weekly rig count up 5 to 484 with oil rigs up 2 to 380 and gas rigs up 3 to 104; DNOW was upgraded to Buy at Stifel who says oil & gas customer spending likely bottomed in 4Q20/1Q21 and should accelerate seasonally and cyclically ahead, which could result in higher profitability, and their pristine balance sheet with $374 million of cash and no debt at end 1Q21 allows room for meaningful inorganic growth which we also expect to be accretive to gross margins; HP was upgraded to neutral from underperform at Bofa

·     Pipelines: Wolfe upgraded ET to Outperform with the stock down 14% from the June highs as energy has consolidated and growth has rallied, creating a buying opportunity in a favorable macro environment with higher commodity prices and a return to production growth in the Permian; Morgan Stanley upgraded PAA, PAGP to OW due to leverage to recovery in Permian Basin oil production, where they see strong growth in 2021/2022, and valuation below peers

·     Refiners: Credit Suisse downgraded SHLX to Underperform on valuation as it trades at a >1.5x premium to peers at one of the highest multiples in their coverage group and assumed HESM with a Neutral rating and $25 PT

·     Utilities & Solar; REGI was named as a new Outperform with a $72 PT at Raymond James as it presents a refreshingly proven business truly playing a role in the world’s shift towards lower-carbon fuels; Credit Suisse assumed coverage of SHLS at Outperform with a $40 PT



·     Bank movers; FHN Q2 adj EPS $0.58 vs. est. $0.43; Q2 revs $781M vs. est. $771M; Q2 net interest margin 2.47% vs. 2.90% a year ago; tangible book value per share of $10.74 up 4% from Q1; other earnings results from PBCT, BANF, WAL; STT raises quarterly dividend 10% to 57c from 52c, authorizes $3B share buyback and reported Q2 EPS/revenue beat; HOMB downgraded to market perform at Raymond James following 2Q21 results that fell short of our Street high forecast but which matched consensus on a core basis

·     FinTech & Payments; SQ is forming a new business that pulls together Seller, Cash App & Tidal to focus on "building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services," CEO Jack Dorsey tweeted; MGI rises early after the Financial Times reported of a potential takeout bid from private equity firm Advent



·     Pharma movers; ABBV said the FDA didn’t meet the Prescription Drug User Fee Act action date for the supplemental new drug application for the company’s treatment for moderate to severe atopic dermatitis; BMY said its late-stage trial testing combination of its immunotherapies Opdivo and Yervoy in a type of cancer that affects head and neck, did not meet the main goals; CRVS discontinues phase 3 study of Mupadolimab (anti-cd73) for covid-19 due to vaccine effectiveness in reducing hospitalizations; in cannabis space, shares slide (CURLF, GTBIF, TCNNF) after this week’s bill introduced by Senate Majority Leader Chuck Schumer to legalize marijuana on the federal level did not have enough votes to pass; KDMN said it received FDA approval for Rezurock 200 mg once daily for the treatment of adult and pediatric patients 12 years and older with chronic graft-versus-host disease,

·     Biotech movers; FGEN shares tumble after a panel of experts to the U.S. FDA voted against the approval of FGEN drug candidate, roxadustat, to treat anemia of chronic kidney disease; shares of AKBA advance in sympathy as Cantor noted the negative roxadustat panel news in both dialysis and non-dialysis creates first-in-class opportunity for the company’s vadadustat (Vadadustat would be the first oral HIF-PH inhibitor to enter the market in 2022); MRNA will join the S&P 500 index as of the start of trading on July 21, replacing ALXN which is being acquired by AstraZeneca; ERAS 18.5M share IPO priced at $16.00; IMGO 8.6M share IPO priced at $16.00; SCAN 6.67M share IPO priced at $15; BIIB with more bad press as two major hospitals said they won’t administer its drug to treat Alzheimer’s disease. On Thursday. Cleveland Clinic said it reviewed the evidence on the drug, aducanumab, and decided not to carry it, while Mount Sinai in New York also decided not to administer it, according to the New York Times, which was first to report the moves.; IBIO said late Thursday its COVID-19 vaccine candidate, IBIO-202, demonstrated antigen-specific memory T-cell response in preclinical studies

·     Healthcare Services; CERN shares in focus as the VA pauses its Cerner rollout after an internal report finds significant problems, with VA Secretary Denis McDonough telling the Senate Veterans’ Affairs Committee that he will make changes in project oversight, training, implementation sequencing, and budgeting; ZTS downgraded to Market Perform at Raymond James noting shares have run up over 30% since the start of March, capturing most of the upside we saw in the name from an undervalued multiple analysis; CLOV announces that it’s enhancing its current over-the-counter benefit to include groceries


Industrials & Materials

·     Aerospace & Defense; TXT upgraded from Buy to Conviction Buy list with $82 tgt at Goldman Sachs finding Cessna’s exposure to a strengthening business jet market now appears sustainable for the long term along with end-market tailwinds in both the Industrial and Bell segments; SPCE shares pulled back for a 6th straight session, touching its 100-day MA support around $30.90 (its 200-day lower at $30.25)

·     Industrial & Machinery; GATX was upgraded to Outperform and tgt raised to $101 at Cowen saying after five years of mostly anemic lease rates, they expect solid rail traffic growth through at least 2022 and raising our earnings forecast modestly; CMI also upgraded at Cowen and tgt raised to $284 as boost their already-above-consensus Class 8 forecast and expect reduced vertical integration by the OEMs.

·     Transports; ALK sees 2Q ASM -21% vs 2019, sees rev passengers -28% vs 2019, sees load factor 77%, sees 2Q economic fuel cost/gallon $1.90, sees CF from ops about $830Mm; AAL tells remaining 3,300 flight attendants on leave they’ll be coming back by the end of the year, plans to hire 800 to support demand; GLG said it entered into a non-binding letter of intent to buy two companies to get into the unmanned logistics and new energy vehicle industry; in rails, KSU Q2 EPS missed ests by $0.12 as operating expenses jumped in part due to a $700M termination fee paid to CP, which CNI will reimburse upon shareholder vote on the merger

·     Metals & Materials; AA posts Q2 top and bottom-line beat (EPS $1.49 vs. est. $1.37; Q2 revs rise 32% to $2.83B vs. est. $2.64B) and says to expect a strong 2021 based on continued economic recovery and increased demand for aluminum in all end markets (upgraded at Citigroup); in chemicals, OLN and WLK both upgraded at Bank America on valuation while downgraded DOW and LYB saying they see the risk reward as fairly unfavorable approaching 2Q earnings given high expectations and peak sales growth; in mining, TRQ shares slide after saying its Q2 mining activities were hurt by personnel shortages due to COVID-19 restrictions, causing an increase of lower-grade stockpile material being processed during the quarter.

Technology, Media & Telecom

·     Semiconductors; INTC is considering a deal to buy GlobalFoundries, The Wall Street Journal reported citing people familiar with the matter, saying a deal may value GlobalFoundries at about $30B ; AEHR shares rise after reporting higher Q4 sales of $7.6M, more than double the $3.8 million a year earlier; MU shares break the 200-day MA support of $76.30 today as semis dragging Nasdaq lower, Philly semi index (SOX) down over -1.8% late day around 3,160 (after hitting record highs 2-days ago at 3,357)

·     Media movers; Goldman Sachs initiates coverage on LYV and IHRT at buy and FWONK at Neutral noting LYV shares have bounced strongly off pandemic bottoms ahead of a recovery in live events and ticketing and has more potential upside to the $110 12m price target; says IHRT is well-positioned to make the shift from a legacy terrestrial radio broadcaster to a digitally drive audio-media company;

·     Telecom; ERIC warned that it expects to lose market share in China following Sweden’s decision to ban Huawei Technologies Co. from its 5G networks; Wells Fargo said TMUS remains their favorite of the Big 3 in wireless carrier eps preview due to (a) upside growth adjacencies from its rural, enterprise and home broadband expansions, (b) its head-start in mid-band 5G coverage; and (c) our expectation for >20% FCF growth through 2027 and a meaningful share repurchase program starting in 2023; AT said it lost 473,000 premium video subscribers in Q2 vs 887,000 a year earlier, while overall Q2 premium video subscriptions fall 14% to 15,412; DirecTV churn in Q2 was 1.87% vs 2.42% a year earlier


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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