Market Review: June 02, 2021

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Closing Recap

Wednesday, June 02, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finish slightly higher, bouncing late day after trading in a narrow range earlier with major averages still not far from their record highs heading into key economic data later this week…but the story today was once again the volatility and activity in a basketful of stocks that remain the focus of social media trading. Momentum related names/sectors were the biggest movers with the recent resurgence of the January Reddit/WSB, so called “meme” stocks as well as an apparent “squeeze” on high short interest stocks grabbed all the headlines. Shares of AMC surged as much as 120% topping the $70 level (all-time highs) before paring gains along with massive bounces in BBBY, BB, EXPR, KOSS, GME, NOK (among others) as well. There were also gains in energy for a second day behind oil strength, but momentum stocks grabbed all the headlines. Market participants also await the monthly jobs report on Friday, while ADP releases its report on private sector employment tomorrow, along with weekly jobless claims. Markets still not showing any fear of rising inflation pressures or concern over Biden’s tax plan to fund infrastructure deal, though the Fed Beige Book showed the U.S. economy continued to pick up speed in the spring, as consumers, flush with federal stimulus cash, put money in the economy.


Currencies & Treasuries

·     Treasury yields were modestly lower, trading in a tight range as investors held off from making big moves ahead of private payrolls data this week (ADP and jobless claims tomorrow and nonfarm payrolls Friday). The 10-year Treasury yield slipped back below 1.6% having trade within a range of 1.55% to 1.64% for more than a week. While economic data has shown signs that reopening is driving growth, the labor market recovery has been less enthusiastic. The U.S. dollar index (DXY) slipped from earlier highs, dropping back below the 90 level ahead of the key jobs data later this week, flattish on day vs. euro and yen.



·     Oil prices rose on Wednesday, with WTI crude up $1.11 or 1.64% to settle at $68.83 per barrel as U.S. Treasury yields pulled back, as investors await key economic data this week, and amid a further rotation into commodity prices as the economy continues to rebound. Brent crude rose $1.10 or 1.57% to settle at $71.35 per barrel. Gold prices rose $4.90 or 0.3% to settle at $1,909.90 an ounce, back to their highest levels since the first week of January.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; OSTK rises tZERO after reports it is looking for a Buyer, according to CoinDesk. The company is exploring several options, including a SPAC merger, said tZERO VP of Investor Relations Michael Mougias ; LE 1Q EPS $0.08 vs. est. ($0.29) on revs $321.3Mm vs. est. $280.3Mm; sees 2Q revs $345-355Mm vs. est. $328.4Mm, sees 2Q EPS $0.05-0.12 vs. est. ($0.16); guides FY net revs $1.61-1.65B vs. est. $1.58B; CTRN said it has authorized a new $30 million share-buyback program after what the company said was a strong first quarter; BBBY announces three new private label brands (but shares soar with other Reddit names); HOME reported better than expected Q1 results as revenues of $537.1M were well above consensus of $466.1M with SSS up 187.3%; RGR, SWBI, VSTO active as FBI reports 3.22M NICS firearm background checks in May (down from 3.514M last month but up from 3.091M YoY

·     Auto sector; AAP Q1 adj EPS $3.34 vs. est. $3.08; Q1 sales $3.3B vs. est. $3.28B; Q1 comp sales rose 24.7% and raises FY21 revenue view to $10.4B-$10.6B from $10.2B-$10.4B and ups its FY21 comp sales view to 4%-6% from 2%-4%; in auto parts, BWA said it will supply its integrated drive module to Hyundai Motor Group; TSLA shares tumbled as Credit Suisse Tesla’s global electric vehicle market share plunged to 11% in April from 29% in March, marking Tesla’s lowest monthly global market share since January 2019

·     Consumer Staples; JBSAY shares active after the Brazil-based meat-processing giant suffered a ransomware attack that disrupted production, causing volatility in meat sector (TSN, PPC, SAFM); SAFM downgraded to an Equal Weight from Overweight at Barclay’s after the company put a new facility on hold with constructions costs high. That facility was seen as needed to justify the higher rating; Bernstein noted except for SMPL, HSY, and SJM in food space, all experienced negative sales growth YoY in the last 4 weeks period citing Nielsen data (sales were +31.4% for SMPL +4.2% for HSY and +1.9% for SJM – negative for MKC, BYND, CAG, KHC, GIS, HAIN, TSN, CPB, K and MDLZ); POST acquires ready-to-eat cereal business from THS for $85M; CCEP upgraded to Overweight from Neutral, price target $70 from $49 at JPMorgan

·     Theatres; AMC extended Tuesday’s gains (and then some) after raising $230.5 million in a stock sale to Mudrick Capital Management – investors unfazed after the Hedge fund sold 8.5 million freshly issued AMC shares at a profit on Tuesday, immediately after buying them; AMC said it is launching "AMC Investor Connect" to communicate with its retail investors, rewarding them with special offers like free popcorn and exclusive screenings; Goldman Sachs downgraded CNK to Sell from neutral and cut tgt to $19 from $21 and IMAX to Sell as well with $18.60 tgt which reflects their more cautious view on domestic box office and see secular headwinds with a more limited domestic box office recovery vs. consensus expectations



·     Energy stock movers; oil companies adding to Tuesday’s gains (not to the same degree) as crude extends gains on OPEC+ supply discipline. In recent days, prices have hit highs not seen in over 2-years following OPEC+’s statement of confidence that global oil demand is recovering. OPEC+ reiterated their plans on Tuesday to taper output cuts by 441kbpd in July, while Saudi adds back the remaining 400kbpd of their unilateral cut. The plan to eventually return 1.9Mbpd to the market no faster than 0.5Mbpd each month was reiterated, while it was agreed that monthly meetings would resume after missing a month.

·     Services, E&P and Majors; PBR said it is offering to buy up to $2.5 billion in global notes maturing between 2025 and 2050; SWN announces agreement to acquire Indigo Natural Resources for about $2.7B which will be comprised of $400 million in cash, approximately $1.6 billion in SWN common stock and $700 million of assumed 5.375% senior notes due 2029; SLB guided 2021 revenue to above $22.5B vs. est. of $22.53B and sees free cash flow margin above 10% – shares outperformed in the oil service space as the OIH hit 52-week highs.



·     Bank movers; FBNC announced it is acquiring SLCT in an all-stock deal for $314.3 mil. SLCT shareholders will receive 0.408 shares of FBNC, or $18.53 based on yesterday’s close (29% premium); strength today in payments and Fintech with MA, Visa (V), PYPL and GPN among early leaders in the S&P 500 – Jefferies noted Visa updated volumes through May which showed continued recovery relative to 2019 levels across all metrics. Specifically, US payment volumes improved to 32% above 2019 levels; card present volumes are 10% above ’19 QTD

·     Bitcoin news; Dogecoin prices jumped after COIN adds the meme-inspired alt coin to its professional trading platform. "Starting immediately, we will begin accepting inbound transfers of Doge to Coinbase Pro," Coinbase said in its blog; OSTK rises tZERO after reports it is looking for a Buyer, according to CoinDesk. The company is exploring several options, including a SPAC merger; MARA announces Bitcoin production and mining operation updates for May 2021 saying total Bitcoin holdings to increase to approximately 5,518 BTC; NLOK unveils Norton Crypto, a new feature that enables a safe and easy way to mine Cryptocurrency; GOOGL said beginning August 3, advertisers offering cryptocurrency exchanges & wallets targeting the U.S. may advertise products and services.



·     Pharma movers; cannabis stocks TLRY, ACB, CRON, climb after AMZN said it will actively support proposed U.S. legislation that would legalize marijuana at the federal level; SLNO said the FDA granted its diazoxide choline extended-release tablets orphan drug designation for the treatment of Glycogen Storage disease, or von Gierke disease; PGNY downgraded at Guggenheim after the significant run in the shares YTD (+52% vs S&P +12%); LYRA rises on plans to partner with LianBio to commercialize an experimental treatment for chronic sinusitis, LYR-210, in China and other parts of Asia.

·     Biotech movers; German co MorphoSys AG (MOR) announced a $1.7 billion acquisition of CNST, paying $34.00 per share in cash. At the same time, MorphoSys also entered a long-term strategic funding partnership with RPRX which will make a $1.425 billion upfront payment to MorphoSys, supporting its growth strategy. The investment is anchored by royalties on Janssen’s Tremfya

·     MedTech Equipment; IRTC said Mike Coyle has decided to resign from his position as president and CEO and a member of the company’s board, effective June 1, due to personal matters; BRKR said it sees organic revenue +13% to +15%, up from +11% to +13% and sees 2q non-Gaap organic rev. growth more than 25% y/y

·     Healthcare Services; ABC raised its annual earnings forecast following the completion of its purchase of the majority of Walgreens Boots Alliance Inc.’s Alliance Healthcare businesses for $6.275 billion in cash and two million shares; XELA announces expansion of PCH Global platform for over 18,000 providers across the country, increasing the total user count to over 35,000 healthcare providers and hospital systems


Industrials & Materials

·     Transports, Industrial & Machinery; early strength again for airlines; CAT CEO at Bernstein Conference said aims to boost ME&T services revs to ~$28B in 2026, expects higher dividends to continue for shareholders, raised prices, which will impact 2H21, and rising commodity prices are `net positive’ for CAT; FDX tgt raised to $366 at JPMorgan as see upside to consensus estimates for the quarter and expect a strong FY22 guide

·     Metals & Materials; in chemicals, SMG raises FY21 EPS $9.00-$9.30 vs prior $8.60-$9.00 and consensus $9.16; now expects company-wide sales growth of 17%-19%; says revision is due mainly to stronger growth in the U.S. Consumer segment, where the company now expects sales growth of 7%-9% vs prior 4%-6%; in steel space, NUE shares declined after touching record highs the day prior in profit taking in some of the metals space

Technology, Media & Telecom

·     Internet; ETSY has signed a definitive agreement to acquire fashion resale marketplace Depop for $1.625 billion consisting primarily of cash; AMZN said it would hold its annual Prime Day sales event on June 21 and 22 in the U.S. and other countries, though it is postponing the event in Canada and India; EBAY said it launches authentication for luxury handbags (shares of REAL pulled lower following headlines); GOOGL CFO said has no plans to do stock split because fractional shares can be purchased -meeting

·     Semiconductors; AMBA reported better sales and a narrower loss for Q1 despite a range of supply chain disruptions as auto momentum (+40% y/y) continues on share gains and accelerating CV adoption (ADAS, L2+ Autonomous driving) while guides Q2 revs above views ($74M-$77M vs. est. $69.4M); STX raised June qtr and FY estimates as sees better demand and pricing trends at Cleveland Research which was also positive on WDC as sees improved HDD demand and pricing trends; AMD rises for a 7th straight day alongside broader strength in semiconductors despite chip supply shortages impacting production

·     Software movers; ZM delivered a beat-and-raise print and a strong start to FY22 with FQ1 revenue of $956.2mn, up 191.4% y/y, though growth did decelerate from recent (prior three quarters) topline levels of 350% + y/y; BOX announces commencement of modified Dutch auction tender offer to purchase up to $500 million of its class a common stock; MDLA reported better than expected Q1 revenue and profitability in-line with expectations. Revenue guidance for Q2 was ahead of prior estimates and the full-year revenue guidance was raised moderately; DBX spiked midday after the WSJ reported Elliott Management Corp. has taken a sizable stake

·     Video game/interactive space; TTWO to acquire Mobile Games Developer Nordeus in total consideration of up to $378 million in cash, stock, and potential earn-out; SKLZ entered into an agreement to acquire Aarki, a leading technology-driven marketing platform for about $150M

·     IT Services & Consulting; DXC upgraded to Overweight, raising our 2022 estimates and elevating our price target to $48 at Wells Fargo as see a situation where a discounted valuation presents an attractive risk/reward ratio and the possibility of higher EPS/valuations as the market gains confidence in the turn-around story that is playing out at DXC

·     Hardware; HPE Q2 sales of $6.7bn, +11.5% y/y, beat Consensus by ~$100mn on better-than-seasonal trends in most segments, with strength from Intelligent Edge (+20% y/y), HPC/MCS (+13%) and all-flash storage and raised its full year EPS and FCF guidance but upcoming July quarter EPS guidance was a bit softer than expected as HPE is guiding EPS to $0.38- $0.44 with a midpoint of $0.41 which is below consensus of $0.43; shares of BB, NOK (names that have been mentioned on Reddit/WSB forums over the last few months) saw renewed action today as so called “meme” stocks surged


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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