Market Review: June 25, 2021

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Closing Recap

Friday, June 25, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks close out the week with solid gains, as the Nasdaq Composite just failed to post its 4th consecutive record closing high, but the S&P 500 posts its 3rd straight record close. The Dow Jones Industrial failed to join the other 2 indices in hitting record highs this week but outperformed today as Nike (NKE) soared roughly 15% to all-time highs and banks jumped after Fed stress tests last night showed 23 of the largest firms would suffer a combined $474 billion in losses under a hypothetical severe downturn but would still leave them with more than twice as much capital required under Fed rules (consequently, all pandemic-related restrictions on buybacks and dividends will be lifted at the end of the month). U.S. equity funds attracted massive inflows in the week to June 23, as data from Refinitiv Lipper showed investors put a net $16.1 billion into U.S. equity funds in the week to Wednesday, the most since the week ended March 17th. Weaker-than-expected inflation data (PCE) eased worries about a sudden tapering in stimulus by the Fed, though YoY figures hit their highest levels since 1992, pushing Treasury yields a little higher on the day (10-year 1.54%). Stocks finished the week strong behind the infrastructure agreement yesterday between the White House and bipartisan senators (for about $1 trillion), as well as dovish Fed commentary (for the most part outside of Kaplan and Bullard) on the rate outlook and tapering of assets view.

·     Sector/stock movers: NKE surges to record highs, leads the Dow higher after reporting record revenue and guiding full-year revenue to over $50B for the 1st time ever (LULU, FL, UAA, DKS) outperform in sympathy; FDX slides despite its earnings beat on pressures related to labor, gas costs; KMX soars on its own earnings/rev beat, lifts other auto sellers; BB falls despite relatively in-line earnings as Canaccord, TD downgrade the stock; KBE, KRE, XLF Bank stocks JPM, WFC, BAC, MS, COF were generally higher after the Fed announces it will lift pandemic-related restrictions on buybacks/dividends after yesterday’s stress test; DRI adds to yesterday’s earnings-related gain after MKM upgrades to Buy today in response and RAD falls further after yesterday’s miss on JPM’s downgrade to UW today; solar stocks were active again today – JKS spikes on its surprise quarterly profit, while ENPH rose on a bullish initiation at Citi and Stephens; SPCE shoots higher by over 30% after the FAA approves commercial space flights.


Economic Data:

·     Personal income for May fell -2.0%, better than the -2.5% estimate (April had fallen -13.1%); Personal spending for May unchanged, below the 0.4% estimate (April revised to 0.9% from 0.5%); Real consumer spending fell -0.4% vs. April +0.3%

·     Inflation readings: Overall May PCE price index rises +0.4% vs April +0.6%, the May core PCE price index +0.5% below est. +0.6% (April was +0.7%); on a YoY basis, PCE Index rises 3.9% vs. April 3.6% and core PCE YoY rose 3.4% vs. April +3.1%

·     University of Michigan surveys of consumers sentiment final June 85.5, slightly below consensus 86.5 and the preliminary June reading of 86.4; the expectations index final June 83.5 and current conditions index final June 88.6 vs prelim June 90.6



·     Oil prices reversed higher on Friday (off low $72.85), posting its 5th straight week of gains as WTI crude rose $0.75 or 1.02% to settle at $74.05 per barrel (up about 3% for the week) amid rising expectations demand growth will outstrip supply and OPEC+ producers will be cautious in returning more supply to the market from August (ahead of next week OPEC+ meeting). Brent crude prices rose $0.62 or 0.82% to settle at $76.18 per barrel. U.S. natural gas futures rose to 29-month highs on forecasts for hotter weather/higher air conditioning –up around 2c, or 0.5%, to $3.436 per mln btus, around its highest close since January 2019 for a second day in a row. For the week, the front-month was up about 7%, its biggest weekly increase since late April.

·     Gold prices rise $1.10 to $1,777.80 an ounce, closing the week up about 0.5% (first weekly advance since May), helped by a weaker dollar, but also held back by stronger U.S. markets. Tempered bets for early monetary policy tightening by the Federal Reserve after comments this week from Fed Chairman Powell helped precious metals. Data earlier showed the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, was below expectations in May…but also at its highest level since 1992.


Currencies & Treasuries

·     The U.S. dollar index (DXY) remains little changed on the day around 91.80, with the euro and Japanese yen flat on day vs. the buck at 1.1928 and 110.85 respectively, but the buck falls on the week. Treasury yields were steady most of the week but edged higher on the day with the 10-year up over 5 bps to 1.54%, its highs of the week following another higher inflation reading (PCE), coupled with some mixed comments by Fed officials this week which warned that inflation could rise more than policymakers expected in the near term. Cryptocurrencies ending a very volatile week lower as Bitcoin drops back below 32K (after topping 35K yesterday) and Ethereum down over 8% falling to around $1,850 an ounce.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; NKE shares surge after the sportswear maker reported better-than-expected 4Q results and forecast FY revenue surpassing $50B for the first time, prompting several analysts to increase their price targets on the stock – reported Q4 EPS 93c vs est. 51c on record quarterly revs $12.3B vs est. $11B, direct sales $4.5B (+73%) that helped gross margins improve +850bps to 45.8%; shares of UAA, LULU, FL, HIBB, LULU, ADDYY, DKS were higher in sympathy; KeyBank reiterated their OW rating and $40 PT on PRPL ahead of the company’s Analyst Day on Tuesday as their consumer survey work and checks support their long-term growth story.

·     Auto sector; DIDI the Beijing-based ride-hailing company, is targeting a valuation of $62B-$67B in its IPO, according to its latest public filing (is looking to raise $3.9 billion in the initial public offering by selling 288M American depositary shares – price range $13-$14); Panasonic Corp sold shares in TSLA for about 400B yen ($3.61B) during the financial year ended March, a company spokesperson said on Friday; KMX rises after 1q revenue beats estimates – Q1 adj EPS of $2.63 on revs $7.70B tops ests of $1.63/$6.24B, as retail used-unit sales doubled to 270,799 units in Q1, helped by strong demand for personal vehicles over public transport (shares of AN, PAG, LAD, SAH among movers in sympathy); LAZR upgraded to Outperform with $30 tgt at Baird saying the stock is poised to outperform peers calling it well positioned to upward-revise its order book and raise its medium-term revenue outlook, driven by standard adoption of L3 hardware in next-generation vehicles including with Volvo.



·     E&P and Majors; a good week for energy stocks as oil prices topped more than 2-year highs and Wall Street analysts get more bullish on commodity space as rising user demand; in research, JPMorgan upgraded CLR to Overweigh from Neutral given the compelling valuation and positive takeaways from our discussion with management at our conference, while downgrade APA to Neutral from Overweight but raises target to $27 from $24 to incorporate the increase in strip pricing; U.S. active drilling rigs stayed flat at 470, after rising by 14 in the previous two weeks, Baker Hughes reports in its latest weekly survey; drilling rigs targeting crude oil in the U.S. fell by 1 to 372, while gas rigs added 1 to 98.

·     Refiners/biofuels, shares of DAR, REGI slide on headlines Supreme Court backs refineries on biofuel-quota exemptions; separately, DAR was upgraded at BMO saying it should continue to enjoy among the best fundamentals across our coverage group, driven by the shift toward renewable diesel, while the fear around the EPA’s RVO decision creates a compelling entry point

·     Solar; Citi initiated ENPH at Buy with a $220 target as its top pick despite its lofty valuation as they see secular tailwinds from solar and storage installation growth, GNRC at Buy with a $475 target as the best way to play the burgeoning backup power, grid services and distributed generation themes, and SEDG at Neutral with a $300 target as they benefit from the same tailwinds as ENPH but have lost some share in the residential inverter market and is playing catch up on the storage side; Stephens initiated Overweight ratings on RUN ($82 PT), ENPH ($215 PT), SEDG ($336 PT), NOVA ($56 PT), and FSLR ($102 PT); JKS Q1 EPS 4c vs. est. loss (2c) on revs $1.21B vs. est. $1.19B, solar module shipments 5,354 (+33.7% YoY), and sees Q2 revs $1.2B-$1.25B, below est. $1.4B, and Q2 gross margin 12%-15%

·     Utilities; Argus upgraded DUK to Buy on attractive valuation, a bullish pattern since March 2020 of higher highs and higher lows, and a high yield of 3.9% vs industry average of 2.8%; Bank of America downgraded NJR to Underperform; BMO lowered their price target on SRE to $145 ahead of next week’s analyst day; Mizuho lowered their target on Underperform-rated SO to $57 from $59 to account for current market multiples and on the possibility that the NRC expands the scope of its review given the deficiency in the company’s quality control programs; DTE cut its quarterly dividend to 82.5c



·     Bank movers; shares of major U.S. banks (C, MS, WFC, BAC, JPM) were active after the Federal Reserve removed pandemic-era restrictions on stock buybacks and dividends, after positive results to its latest stress test. Fed’s stress test finds major banks will be left with more than twice as much capital than the central bank’s requirements after a hypothetical downturn scenario. UBS said COF, MS, BAC, PNC, TFC and USB stand out as positives, while see Citi, WFC as laggards; BBDC upgraded to Buy at Bank America calling the BDC’s improving financial performance combined with valuation discount a compelling opportunity.



·     Pharma movers; OSMT announced an agreement with Alora Pharmaceuticals to sell its portfolio of legacy products and Marietta, Georgia manufacturing facility for up to $170M (is set to receive a $110M upfront cash in addition to potential milestone payments worth $60M); PIRS announces development of PRS-220, $17M grant; for ABBV the FDA has informed the company that the FDA will not meet the PDUFA action dates for the sNDAs for RINVOQ.

·     Biotech movers; BMRN receives positive CHMP opinion for vosoritide marketing authorization; INCY and MOR announce positive CHMP opinion for tafasitamab in combination with lenalidomide for the treatment of adults with relapsed or refractory diffuse large b-cell lymphoma; ELEV 6.25M share IPO priced at $16.00; GRPH 14M share IPO priced at $17.00

·     Healthcare Services; JPMorgan downgraded RAD after disappointing guidance yesterday given fading vaccine tailwinds and underlying retail pharmacy profits given weak OTC cough/cold/flu sales


Industrials & Materials

·     Aerospace & Defense; SPCE shares surge as the co receives approval from U.S. Federal Aviation Administration to allow co to fly customers to space – marks the first time the FAA has licensed a Spaceline to fly customers (says it completed review of May 22 test flight, confirming that the flight performed well against all objectives); LDOS said U.S. air force awards company $950M contract to support ISR

·     Industrial & Machinery; among one of the best performing sectors yesterday after President Biden said he had reached an infrastructure agreement with a bipartisan group of senators in a deal that will include about $600 billion in new federal spending on investments for new roads, clean energy, and other projects, and cost nearly $1 trillion over the next five years. Analysts weighed in today on the potential impact of several names; GMS was upgraded by three analysts (Baird, Stephens, and RBC) after reported a strong beat across the board and ahead of guidance, largely driven by price improvement with some volume growth and SG&A leverage; ROK agreed to buy privately held SaaS company Plex Systems for $2.22 billion in cash

·     Infrastructure analyst calls: Jefferies upgraded shares of MLM (tgt to $424 from $360) and VMC (tgt to $207 from $180) after the bipartisan group of Senators and President Biden agreed on a framework for infrastructure package worth $1.2T over eight years firm sees both being positioned to outperform from a potential infrastructure bill and recovery in non-residential construction; Citigroup said they view the agreement for a ~$1tr Bipartisan Infrastructure Framework as incrementally positive for infrastructure exposed companies under U.S. construction materials (VMC, MLM, SUM, and EXP) and industrials (ACM, J, MTZ, and PWR).

·     Transports; FDX reported 4Q adj EPS $5.01 vs est. $4.99 on revs $22.6B vs est. $21.5B and guided FY22 adj EPS $20.50-21.50 vs est. $20.37, sees CAPEX $7.2B, though shares were under pressure as the quarterly beat did not meet bull case expectations and the company continues to face headwinds and cost pressures related to rising labor and gas costs; UAL plans to announce a large order for aircraft next week, perhaps the largest ever (holding investor presentation next Tuesday) – Bloomberg, quoting sources, reported June 10 that United could order 100 Boeing (BA) 737 Max 8 jets, as per Forbes; DSX announces time charter contract for m/v Melia with Viterra as gross charter rate is us$25,750 per day, minus a 5% commission paid to third parties

·     Metals & Materials; Lumber futures down another 7% today under $800 – down a 4th straight day and 17 of last 20 sessions after surging to record highs around $1,600 per thousand boards (vs. around $400 March 2020); copper prices rose (along with other metals yesterday) after U.S. President Joe Biden embraced a bipartisan Senate infrastructure deal valued at $1.2 trillion over eight years, which helped reinforce expectations of stronger demand; FUL downgraded at Citigroup citing the near-term price lag to raw material costs and expected low EBITDA growth in the second half of 2021 for the downgrade; IKNX surges U.S. bitcoin mining company TeraWulf Inc says it expects to become a Nasdaq-listed company through a business combination with IKONICS Corp

Technology, Media & Telecom

·     Internet; NFLX upgraded to outperform at Credit Suisse saying subscriber growth expected to normalize in 4Q21 and a survey by CS of U.S. consumers reinforced the stream platform’s strong competitive position and high user satisfaction; after leading Nasdaq to record highs earlier this week, large cap mega tech (AMZN, GOOGL, FB, TWTR) saw modest declines today

·     Semiconductors & Software movers; MU rises ahead of earnings next week – due to report its May-qtr results on June 30 (ests. expect qtrly rev up 33% to $7.2 bln and EPS of $1.70); CAMP 1Q adj EPS $0.08 on revs $80.5Mm vs est. $80.25Mm, qtrly software and subscription services revs +26% to $35Mm; maintaining policy of not providing qtrly guidance; ON reit Buy, $45 tgt at Piper saying walked away from mgmt meetings increasingly confident about the company’s ability to drive gross margin expansion and its competitive positioning in the electric vehicle market.

·     Hardware, Components & Services; BB posted Q1 EPS loss (5c) vs. est. loss (5c); Q4 revs $174M vs. est. $171.25M (and down from $206M a year earlier); Q1 gross margins 65.5%; said its auto business has been strong despite global chip shortages; NTAP was upgrade from Market Perform to Outperform with $100 tgt at Raymond James saying it has embarked on an evolution to embrace a multi-cloud strategy; NOK was upgraded to Buy at Goldman Sachs saying Nokia has underperformed rival Ericsson by about 75% over the past three years and European tech by 67% due to lagging wireless equipment product quality, share losses and negative EPS revisions – but now sees wireless product progress and share gain potential.


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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