Market Review: March 18, 2021

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Closing Recap

Thursday, March 18, 2021





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Equity Market Recap

·     Stock markets fell on Thursday, giving back Wednesday’s Fed Chairman Powell/FOMC induced rally amid sharp declines in technology and energy, though most sectors lost ground apart from financials which were helped by surging Treasury yields. The stock sell-off accelerated late day amid developments in Europe, falling after France’s PM imposed a month-long lockdown on Paris and several other regions after a faltering vaccine rollout and the spread of highly contagious virus variants. The headlines started a downturn in markets led by travel stocks along with technology and energy (oil plunged over 7%), while banks held gains as the 10-year yield hit a 14-month high of 1.75% before paring losses late day (to 1.70%). Also weighing on sentiment was a Bloomberg report late day that Democrats are preparing a proposal for a financial transaction tax. The Nasdaq Composite fell as a jump in U.S. Treasury yields appeared to fuel another round of rotation into sectors more sensitive to the economic cycle.

·     Sector movers: Energy stocks were pummeled after WTI crude dropped below $60 per barrel for its lowest close in nearly a month. Financials were the market leaders, led by banks and insurance stocks which tend to benefit from rising rates. Retail earnings generally strong as WSM soars to ATH on its beat, div raise, and new stock buyback program, FIVE also hits record levels on its beat before falling on profit-taking, SIG 52-week highs on beat, AOUT surges on beat-and-raise, though DG was the worst stock in the S&P on its EPS miss and weak guidance. Note the Nasdaq 100 index (QQQ) underperformed, led by declines in AMZN, AAPL, MSFT and GOOGL (which according to CNBC make up about 36% of the ETF). A day after the Dow made history, rising to another all-time high (note the Dow topped the 33,000 level for the first time yesterday – just five days after it first closed above the 32,000 level – its quickest 1,000-point milestone on record) the index held up relatively well despite mass selling pressure. Economic data was mixed with better jobless claims data, and exceptionally strong manufacturing data out of the Philadelphia region, scoring its highest reading since 1973. The downside of the report showed prices paid soared to its highest level since 1980, renewing concerns about inflation.

Economic Data

·     Weekly jobless claims rose to 770K in latest week vs. est. 700k (prior week revised to 725K from 712k), continuing claims reported at 4.124M vs. est. 4.07M (prior week 4.144M), the 4-week moving average fell to 746,250 in latest week from 762,250 prior week (previous 759,000); the U.S. insured unemployment rate rose to 3.0% from 2.9% prior week.

·     Philly Fed Survey jumps to 51.8 (highest since 1973) above est. and prior around 23 level – Treasury yields bounce again on the strong data as prices paid component at 75.9, the highest since 1980


Commodities, Currencies and Treasury’s

·     Oil prices falling a 5th day amid a stronger dollar, a further increase in U.S. crude and fuel inventories, and short-term developments in Europe with stuttering vaccine rollouts that have weighed on demand sentiment. WTI crude fell -$4.60 or 7.12% to settle at $60.00 per barrel, its lowest close in nearly a month (both contracts are down 8% over the past five days). Oil prices failed to rally with stocks yesterday despite the Federal Reserve meeting results. A sharp rise in the value of the dollar after the Fed meeting has also driven the oil sell-off. Government data on Wednesday showed U.S. crude inventories have risen for four straight weeks after severe cold weather forced shutdowns at refineries in the south. A slowdown in some vaccination programs and the prospect of more restrictions have tempered expectations for a recovery in fuel use.

·     Gold prices erase early declines, rising $5.40 or 0.3% to $1,732.50 an ounce as investors continued to digest yesterday comments from the Federal Reserve and the central bank’s chairman. Gold prices managed a rebound despite the U.S. dollar staying elevated vs. other currencies. The dollar hung on to gains as the dollar index (DXY) rises 0.4% back to around 91.75, recouping most of yesterday’s losses while Treasury yields jumped early this morning and held those levels throughout the day, with the 10-year yield touching highs above 1.75% and the 30-year hitting the 2.40% level – both more than 1-year highs.






WTI Crude















10-Year Note





Sector News Breakdown


·     Discount retailers; DG shares slip after results as posted Q4 EPS of $2.62, missing ests by 10c on better sales of $8.4B, on better comp sales of 12.1% vs. est. 11.2% and slightly better margins (32.5%) (along with $2B buyback and div hike) but guided net sales in the range of a -2% to flat vs. +1.85% consensus and on comp sales guidance of down (4%-6%); FIVE shares rise on results as posts the highest F4Q comparable sales growth in company history (+13.8% vs. est. 10.3%), and an earnings beat to consensus expectations

·     Softline/apparel retail; GIII results mixed as Q4 EPS of $0.30 beats but revs of $526.2M below consensus $535.1M (Q1 EPS guide better and revs miss); SIG posted Q4 EPS of $4.15, beating the $3.54 estimate citing strong growth in N.A. ecommerce sales and guided Q1 sales of $1.42B-$1.46B above est. $1.28B; ROST named short-term catalyst buy idea at Deutsche Bank; ADDYY and PTON join forces to release inclusive apparel line; RVLV upgraded to a Buy at Bank America saying it offers an opportunity to invest in trends that will strengthen in both a recovery & post-pandemic. Our $65 PO is based on 35x our F23E EV/EBITDA, which is a slight discount to a group of high growth digitally-focused peers

·     Specialty/Broadline/Hardline retail: AOUT shares outperform on beat and raise as Q3 adj EPS 82c topped the 36c estimate on better revs of $82.6M vs. est. $59.02M – also raises FY21 EPS $2.08-$2.15 (up from prior $1.49-$1.67) and sales $268M-$272M (up from $235M-$245M) – shares of other gun retailers (SWBI, RGR) moved in sympathy;

·     Auto sector; NKLA slips after saying South Korea’s Hanwha Corp to sell up to half of its 5.65% stake in NKLA this year, Reuters reported; RIDE slides after Lordstown Motors CEO Stephen Burns says preorders are non-binding during interview on CNBC this morning – follows news overnight that it received request for information from SEC regarding Hindenburg short report; strength in major autos this morning (GM, F), while EV stocks slide (TSLA)

·     Housing & Building Products; housing stocks starting to soften given the recent rise in Treasury yields to highest levels since January of 2020 – which impact mortgage rates (watch builders TOL, LEN, PHM , KBH, MTH, TMHC); in home furnishing, WSM trades to new all-time highs after posted its 2nd straight quarter of ~25% comp growth, with strong 4Q sales across all of the company’s brands, driven by the Retail Lift and consumers’ continued focus on the home.

·     Consumer Staples; UTZ Q4 adj net income $20.4M tops est. $12.6M and revs $246.3M slightly above est. $243.0M and better EBITDA $34.0M vs. est. $31.5M on better FY21 EPS guide; CLX downgraded to Neutral from Buy, at Davidson and cut tgt to $189 from $234 noting in the four weeks ended March 7th, IRI data showed POS turned negative (-10.8%) due to the start of hard COVID-driven prior-year comps, which get even more difficult next month (+75%); Wells Fargo said Cannabis Banking Bill to be Reintroduced in Congress and view this as a headline positive for Overweight STZ, but also the broader cannabis complex,

·     Lodging, Leisure, Casinos and Gaming; PENN received a temporary permit to offer OSB in Virginia. Expects to launch Barstool Sportsbook mobile app in the coming months pending regulatory approvals; AMC said that beginning Friday, March 19, 98% of its U.S. theatres will be open for guests and expects that by Friday, March 26, 99% of its U.S. circuit will be open; SIX announces reopening of California and Mexico theme parks today; CHDN launched its TwinSpires sports mobile app and desktop product in Tennessee. In addition to horse racing wagering, the TwinSpires brand will now offer Tennessee players a platform to bet on professional sports; LYV, MSG among movers higher after NY raises sports venue outdoor capacity for April 1



·     Energy stock movers; Cowen reiterated RDS at Outperform and one of their Europe Best Ideas with a new $48 price target from $43 as they see the company’s reset strategy and financial framework setting it on a trajectory to improve FCF yield return yield and debt to the top end of the peer group; Goldman started coverage on TRGP at Conviction Buy with a street-high $49 target; Wells upgraded FLMN to OW with a $8 target; TOT’s board proposed the company change its name to TotalEnergies to reflect its transition to a broad energy company committed to sustainable development and carbon neutrality; VEI opens at $13.75 after IPO priced at $14

·     Alternative energy & Solar; CSIQ Q4 crushed analysts’ expectations with EPS 11c vs est. (55c) loss on net rev $1.04B vs est. $997.9M, total module shipments +22% YoY, and they see Q1 rev $1-1.1B (est. $990.3M) and FY21 revs $5.6-6.0B (est. $4.96B); Canaccord said PLUG restating its 2018-2020 financials are likely to create a buying opportunity and they maintain their Buy and $69 tgt as the accounting errors are largely related to balance sheet and will have no impact on current commitments or trigger walkaway rights

·     Utilities; Guggenheim downgraded both NRG, VST to Neutral from Buy given near-term uncertainties from the recent Winter Storm Uri in Texas after NRG suspended its guidance yesterday given a much larger loss from the storm than they previously anticipated; NRG was also downgraded to In-Line with a $42 target at Evercore; Mizuho remains UW on SO but lifted its target to $57 from $52 as they believe the company is far behind in closing out its work packages and turning tis systems over to ITP testing despite targeting the second half of March to start its hot functional testing; PPL said it agreed to sell its UK utility business to NGG for GBP7.8B (~ $10.9B) and agreed to acquire Narragansett Electric Company in Rhode Island from NGG for a total equity value of $3.8B; SJI 10.25M share Secondary priced at $22.25



·     Bank movers; Banks are strong in the early going with gains in JPM, BAC, MS, WFC, Citi among them amid the rising Treasury yields (regional banks – KRE – at all-time highs today); in consumer Finance; FNMA and FMCC both downgraded to underperform from market perform at KBW Inc. as believes there is a high likelihood that the status quo will stay in place for the foreseeable future; in payments and FinTech; PAYA 20M share Secondary priced at $12.25; GPN says that TSYS, its issuer solutions business, has signed a multi-year agreement with a subsidiary of UMBF; WSJ reported that GS is talking to JBLU about taking over its credit-card program; insurance stocks (MET, AIG, PRU, TRV, ALL) surging along with banks on rising rates as they help bolster insurers’ profitability; insurance space also boosted by M&A talk after Bloomberg reported midday that CB is exploring a possible deal for rival HIG ; in other lending, UPST shares surged after the AI-driven lending platform Upstart announced "blowout" (according to Jefferies) earnings last night & enviable forward guidance



·     Biotech & Pharma movers; the European Medicines Agency has recommended the continued use of the COVID-19 vaccine developed by AZN; the U.S. plans to send roughly 4 million doses of AZN’s COVID-19 vaccine that it is not using to Mexico and Canada in loan deals with the two countries, Reuters reported; TBIO shares slide after posting disappointing results from early-to-mid stage clinical trial of its mRNA product candidate, MRT5005, for cystic fibrosis – prompting two analyst downgrades (Evercore and Truist); PHAS 16M share Secondary priced at $3.50; for AZN U.K. drugs regulator said the company’s vaccine benefits outweigh risks; WOOF rises early on better revs $1.34B vs. est. $1.31B as EBITDA beat and FY22 is ahead across the board and guides revenue for year $5.25-5.35 vs. est. $5.24B, adj EBITDA guide $520-530mn

·     Cannabis sector volatile of late after reports a Banking Bill to be Reintroduced in Congress – The US may be on the verge of pushing through the first major federal cannabis legislation in generations; HEXO achieves positive adj. EBITDA and reports seventh consecutive quarter of adjusted core earnings improvement; said total net revenue increases 94% to C$32.8 mln in Q2 from a year earlier, and 12% sequentially; SNDL reported Q4 earnings overnight

·     MedTech and Equipment; The FDA has approved BSX’s TheraSphere Y-90 Glass Microspheres, developed to treat patients with hepatocellular carcinoma; TMO was upgraded to Overweight at KeyBanc with $520 tgt after Europe’s Sartorius provided guidance and gave what he calls insightful guidance about COVID-19 production demand in 2021


Industrials & Materials

·     Industrial & Machinery; the sector remains a market leader, with shares of CAT, IR, DE, AGCO, HON, MMM rising again early, outperforming on further signs of economic improvement (look to strong manufacturing data again today) which has also boosted industrial metal stocks; ROP raised to overweight from equal-weight and up tgt to $440 from $410 at Barclay’s saying it does not at first glance fit various ‘flavor of the month’ themes (Electricity etc.), but we think the extent of underperformance / valuation de-rating captures this

·     Transports; another record high for the Dow Transports, topping the 14,300 level (prior high was 14,260), with broad sector gains; LYFT posted positive year-over-year growth in daily rideshare ride volume for first time in a year and says last week, rideshare ride volume reached a new record for 2021 and was the company’s best week since March 2020; XPO unveils GXO as new company name for planned spin-off of logistics business

·     Aerospace & Defense; the FAA has stripped Boeing’s (BA) authority to inspect and sign off on several newly produced 787 Dreamliners, part of tighter regulatory scrutiny of production problems that have stopped deliveries of the widebody jets – WSJ reported; MAXR 10M share Secondary priced at $40.00

·     Metals & Materials; STLD said it sees Q1 EPS guidance between $1.94-$1.98 vs. est. $1.96; says Q1 profitability from the company’s steel operations is expected to be significantly higher than sequential Q4 results; in chemicals space, more gains as Wells boosted ests and tgt for CE to $165 noting strong demand and tight supply post Winter Storm Uri push acetyl chain prices to new highs; shares of EMN also higher on the day, along with OLN as Barclay’s raised its 2021 estimates to reflect updated guidance and take tgt to $43; DOW has been a market leader this week in the Dow after issuing better guidance for Q1 upside on Tuesday, delivering $50-100 million EBITDA higher than current 1Q21 First Call consensus estimate

Technology, Media & Telecom

·     Internet; Non-fungible tokens (NFT) the latest market craze, as shares of TKAT, OCG, ZKIN soared again as investors focused on companies that deal in online art; large cap tech names pressured early (high growth) following another spike in Treasury yields with the 10-year hitting 1.75%, highest levels since January of last year (GOOGL, AMZN, FB, NFLX)

·     Semiconductors; COHR confirmed receipt of a revised acquisition proposal from IIVI of $7B; per the revised terms, each share of Coherent common stock would be exchanged for $220 in cash and 0.91 of a share of II-VI common stock (follows a recently revised offer from LITE of $6.9B); SMTC reported a solid beat-and-raise quarter with gross margins of nearly 62% and remains confident in its near-term outlook and could see double-digit growth this year; LAZR said it will provide Iris lidar sensors and components of its new Sentinel software system to the R brand electric vehicles from SAIC, China’s largest automaker; LRCX positive mention at Motley Fool

·     Media & Telecom movers; NWSA upgraded to buy from neutral at Guggenheim and raising tgt to $32 from $21, as view News Corp as well positioned to continue to benefit from the growth stories at Digital Real Estate and Dow Jones – these two segments account for 85+% of NWSA’s value (and we see continued strength and upside at both); VIAC downgraded to underperform at Macquarie but up tgt to $78 from $59 and downgraded DISCA to underperform noting both companies have made bold moves in direct-to-consumer, but both stocks have been rewarded with outsized share price moves and now appear overvalued

·     IT Services, Hardware & Component news; ACN tops Q4 estimates with $12.09B in revenue (up 9% on the year) and $2.03 EPS, $0.13 above consensus while new bookings hit a record $16B, up 13% on the year and evenly split between consulting and outsourcing bookings; NOK reaffirmed its 2021 outlook; IDCC guides Q1 revs $77M-$81M below estimate of $83.2M; shares down -2.8%


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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