Market Review: May 04, 2021

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Closing Recap

Tuesday, May 04, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks were pressured all session, as a sharp decline mega-cap technology stocks pushed the Nasdaq lower by 2%, as renewed rising interest rate concerns and inflation fears weighed on sentiment. Treasury Secretary Janet Yellen (a former Fed Chair) commented on the potential need for rising interest rates earlier today, further exacerbating the tech selloff which hit high growth companies. There were a few pockets of strength with financials rallying mid-afternoon, steel stocks and other industrial metals jumped, along with healthcare, housing, and energy. Top decliners included technology, communication services, and consumer discretionary. Some of the so-called "pandemic winners," however, have recently started to fall out of favor, with big declines off last year highs now for ZM, PTON, ROKU, TDOC and several software related names.

·     First-quarter earnings have been largely upbeat as the average profits at S&P 500 companies are expected to have risen 47% in the quarter, compared with forecasts of a 24% growth at the start of April, according to Refinitiv, with 85% earnings beat so far. The Cboe volatility index (VIX) hits highest level since March 25, around 21.70 before paring back. European markets dropped sharply as Europe’s Stoxx 600 down 1.5%; Germany’s Dax down 2.5% (worst day in over four months), Britain’s FTSE 100 down 0.8%, France’s Cac 40 down 1.1%, and Spain’s ibex down -0.5%; Europe’s tech index falls 3.8%, its worst day in over six months.

·     U.S. Treasury Secretary Yellen said today “we expect to be in a low-interest rate setting for a while, but we must ensure that deficits remain manageable.” She also “reallocation may result in some small increases in interest rates” and “rates may have to rise to stop economy overheating” – none of these comments were well received by stock markets today, with major averages sinking to their lows late morning after she spoke. Her comments on rates rising contrast with Federal Reserve Chairman Jerome Powell’s insistence that the central bank will be patient and isn’t "thinking about thinking about raising rates" until there’s "substantial progress" in meeting its goals of full employment and inflation exceeding 2%. Also in Fed speakers, Kaplan (2023 voter) out again calling for time to start talking about tapering and says ‘jury is out’ on inflation outlook, watching inflation very carefully, while Daly (2021 voter) siding with Powell and other governors that there is a long way to go before tapering.

·     Stock and Sector movers: Nasdaq tumbles to the 13,500 level for the first time since April 1 as the index suffers its worst day since March 24; the Philly semi index (SOX) broke below the 3,000 level, dropping below its 100-day MA support of 3,022 – and now about 10% off 3,314 record highs this year; VIX jumps to its highest levels since March 25 as Yellen’s comments on possibly raising interest rates hampers sentiment in growth stocks; CVS, SEE soar to 52-week highs, IT, CWH makes new ATH, ARNC was the best in the S&P after each report beat-and-raise quarters; earnings losers include IRBT despite its beat as shares plunge on warnings of rising costs/margin pressures, IPGP, UAA, FANG also dropping sharply despite their beats; SEDG plummets despite its beat on supply chain headwinds, as solar space was weak – TAN touches its lowest in more than 5 months and ENPH was the biggest decliner in the S&; SDC sinks to its lowest price since Sept 1 on a wider-than-expected EPS loss and disclosure of a cybersecurity incident, weighing on ALGN.


Economic Data:

·     U.S. March Trade Deficit -$74.4B in-line with consensus $74.5B and vs. Feb deficit $70.5B; March goods deficit $91.56B, services surplus $17.11B as exports +6.6% vs. Feb -2.4%, imports +6.3% vs. Feb -0.7%; March exports $200.03 bln vs. Feb $187.59B, imports $274.48B vs Feb $258.11B

·     March Factory Orders rise +1.1% vs. +1.3% consensus and -0.5% prior (revised from -0.8%)



·     Gold prices slide -$15.80 or 0.9% to settle at $1,776 an ounce, extending losses late day as comments from U.S. Treasury Secretary Janet Yellen (former Fed Chair) hinted that an interest-rate increase may be forthcoming from the Fed to keep the economy from overheating. Other commodity prices continue to surge as corn hits $7 a bushel for first time since 2013 on supply worry. Copper prices on the LME climbed back towards $10,000 per tonne, supported by prospects for higher demand while inventories dwindle. Palladium touches a record above $3,000 an ounce. Oil prices finished higher ahead of weekly inventory data, with WTI crude rising $1.20 or 1.86% to settle at $65.69 per barrel.


Currencies & Treasuries

·     The U.S. dollar gained vs. most rival currencies, as the dollar index (DXY) trades to 9.125 (+0.3%) as the British Pound dipped with potential volatility expected by analysts ahead of Thursday’s Bank of England meeting and the Scottish parliamentary elections. The BoE is expected by some analysts to announce tapering, or a reduction in the pace of its bond purchases at its meeting according to Reuters. The euro retraced back towards the 1.20 level. U.S. Treasury yields retreated, with the 10-year sinking to 1.55% (down from 1.776% March 30 highs) before parling losses as investors fled to safety on Treasuries and out of stocks.






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10-Year Note





Sector News Breakdown


·     Retailers; UAA raised its annual profit and sales forecasts after reporting a 35% jump in quarterly revenue, as reopening markets in the United States and Asia fuel demand; retailers were among the biggest gainers the day prior – but mixed today; IRBT overnight reported a big EPS beat of 41c vs. est. 9c on better revs of $303M, but only reaffirmed operating income and EPS forecasts to manage spending as higher-than-expected costs; DG downgraded from Overweight to Sector Weight at KeyBanc given valuation and difficult comparisons as the economy returns to normal and as the stimulus impact wanes; DG, DLTR, BIG, WMT, TGT estimates raised at KeyBanc into earnings as analyze the impact from recent stimulus across the retail/consumer landscape, utilizing data from our proprietary credit/debit card and ACH data; FRPT beat on Sales and adj. EBITDA but missed on EPS due to a loss on equity method investing and the higher share count

·     Auto sector; RACE postponed its 2022 financial targets by a year due to the pandemic despite reporting a record order book – Q1 EBITDA rose 19% to 376 million euros vs. the 369 million expected; in auto retail research, Goldman Sachs upgraded AAP to Buy from Sell after the company’s Investor Day last week revealed its promising 3-year strategy, and upgraded GPC to Neutral from Sell after reported solid 1Q results and raised 2021 guidance; Ford (F) says electrified vehicle sales post best sales month ever – up 262% on Mustang Mach-e and f-150 power boost hybrid

·     Housing & Building Products; in housing, KeyBanc says industry remains in a Goldilocks period of high demand, tight supply, and stable (low) interest rates, with March existing sales up 13% y/y, inventory down 49% y/y, prices up 10% y/y; building products out with earnings today as VMC 1Q EPS $1.20 and revs $1.1B tops est. $0.45/$1.02B, but mixed guidance; MLM big Q1 EPS and revenue beat but guidance for year disappoints (FY21 revenue $4.510B-$4.700B vs. est. $4.68B); FBHS strong 1Q21 results ($1.36 vs. $1.06) and raised outlook

·     Consumer Staples & Restaurants; SYY mixed Q3 as EPS of 22c beats by 2c but sales of $11.8B misses the $12.39B est. – does say sales trends are improving as markets reopen, with April sales more than doubling, up 102.1%, year-over-year; in research, Goldman Sachs downgraded grocers ACI (to Neutral from Buy) and KR (to sell from neutral) given the potential for an inflationary and promotional environment; DPZ downgraded to neutral at Northcoast as thinks the pizza chain could see labor and food inflation pressure margins this year.

·     Casinos, Gaming, Lodging & Leisure sector; in RV space, CWH with big beat for Q1 $1.40 vs. est. 69c and revs $1.56B vs. $1.31B est. – raises 2021 Ebitda guidance (positive read for LCII, PATK, THO, WGO); RRR said its subsidiary Station Casinos LLC is selling the Palms Casinos Resort for $650 million in cash to a subsidiary of the San Manuel Band of Mission Indians; in services; CHGG reported solid 1Q results, beating Chegg Services and subscriber growth, and also raised 2021 Chegg Services revenue by $10M



·     Energy stock movers; COP Q1 adj EPS 69c beats the 54c estimate, declares quarterly dividend; announces debt-reduction plan and intention to begin sales of CVE shares with proceeds to fund incremental buybacks; schedules midyear market update; MPC posted a smaller-than-expected Q1 loss, helped by a jump in refining margin and COVID-19 vaccine rollouts, which drove a rebound in fuel demand

·     E&P and Majors; BCEI Q1was 7.3% above consensus, 1Q21 production was 3.5% below consensus, 1Q21 oil production guidance was in line with consensus, and 1Q21 capex was $5M below consensus and reiterated its 2Q21-4Q21 oil and total production guidance; FANG 1Q21 CFPS was 0.7% above consensus, but FANG raised its 2021 oil production guidance by 0.7% – new 2Q21 oil production guidance was in line with consensus, its 2Q21 production guidance was 0.5% above consensus, and its 2Q21 capex guidance was 18% below consensus

·     Pipelines: PSXP and ET active after the U.S. Army Corps of Engineers does not believe a judge should order a shutdown of the Dakota Access Pipeline while an environmental review continues, court filings say; WMB Q1 top/bottom line beat and raised guidance; MMP reported solid 1Q21 results and increased its 2021 guidance

·     Alternative energy & Solar; BLDP Q1 GAAP EPS loss of (6c) missed est. (5c) loss and revs $17.6M (-26.1% Y/Y) missed est. $25.25M, Gross margin 15%, a decline of 6-points due to lower revenue and a shift toward a lower overall margin product and service revenue mix that also impacted adj EBITDA, which came in at ($14M), a wider loss than last year’s ($8.8M); REGI Q1 adj EPS $0.88 beat est. $0.18 on revenue $539.74M vs est. $535.26M, adj EBITDA $56.06M vs est. $22.08M as higher selling prices offset the decline in renewable diesel sales due to COVID-19 disruption and planned facility turnaround, and they see Q2 adj EBITDA $65-85M; SEDG Q1 EPS 98c vs. est. 99c on revenue $405.5M vs. est. $396.21M, sees Q2 revenue $445M-$465M (est. $446.81M) and Q2 revenue from solar products to be $405M-420M, non-GAAP gross margin 32%-34%; SHLS reported Q1 adj EPS 5c vs est. 4c on revs $45.6M vs est. $43.4M, and guided full-year net income to $47-51M and revs $230-240M

·     Utilities; D (Dominion Energy) reported Q1 EPS $1.09 (est. $1.08) on revs $3.87B (est. $4.21B), sees Q2 EPS 70-80c (est. 87c), and reaffirms full-year EPS guidance $3.70-4.00; AWK posted Q1 EPS 73c on revs $888M that beat consensus $870.3M, and reaffirmed its FY21 EPS guidance $4.18-4.28; AGR Q1 topped consensus views with adj EPS $1.14 on revs $1.97B vs ests. 76c on $1.82B, and upped its full-year EPS forecast to $2.25-2.45 from $2.15-2.35; AWR Q1 EPS 52c vs est. 45c on revs $117.1M vs est. $100.9M; OTTR recorded Q1 EPS 73c vs est. 67c on revs $261.7M vs est. $246.6M and raised its full-year EPS guidance to $2.47-2.62 from $2.39-2.54; BWXT Q1 EPS 73c vs est. 71c on revs $528.3M that slightly missed est. $531.7M; OGS Q1 EPS $1.79 barely missed est. $1.81 on revs $625.29M that bested est. $581.57M



·     Bank and PE movers; broader banking and financial stocks outperformed a generally weak day in the market, with JPM, TRV, AXP among top gainers in the Dow; in asset managers, BEN reported higher profit from a year ago, while its assets under management stayed around flat from the end of the first quarter; KKR reported a profit in Q1 as it reported positive investment income and revenue, as total revenue at KKR was $4.56 billion, compared with negative revenue a year earlier of $1 billion and company’s assets under management were $367.45 billion; in insurance; EVER reported solid 1Q results (rev. +28% y/y; 2% above Street) and raised its ’21E revenue/EBITDA outlook by 1%/2%; in payments, GPN raises FY21 adjusted EPS view to $7.87-$8.07 and ups FY21 revenue view to $7.55B-$7.625B from $7.50B-$7.60B after Q1 beat ($1.82/$1.99B vs. est. $1.78/$1.77B) – to acquire Zego for $925M in cash, inclusive of a tax asset .



·     Pharma movers; PFE posted a big beat for Q1 EPS and revs and boosted its year outlook; BHC Q1 revenues rose 1% Y/Y to $2.027B for Q1, negatively impacted by ~$100M due to the COVID-19 pandemic and misses the $2.06B estimate, while reaffirms year revs/Ebitda; LGND reported 1Q revenues below consensus due in part to weather-related manufacturing impacts on Captisol ($12M in finished goods) as well as COVID-related weakness on royalty bearing assets; CCXI drops after an FDA briefing document earlier indicates the agency has several areas of concerns with its vasculitis candidate avacopan

·     Biotech movers; VXRT reported new data from its early-stage study of its oral COVID-19 vaccine candidate, showing the vaccine demonstrated higher T-cell responses than the vaccines developed by rivals PFE and MRNA RBC Capital expands coverage in gene therapy with launches on NTLA (OP, $110 PT), SGMO (OP, $22 PT), BEAM (OP, $85 PT) and EDIT SP, $40 PT); BLRX surges following positive top-line results from its Genesis Phase 3 trial evaluating its lead clinical candidate, Motixafortide in stem-cell mobilization for autologous bone marrow transplantation in multiple myeloma patients

·     MedTech Equipment; IDXX raises FY21 EPS view to $7.88-$8.18 from $7.39-$7.71 and ups FY21 revenue view to $3.11B-$3.16B from $3.07B-$3.12B after Q1 beat ($2.35/$777M vs. est. $1.71/$737.4M); DGX upgraded to Buy from Neutral at UBS as think Consensus underestimates the top-line potential for the base business beyond COVID; LNTH posts surprise Q1 profit on better revs $92.5M vs. est. $87.2M driven by a 6.6% rise in its echocardiography agent Definity’s revenue and raised its outlook for the year; TCMD solid 1Q results, with sales of $42.8M (-2% YOY) coming in $1.1M above consensus and slightly better than management’s expectation for a mid-single-digit decline due to continued COVID headwinds; ZBH posted Q1 EPS and revs above views ($1.71/$1.85B vs. est. $1.53/$1.76B) but Q1 sales from dental and spine unit of $246M missed the Refinitiv est. of $254M

·     Healthcare Services; CVS Q1 adj EPS $2.04 vs. est. $1.71; Q1 revenue $69.1B vs. est. $68.39B; raised 2021 adjusted eps guidance range to $7.56 to $7.68 from $7.39 to $7.55; confirmed 2021 cash flow from operations guidance range of $12.0 billion to $12.5 billion; SDC said it experienced a systems outage caused by a cybersecurity incident on April 14 and expects it to have a material impact on its Q2 results as now sees revs $195M-$200M below ests $206.6M; HSIC reported strong 1Q21 results, with adj. EPS of $1.24 well ahead of consensus of $0.84, driven by stronger core dental growth (ex-PPE) of 11% and a recovery in gross margin


Industrials & Materials

·     Aerospace & Defense; BA upgraded to market perform from underperform and raise tgt to $229 from $196 as Bernstein as see less company-specific risk now that Boeing controls 787 deliveries, 777X expectations have been reset, and free cash flow estimates have been brought down; MAXR Q1 revs rose to $392M but missed the $436.5M estimate and said Q1 backlog was $1.8 bln as of March 31, compared with $1.9 bln as of Dec. 31; WWD beat on FY2Q margins, with strong cost controls and operating productivity, generating solid Industrial segment y-o-y OM expansion for the fourth straight quarter

·     Industrial & Machinery; CMI Q1 EPS $4.07 vs est $3.47 on revs $6.1B vs est $5.36B as demand accelerated in the quarter though the supply chain was strained, and raised its FY revs guidance to +20-24% (est. +12%) from +8-12%); ETN Q1 results beat consensus as adj EPS $1.44 beat est. $1.23 and net sales $4.69B topped est. $4.57B and is now projecting Q2 adj EPS $1.45-1.55 (est. $1.29) and upped its full-year adj EPS forecast; FLS Q1 EPS 28c vs. est. 19c on revs $857.3M vs. est. $812.8M, raised FY21 EPS view to $1.40-$1.60 from $1.30-$1.50; KMT Q3 adj EPS 32c vs. est. 20c on sales $485M vs. est. $472.4M and guided 4Q sales +MSD sequentially; RBC posted Q1 adj EPS $1.98 vs. est. $1.71 on sales $814.1M vs. est. $784.9M, daily orders +17% in 1Q and almost +90% in April, guides Q2 sales to increase in the high-20% (est. +23%) and adj EPS $1.85-2.05 (est. $1.82); ITRI beat the consensus 1Q21 adj. EPS estimate on margin outperformance while lifting FY guidance for impacts of the recent capital raise; MTOR reported Q2 EPS 68c vs est. 61c on revs $983M vs est. $948M and sees full-year EPS $2.15-2.30 on revs $3.56-3.8B; PLOW surprised analysts by reporting a profit in Q1 as adj EPS 4c vs est. (18c) loss and sales also surprised to the upside, totaling $103.3M vs est. $77.1M; HSC Q1 adj EPS 15c vs. consensus 5c on sales $529M vs est. $514.8M; CR posted Q1 adj EPS $1.66 vs est. $1.29 on revs $833.5M vs est. $786.2M and raised its full-year forecasts for adj EPS and revs

·     Paper & Packaging industry; UFS rises on a report that Canada’s Paper Excellence is exploring a potential bid for the company according to Bloomberg, saying a deal may value Domtar in the mid-$50s/share, but says there’s no certainty a transaction will occur; SEE shares outperform on beat as 1Q adj EPS $0.78 vs. est. $0.70 on sales $1.3B vs. est. $1.22B; guides FY adj EPS $3.40-3.55 vs. est. $3.35, sees FY sales $5.25-5.35B vs. est. $5.2B; LPX posts a 30c EPS beat for Q1 on better revs of $1B, with buyback of over $1B in stock

·     Transports; CAR Q1 adj EBITDA $47m vs est. -$68m as the company took advantage of pricing opportunities in back half of the qtr (Revs/day is now +12% y/y at end of the qtr = good) while is not providing guidance but the semiconductor shortage is causing uncertainty in the fleet supply; XPO delivered another strong quarter in 1Q21, which handily outperformed expectations as revs of $4.774B (+24% y/y) was well above consensus estimates of $4.350B

·     Metals & Materials; X and CLF upgraded to Outperform at Credit Suisse and downgrade CMC to neutral on valuation saying the U.S steel sector is set to achieve the highest global margins in their view owing to the simple fact today that U.S. prices are the highest and raw material costs are the lowest; ARNC reported Q1 EPS 46c on revs $1.68 that were above estimates that called for 27c on $1.53B, and raised its FY rev forecast to $7.1-7.4B from $6.6-6.9B, and also authorized a $300M share buyback program

·     Chemicals; CC Q1 adj EPS 71c vs. est. 63c; Q1 revenue $1.4B vs. est. $1.4B; boosts FY21 adj EPS view to $2.84-$3.56 from $2.40-$3.12 (est. $2.87); says free Cash Flow now expected to be greater than $450M, up $100M vs. prior outlook; DD with Q1 top/bottom line beat and raises FY21 adj EPS view to $3.60-$3.75 from $3.30-$3.45 (est. $3.45) and boosts FY21 revenue view to $15.7B-$15.9B from $15.4B-$15.6B (est. $15.6B); LTHM slight Q1 beat and guidance boost to high-end of $40-60M FY EBITDA range (est. $55M)

·     Ag chemical stocks were active after earnings results from MOS (5c EPS beat for Q1 on better revs $2.3B vs. est. $2.25B); NTR (in-line Q1 EPS on better revs and raised year EPS and Ebitda view), and IPI (5c EPS beat on better revs $71.5M vs. est. $58.1M)


Technology, Media & Telecom

·     Semiconductors; the Philly semi index (SOX) broke below the 3,000 level, down -2.4% (dropped below its 100-day MA support of 3,022) – now about 10% off 3,314 record highs this year; INTC said will invest $3.5B to equip its New Mexico operations for the manufacturing of advanced semiconductor packaging technologies; CRUS was upgraded to Buy at Needham after recent pullback post weaker outlook

·     Software movers; ZBRA Q1 adj EPS $4.79 vs. est. $4.34 on revs $1.347B vs. est. $1.33B; guides 2Q adj EPS $4.00-4.20 vs. est. $3.62, sees 2Q adj net sales +38-42% vs. est. +30%; guides FY adj net sales +18-22% vs. est. +13.75%; ZI has now delivered strong results in all four quarters as a public company, as adjusted revenue grew north of 48% y/y; VRNS strong results with ARR accelerating to $306.9M, +39% y/y vs. +37% q/q and consensus of $295.7M (3.7% beat vs. 0% last quarter) and sub rev of $44.8M also accelerated (+120% y/y vs. +99% q/q) above expectations of $36.5M; ATVI, RNG among names reporting earnings after the close; ZM dropped below the $300 level for the first time since August amid more selling pressure in software; AYX falls a 6th-straight session into earnings results and trading at 52-week lows

·     Hardware, Components & Services; NTNX upgraded to Overweight at JPMorgan and up tgt to $38 from $30 saying current price levels provide an attractive entry point for long-term investors; CRSR Q1 beats and raises year rev outlook to $1.8B-$2.1B from prior $1.8B-$1.95B; IT shares among the top gainers in the S&P after Q1 results top consensus

·     Internet & Media movers; WMG reported a Q2 profit and revenue that beat expectations, boosted by 23% growth in streaming revenue as swung to net income of $117 million; FOXA upgraded to Neutral from sell at Rosenblatt and up tgt to $35 from $25 as see Fox News/Sports having AVOD/SVOD optionality in the near future, and Tubi providing a cost effective funnel to both; SABR plunges as Q1 rev falls 50% YoY to $327.5M, well below Street consensus view of $410.6M on a wider EPS loss of (72c) vs. est. loss (55c)


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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