Closing Recap

Wednesday, May 05, 2021

Equity Market Recap

·     Stocks finish mixed as the Nasdaq Composite slumped into negative territory in the final hour of trading, erasing earlier gains, led by plunging biotech names while the S&P 500 was flat to up slightly as materials and energy stocks helped support it. Earlier in the session both the Dow Jones Industrials and Transports each touched fresh record highs. Economic data was mixed as ISM services headline missed views while showed the highest reading for prices paid since 2008, while ADP private payrolls posted a strong gain, but below ests (ahead of the nonfarm payroll report on Friday). Stocks initially opened higher after U.S. Treasury Secretary Janet Yellen said late Tuesday, she sees no inflation problem brewing, downplaying earlier comments Tuesday that rate hikes may be needed to stop the economy overheating as President Joe Biden’s spending plans boost growth.

·     Federal Reserve members came to the market rescue, with at least four speakers today alone talking about being too soon to taper, etc., as the Fed’s Evans, Mester, Clarida, and Rosengren all sticking to guns that "monetary policy will need to be very accommodative for some time to support the broadening of the economic recovery; expect inflation will be well restrained; economy recovering but still have long way to go" – just a few headlines from them today – still trying to put markets at ease on inflation.

·     Top sector/stock news: MRNA, BNTX, NVAX, PFE slide late day on reports the U.S. backs Covid vaccine intellectual property waivers to expand access to shots worldwide; PTON plummets after recalling its treadmill following a child death; shares are now more than 50% off January 14’s ATH; LYFT opens higher after its earnings beat and path to profitability this year, but shares roll to red with $UBER $DASH on headlines that the Biden admin will rollback a regulation that made it easier to classify gig workers as contractors; CZR soars back over $100 after its strong same-store adj EBITDA, lifts other Las Vegas casinos WYNN, MGM; stay at home winners in 2020 continue to give back gains with TDOC, ZM, CHWY among sharp decliners today.

Economic Data:

·     ADP said private payrolls rose by 742,000 jobs last month, the largest gain since last September (but below ests of 800K), while data for March was revised higher to show 565,000 jobs added instead of the initially reported 517,000.

·     Markit U.S. services sector final PMI for April at 64.7 vs flash reading 63.1 and final March 60.4; the U.S. services sector final new business index for April at 64.3, a series record going back to October 2009, vs flash reading 63.2 and final March 58.7; Services sector final input prices index at series high going back to October 2009; new orders index for April at 63.9 vs flash reading 62.9

·     ISM report on U.S. Non-manufacturing sector shows PMI 62.7 in April (below consensus 64.3) and down from prior 63.7 in March; business activity index 62.7 in April (consensus 69.5) vs 69.4 in March; prices paid index rises to 76.8 in April vs. 74.0 in March (highest since July 2008) while new orders slipped to 63.2 in April vs. 67.2 in March

Commodities

·     Oil prices slip as WTI crude dips $0.06c to settle at $65.63 (well off earlier highs of $66.76), erasing earlier gains following bullish weekly inventory data. Prices had been trading higher on expectations that an economic recovery in the U.S. and Europe would lead to higher demand for oil. The EIA reported that U.S. crude oil stockpiles last week fell more sharply than expected as refining output rose and exports surged. Crude inventories fell by 8 million barrels in the week to 485.1 mln barrels, vs. estimates for a 2.3 mln-barrel draw.

·     Gold prices finished higher, gaining $8.30 or 0.5% to settle at $1,784.30 an ounce as several Fed speakers reassured markets that higher U.S. interest rates are not coming soon and they are unconcerned about rising prices. Gold recovered a portion of yesterday’s slide. At the same point, the dollar index was hovering close to a near two-week peak against its rivals. Investors await April payrolls on Friday for cues on the health of the U.S. economy. Palladium prices remained higher after hitting an all-time high of $3,017.18 Tuesday on shortage concerns. The most-active corn contract on the CBOT reached $7.08, the highest level since March 2013.

Currencies & Treasuries

·     The U.S. dollar index (DXY) was little changed most of the morning around the 91.30 level; the euro dipped below the 1.20 level; the Canadian dollar extends gains, touches a 3-year high at 1.2253 to the U.S. dollar. Treasury yields were slightly lower, ending the session near lows (10-year at 1.58%). The U.S. Treasury Department said today it will keep its coupon issuance steady over the coming quarter, and that declines in outstanding Treasury bills should slow. The Treasury said it will sell $58 billion in three-year notes next week as well as $41 billion in 10-year notes and $27 billion in 30-year bonds, unchanged from last quarter. The Treasury also said it expects Congress to raise or suspend the U.S. debt limit in a timely manner, and that it may take certain extraordinary measures if Congress does not.

Sector News Breakdown

Consumer

·     Retailers; BGFV said Q1 same-store sales rose 31.8% vs guidance of 20% growth, reflecting broad-based demand for apparel, footwear and hardgoods; for Q2, sees comp sales to increase 22%-27%; UAA was upgraded by three analysts (Barclays, Atlantic UBS) following earnings the day prior; ODP said it will spin off its distribution platform, used by schools, offices and other businesses to buy supplies, into a separate company and announces a new $300M buyback; TUP Q1 EPS of 82c tops the 54c estimate on better sales or $460M amid an increase in activity and productivity of the direct selling sales; KSS upgrade from Mixed to Positive by OTR Global; LL tumbles as reported Q1 EPS 34c vs. est. 23c on lighter revs, while comps rose 6.9%, missing the 10.5% estimate and is not providing guidance; PTON slides after issuing voluntary recalls of its Tread+ and Tread treadmills, and its chief executive apologized for the company’s initial refusal to comply with federal safety regulators who pushed for the action weeks ago.

·     Auto sector; GM reported Q1 adjusted EPS $2.25 vs consensus $1.04 on revenue $32.5B vs consensus $32.67B, North America adj EBIT $3.1B (+41% YoY), adj international EBIT $0.3B, and said it expects to be at the higher end of its adj EBIT range of $10-11B for the full year; LYFT posts narrower-than-expected Q1 loss, maintains Q3 profit target as continued cost cuts allow LYFT to earn more per ride and said Q1 Ebitda was $73M vs. est. loss $144M; BWA Q1 adj EPS $1.21 beat est. 92c on revs $4B that also topped est. $3.57B, guided FY adj EPS $4.00-4.35 (est. $4.01) and sales to $14.8-15.4B (est. $14.9B); SocGen downgraded RACE to Hold and lowered its target to $231 from $269 after the company postponed its FY22 targets set in 2018 to FY23 on warnings that the pandemic will delay some launches and reduce anticipated volumes; Bloomberg reported the Biden administration plans to block a regulation that would have made it easier to classify gig workers as independent contractors – decision could mean that DASH, GRUB, UBER, LYFT face a higher risk of having to classify drivers as employees

·     Electric vehicles; Two senior U.S. Senate Democrats on Tuesday proposed spending $73 billion to electrify the nation’s 70,000 transit buses as part of a push to move the United States toward zero-emission transportation. Senate Majority Leader Chuck Schumer and Senate Banking Chairman Sherrod Brown noted that only 2% of U.S. buses were zero-emission vehicles (note ACTC, NGA are SPACs that have taken electric bus manufacturers public and PLUG is also in partnerships to develop Hydrogen-powered buses)

·     Consumer Staples & Restaurants; MO downgraded to Hold from Buy at Argus noting it has seen a sharp decline in the value of its JUUL investment and is facing increased legislative and regulatory risks; HNST 25.81M share IPO priced at $16.00; PFGC Q3 EPS missed (19c vs. est. 28c) on better sales $7.2B (watch other food services SYY, USFD) and issues higher Q2 sales view ($8.2B vs. $7.5B); HLF Q1 results top consensus and raises FY 2021 net sales, adjusted diluted EPS forecast; DIN 1Q adj EPS $1.51 vs. est. $0.87 on revs $204.2Mm vs. est. $199.3Mm, IHOP comps -0.9%, Applebee’s comps +11.9%, says 99% of domestic restaurants open; currently cannot provide complete business outlook for FY; says April preliminary comps +11.4% Applebee’s, -4.7% IHOP; William Blair added PLAY to its near-term focus list as the company’s sales recovery thus far in the year sets it up to recover more than 90% of its pre-pandemic sales by the end of the year

·     Leisure, Casinos, Gaming; CZR reported a Q1 EPS loss ($2.03) vs. est. loss ($1.80) on in-line revenue $1.7B, same-store adj EBITDA $548M (+34% YoY) beating consensus $414M; POOL announces a 38% increase in its quarterly cash dividend and an additional $450.0 million of authorization under its share repurchase program; HAYW Q1 EPS 85c handily beat consensus 17c on sales $334.4M above est. $258.5M, guided FY adj EBITDA $360-390M above est. $272.2M, and sees FY sales +40-45%; FUN reported a Q1 net EPS loss of ($1.95), wider than est. ($1.82) loss but better than last year’s loss of ($3.83), on revs $9.7M that fell more than 80% YoY but still topped est. $6.3M despite no park operations in the quarter due to the pandemic; LYV shares saw a midday pop after NY Gov Cuomo said Broadway tickets will go on sale tomorrow, and that baseball to resume normal seating May 19^th with restrictions; CCL, RCL, NCLH slipped as CDC issues Phases 2B & 3 of conditional sailing order; guidance for cruise ships to undertake simulated voyages; doesn’t anticipate releasing any addl documents for Phase 4.

·     Lodging sector; HLT Q1 adj EPS 2c missed est. 8c on revs $874M that also missed est. $1.1B, and Q1 system-wide comparable RevPAR decreased 38.4%, but was an improvement from $40.68 in the prior quarter; Hyatt (H) Q1 adj EPS ($3.57) was wider than est. ($1.30), comparable system-wide REVPAR -48.9% and said from Jan to Mar 2021 system wide comparable REVPAR rose over 50%, guided FY CAPEX about $110Mm, sees adj SG&A about $240Mm, and suspended all share repurchase activity and its dividend; HST reported 1Q21 adjusted FFO of $0.01, $0.13 above the Street and also reported adjusted EBITDA of $3M, compared to the Street at -$86M

Energy

·     E&P and Majors; PXD delivered adjusted EPS and EBITDA ahead estimates, excluding PE integration expenses and announced that it closed the Double Point acquisition and adjusted FY21 guidance and introduced 2Q21 as a result; DVN Q1 adj EPS 45c vs. est. 33c. operating cash flow $592M, EBITDAX $959M, oil production 268k barrels per day exceeded the quarterly guidance by 5k, said it is on track to achieve its full-year 2021 capital objectives; BRY Q1 adj EPS $0.07 vs. est. ($0.07) on revs $94.2M vs. est. $118.9M; WTI posted Q1 EPS 11c on revs $125.65M that topped consensus views that called for 4c on $114.2M; CRK reported Q1 EPS 25c vs est. 12c on revs $332M vs est. 4 and average production 1.281bcf/day; MGY Q1 EPS 38c beat est. 26c on sales $207.66M that beat est. $190.10M; PVAC Q1 EPS 39c was below est. 41c on sales $88.56M above est. $73.10M; Bank of America upgraded COP to Buy and upped its pt to $67 from $65 on its improved balance sheet and sale of its CVE stake, combined with a pullback since March despite forward Brent standing at the highs of year; in refiners, HFC posts bigger-than-expected Q1 loss as refineries ran below planned production in the Q1 at 348,000 barrels per day (bpd), 2,000 bpd below guidance; in equipment, BOOM 2.5M share Secondary priced at $45.00

·     Utilities & Solar; SPWR tops Q1 EPS estimates while revenues rose 5.5% Y/Y but fell 10.3% Q/Q and gross margin of 18.7% topped the 12.1% from the year-ago quarter but fell from 22.3% in Q4 2020; AMRC delivered better-than-expected 1Q21 revenue and EBITDA (+20.1% versus Stifel above-consensus forecast) fueled by both the Projects and Energy Assets segments

Financials

·     Consumer Finance; SQ tgt raised to $300 at KeyBanc as consumer survey indicates swelling interest in investing (high-30s% opened up a new investing account recently) and crypto (20%+ invest in crypto with ~80% opening up an account recently); VIRT shares dipped late Tuesday with reports this morning suggesting CEO Douglas Cifu received from friction on the company’s Q1 earnings call about ending its practice of providing monthly breakouts on market-making revenue; WU EPS inline ($0.44 vs. $0.44 cons) and guidance reaffirmed;

·     Bitcoin news; EQOS rises as HC Wainwright said it initiated the cryptocurrency trading, management, and custody company with a Buy rating and said setting an ultra-conservative $12 price target at a rough 50% discount to the stock’s recent high; FIS in a partnership with bitcoin-focused tech partner NYDIG, introduces a solution that allows banks to offer their customers the ability to buy, sell and hold bitcoin

·     REITs; VICI was downgraded to In-Line at Evercore, but Loop reiterated their Buy rating on the stock with a new street-high $37 pt as they expect its discount to non-gaming peers to narrow and eventually trade at a premium vs traditional retail REITs; DEI FFO beat ($0.44 vs. $0.42 cons) and guidance increased 2c at midpoint

Healthcare

·     Pharma movers; Covid-19 vaccine players MRNA, BNTX, PFE, NVAX declined sharply late day on reports the U.S. backs Covid vaccine intellectual property waivers to expand access to shots worldwide; CHMA rises after UK-based Amryt Pharma Holdings agreed to buy the co for $296.7M in an all-stock deal, gaining access to co’s hormonal disorder drug Mycapssa; ESPR slides as Q1 sales disappoint, weighed down by pricing dynamics as U.S. revenue of $6.35M missed CSFB Rx-implied estimate of ~$11M; CLVS reported Q1 Rubraca sales of $38.1M, down 11% YoY citing Covid headwinds – U.S. product revenues of $31.7M compared to $39.3M YoY

·     MedTech Equipment; BRKR with a top and bottom line Q1 beat and raises year organic revs view to +11% to +13%, from prior +7.00% to +9%; EXAS delivered a slight top line Q1 beat and initiated a Q2 guide slightly above consensus, but initiated a 2021 guide that came in just below the Street; GMED beat consensus revenue by 16% and EPS by 32% in 1Q21 driven by strong robotics implant pull-through, competitive rep hiring, new products, and improving biologics performance while raises its 2021 financial guidance; OMI posts Q1 adj EPS beat ($1.57 vs. est. 99c) and raises FY EPS outlook to $3.75-$4.25 per share from a previous $3.00-$3.50 per share; INSP reported another solid beat and guide up quarter; WAT with Q1 EPS and revs beat and guides both Q2 and year EPS views above estimates; ALC forecasts FY core EPS of $1.85-$1.95, below est. $1.96, and reported Q1 revenue of $1.91B missing the $1.92B estimate

·     Healthcare Services; ABC reported F2Q results with revenue of $49.15B (vs. $49.98B est.) and EPS of $2.54 (vs. $2.48), with better margins driving slightly softer top-line and low end of guidance was raised slightly; CERN mixed Q1 results as misses on the top line with $1.39B but bottom line beats by 2c and year guidance also mixed; CYH upgrade from Hold to Buy at Jefferies given view that the stock is positioned for multiple expansion and upward EBITDA revisions; also in hospitals, THC tgt raised to $70 from $55 and UHS to $168 from $151 at Mizuho

Industrials & Materials

·     Aerospace & Defense; MRCY shares tumble as mgmt revised lower its FY21 revenue outlook and organic growth outlook citing timing and execution issues; aero parts supplier SPR slides after posting larger-than-expected Q1 EPS loss of ($1.22) on in-line revs of $901M

·     Industrial & Machinery; CNHI posted much stronger than expected Q1 earnings and a 40% Y/Y rise in industrial net revenues to $7B, due to higher volumes driven by strong industry demand; TT posts EPS 39c better than consensus, raised FY guidance by 60c and strong organic growth of +11% while margins very strong vs easy comps; EMR with EBIT beat by 9%, EPS 7c better, and raising FY guidance by 20c

·     Transports; no pullback in transportation, as the Dow Transports sets another fresh intraday record high (just shy of 15,700), topping its prior record closing highs of 15,676. Dow Transports looking to make it a 14th straight week of weekly gains (the current 13-win streak is longest in over 120-years); shares of UPS, FDX have led the rally on an economic recovery as well as rails on good earnings quarter and airlines as reopen/vaccine play.

·     Metals & Materials; in paper space, WRK posts top and bottom line miss as Q2 adj EPS 54c missed the est. 61c and revs of $4.4B below est. $4.51B – did say successfully implementing published PPW price increases across all major paper grade; in gold miners, GOLD beats estimate for Q1 profit and sticks to full-year production forecast; uranium names rise (UUUU, UEC, CCJ) after Reuters reported that the White House has signaled privately to lawmakers and stakeholders in recent weeks that it supports subsidies to keep existing nuclear plants from closing; in chemicals, SMG sees FY sales +30% to +40%, well above prior +8% to +12%; FCX, SCCO, TECK copper stocks rise as the commodity price hits 10-year highs

Technology, Media & Telecom

·     Internet; ZG reported Q1 revs of $1.2B topping its prior outlook as reported higher mobile and web traffic including a 15% increase in avg monthly unique users from a year ago; AKAM Q2 guide beat and guide raise for the year caused by Security, OTT, gaming, and Edge Apps strength flow-through; shares of BKNG, ETSY, MELI among those reporting tonight

·     Semiconductors; AAPL said it awarded IIVI an additional $410 million from its Advanced Manufacturing Fund (more than doubles the total award to II-VI, after an initial $390 million award in 2017); LSCC beat and raise revenue and EPS was driven by broad based strength in its three target segments of Communications & Compute, Industrial & Automotive, and Consumer; XLNX reported MarQ rev/EPS of $851M/$0.75, and did not guide the JunQ given its pending acquisition by AMD beat and raise, with 2Q21 revenues guided to record levels (+12.3% vs. Stifel est.) backed by solid bookings, and capacity improvements.

·     Software movers; AYX reported qtrly rev above analyst estimates and loss per share narrower than expected, while guides Q2 revs $111M-$114M vs. est. $111.6M; PAYC reported an in-line revenue quarter (vs a ~2% average top-line beat in 2020) owing to a greater-than-expected one-time headwind from annual form processing; MCFE reported a significant upside 1Q, led by revenue growth of 25% Y/Y that beat forecast and 885K subscriber adds, which accelerated q/q – while Q2 guidance implies q/q consumer revenue declines, affirmed year; RNG reported strong Q1 results, driven by accelerating growth in enterprises (ARR growth of 62% Y/Y vs. 55% in Q4), strong momentum with partnerships (in early stages) and increasing CCaaS attach rates; SKLZ reported Q1 results and raised full-year financial guidance following an announcement that its financial statements for the year ended Dec. 31 should no longer be relied on; ATVI handily topped consensus first-quarter estimates and raised full-year guidance

·     IT Services, components; LPSN reported a strong quarter, showing accelerated growth of 38% Y/Y on up-market success driven in part by large deals and early partnership contribution but raised guidance by only $2 million for the year despite a $4+ million beat in Q; ANET reported a strong beat and raise as mgmt called out Cloud Titan visibility and broadly solid trends (EPS was strong at $2.50 beating consensus by 5%)

·     Media & Telecom movers; TMUS boosted its full-year postpaid subscriber net additions forecast to 4.4M-4.9M from prior 4.0M-4.7M after beating Q1 results and postpaid phone subscriber adds, boosted by robust demand for 5G services; MTCH forecasts Q2 revenue above Street estimates ($680M-$690M vs. est. $678.8M), betting vaccine drives, summer months will lead to more subscribers for its online dating services; WOW upgraded to Buy with $25 tgt at Truist; in towers, AMT announces offering of 8.5M shares; NYT shares slipped as EPS beat but net subscriber additions came to just 293,000.