Mid-Morning Look

Tuesday, August 24, 2021

U.S. stocks continue to make new highs, with the Nasdaq Composite topping the 15,000 level as tech again a market leader, while the S&P 500 approaches the 4,500 level amid a broad market sector rally (energy, discretionary, materials), though defensive sectors underperform (staples, utilities). Fear continues to remain non-existent as last week’s stock market decline (around 1%) on slowing growth fears, Fed asset tapering concerns, and rising Covid variant cases is all but a memory. Stocks jumped on Monday following full approval for the PFE/BNTX vaccine for those 16-years and older, giving a boost to the reopen sectors (casinos, airlines, lodging), though approval was never in doubt. Markets also prepare for a busy week of software and retail earnings, a few economic data points (better housing data today but softer manufacturing data) and of course the big event for markets this week will take place in Jackson Hole at the economic symposium of the Federal Reserve. While some officials have stated plans to scale back stimulus, threats from the Delta variant have raised questions about whether they will hold off on signaling a taper timeline on $120B/month in bond buying. Oil prices recover as Brent moves back above $70 per barrel, but Treasury yields remain stuck around the 1.25% level.

Economic Data

·     New Home Sales for July rose 1.0% to 708K, above the 697K estimate and prior 701K; the median sale price up 18.4% to a record $390.5K (previous 361.8K, +6.1% from June 2020); July single-family home sales +1.0% vs June -2.6%; July new home supply 6.2 months’ worth vs. 6-months June.

·     Richmond Federal Reserve Manufacturing Survey disappoints at +9 vs. +25 consensus and +27 prior; shipments +6 vs. +21 prior, capacity utilization +6 vs. +21 prior and volume of new orders +5 vs. +25 prior.

Sector Movers Today

·     Retailers; BBY with a beat and raise as 2Q adj EPS $2.98 topped est. $1.85 on enterprise comps +20% vs est. +17.2% while guides Q3 revs $11.4B-11.6B above est. $10.6B and boosts year comp store sales view to +9-11% (from 3%-6%) and above est. +7.5%; URBN said to launch marketplace called Nuuly thrift; Citigroup opens a positive catalyst watch call on SIG as believe the setup heading into SIG’s earnings report on 9/2 is favorable; CTRN said its sales rose for the fiscal second quarter as it saw customers being in a better financial position compared with a year ago; VSCO downgraded to Equal-weight at Morgan Stanley on a more balanced risk reward & fewer catalysts until 2H22 noting shares have rallied +44% since the separation

·     Bitcoin, FinTech & Payments; RIOT reported consolidated total revenue of ~$34.3M, in-line with consensus of ~$34.6M as mining revenue was up ~36% sequentially ($31.5M during Q2) and up 1,540% Y-Y; COIN initiated Buy and $420 tgt at Needham as sees as a market-leading crypto asset exchange with significant opportunities beyond exchange services; MSTR said during Q3 fiscal YTD, co purchased about 3,907 bitcoins at an average price of about $45,294 per bitcoin

·     Healthcare Services; GTS agreed to be acquired by GuideWell Mutual Holding Corp., the parent of Blue Cross and Blue Shield of Florida, for about $900M, or $36 in cash https://bit.ly/3zqomIA ; at least six U.S. states, including Georgia, have decided they will not fully sign on to a proposed $26 billion settlement with three drug distributors (ABC, CAH, MCK) and JNJ which have been accused of fueling the nation’s opioid epidemic, according to the states’ attorneys general – Reuters reported; CI announces $2B in accelerated share repurchase agreements

·     Casinos, Gaming, Lodging & Leisure sector; Casino stocks active, especially those with Macau exposure (WYNN, LVS, MLCO) after the special administrative region’s authorities announced an easing of testing polices for travelers from the mainland, according to Bloomberg. Starting Wednesday, travelers from mainland China who haven’t visited a foreign country or Taiwan or Hong Kong are required to hold a negative Covid nucleic acid test less than seven days old, a loosening of a previous rule requiring a test conducted within the past 48 hours; PLNT was initiated Overweight and $93 tgt at Morgan Stanley saying with the stock having underperformed its benchmark by ~15% YTD and off pre-Covid/early 2021 highs, the market seems skeptical of a return to normalized membership but firm sees evidence that in-person fitness can recover; MCW 12M share secondary priced at $19.57

Stock GAINERS

·     BBY +6%; with a beat and raise as 2Q adj EPS $2.98 topped est. $1.85 on enterprise comps +20% vs est. +17.2% while guides Q3 revs $11.4B-11.6B above est. $10.6B and boosts year comp store sales view to +9-11% (from 3%-6%) and above est. +7.5%;

·     CARA +21%; after the company and Switzerland’s Vifor announced U.S. FDA approval for Korsuva kidney disease drug.

·     CRWD +7%; as the cybersecurity firm will replace MXIM in the Nasdaq-100 Index starting Aug. 26

·     GTS +46%; agreed to be acquired by GuideWell Mutual Holding Corp., the parent of Blue Cross and Blue Shield of Florida, for about $900 million, or $36 a share, in cash https://bit.ly/3zqomIA

·     JD +12%; helping lead rebound in Chinese stocks after weeks of selling pressure on increasing regulatory concerns in mainland China (BABA, NTES, BIDU rallying early)

·     PANW +17%; reported better-than-expected FQ4 results, exceeding Street expectations across all key metrics and issued a better-than-expected outlook for both FQ1 and FY22

·     SHOP +4%; after the NY Times reported TikTok adds in-app shopping, in a partnership with Shopify

·     TCEHY +8%; shares rise after the company bought back 230,000 shares for HK$100.9 mln ($12.95 mln) on Aug. 23, according to HK Exchange filing

·     WYNN +5%; Casino stocks active, especially those with Macau exposure (WYNN, LVS, MLCO) after the special administrative region’s authorities announced an easing of testing polices for travelers from the mainland, Bloomberg reported

Stock LAGGARDS

·     CPB -1%; weakness early in defensive food stocks (K, CAG, MDLZ)

·     MCW -5%; as 12M share secondary priced at $19.57

·     MRNA -3%; seeing early pullback weakness in vaccine related names (BNTX) after yesterday’s sector rally following the FDA full approval for BNTX/PFE drug for 16-yrs and older

·     STX -6%; weakness in HDD space (WDC lower as well)

·     TBPH -29%; after early results showed its experimental drug, izencitinib, for an inflammatory bowel disease called ulcerative colitis, failed to meet the main goal in its mid-stage study