Mid-Morning Look: July 14, 2021

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Mid-Morning Look

Wednesday, July 14, 2021

Index

Up/Down

%

Last

 

DJ Industrials

103.76

0.30%

34,992

S&P 500

15.18

0.35%

4,384

Nasdaq

69.80

0.47%

14,747

Russell 2000

1.82

0.08%

2,240

 

 

Major averages open higher (S&P sets new record high) to start the trading day ahead of Fed Chairman Powell testimony to the House on the economy and monetary policy. In prepared text, Powell showed that the central bank’s trigger-point for cutting back on its asset purchases is “still a ways off” and also noted that inflation will likely remain “elevated” in the near term, though he expects an eventual moderation, according to testimony prepared. The Fed headlines were released at 8:30 this morning…the same time that the June producer price index (PPI) inflation reading showed another spike in prices (well-timed release), following the spike in CPI data yesterday. Note CPI growth has been above economists ests. for 4 straight months & came in at +5.4%; PPI growth has been above economists ests. for 12 straight months & came in at +7.3%. Technology stocks jump led by gains in mega cap again (AMZN, GOOGL) and semiconductors (SOX touching record highs) after Bloomberg reported that AAPL has asked suppliers to build as many as 90M next-gen iPhones this year, a 20% increase from its 2020 iPhone shipments. Banks are mixed after another round of earnings (BAC, Citi, PNC, WFC this morning).

 

Crude prices volatile on reports Saudi Arabia and the United Arab Emirates (UAE) reached a deal that would allow a stalled OPEC+ deal on output levels to proceed, with the U.A.E. allowed to boost the baseline used to determine how much crude it’s allowed to pump, Reuters reported (Reuters headlines later from UAE energy minister said no agreement has been reached yet with OPEC+ on supply deal, deliberations continue). OPEC+ talks on a proposal to lift production by a cumulative 2 million barrels a day between August and December fell apart earlier this month after the U.A.E. insisted that its baseline should be raised from around 3.16 million barrels a day. Reuters reported that the UAE’s baseline would be lifted to 3.65 million barrels per day after the current pact on production curbs expires in April 2022.

 

Overnight, Senate Democrats on the Budget Committee agreed to set a $3.5 trillion top-line spending level for a bill to carry most of President Joe Biden’s economic agenda into law without Republican support. Democrats on the committee had been divided about the size and scope of the package, with chairman Bernie Sanders initially pushing a $6 trillion measure. The Budget Committee agreements includes the Medicare expansion.

 

Economic Data

·     Hotter inflation again: Producer Price Index (CPI) MoM for June reported up 1%, above the 0.6% estimate and on a YoY basis rose 7.3% vs. est.6.8%; PPI Ex: Food & Energy (core) MoM for June rose 1.0% vs. est. 0.5%, while on a YoY basis, core PPI rose 5.6% vs. est. 5.1% – inflation readings come in above ests on headline and core prices

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.38

74.89

Brent

-0.35

76.14

Gold

12.40

1,822.30

EUR/USD

0.0047

1.1821

JPY/USD

-0.54

110.07

10-Year Note

-0.049

1.366%

 

 

Sector Movers Today

·     Bank movers; BAC 2Q EPS $1.03 vs est. $0.77, NII $10.2B vs est. $10.45B (light), net charge-off ratio 0.27%; FICC revs $2.0B, equities revs $1.6B, excl DVA sales & trading revs $3.6B (Results were boosted by a $2.2 bln release from BAC’s reserves that it had set aside last year at the height of the COVID-19 pandemic); PNC 2Q adj EPS $4.50 vs est. $3.10, NII $2.6B vs est. $2.53B, revs $4.7B vs. est. $4.4B; qtrly provision $302Mm; common equity tier 1 capital ratio estimated 10% June 30 and 12.6% March 31; WFC Q2 EPS $1.38 tops the $0.97 est. on better revs $20.27B vs. est. $17.75B (includes $1.6B, or $0.30 per share, decrease in allowance for credit losses) – says Q2 non-interest expense $13,341 mln vs $14,551 mln in q2 2020; Citigroup (C) Q2 EPS $2.85 tops the $1.96 estimate on revs $17.47B (down 12%), as beats est. $17.2B – said spending on Citigroup-issued credit cards soared 40% from a year ago, during the depths of the pandemic (it was also up 6% compared with the 2019 period) – said trading revs fell 33% YoY

·     Consumer Staples; OTLY negative mention by short seller Spruce Point Capital which accused the company of shady accounting practices and greenwashing and alleges that Oatly has overstated both its revenue and margins to investors https://cnb.cx/2TcFdPu ; beauty space a focus of Raymond James today as they upgraded shares of ULTA to outperform ($395 tgt), EL to strong buy ($355 tgt) and SBH to market perform, while initiated ELF at Outperform and $33 tgt; CHD also downgraded to Raymond James on valuation; CAG downgraded by a few analysts after co lowered year outlook Tuesday

·     Semiconductors; AVGO is said no longer in talks buy SAS Institute after a WSJ report yesterday that SAS may be acquired for $15B-$20B. The founders of the SAS Institute changed their minds on a potential sale after news of the possible sale – WSJ reported; shares of iPhone suppliers (TSM, QCOM, CRUS, QRVO, SWKS, AVGO) surge after Bloomberg reported that AAPL has asked suppliers to build as many as 90 million next-generation iPhones this year, a 20% increase from its 2020 iPhone shipments (semiconductor index touches intraday record-high); VLDR said it joined the Nvidia Metropolis program for traffic monitoring and analytics.

·     Metals & Materials; in fertilizer sector, Scotiabank raised Ebitda ests for MOS, NTR, SQM, and YAR while lowered estimates for SDF and CF saying while N, P, and K fertilizer prices all realized multi-year highs in Q2, it’s important to note that much of the price surge, particularly for potash, occurred later in the quarter, when order books had mostly been filled. Therefore we’re more excited about Q3 EBITDA revisions than for Q2 EBITDA beats; CMP rises as identifies a lithium brine resource of ~2.4 mln metric tons lithium carbonate equivalent (LCE) at its active Utah site

 

Stock GAINERS

·     AAL +5%; pacing gains in transport sector after issuing expectations for a slight pretax profit in the same period, along with gains in DAL after earnings

·     AAPL +1%; touches new all-time intraday high as Bloomberg reported the company has asked suppliers to build as many as 90 million next-generation iPhones this year, a 20% increase from its 2020 iPhone shipments

·     AFRM +3%; defended at Truist today sell-off on news AAPL and GS may launch integrated Pay solution seems like an overreaction given the company’s position as the leading enterprise BNPL provider, boasting exclusive integrations with platforms including SHOP and PTON

·     CMP +17%; as identifies a lithium brine resource of ~2.4 mln metric tons lithium carbonate equivalent (LCE) at its active Utah site

·     CVA +7%; to be acquired by EQT Infrastructure for $20.25 a share in cash in a deal valued at $5.3 billion https://on.mktw.net/3ekeDeG

·     JEF +9%; as formed a strategic alliance with Sumitomo Mitsui Financial Group Inc. to work on leveraged finance and cross-border merger businesses, as the Japanese company plans to acquire up to 4.9% of Jefferies shares in the open market, worth about $386M

·     LB +3%; pre-announced 2QTD results ahead of expectations again as robust demand trends continued from 1Q citing healthy merchandise margins as strong customer demand and inventory management led to lower promotions

·     MRNA +%; shares of the Covid-19 vaccine maker reaches an all-time high and exceed the $100B market capitalization for the first time

·     SWKS +3%; semiconductors outperform, especially iPhone chip suppliers after reports AAPL has asked suppliers to build as many as 90M next-gen iPhones this year, a 20% increase

 

Stock LAGGARDS

·     BAC -3%; after lending business was hurt by low interest rates, lower net interest income

·     CHD -1%; downgraded to Underperform at Raymond James

·     GKOS -21%; downgraded at William Blair saying the proposed CMS rate calls for incremental reimbursement for the iStent procedure to be approximately $34, well below the analyst’s expectation of somewhere just south of $300

·     OTLY -2%; negative mention by short seller Spruce Point Capital which accused the company of shady accounting practices and greenwashing and alleges that Oatly has overstated both its revenue and margins to investors https://www.sprucepointcap.com/oatly-group-ab/

·     PTON -2%; downgraded to Neutral from Outperform at Wedbush with a price target of $115, down from $130 saying consumers now back to having a full complement of in-person workout options along with an “unprecedented and ever-growing list” of digital and at-home choices

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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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