Mid-Morning Look: June 03, 2021

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Mid-Morning Look

Thursday, June 03, 2021






DJ Industrials




S&P 500








Russell 2000






U.S. stocks under pressure early, pulling back after major averages neared all-time highs this week, as improving jobs data and rising prices once again renews inflation fears. The Dow Jones Industrial Average falls for the first time in six days, while the tech heavy Nasdaq falls the most, dropping over 1% as mega cap tech names are broadly lower. The Reddit/WSB social media “meme” stocks that have taken Wall Street by storm are seeing selling pressure today following two stock offerings. EXPR said it may offer and sell up to 15 million shares of its common stock from time to time through an “at-the-market” or ATM equity offering program (followed earnings this morning), while AMC also launched its second share issue in three days by agreeing to sell up to 11.55M shares from time-to-time in an ATM offering. The two offerings taking a little steam out of some (not all – BB, WKHS are higher) of the “meme” Reddit trades with GME, KOSS, BBBY all lower. Gold rolling to fresh lows down over 2.1% or $40 to move below $1,870 an ounce (biggest move since March) and silver tumbles by most since February, weighed down by a bounce in the dollar index (DXY) following the better ADP and weekly jobless claims reports, showing improvement in the job’s situation ahead of tomorrow’s nonfarm payroll report. The euro falls to a more than 2-week low vs. the dollar around the 1.213 level, while Sterling fell over -0.4% to $1.4110 following the stronger than expected U.S. private payrolls data, having touched a three-year high of $1.4250 earlier this week.


Economic Data

·     ADP Employment change reported at 978k (above est. 650k downwardly revised 654K

·     Weekly jobless claims fell to 385,000 in latest wee vs. est. 390K and down from 405K the prior week; the 4-week moving average fell to 428,000 from 458,500 prior week; continued claims rose to 3.771M vs. 3.615M estimate; the U.S. insured unemployment rate rose to 2.7%

·     U.S. nonfarm productivity rebounded solidly in Q1, as the hourly output per worker increased at an unrevised 5.4% annualized rate last quarter, mostly in-line with the 5.5% est. Productivity fell at a 3.8% rate in the fourth quarter, down from an unrevised 4.1% rate. Hours worked increased at a 3.0% rate last quarter, revised slightly up from the 2.9% pace estimated last month.

·     Unit labor costs – the price of labor per single unit of output – increased at a 1.7% rate, up from the expected decline of (-0.4%). Unit labor costs surged at a 14.0% rate in the fourth quarter. They rose at a 4.1% pace from a year ago, instead of at a 1.6% rate as previously reported.

·     The ISM non-manufacturing activity index rebounded to 64 last month, the highest reading in the series’ history, from 62.7 in April and above the estimate of 63.0. Measure of backlog orders soared to a reading of 61.1 from 55.7 in April. Prices paid by services industries shot up to 80.6, the highest reading since September 2005, from 76.8 in April.







WTI Crude















10-Year Note





Sector Movers Today

·     Energy, E&P and Majors; Barclays upgraded OXY to Overweight from EW with a price target of $33 from $28, saying oil and inventory trends suggest a macro recovery is on track and OPEC+ continues to show willingness to support a tight oil market, OVV to OW from UW with a price target of $33 from $21 citing the company’s accelerated debt reduction, lower well costs, and enhanced free cash flow outlook, EOG to OW with a price target of $100 from $74, and downgraded APA to EW and CLR to UW; TELL finalized a liquefied-natural-gas sales-and-purchase agreement with Vitol Inc. for three million tons per annum on a free-on-board basis at Driftwood LNG for a 10-year period, valued at about $12B in revenue over the 10 years at current prices

·     Utilities; PJM Interconnection, the largest U.S. power grid operator who serves more than 65 million people, will get $50/MW-day for the year starting June 2022 according to yesterday’s auction results. This price was well below the estimates of $85, was the lowest price since the auction held in post-recession 2009 and 2010, and down from $140/MW-day in its last auction in 2018. Credit Suisse lowered their price target on VST to $23 from $26 and slashed their 2022-23 EBITDA estimates, and shares fell along with EXC and NRG following the disappointing results

·     REITs; Mizuho upgraded shares of AVB, AIRC, DEI, FRT, and O all to Buy from Neutral in REIT sector, downgraded LTC to underperform and makes several est. and tgt changes while upgrading the Office, Malls and Triple Net sectors, while downgrading Healthcare and Industrial; at BTIG, maintained buys on AVB and EQR while raising tgts from $206 to $251 on AVB and from to $78 to $85 for EQR saying valuation assumes a 28% relative premium for Apartment REITs over REITs overall and that AVB and EQR are valued at 15% and 10% premiums to the sector

·     Transports; airlines with some updated: DAL said it expects a full restoration of domestic leisure travel in June, up from 60% in March/it expects to generate pretax profit in the second half of the year and sees a pretax loss of $1B- $1.2B for the June quarter, compared with its prior guidance of $1B-$1.5B; AAL said it generated cash in May for the first time since the pandemic/said the 7-day moving average of net bookings was about 90% the level in the same period in 2019/said it expects the strength in bookings to continue through the end of Q2 into Q3/still sees Q2 system capacity to be down 20% to 25% and for revenue to be down about 40% from Q2 2019



·     CIEN +7%; as Q2 beats as revs fell 7% YoY but topped consensus by about $5M and adjusted EPS of $0.62 was $0.14 ahead of estimates on better margins of 49.2%, topping the 46.3% consensus

·     CONN +14%; posts Q1 EPS of $1.55, blowing past estimates of 30c after having posted a loss of $1.89 a year earlier, boosted by a 19.4% jump in same-store sales

·     LESL +4%; raises its guidance for the FY21 to $1.28B-1.30B from prior $1.25B-$1.27B on better EPS and Ebitda

·     MDP +5%; as co accepted a revised proposal of GTN to acquire Local Media Group for ~$2.825B in cash vs. previous offer of $2.7B; MDP holders to receive $16.99 per share in cash, revised from the previously $14.51 per share in cash, and 1-for-1 equity share https://on.mktw.net/3ifktAS

·     TELL +20%; said it has finalized a liquefied-natural-gas sales-and-purchase agreement with Vitol Inc./at current prices, the agreement is valued at about $12 billion in revenue over 10 years

·     TLRY +10%; upgraded to Overweight from Neutral (reassumes coverage) at Cantor with a price target of $22, down from $30.25 due to sectoral derating and reduced EBITDA estimates, after assuming coverage of the name following the merger with Aphria



·     AI -9%; posted slightly better Q1 results (smaller loss and better revs) and guidance also above views, but outlook failed to reassure analysts about its growth prospects

·     AMC -21%; after rising six of the last seven trading days (up 357% during that stretch), the company launched its second share issue in three days by agreeing to sell up to 11.55M shares from time-to-time in an ATM offering, while warning investors they might lose money. Tuesday, AMC sold 8.5M shares to Mudrick Capital, which quickly dumped those shares for a profit

·     BA -1%; cautious at Baird saying their May checks sets up 2Q21 deliveries shortfall of ~20% vs. Street (estimating BA delivered ~15 total; deliveries in May which combined with April’s 17 deliveries makes the current)

·     EXPR -20%; said it may offer and sell up to 15 million shares of its common stock from time to time through an “at-the-market” or ATM equity offering program (follows earnings)

·     FEYE -14%; after the cybersecurity firm said it would sell its products business, including the FireEye name, to a consortium led by private equity firm Symphony Technology Group for $1.2 billion in cash

·     FNKO -6%; NFT sales have declined nearly 90% from their May 3 peak. Just $19.4 million of NFT sales went through this past week compared to $170 million in early May, Business Insider reported (names that have been linked to NFTs include FNKO, TKAT https://bit.ly/34JGFLu

·     MDT -1%; after announcing a decision to stop the distribution and sale of the Medtronic HVAD System, an implanted device used to help the heart continue to pump the blood for the body.

·     SPLK -8%; analysts remain largely cautious after it gave an outlook for fiscal second-quarter annual recurring revenue that was below expectations ($550M-$570M vs. est. $557.9M)



·     Cambium Networks (CMBM) 2M share Secondary priced at $48.00

·     Cushman & Wakefield (CWK) 10M share Spot Secondary priced at $18.75

·     dLocal (DLO) 29.41M share IPO priced at $21.00

·     HeadHunter (HHR) 4.5M share Secondary priced at $37.00

·     Tian Ruixiang (TIRX) prices upsized 4.8M unit offering at $7.50 per unit

·     Westport (WPRT) 18.2M share Secondary priced at $5.50


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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