Mid-Morning Look

Monday, March 01, 2021

All appears to be right in the world again as global stock markets surge following declines last week, as major averages rise over 2% to start the day with several factors boosting sentiment. Investors received positive Covid news after JNJ was the 3^rd company to receive emergency use approval for its single shot vaccine (which was widely expected), while drop in Treasury yields to 1.43% (after hitting 1-year highs last week for the 10-year above 1.6%), and better economic data (construction spending rises and ISM activity hits highest levels in 3-years), all helped boost market sentiment. Last week, the Dow fell 1.8%, the S&P 500 declined 2.5% and the Nasdaq sank 4.9% as surging treasury yields boosted rising inflation concerns which could curb global growth – but as of right now, no fear in markets yet again. Another rally in overall stocks leads to all-time highs for several names (CMCSA, DISCA, LYV in media, as well as SBUX, DRI in restaurants and DE, ETN, JCI in industrial space). Dow Jones Industrial Average rallies over 2%, led by gains in JNJ and BA which surges over 6%, adding to recent gains as industrial stocks outperform. The House of Representatives passed President Joe Biden’s $1.9 trillion stimulus package early Saturday, teeing up days of debate and deal-making in the Senate (next potential catalyst for markets). Gold prices up about 0.5% at $1,737 an ounce as a retreat in U.S. Treasury yields helped – Gold rose as much as 1.5% to $1,759.53 earlier in the session, staging a strong comeback from an about 3% drop on Friday. The dollar index (DXY) rose to a three-week high as investors bet on faster growth and inflation in the United States. Dow Transports moving back near all-time highs, paced by gains in airlines; Bitcoin prices rise 7% after positive Citigroup comments on the crypto currency (back near $49K).

Economic Data

·     U.S. manufacturing activity increased to a three-year high in February as the ISM said its index of national factory activity rebounded to a reading of 60.8 last month from 58.7 in January. That was the highest level since February 2018 and above estimate 58.5. ISM U.S. manufacturing prices paid index 86.0 in February (highest since 2008) vs 82.1 in January, new orders index 64.8 in February vs 61.1 in January and employment index 54.4, highest since March 2019

·     Construction spending for January rises 1.7% vs. est. 0.8% and prior month revised higher to 1.1% for Dec from 1%; private construction spending +1.7% and public spending +1.7%

·     PMI manufacturing slows in February (weak report); as per IHS Markit as February final manufacturing PMI at 58.6 (vs flash 58.5) and below January final 59.2; Sector final input prices index for February at 73.2 vs flash reading 73.2 and final January 65.1 (sector input prices index at highest since April 2011)

Sector Movers Today

·     Energy stock movers; energy stocks have been massive mover as Citigroup noted the Energy sector has appreciated by more than 75% since October 2020 lows vs a 17% S&P 500 gain, as WTI spot prices recovered by 70% over the same time period; stocks remain in upswing but some analysts hitting brakes after rally in shares (Bernstein downgraded APA, PXD); HES files mixed shelf offering; PARR was upgraded to Outperform at Cowen and up tgt to $21 from $13 saying its lower OpEx and limited capex in 2021-2023 provides a peer-leading cost structure that should help delever the balance sheet as the operating environment normalizes in 2022

·     Biotech movers; ATNX plunges after receiving a complete response letter (CRL) from the FDA regarding its New Drug Application for oral paclitaxel plus encequidar for the treatment of metastatic breast cancer; REGN Phase II proof-of-concept trial evaluating the investigational antibody cocktail REGN1908-1909 met the primary endpoint of preventing early asthma reactions and also met key secondary endpoints; FLXN announces FDA clearance of investigational new drug application for fx301, a novel formulation of a locally administered nav1.7 inhibitor for post-operative pain; SYNH 7M share secondary priced at $74.95; MRNA falls in reaction to another vaccine on market, as JNJ single shot Covid vaccine receives FDA emergency use approval (was expected)

·     Leisure and Gaming; NCLH proposing to sell $550 mln of its 5.875% senior notes due 2026 in a private offering and RCL files for mixed shelf offering in cruise space (highly anticipated after CCL offering last week); DKNG rises following better results/guidance Friday, prompting several analysts raise tgt prices today – Loop raised tgt to $105; lodging stocks rally with reopen names (HLT, MAR, H) on hopes for improving economy

Stock GAINERS

·     ASLN +30%; as announces positive interim data from the multiple ascending dose study of ASLAN004 in Atopic Dermatitis

·     DKNG +9%; rises following better results/guidance Friday, prompting several analysts raise tgt prices today – Loop raised tgt to $105

·     GRPN +20%; upgraded to neutral from underweight at JPMorgan with $48 tgt highlighting key takeaways from last week’s Q4 earnings report and management calls, including solid EBITDA and upside gross profit

·     JNJ +1%; said after the FDA over the weekend authorized its vaccine for emergency use approval

·     PRGO +7%; reached a definitive agreement to sell its Generic Rx Pharmaceuticals business to Altaris Capital Partners for $1.55B, including $1.5B in cash.

·     SSYS +12%; on better earnings as Q4 EPS of 13c beat ests (0c) on higher revs $142.2M (vs. est. $135.4M) – shares of DDD expected to report tonight

·     THRM +8%; after topping estimates on both lines in its Q4 earnings report, where next year’s revenue guidance is set above market expectations.

·     WIFI+23%; said that it will be taken private by Digital Colony in $854M deal as shareholders will receive $14 per share in cash, nearly a 23% premium to Friday’s closing https://bit.ly/3kzc3TO

·     XRAY +12%; Q4 adj. EPS of $0.87 on revenue of $1.08 bln beats estimates for profit of $0.64 on revenue of $995.7 mln and also forecast FY21 adj. profit in the range of $2.60-$2.80 on revenue of between $4-$4.3 bln (well above ests $2.40/$3.86B)

Stock LAGGARDS

·     ATNX -53%; after receiving a complete response letter (CRL) from the FDA regarding its New Drug Application for oral paclitaxel plus encequidar for the treatment of metastatic breast cancer

·     CRMD -40%; after the FDA declined to approve its DefenCath catheter lock solution, citing concerns at its third-party manufacturing facility

·     MRNA -5%; falls in reaction to another vaccine on market, as JNJ single shot Covid vaccine receives FDA emergency use approval (was expected)

·     ORA -3%; slips after negative call from Hindenburg Research

·     RCL -1%; NCLH proposing to sell $550 mln of its 5.875% senior notes due 2026 in a private offering and RCL files for mixed shelf offering in cruise space (anticipated after CCL offering)