Mid-Morning Look: May 25, 2021

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Mid-Morning Look

Tuesday, May 25, 2021






DJ Industrials




S&P 500








Russell 2000






U.S. stocks open the day higher before paring gains following Monday’s massive rally, as mixed economic data and profit taking in large cap winners lead to small pull off highs. Airlines (positive company updates), cruise lines, casinos, and retailers (economic reopen sectors) are among the early market leaders today while defensive utilities and consumer staples slide. Treasury yields still falling as the U.S. 10-year yield falls to 1.579%, lowest in about two-weeks as market inflation fears have disappeared over the last week or so with several officials continuing to preach that rising prices is likely transitory and not long-term. Oil nudged down and gold edged up while volatile cryptocurrencies were relatively steady, bouncing off overnight losses. Market attention turns back to macro factors (China, infrastructure package, inflation, and the Fed/rates) with earnings season winding down (though still several high-profile software names out this week including Dow component CRM).


Economic Data

·     FHFA House Price Index for April reported at +1.4% vs. +1.0% consensus and +0.9% prior, while rose +13.9% YoY vs. +12.2% prior. In March, rates of appreciation continued to climb, exceeding 15% over the year in the Pacific, Mountain and New England census divisions.

·     U.S. S&P Case-Shiller home price index jumped 2.2% to 251.6 in March for the 20-City measure, better than expected, after climbing 1.3% to 246.2 (was 246.0) in February (another record high). On a 12-month basis, the index posted a 13.3% y/y rate of growth versus 12.0% y/y (was 11.9% y/y) and is the latter the fastest pace of appreciation since the 13.4% clip in December 2013.

·     Richmond Fed composite manufacturing index +18 in May vs +17 in April and the shipments index +12 in May vs +16 in April; Fed services revenues index +29 in May vs +22 in April

·     New Home Sales for April fell -5.9% MoM to 863K, well below the 955K expected and 917K prior (downwardly revised from 1.02M); April home sales Northeast -13.7%, Midwest -8.3%, South -8.2% and West +7.9%; new home supply 4.4 months’ worth at current pace vs March 4.0 months

·     Consumer confidence index for May reported at 117.2 below consensus 119.2 and April revised to 117.5 from 121.7; the present situation index 144.3 in May vs April revised 131.9 (previous 139.6) and expectations index 99.1 in May vs April revised 107.9 (previous 109.8)







WTI Crude















10-Year Note





Sector Movers Today

·     Airlines; UAL now expects Q2 rev per available seat mile to decline 12% vs 2019 levels, which is up from its previous forecast of a 20% decline, Q2 capacity to be down at least 46% from 2019 vs previous -45% outlook, and the company also sees positive adjusted EBITDA for the month of June and expects domestic leisure yields for summer travel to exceed 2019 levels; DAL said bookings have been better than expected and have been building each month; ALK sees Q2 total rev % change versus 2019 down about 32%-37%; plan to return to 100% of 2019 capacity by summer of 2022; sees Q2 passenger load factor about 70% to 75%; after summer of 2022 expect to return to growth rates that are similar to pre-pandemic levels; ALK reaffirmed its Q2 total revenue guidance 32-37% below 2Q2019, raised its Q2 cash flow from ops guidance to $550-650M from $450-550M, sees Q2 passenger load factor 70-75%, and said it plans to return to 100% capacity by summer 2022; AAL said it sees signs of more business travel after the summer and still sees yields going into summer and beyond at or above 90% of 2019 levels

·     Retailers; WSJ was positive on U.S. luxury brands (CPRI, TPR) saying U.S. high-fashion stocks such as Michael Kors-owner Capri are this year making up ground lost to their more exclusive European rivals; in auto retail, AZO posted Q3 top and bottom line beat as EPS of $26.48 topped the $20.19 estimate and well above prior year $14.39 with comp sales soaring +28.9% vs. est. +15.2% though margins slip YoY to 52.4% from 53.6%; CTRN beat and guide higher as 1Q EPS $3.23 tops est. $2.90 on sales $285.4M vs. est. $277M (guides FY sales $970-990M vs. est. $962.6Mm); KTB provided LT outlook in an 8-K at its investor day and said FY23 targets were: Rev ~$2.7B (est. $2.6B), GMs 46%+, OM 15%+, and EPS of $5+ (est. ~$4.6)

·     Consumer Staples; RBC Capital with weekly IRI data in beverages showed MNST volumes up +16.3% in the latest 12 weeks with volumes +11% in the latest 4 weeks, SAM beer volumes up +26% in the latest 12 weeks (vs. Beer -7.6%) driven by Truly up +47% and Twisted Tea +33.5% and STZ beer volumes up +1% in the latest 12 weeks; Bernstein initiated Outperform ratings on SAM ($1,340 pt) due to its positioning within high-growth hard seltzer and tea, STZ ($305 pt) due to its strong growth leverage, and TAP ($74 pt) despite its exposure to weak categories of premium light and sub-premium brands as they believe the market is underestimating a pos-Covid recovery in Europe; FBR cut their price target on WTRH to $5 from $7; Stephens assumed coverage on FLO with an Equal-weight rating and $25 target as they believe risk/reward is balanced at its current valuation after its retail branded business boomed last year

·     Software movers; Stifel initiated coverage in software overnight, with Buys on ADSK ($342 tgt), CYBR ($160 tgt), PANW ($455 tgt), and PTC ($160 tgt) with holds on ANSS, OKTA, PING, and TUFN; ZS tgt cut from $235 to $202 at BMO ahead of earnings as believe ZS has a large TAM, which they estimate to be $68 billion, and solution leadership, which suggests a multi-year runway for growth; ADBE was initiated Buy at Mizuho with $600 tgt saying its expansive portfolio of software solutions has made it the gold standard in content creation, consumption, and collaboration; big week still of earnings for software (CRM, SPLK, VEEV, PLAN)



·     COIN +2%; was initiated overweight and $371 tgt at JPMorgan as see it occupying a key position in the US market for transacting cryptocurrencies,

·     EDU +12%; Chinese tutoring companies TAL, EDU, GOTU rebound after Chinese officials denied speculation that the Beijing’s Haidian district banned students from after school tutoring in the summer https://bit.ly/3fNgbO0

·     MRNA +3%; said its Covid-19 vaccine was effective in children aged 12 to 17 in a new study, a finding that could clear the way for a second shot for use in adolescents

·     NCLH +3%; cruise lines among early winners as reopen plays continue to lead markets

·     SHAK +10%; was upgraded to Buy at Goldman Sachs as one of the last true re-opening stories among restaurants, and the stock was also upgraded to OP at Wedbush who views the post-Q1 decline in share price as overdone

·     UAL +4%; now expects Q2 rev per available seat mile to decline 12% vs 2019 levels, which is up from its previous forecast of a 20% decline, Q2 capacity to be down at least 46% from 2019 vs previous -45% outlook, and the company also sees positive adjusted EBITDA for the month



·     AEE -1%; defensive sectors leading early S&P 500 declines (utilities, consumer staples)

·     BEKE -6%; after Reuters reports China’s market regulator has begun an investigation into suspected anti-competitive practices by BEKE, which is backed by Chinese tec   h behemoth Tencent Holdings (TCEHY) https://reut.rs/3yzY86B

·     DY -11%; shares slid after Q1 top and bottom-line miss and weak guide – Q1 adj EPS loss (4c) vs. est. 6c; Q1 revs $727.5M vs. est. $752.1M; ended the quarter with cash and equivalents of $330.6M; sees Q2 revenue in-line to modestly lower, which is below est. $843.25M

·     EXEL -4%; was reiterated with a Sell at Goldman Sachs following results from Cohort 6 of the Phase 1b COSMIC-021 trial testing the combination of cabozantinib and atezolizumab in patients with metastatic castration-resistant prostate cancer/says results as presented thus far diminish the potential for an accelerated regulatory path to approval in this setting

·     RIDE -13%; after earnings, says 2021 production of its Endurance truck will be half of prior expectations and that it needs additional capital to execute its plans – posts Q1 EPS loss of 72c vs. est. 28c saying ran into challenges, higher-than-expected costs

·     SPCE -4%; slides on profit taking after rising the last seven-trading days (including 28% yesterday on successful flight test success)


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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