Early Look

Monday, February 22, 2021

U.S. futures are looking at a lower open with the S&P 500 index coming into the week riding a 4-day losing streak (as posted its first losing week in three on Friday), its longest in 2021 as Treasury yields continue to inch higher, making stocks less appealing. The 10-year Treasury yield jumped 14 bps last week to 1.34%, near its highest level since February 2020 and has moved up 28 bps so far this month. Still despite overnight weakness, major averages are on track for strong February gains as the Dow and S&P 500 have already climbed more than 5% this month, the Nasdaq advanced 6.2% and the small-cap Russell 2000 has outperformed with a gain of 9.3%. Boeing (BA) weakness weighs on the Dow, falling over 3% after the FAA said late yesterday it was ordering immediate inspections of Boeing Co. 777 aircraft equipped with the type of engine that broke apart in the air and scattered debris over a Colorado town over the weekend. After surging to a record $58,354 on Sunday, Bitcoin fell to below $55,000 overnight following comments from Tesla CEO Elon Musk who tweeted “BTC & ETH do seem high lol,” though it came with a tweet that said “money is just data that allows us to avoid the inconvenience of barter.” Stocks could regain traction higher as the U.S. House of Representatives likely will vote on President Joe Biden’s proposed $1.9 trillion stimulus package by the end of the week. The bill includes $1,400 checks to most Americans, a hike in the minimum wage to $15 an hour, and a boost in supplemental unemployment benefits to $400 a week from $300.

Markets are in store for a busy week, highlighted by Federal Reserve Chair Jerome Powell in his semiannual monetary policy testimony before the Senate Banking Committee and on Wednesday before the House Financial Services Committee as well as a very busy week of earnings. Powell has recently reiterated that the central bank would maintain an easy monetary policy posturing in order to support the economy as it emerges from the coronavirus pandemic. Powell may also use his testimony to reiterate his call for additional fiscal support from Congress to augment the support offered through the Fed’s policies. Earnings plentiful this week including results from recent IPOs DoorDash and AirBnB (both Thursday afternoon), as well as retailers Home Depot, Lowe’s Best Buy, Macy’s and L Brands. Also several “reopen” related stocks with earnings this week including cruise/travel names RCL, NCLH, BKNG and other related names LYV, SIX, CNK, and tech names NVDA, DELL, HPQ, CRM, ZS, ADSK, VMW.

In Asian markets, The Nikkei Index gained 138 points to 30,156, the Shanghai Index fell -53 points to 3,642 and the Hang Seng Index dropped -324 points to 30,319. In Europe, the German DAX is down about -70 points to 13,920, while the FTSE 100 is down about -30 points to 6,590. German Business Climate was 92.4 vs 90.5 consensus, Current Assessment: 90.6 vs 89.0 consensus and Business Expectations registered at 94.2 vs 91.8 consensus.

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -7.26 points, or 0.19%, to 3,906.71

·     The Dow Jones Industrial Average rose 0.98 points, or 0.00%, to 31,494.32

·     The Nasdaq Composite edged higher 9.11 points, or 0.07%, to 13,874.46

·     The Russell 2000 Index advanced 48.30 points, or 2.18% to 2,266.69

Events Calendar for Today

·     8:30 AM EST      National Activity Index for Jan

·     10:00 AM EST    Leading Index MoM for Jan

·     10:30 AM EST    Dallas Fed Manufacturing Index for Feb

Earnings Calendar:

·     Earnings Before the Open: CTB, DISCA, DORM, KBR, KFY, KOS, RCL, SOI

·     Earnings After the Close: ACC, AL, AXGN, BCC, BIGC, BWXT, CDNS, CSR, EVER, EXR, FANG, FIVN, FRPT, GDOT, HLX, HSII, HSTM, HTA, IR, JBT, LSI, MMLP, MRO, NDSN, NLS, O, OKE, OXY, PANW, PLOW, PLSE, PRA, PSB, REAL, RIG, RSG, SBAC, SBRA, TREX, UIS, VNOM, WMB, WRI, XEC, ZI

Other Key Events:

·     Goldman Sachs Insurtech Conference (virtual), 2/22-2/23

·     SVB Leerink Global Healthcare Conference (virtual), 2/22-2/26

Sector News Breakdown

Consumer

·     A group of activist investors has a big stake in Kohl’s Corp. (KSS) and is attempting to take control of the department-store chain’s board, according to reports. A group that includes activists Macellum Advisors GP LLC, Ancora Holdings Inc. and Legion Partners Asset Management LLC, as well as 4010 Capital LLC, controls a combined 9.5% stake in Kohl’s and earlier this year nominated nine people to its now-12-person board, the people said. https://on.wsj.com/3qGDs8x

·     Lucid Motors is close to striking a deal to go public through a merger with blank-check company Churchill Capital IV (CCIV), Bloomberg reported this weekend. The new report builds on a Reuters article from February 16, but with a valuation level cited at up to $15B vs. the $12B cited just a few days ago. https://bit.ly/3k6Q3zA 

·     Toll Brothers (TOL) files automatic mixed securities shelf

·     Tesla (TSLA) has stopped taking orders for the cheapest version of its Model Y electric SUV and removed it from its online configurator just a month into launching the vehicle, according to a report from Electrek

Financials

·     M&T Bank Corp. (MTB) is nearing a deal to buy People’s United Financial Inc. (PBCT) for more than $7 billion, according to people familiar with the matter, the WSJ reported. The companies are discussing an all-stock deal that could be announced as soon as this week, the people said https://on.wsj.com/3aDBq3E

·     Bank stocks mentioned positively ion Barron’s saying the rally in big- bank stocks has room to run as pure-play investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS) can benefit from trading momentum by institutional investors and hedge funds, an increase in M&A activities, and robust initial public offerings. For investors hoping to do more than bet on a heightened IPO market, there are compelling reasons to look at Bank of America (BAC)

·     Mogo Inc. (MOGO) selling ~5.35M common shares at $10.10 per share in a registered direct offering, for gross proceeds of ~$54M; shares down about 10%

Healthcare

·     Takeda Pharmaceutical (TAK) and Daiichi Sankyo are planning to initiate two separate COVID-19 vaccine trials in Japan, the Nikkei newspaper reported on Sunday

·     Ebix (EBIX) shares fell -29% late Friday after RSM resigned as the company’s independent registered public accounting firm. RSM said in a filing it was unable to obtain sufficient appropriate audit evidence that would allow it to evaluate the business purpose of unusual transactions.

·     Pfizer (PFE) Chief Executive Officer Albert Bourla said Friday that the company will use more of its manufacturing capacity and work with new suppliers to ramp up production of the Covid-19 vaccine it developed with BioNTech

·     Sanofi (SNY) and GlaxoSmithKline (GSK) to initiate a new Phase 2 study with 720 volunteers aged 18 and over to select the most appropriate antigen dosage for Phase 3 evaluation of their adjuvanted recombinant protein COVID-19 vaccine candidate.

Industrials & Materials

·     Boeing (BA) shares may be pressured; United Airlines (UAL) said it will immediately halt all flights by its fleet of 24 Boeing (BA) 777 airplanes with the same type of engine involved in Saturday’s emergency landing in Denver, according to Reuters. The announcement came after the Federal Aviation Administration said it would require stepped-up inspections of 777 aircraft with Pratt & Whitney PW4000 series engines after the right engine failure on United Flight 328

·     Fluor (FLR) could flourish as a turnaround play, according to Barron’s saying the company is pressing into growth businesses and plays a leading role in a large natural-gas plant and an export terminal project in Canada. Shares trade cheaply, below their average forward multiple of 17 over the past five years

·     Airlines AAL, ALK, DAL, HA, UAL, JBLU, LUV, SAVE and SKYW all upgraded to buy from hold at Deutsche Bank saying the sector is back on track and with Covid cases, hospitalizations, and vaccination rates all trending in the right direction, a more positive sector stance is warranted

·     KBR (KBR) Q4 adj EPS 51c vs. est. 48c; Q4 revenue $1.47B vs. est. $1.51B; sees FY21 adj EPS $2.00-$2.20 vs. est. $2.07 and sees FY21 revenue $5.8B-$6.2B vs. est. $5.95B

Technology, Media & Telecom

·     Oracle (ORCL) mentioned positively in Barron’s saying the co is turning into a cloud giant and its stock is a buy. Oracle’s public cloud offering is taking on Amazon.com (AMZN), Microsoft, and Alphabet (GOOGL) in a market of potentially trillions of dollars. Yet its shares look cheap, making buying them a risk well worth taking.

·     Amazon (AMZN) is likely to start a test outside the U.S. for a potential mobile wireless phone service and may eventually partner with Dish (DISH) in the U.S., according to Boost Mobile America founder Peter Adderton, as per Seeking Alpha. Amazon appears to be looking at testing a service in Europe and there is a lot of chatter among carriers overseas about this potential development https://bit.ly/37ALwjF

·     Starboard Value Acquisition (SVAC) is nearing a deal to combine with data-center provider Cyxtera Technologies, the Wall Street Journal reported. The deal would value Cyxtera at around $3.4B including debt and could be finalized by Monday https://on.wsj.com/3sfBHj3

·     Dish Networks (DISH) Q4 EPS $1.24 vs. est. 75c; Q4 revenue $4.56B vs. est. $4.42B; Q4 Pay-TV average revenue per user $94.47. Q4 Wireless average revenue per user $38.32 and closed the quarter with 11.29M Pay-TV subscribers, including 8.82M Dish TV subscribers and 2.47M Sling TV subscribers