Early Look

Monday, January 25, 2021

Stocks are looking higher again, building on last week’s momentum as traders are preparing for the busiest week of earnings season, which will include reports from some of the largest tech companies (AAPL, FB, MSFGT, TSLA), as Nasdaq futures climbed nearly 1% to lead gains overnight adding to last week’s 4% advance, while the Dow edges lower. Pharma news, and Dow component Merck (MRK) is dropping out of the Covid-19 vaccine race announcing that it will stop developing both formulations of a vaccine it was working on after trial participants failed to generate a strong immune response to either. Investors also await news on the stimulus front as the White House argues that another $1.9 trillion is needed to cover responding to the virus and providing enhanced jobless benefits and payments to households (after Congress has already passed two relief bills in the amount of $4 trillion). Relief legislation will likely need bipartisan support to emerge from the Senate. In Asian markets, The Nikkei Index gained 190 points to 28,822, the Shanghai Index climbed 17 points to 3,624 and the Hang Seng Index surges over 700 points (2.4%) to 30,159. In Europe, the German DAX is lower by around -30 points to 13,845, while the FTSE 100 is down about -25 points to 6,670.

Markets closed out last week with yet more gains, as the S&P rose 1.94%, the Dow Jones added 0.6%, and the Nasdaq outperformed, rising 4.2%, led by gains in mega cap tech after Netflix (NFLX) reported strong subscriber numbers on Thursday. Earnings are plentiful again this week as roughly 60% of the S&P 500 will report of the next two weeks, led by big tech Apple (AAPL), Facebook (FB), Tesla (TSLA) and Microsoft (MSFT) this week. Other key events this week include the Federal Open Market Committee’s (FOMC) January policy meeting and key economic data releases including Q4 GDP (estimate +4.2%). The Fed has remained committed to keeping their feet on the gas pedal with respect to monetary policy support, specifically signaling that interest rates would stay at their current near-zero level through at least 2023, and that their aggressive asset purchase program would continue at the current rate of $120 billion per month until “substantial further progress” is made in the economic recovery.

Market Closing Prices Yesterday

·     The S&P 500 Index slumped -11.60 points, or 0.30%, to 3,841.47

·     The Dow Jones Industrial Average fell -179.03 points, or 0.57%, to 30,996.98

·     The Nasdaq Composite climbed 121.15 points, or 0.09%, to 13,543.06

·     The Russell 2000 Index advanced 27.34 points, or 1.28% to 2,168.76

Events Calendar for Today

·     8:30 AM EST      Chicago Fed National Activity Index for January

·     10:30 AM EST    Dallas Fed Manufacturing for January

Earnings Calendar:

·     Earnings Before the Open: BMRC, BOH, CADE, FRBK, KMB

·     Earnings After the Close: AGNC, ATGN, BOOT, BRO, BXS, CR, CVLG, ELS, EQBK, FBX, FLXS, FUL, GGG, HMST, HTLF, HXL, JJSF, STLD, STXB, WSFS

World News

·     President Joe Biden will impose a ban on most non-U.S. citizens entering the country who have recently been in South Africa starting Saturday in a bid to contain the spread of a new variant of COVID-19 – Reuters

·     German January IFO data showed: Current Assessment: 89.2 vs 90.6 consensus, the Expectations index 91.1 vs 93.2 consensus and Business Climate: 90.1 vs 91.8 consensus

Sector News Breakdown

Consumer

·     LKQ Corp. (LKQ) positive mention on Barron’s saying the auto-parts supplier has been stuck in neutral for years, but 2021 could see things turn around for the company as the pandemic forces it to take steps that some say it should have taken long ago

·     DraftKings (DKNG) launched DraftKings Sportsbook in Virginia, making it the 12 state in which the mobile and online sportsbook is available.

Energy, Industrials and Materials

·      Cleveland-Cliffs Inc. (CLF) said it sees Q4 revenue of $2.2B-$2.3B, above consensus of $1.82B and a more than fourfold increase over the year-ago period, which will include operations of the recently acquired ArcelorMittal USA from Dec. 9 through Dec. 31, 2020; said it sees steel sales volume of 1.9 million net tons; sees Q4 adj Ebitda $280M-$290M

·     Mosaic (MOS) upgraded to Buy from Neutral with a price target of $33, up from $26 at Citigroup

·     Schlumberger (SLB) upgraded to Buy from Neutral with a price target of $31 from $27 at Bank America

·     SPI Solar, Inc., a wholly owned subsidiary of SPI Energy (SPI) has started the construction of the 712kW Oahu 101-1 solar carport project.

·     Italian energy group Eni has agreed to buy Spanish energy retailer Aldro Energia as part of its plans to increase its portfolio of retail power and gas customers in Europe.

Financials

·     NCR Corp. (NCR) is nearing a deal to buy Cardtronics (CATM) for $39 per share or around $1.7B, the Wall Street Journal reported, citing people familiar with the matter https://on.wsj.com/365LCPt 

·     Bill Foley’s SPAC Foley Trasimene Acquisition Corp. (WPF) is near a deal to take U.S. benefits services provider Alight Solutions public at a valuation of $7.3b including debt, Reuters reported https://reut.rs/2Y8RDXg 

·     Natural catastrophes resulted in $97 billion in insured losses in 2020, 40% above the average for this century, in a year when insurers also faced hefty bills due to the coronavirus pandemic, insurance broker Aon said in a report

·     Green Brick (GRBK) announces offering of 6M shares of common stock for holders

·     Cadence Bancorp (CADE) Q4 adjusted EPS $1.57 vs. est. $1.48; Q4 adjusted pre-provision revenue $542.5M

·     TS Innovation Acquisitions (TSIA) rises 100% as the SPAC entered into a definitive merger agreement that will result in Latch becoming a publicly listed company in a transaction valuing the Company at an equity value of $1.56B

Healthcare

·     Merck (MRK) is dropping out of the Covid-19 vaccine race. It announced this morning that it will stop developing both formulations of a vaccine it was working on after trial participants failed to generate a strong immune response to either

·     Alnylam (ALNY) downgraded to Market Perform from Outperform at BMO Capital

·     Regeneron (REGN) upgraded to Outperform from Market Perform at BMO Capital with $630 tgt

·     Roche (RHHBY) announces positive topline results from two identically designed phase III studies, TENAYA and LUCERNE, evaluating faricimab, in people with neovascular or “wet” age-related macular degeneration (nAMD).

·     Zomedica (ZOM) said it has signed an agreement with Miller Veterinary Supply for the distribution of Truforma, Zomedica’s first product, planned to begin sales on March 30, 2021.

Technology, Media & Telecom

·     AMC Entertainment (AMC) announced that since December 14, 2020, it has successfully raised or signed commitment letters to receive $917M of new equity and debt capital.

·     SBA Communications (SBAC), Equinix (EQIX) among names to buy in year of digital infrastructure, according to Barron’s saying soaring demand for bandwidth and the rollout of 5G helped propel tech stocks higher in 2020. So it’s surprising that cell towers and data centers-two of the industries tied to those themes-aren’t winning much love

·     Netflix’s (NFLX) story “fundamentally changed” this past week according to Barron’s as the company now aims to break even on a free-cash-flow basis this year. The level of cash generation should grow as the subscriber base continues to expand. As more streaming rivals arrive, consumers are adding subscriptions rather than dropping Netflix.

·     Chinese video-clip and live-streaming group Kuaishou Technology is seeking to raise up to $5.4 billion from an initial public offering, joining a string of tech companies from China that have listed in Hong Kong – Dow Jones reported