Closing Recap

Wednesday, April 28, 2021

Index	Up/Down	%	Last
DJ Industrials	-161.59	0.48%	33,823
S&P 500	-3.27	0.08%	4,183
Nasdaq	-39.19	0.28%	14,051
Russell 2000	-2.91	0.13%	2,304

 

Equity Market Recap

·     Stocks jumped to their highs (new record briefly for the S&P 500) after Fed Chairman Powell reiterated that it is not yet time to talk about tapering and iterated transitory rise of inflation will not warrant a rate hike (but markets pared gains into the close). The comments followed the Fed’s 2-day policy meeting where they kept rates at ultra-lows and made no changes to its bond buying program ($120B a month), in-line with expectations. The FOMC statement held little new, other than nodding to inflationary pressures, although with its mantra that they are "transitory” continues to ring loud (despite lumber, copper, soybeans, etc. trading at decade or record highs). The Fed keeps saying inflation is transitory – but several high-profile companies in their recent earnings statements have noted they will/or have raised prices to counter higher material costs (KMB, SWK, PG, HON, KO, SAM, CCK, STLD, WHR just some).

·     Prior to the FOMC statement and press conference by Powell, stocks were trading sideways in a relatively narrow range all week, amid the busiest week of earnings (180 S&P names total this week). The S&P 500 index touched another all-time high and the Dow Transports remain on track for a 13^th straight week of gains (longest in its history), while the tech heavy Nasdaq rebounded off morning declines in another all-out buying blitz. The earnings barrage continued overnight/this morning with GOOGL, Visa, SHOP jumping on results, MSFT, AMD sliding despite big beats, and AMGN, SPOT, BA, SYK, SBUX among those sliding on mixed results. Tonight, we get more big tech with Apple and Facebook earnings

·     The other market catalyst remains President Biden with fiscal stimulus the main area of focus ahead of his speech to Congress tonight. Reports note Biden will outline an American Families Plan worth $1.8T that will be largely paid for by raising taxes on the wealthy. Plan will largely be paid for by raising taxes on the wealthy. It proposes raising top income-tax rate to 39.6% from 37%. For households making more than $1M, top rate on capital gains and dividends would rise to 39.6% from 20% (and go to 43.4% when including the 3.8% existing payroll and investment taxes). Also eliminates the carried interest provision and the step-up basis but does not change the inheritance tax.

·     Goldman Sachs with bullish call on energy complex today helping boost stocks as firm expects the biggest jump in oil demand ever – a 5.2 mb/d rise over the next 6m, 50% larger than the next largest increase over that time frame since 2000, coinciding with commodities rallying another 13.5% over the next six months, with oil hitting $80 per barrel. U.S. advance march retail inventories excluding autos +0.6%; advance march goods trade balance -90.59 billion dollars and advance march wholesale inventories +1.4%

·     Investors continue to pile into markets: Exchange traded funds continue to take in a record-setting pace of inflows. Year-to-date ETFs have brought in +$311B, which keeps the pace up to reach a record one-year $1T in inflows. $1T would not only be a record intake, but it would also double its previous record. In the first quarter of 2021, investors were net purchasers of +$221.6B in ETFs and now net purchasers of +$311B. To put the record pace of inflows into context, market participants had to wait until the fourth quarter of 2020 in mid-October to reach +$311B of inflows. https://bit.ly/3gJLTOr

 

Federal Reserve:

·     As expected, the Federal Reserve held interest rates and its monthly bond-buying program steady ($120B per month) on Wednesday (surprising no one), noting the growing strength in the U.S. economy in a unanimous policy statement at the end of a two-day meeting. The Fed said the ongoing public health crisis continues to weigh on the economy and risks to the economic outlook remain. Despite the bright outlook on the economy, the Fed repeated the guidance it has used since December, setting the list of conditions that must be met before it considers pulling back from the emergency support put in place. The Fed again also noted that inflation has risen, largely reflecting transitory factors. At his press conference reiterated again it is not time to talk about tapering yet and transitory rise of inflation won’t warrant rate hike.

 

Commodities

·     Oil prices rose, with WTI crude rising $0.92 or 1.46% to settle at $63.86 per barrel after U.S. distillate inventories posted a large drawdown and refining activity picked up, boosting hopes for rising fuel demand, along with a bullish energy commodity call from Goldman Sachs. The EIA said U.S. crude inventories rose by 90,000 barrels last week to 493.1 million barrels, smaller than the 659,000-barrel rise estimate. Distillate stockpiles fell by 3.3 million barrels in the week, and refining capacity use rose to 85.4% on the week. Also today, Goldman Sachs said it expected "the biggest jump in oil demand ever," at 5.2 million barrels per day (bpd) over the next six months, as vaccination campaigns accelerate in Europe and travel demand climbs. Goldman said easing international travel restrictions in May would hike jet fuel demand by 1.5 million bpd. Gold prices fell -$4.90 or 0.3% to settle at $1,773.90 an ounce ahead of the FOMC policy decision and Powell conference (prices pared losses after the FOMC statement).

 

Currencies & Treasuries

·     Treasury yields edged higher heading into the FOMC policy meeting but tumbled as Fed Chairman Powell spoke dovish (as expected) saying it is not time to talk about tapering yet and transitory rise of inflation won’t warrant rate hike. The dollar index (DXY) was little changed prior to the FOMC at 90.90 level, with the euro at 1.208 and the British Pound holding around the 1.39 level. Bitcoin prices dipped as the SEC said it will adopt a longer review period for VanEck’s proposed bitcoin ETF to ensure it has "sufficient time" to evaluate the proposal, CoinDesk reported – as the decision will be pushed to at least June.

 

 

Macro	Up/Down	Last
WTI Crude	0.92	63.86
Brent	0.85	67.27
Gold	-4.90	1,773.90
EUR/USD	0.0025	1.2116
JPY/USD	-0.05	108.62
10-Year Note	-0.004	1.618%

 

 

Sector News Breakdown

Consumer

·     Retailers; RL upgraded to Outperform at Cowen as consensus models appear too conservative into FY23 (Wells Fargo raised tgt to $150 from $132 citing n-t confidence in brand trajectory; SHOO Q1 EPS $0.33 vs consensus $0.17 and revenue $361.0M vs consensus $336.0M while margins above consensus and inventories +4.2% y/y, but Q2 EPS guide $0.26-$0.28 below consensus $0.34 and revenue $360M-$365M below consensus $368.7M

·     Housing & Building Products; OC 1Q adj EPS $1.73 vs. est. $1.43 on revs $1.9B vs. est. $1.84B; says expects near-term US residential housing market to remain robust and the commercial and industrial markets to continue to strengthen; SWK boosts fy21 tools and storage organic growth view and boosts FY organic growth view to 11%-13%; in furniture, HVT Q1 EPS $1.04 tops $0.41 est. and revenue $236.5M above consensus $200.6M as comps +11.5%

·     Consumer Staples; in the food space, MDLZ traded higher following a Q1 top and bottom line beat, driven by an increase of 3.8% in organic net revenue, while guides for high single-digit growth; CHEF Q1 EPS ($0.50) vs consensus ($0.43) and revenue $280.2M vs consensus $269.7M and said will not be providing guidance; MO, PM active after the Washington Post reported the Biden administration is expected to announce this week that it will propose a ban on menthol cigarettes, an action urgently sought by tobacco opponents and civil rights groups that say African Americans have been hurt by the industry’s targeting of Black communities.

·     Restaurants; NY Gov. Cuomo announces the midnight curfew for restaurants will be lifted on May 17th for outdoor dining, May 31st for indoor dining; SBUX posted a mixed Q2 as EPS beat but revs just fell short of consensus while global com store sales increased 15% vs. the 17.3%; WING 1Q EPS $0.44 tops est. $0.31 on revs $70.7Mm vs. est. $68.8Mm, domestic comps +20.7%, digital sales mix 63.6% vs 43.3% year ago and guides +MSD comps growth and 11%+ unit growth for FY; EAT Q3 results missed expectations with adj EPS 78c missing est. 82c and revs $828.4M missing est. $848.4M; YUM Q1 adj EPS $1.07 topped consensus $0.86 on revs $1.49B vs est. $1.45B; YUMC Q1 adj EPS 54c vs. est. 46c on revs $2.56B vs. est. $2.14B, system sales +34% (KFC +24%, Pizza Hut +57% ex FX), comps +10% (KFC +5% vs est. +7.1%, Pizza Hut +38% vs est. +29.3% ex FX), and said the recovery of same-store sales to 2019 levels will be uneven

·     Casinos, Gaming, Lodging & Leisure sector; SIX posted a narrower Q1 EPS loss of ($1.12) vs. est. loss ($1.28) on better revs $82M vs. est. $48.03M saying at 1.3 million guests, attendance at open parks was about 95% of the first quarter of 2019 at those same locations; NCLH unveils next phase of return to cruising outside the U.S.; continues phased relaunch with voyages in Mediterranean beginning september 2021; in gaming, BYD reported a massive Q1 EBITDAR beat (+23/+30% to us/Street) with record EBITDAR and margins in the Locals and Midwest & South markets according to Truist

 

Energy

·     E&P, Equipment and Majors; Goldman Sachs with bullish call on energy complex today helping boost stocks – frames the case for a climb higher across the commodity complex following the recent stall due to lockdowns across Europe, the shoulder months of commodity demand and headwinds from stronger dollar. The firm expects the biggest jump in oil demand ever – a 5.2 mb/d rise over the next 6m, 50% larger than the next largest increase over that time frame since 2000, coinciding with commodities rallying another 13.5% over the next six months, with oil reaching $80/bbl and copper reaching $11,000/t with risks to the upside

·     Stock movers; PXD issued a warning that oil and gas derivatives will knock $691M off Q1 earnings results, according to an 8-K filing; NOV recorded a Q1 EPS loss of (30c), wider than the est. (22c) loss, on revs $1.25B vs est. $1.26B; HES posted a Q1 adj EPS 82c on revs $1.92B vs est. $1.37B and lowered its full-year production guidance to 290-295k boe/d from its previous guide of 310k; CLR highlighted as a tactical idea into the print at RBC given the likely natural gas & NGL price strength and production outperformance through the balance of 2021; LBRT posted a smaller Q1 adj EPS loss of (17c) as revs rose 114% to $552M, topping the $498M est.

·     Utilities & Solar; FTCI 19.84M share IPO priced at $13.00; ENPH beat consensus by $0.02 driven by higher revenue and GM offset by higher OPEX but Q2 revenue guidance was $300M-$320M below the consensus of $321M – the tight supply of semiconductors is expected to constrain growth in Q2 and start to ease over the next couple of quarters; DTE downgraded at UBS to neutral while raise tgt to $144 after outperforms peers over the last month

·     Pipelines: Wells Fargo said while some uncertainty remains, the outlook for Dakota Access Pipeline (DAPL) has improved and are revising the base case in models for DAPL-exposed names (ET, PSXP, OKE, MPLX) to assume DAPL does NOT shut down and remains in-service; OKE reported a 9c EPS beat for Q1 as Ebitda rises 24% to $866.4M and boosts the mid-point of FY21 and Ebitda estimates; SXC says it is well positioned to achieve top end of full year 2021 adjusted EBITDA guidance range of $215 mln to $230 mln

 

Financials

·     Joe Biden is taking aim at real estate investors used to buying and selling properties without having to pay capital gains taxes. The U.S. president’s new economic plan calls for abolishing the right to defer certain tax payments on property-investment gains of over $500,000, part of a broader effort to raise taxes on the rich to pay for the expansion of services including free preschool to less-wealthy Americans. The strategy was projected to save investors $41.4 billion between 2020 and 2024, according to Congress’s Joint Committee on Taxation. These figures, however, don’t break down how much of this benefit applies to gains greater than $500,000, as per Bloomberg report

·     Insurance; CB Q1 core EPS $2.52 vs. est. $2.49, net premiums written $8.66B (+8.6% YoY) vs est. $8.38B, net premiums earned $8.22B vs est. $8.25B (increased share buyback authorization to $2.5 billion from $1.5 billion); PFG Q1 EPS $1.53 vs. est. $1.34 on revs $3.11B vs est. $3.87B, a record AUM of $820.3B, raised its dividend by 5% to 61c/share; Piper upgraded MMC to OW with a $145 pt after the company’s strong Q1 earnings report yesterday with lockdowns not impacting organic growth as much as expected, expectations that commercial insurance rate increase continue at a high pace throughout the year, and valuation; AON rises after Reuters reported EU antitrust regulators unlikely to ask co for more concessions over $30B bid for WLTW

·     Banking; DB swings to better-than-expected net profit for Q1 as strength at the investment bank helped offset the headwinds of an ongoing restructuring program and said it sees 2021 revenues to be "essentially flat", compared with a previous estimate of "marginally lower"

·     FinTech & Payments; FISV mixed 1Q21 print that featured an EPS beat driven by a few below the line items that more than offset marginally lower revenue and op income as Merchant grew 8% y/y, Fintech +2%, and Payments +2%

·     Consumer Finance; Dow component Visa (V) topped quarterly estimates for profit as its customers shopped more online, saying total payment volumes rose 11% on a constant dollar basis from a year earlier, after rising 5% in the previous quarter; COF swung to a Q1 profit, beating analyst expectations, despite slightly lower revenue in the period – said net income was $3.24 billion, compared with a loss of $1.42 billion a year ago.

·     REITs; BXP reported 1Q21 FFO/sh of $1.56 (high end of guidance at $1.53-$1.57), above consensus at $1.55, driven by +4c from better portfolio performance +1c of higher fee income, partially offset by -4c non-cash write-off from preferred stock redemption; HIW reported 1Q21 FFO/sh of $0.91, above consensus at $0.87; UDR Q1 adj FFO/shr was in-line at 47c on revs $301.4M vs est. $300.7, and now see FY21 FFO $1.76-1.85 vs previous range of $1.87-1.89; WRI Q1 core FFO/shr $0.48 vs est $0.41, cash collection of rent and billable expenses were 95% of total billed in 1Q; ESS Q1 FFO $3.07 vs. est. $3.06, guided Q2 FFO to $2.84-3 (est. $3.04), and reaffirmed FY21 FFO guidance range $11.86-12.46 (est. $12.30); EQR Q1 FFO in-line 68c on revs $597.6M vs est. $592.6M, and sees Q2 FFO 67-71c (est. 69c) and FY FFO $2.70-2.80 from $2.60-2.80; QTS Q1 FFO 76c on revs $148.7M

·     Services; CSGP posted solid 1Q results, beating estimates across the board. Net new sales were strong and came in at $52 million fueled by strength in multifamily and LoopNet; Genpact (G) will replace GNW in the S&P MidCap 400; NCR reported better than expected rev/EPS in 1Q, as a recovery in retail and hospitality, along w/ strong expense mgmt (+420bp EBITDA margin) drove the beat; MCO boosted its FY2021 guidance following a blowout Q1, bolstered by 30% growth in investors service segment revenue as sees FY 2021 adjusted EPS $11.00-$1.30 vs. prior guidance of $10.30-$10.70 (est. $10.70)

 

Healthcare

·     Pharma movers; TEVA beat Q1 earnings expectations (63c vs. est. 59c), even though sales of its multiple-sclerosis drug continue to dwindle as revenue for the quarter was $3.9 billion, down from $4.3 billion in the first quarter of 2020 (posted a 5% drop in sales in N.A. and falling sales of Copaxone in North America, down 17% to $164M and in Europe, down 8% to $100M); SNY Sales fell to 8.59 billion euros ($10.39 billion) for Q1, just shy of a consensus estimate while net profit also fell but beat expectations; GSK topped analysts’ expectations for Q1 earnings as more people visited clinics for critical treatments such as HIV and routine shots once COVID-19 curbs eased; PLX falls after FDA rejection of experimental therapy for Fabry disease; NKTX said the FDA has cleared an Investigational New Drug (IND) application to study cancer treatment NKX019 in patients with relapsed or refractory B cell malignancies.

·     Biotech movers; Dow component AMGN reported a choppy quarter missing on both the top ($5.90B revenue vs. consensus $6.24B) and bottom lines (EPS $3.70 vs. $4.04) as Bernstein noted the most important factor here was softer I&I pricing – lower than expected numbers for Enbrel and Otezla accounted for $235M of the $340M delta from consensus total revenues; ADMA rises after the FDA has granted approval for its expanded manufacturing process; AKTX said the FDA he FDA granted "Fast Track" designation to the company’s nomacopan for the treatment of patients with moderate and severe Bullous Pemphigoid; MRNA said the U.S. government had agreed to increase the contract for the company’s COVID-19 vaccine by $236 million to roughly $1.25 billion, to include additional costs related to the shot’s studies.

·     MedTech Equipment; BSX 1Q adj EPS $0.37 vs. est. $0.31 on sales $2.75B vs. est. $2.62B; guides 2Q adj EPS $0.36-0.38 vs. est. $0.35 as sees 2Q sales +46-50% on a reported basis; SYK reported 1Q21 results that fell a bit short, as revenue of $3.95B grew 5% organic vs. Q1 2019 and was in-line with consensus, while EPS of $1.93 missed by 6 cents (~3%), weighed down in part by Wright Medical integration expenses; ATRC Q1 revenue, adjusted EBITDA, and adjusted EPS all beat consensus

·     Healthcare Services; HUM 1Q adj EPS $7.67 vs. est. $7.06 on adj revs $20.75B vs. est. $20.5B; sees FY adj EPS $21.25-21.75 vs. est. $21.54, reaffirms FY expected individual Medicare advantage membership growth of approx 425-475k members; HUM will be acquiring the remaining 60% interest in Kindred at Home from TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS), for $5.7 billion

 

Industrials & Materials

·     Aerospace & Defense; Dow component BA reported a Q1 loss ($1.53) wider than the est. ($1.16) on revs $15.22B vs est. $15.12B as its commercial airplane and global services segments missed estimates but its defense, space, & security revenue beat – said sees passenger traffic return to 2019 levels in 2023-24; GD beats Q1 profit and revenue estimates, as its aerospace unit sales picked up, fueled by hopes of economic recovery as EPS of 42.48 topped the $2.30 est. as total revenue rose 7%, while aero revenue jumped nearly 12%

·     Materials, Industrial & Machinery; AVY 1Q adj EPS $2.40 tops est. $2.03 on sales $2.05B vs. est. $1.93B and raises FY adj EPS guide to $8.40-8.80 vs. est. $8.00; OSK 2Q adj EPS $1.48 beats est. $1.15 on sales $1.89B vs. est. $1.76B and issues upbeat FY guidance of revs $7.75-7.95B vs. est. $7.24B; saw some profit taking in industrial metal related names (FCX)

·     Transports; CHRW reported a strong 31% beat to 1Q consensus estimates on the strength of Global Forwarding results; UPS upgraded to market perform at BMO Capital with $195 tgt after earnings beat, saying the co has benefited from both constrained transportation markets and revenue quality/ productivity initiatives; NSC Q1 EPS $2.66 above $2.54 est.; Q1 revs $2.6B vs. est. $2.62B; qtrly railway operating revenues of $2.6 bln increased 1%, or $14 mln, compared with first-quarter 2020; qtrly railway operating expenses were $1.6 bln; shipping names active (SBLK, SHIP, EGLE) as the Baltic Dry Index rises to over 10-year highs, up 68 points, or 2.4%, to 2,957, a peak since mid-September 2010 (extended its winning streak to an 11th straight session) – the Capesize index rose 164 points, or 3.6%, at 4,680, its highest in more than one year.

 

Technology, Media & Telecom

·     Internet; GOOGL shares trade new all-time highs, with its price tgt raised by several analysts after crushing earnings while revenue growth reaccelerating across most of Alphabet’s core businesses as Search and YouTube’s gross revenue growth accelerated +30% & +49% Y/Y, respectively—and 1Q21 revenue and operating income coming in 8% and 39% above consensus; SHOP Q1 rev more than doubles to $988.6M vs. est. $865.5M, as benefited from the past year’s COVID-19 driven boom in online buying and selling, as gross merchandise volume (GMV) soared 114% to $37.3 billion in Q1; PINS warned of a slowing user growth in the U.S. as people are dialing down time spent on social media, while reports a 78.4% rise in Q1 revenue to $485.23M, above the $473.6M estimate

·     Semiconductors; several chip makers with earnings overnight as AMD said it now expected 2021 revenue to rise 50% from a year earlier, implying $14.64B, above its previous forecast of a 39% jump, which followed better-than-expected results for Q1; TXN posted strong results and guidance solidly above expectations, with strength across auto, industrials, and personal electronics, which in aggregate grew ~40% y/y, though 2Q guidance was 500 bps below seasonal; MXIM reported their MarQ with Revs/GM/EPS were 4%/11bps/10% above consensus with all end markets growing QQ; TER posted a beat for Q1 and much higher guide for Q2 saying a recovery for industrial automation is in full swing

·     Software movers; MSFT earnings beat expectations across the board, but the stock is still falling (Q3 EPS $2.03 vs $1.78 cons, and revenue $41.7B vs. est. $41.05B) – reported a solid F3Q, led by the Intelligent Cloud and MPC segment, while Azure revenue growth (+50% Y/Y reported, +46% Y/Y CC) was strong, above the Street’s ~42% forecast. F4Q topline guidance was above the Street; FEYE reported a very solid 1Q, led by billings growth of 18% Y/Y that easily surpassed the Street’s 9% target helped by an easy -7% compare) and reported upside to revenue, ARR, EPS and CFFO; MANH shares advanced after boosting its full-year forecast

·     Components & Services; JNPR Q1 profitability topped expectations with revenues that were in line with modest growth, up 8% to $1.07B, but down 12% from prior quarter, while warned business continues to be affected by shortages of components; FFIV shares slipped early despite a beat on Q2 earnings and revs as the mid-point of Q3 EPS guidance missed views; FSLY downgraded to market perform at Raymond James saying that the firm’s in-house traffic data collection suggests flattish YTD trends in terms of requests-per-second, an important KPI in Fastly’s usage-based model; MVIS rises after earlier announced completion of its long-range lidar sensor a-sample hardware and development platform – erases yesterday’s 23% decline on profit taking as shares up 373% YTD on recent Reddit platform momentum

·     Media movers; VIAC upgraded to Buy from Neutral at Citigroup with a price target of $56, down from $92 saying the company will likely have up to $4.6B of capital to accelerate its digital pivot and there may be scope for it to exceed the Street’s streaming net addition estimates; DISCA said it now has 15 million subscribers for its direct-to-consumer video-streaming services, which include Discovery+, Eurosport Player and Food Network Kitchen. Discovery added about 4Mm streaming subscribers since February; AMC filed to sell up to 43 mln shares in "at-the-market" sales program and also said it’s temporarily withdrawing proposal to increase authorized shares by 500 mln as released preliminary Q1 results of approx $148.3 mln in total revenue; SPOT posted Q1 EPS loss of eu0.25 on in-line revs eu2.15B (+16% YoY) with MAUs 356M vs est. 361.8M, and updated its full-year guidance for operating loss of eu150-250M from eu200-300M, revenue to eu9.11-9.51B from eu9.01-9.41B, and MAUs to 402-422M from 407-427M; IPG rises after Q1 revs $2.26b tops the $1.94B est. and op expenses fell by 5.9%;