Market Review: May 25, 2021

Closing Recap

Tuesday, May 25, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Markets took a breather after yesterday’s gains, as the major indices traded in a narrow range throughout the session, though there was a steady decline off a green open. The 10-year yield dropped below the 1.57% level for the first time in two weeks, though the tech-heavy Nasdaq barely nudged despite being buoyed by low interest rates recently. Market participants likely remain worried with stocks hovering near record levels, as evidenced by the short interest in SPY, the ETF that tracks the S&P 500, reaching the highest level of 2021 near 4.8%. Political jostling over an infrastructure package continued as Republican senators released more information on their infrastructure counterproposal. Sen. Capito said their full plan will be unveiled on Thursday and Sen. Wicker said the plan will be in line with President Biden’s parameters and will total near $1T. This is the latest step in negotiations between the two parties after President Biden’s amended $1.7T offer, which was revised down from the original $2.25T proposal, was broadly renounced by Republicans last Friday. However, Sen. Barrasso said that the two sides remain extremely far apart. Within the stock market, reopen related travel names outperform as the U.S. is expected to announce a majority of adults are now fully vaccinated against Covid-19. Airline stocks rose amid generally positive commentary from several airline executives and cruise names joined them in the list of top S&P performers on the day. Meanwhile, defensive sectors such as utilities and staples underperformed.

·     Stocks/sector movers; RIDE plummets after cutting its 2021 production guidance of its Endurance truck in half; SHAK jumps after Goldman, Wedbush upgrade the stock after falling nearly 20% since its earnings report earlier this month; CGC rises on its MKM upgrade given favorable risk-reward in cannabis sector, lifts TLRY, CRON; COIN soars after JPM initiates coverage OW given its position within the crypto ecosystem; AZO slips despite its EPS beat on falling gross margins, CBRL also slides despite its beat, and DY plunges after reporting a quarterly loss despite expected profit; Chinese education names TAL, EDU, GOTU surge, recoup some of yesterday’s losses after Chinese officials said yesterday’s news that they banned after school tutoring was not true; homebuilders TOL, NVR, LEN, KBH, DHI rise after Case-Shiller index recorded the largest increase in housing prices since 2005.


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)

·     U.S. companies borrowed $9.8 billion for capital investments in April, up 19% from a year earlier, benefiting from an economic recovery triggered by mass COVID-19 vaccinations and easing restrictions, the Equipment Leasing and Finance Association (ELFA) said


Commodities, Currencies & Treasuries

·     Oil prices ended little changed, recovering from morning losses as WTI crude gains 2c to settle at $66.07 per barrel while Brent crude roe 19c or 0.28% to settle at $68.65 per barrel. Energy markets continue to keep a watchful eye on developments tied to talks aimed at reviving the Iran nuclear deal. Gold prices rose by $13.50, or 0.7%, to settle at $1,898/oz, the highest settlement price since early January after the misses in consumer confidence and home sales might mean that loose monetary policy would continue and the decline in Treasury yields pushed investors into precious metals. Treasury yields ended on the lows as the 10-year hit 2-week lows of 1.56% while the dollar sunk further vs. counterparts.






WTI Crude















10-Year Note





Sector News Breakdown


·     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); AMZN was sued by D.C. attorney general over online retail pricing

·     Auto sector; RIDE shares plunge 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; formerly ousted VLDR founder Hall calls for SPAC-appointed directors Michael Dee and Christopher Thomas to step down, saying the board and management team is "fostering an anti-stockholder culture; TSLA Cybertruck reservations peak at over 1 million units, according to Electrek

·     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

·     Restaurants; Goldman downgraded DPZ to Neutral on valuation and difficult near-term same-store sales comparisons and upgraded SHAK to Buy 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 (down about 20% since 5/6 vs -1.5% for S&P Restaurants) given the upcoming urban recovery; CBRL reported Q3 EPS $1.41 on revs $713.4M vs est. $681.1M, restaurant comp sales +56.5% vs est. +51.8%, and retail comps +102.8% vs est. +66.5%; YUM held its investor event today which outlined plans for the KFC brand to increase same-store sales and see unit growth at the same time.

·     Casinos, Gaming, Lodging & Leisure sector; BYD announces private offering of $750 million senior notes due 2031; MMYT reported a quarterly adjusted loss of 3c for the quarter ended in March vs. estimate for a loss of 12c per share; revenue fell 42.3% to $79.22 million from a year ago; in online learning, 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 ; cruise lines (CCL, RCL, NCLH) among early winners as reopen plays continue to lead markets



·     Energy stock movers; weakness continued in E&P and equipment oil names after a strong run in April has been met with selling pressure in May despite oil prices edging higher. in refiners, DK was upgraded to Overweight at Piper saying as the US re-opening continues to gain momentum and mobility roars back to life, we are revising our expectations for 2021 refining margins/earnings higher (increased 2021 estimates by ~30% and see ~30% upside to Street ests on the combination of both higher utilization and higher margins)

·     Utilities & Solar; SEDG insider sell Avery sold 25K shares @ $248.71 between 5/20-5/21; BEEM 1Q EPS ($0.14) vs. est. ($0.17) on revs $1.372M vs. est. $1.8M and its pt was cut to $50 from $90 at Maxim who maintained their Buy rating; Even though Roth sees CA bill AB 1139 dying in the state senate or being vetoed by the governor, they say that the fact that the bill is even on the table is a negative for residential solar stocks (RUN, SPWR, SUNW) and should weigh on ENPH, GNRC, SEDG to a lesser extent

·     Utilities; Barclays upgraded OGE to Equal-Weight with a $37 pt from $33 to reflect a higher group average 2023 P/E multiple, though they continue to see a 10% discount to this valuation vs peers given the company’s below-peer average growth rate and regulatory exposure and downgraded POR to UW as they also see a 10% discount vs peers given the company’s long-term growth CAGR at or below other US utilities and earnings risk as it only operates in one state



·     FinTech & Payments; Piper noted that downloads of SQ’s Cash App, PYPL’s Venmo, and the U.S. side of PayPal’s Mobile Cash app are all at their lowest levels since the pandemic began. We see several potential explanations: waning stimulus payments, less online shopping, and more in-store shopping (is OW rated on PYPL, neutral on SQ); in consumer Finance; ACIW announced a collaboration with J.P. Morgan, that will enable merchants in certain European countries to deliver in-store payment acceptance capabilities to their customers; SYF approved a share repurchase program of up to $2.9B

·     REITs; BEKE slips 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) ; REXR 9M share Spot Secondary priced at $55.60; XHR upgraded to Outperform from Market Perform and increase our target price to $23 (+$1) at BMO as believe XHR’s broad top 25 market strategy, which is Sunbelt-focused with limited gateway market exposure, position it for a faster recovery than full-service peers; AAT announced it is under contract to acquire the 280ksf Eastgate Office Park for $125M, or $446/sf



·     Pharma movers; Britain’s competition regulator is reviewing AZN’s planned $39 billion takeover of ALXN on whether it could reduce competition in Britain or other markets; CGC upgraded to Buy from Hold at MKM Partners ahead of earnings as believes that after Q4 and through the reopening of Canadian economy, co will return to sequential growth and have better aligned its supply chain to capture demand opportunities; ANPC said its board approved establishing a joint venture with founder and chairman Chris Chang Yu to develop a new cancer treatment technology; TGTX announces FDA acceptance of biologics license application for ublituximab in combination with Ukoniq® (umbralisib) as a treatment for patients with chronic lymphocytic leukemia and small lymphocytic lymphoma; XNCR, BMY enter license agreement for use of Xtend(TM) XmAb(R) Technology in SARS-CoV-2 neutralizing monoclonal antibody combination for the treatment of COVID-19

·     Biotech movers; MRNA 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; EXEL 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; PIRS entered into a multi-program research collaboration and license agreement with Genentech, a member of Roche Group, to discover, develop and commercialize locally delivered respiratory and ophthalmology therapies

·     MedTech Equipment; GH, NTRA init at overweight with EXAS, NVTA initiated at equal-weight at Wells Fargo in initiation of Emerging Growth Diagnostics, specifically a subset of the genomics application companies; NVCR entered into a clinical trial collaboration agreement with GT Medical Technologies to develop Tumor Treating Fields ((TTFields)) together with GT Medical’s GammaTile Surgically Targeted Radiation Therapy

·     Healthcare Services; EHTH said in a regulatory filing that Derek Yung will resign as CFO and principal financial officer, effective June 11; JYNT will replace CUB in the S&P SmallCap 600 effective prior to the opening of trading on Thursday, May 27; Guggenheim lowered tgt on GDRX to $43 from $50 but raised tgt on HCAT to $60 and WW to $43


Industrials & Materials

·     Industrial, Aerospace & Defense; aircraft leasing firm SMBC Aviation Capital has agreed to buy an additional 14 Boeing (BA) 737 MAX aircraft with a low-cost carrier configuration, with deliveries due to begin later this year, it said on Tuesday; SPCE slides on profit taking after rising the last seven-trading days (including 28% yesterday on successful flight test success); DY 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; EH revealed its new type of electric passenger-grade autonomous aerial vehicle, or AAV, the "VT-30", which it calls "the first in EHang’s product suite that is designed for inter-city transportation

·     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

·     Transports; NAT posted an in-line Q1 EPS (16c) loss on revs $18.8M vs est. $22.8M; Evercore upgraded tankers DHT, FRO, NAT to Outperform and downgraded KSU to in-line; KeyBanc said its proprietary Truckload spot rate index was flat sequentially last week, but remains above seasonal variations May to-date and elevated on absolute basis heading into the final stretch of the mid-year peak

·     Metals & Materials; FINGF downgraded to Market Perform at BMO Capital as expect the ratcheting up of political uncertainty in Chile will weigh on FTT’s multiple and keep the valuation spread with TIH above historical average levels; NSDN Q2 EPS $2.12 vs. est. $1.64; Q2 sales $590M vs. est. $548M; sees FY EPS $7.20-$7.50 vs. est. $6.65 and sales up about 8%-10%; CRS said it will increase base prices by 6% to 9% on new, non-contract orders across all specialty alloy products; precious metals slip early

Technology, Media & Telecom

·     Semiconductors; North America-based semiconductor equipment companies posted $3.41B in billings in April, up 4% on the prior month and 50% on the prior year’s period, according to new data from industry group SEMI; the overall semiconductor index (SOX) opened sharply higher before fading along with broader tech

·     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)

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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.