Mid-Morning Look

Monday, August 30, 2021

Another day, another market rally to new all-time highs for the S&P 500 and Nasdaq, extending last week gains following Friday’s dovish address from Federal Reserve Chairman Jerome Powell. The tech heavy Nasdaq Comp moves to new all-time highs, topping the 15,200 level, up over 0.7%, rises for the 7th time in last 8-sessions as semi’s leading along with mega cap (AAPL, AMZN, MSFT all up over 1%) in another light volume and news day as stocks drift higher to close out a strong month of stock returns. Treasury yields extend last Friday declines, with the 10-year down around 1.28%, while the dollar is little changed. Oil prices surprisingly not volatile giving up most of an earlier rally to a four-week high, as Hurricane Ida weakened after forcing shutdowns of U.S. Gulf oil production, and OPEC+ looked set to go ahead with a planned oil output increase. Pending Home Sales for July down -1.8% MoM to 110.7 vs. +0.3% consensus and -2.0% in June. Dovish remarks from Federal Reserve chief Powell last week bolstered optimism in an economic rebound and eased fears of a sudden tapering in monetary stimulus. There remains no market pullback, no fear or concerns about valuations or run-up in shares over the last month, no concern about slowing economic data or geopolitical concerns (Mideast). The Russell 2000 Small cap index underperforms today after a 5% surge last week.

Sector Movers Today

·     Semiconductors; Philly semi-index (SOX) trading new highs, up over 1%, topping prior ATH of 3,451), led by AMD shares up over 2% in push for chip names; MX said that the Committee on Foreign Investment in the U.S. (CFIUS) has identified national security risks with the sale to Wise Road and the deal will be referred to the President Biden for his decision. MagnaChip (MX) said it received a letter on Aug. 27 from the Dept. of Treasury on behalf of CFIUS; SYNA acquires DSPG, a global provider of voice and wireless chipset solutions for converged communications, at $22.00 per share in an all-cash transaction. The combination is anticipated to generate annual run rate synergies of $30 million for the new entity to be realized within 12 months of closing https://bit.ly/3DtTCZR ; MU tgt cut to $95 from $110 at Deutsche bank noting memory stocks have been under pressure as DRAM spot prices weaken and fears of a cyclical peak rise

·     Insurance; Property & Casualty stocks (ALL, CB, HIG, TRV, ACGL) among active names after Hurricane Ida made landfall Sunday afternoon in the low lying coastal region of Louisiana, as a Category 4 event, notably a distance to the southwest of the major port city of New Orleans. Ida’s landfall represents the first major landfall-making hurricane in the U.S. for the 2021 hurricane season. It is too early to estimate an insured loss estimate for the event, but, RBC said they have seen some initial ‘guesstimates’ of $20B of damage which in our view is a good starting point and comparable to totals reached by hurricane’s Harvey and Laura as well as Sandy. Wells Fargo said as a preliminary estimate, they would expect insured losses in the range of $15-20B.

·     Biotech movers; MRNA slumped after authorities in Japan suspended the use of a second batch of the drugmaker’s coronavirus vaccine following the discovery of contaminants; REGN Dupixent® (dupilumab) pivotal trial meets all primary and secondary endpoints becoming first biologic medicine to significantly reduce signs and symptoms of moderate-to-severe atopic dermatitis in children as young as 6 months; PFE said its drug to treat patients with moderate to severe atopic dermatitis was statistically superior compared to a rival from REGN/Pfizer said its drug, abrocitinib, met the main goals in a late-stage study

Stock GAINERS

·     AAPL +2%; large cap technology leading markets to record highs again (no specific news, but have continued to be the market leaders); AMD, AMZN, MSFT as well

·     AFRM +36%; after announced late Friday that its flexible payment solution will soon be available to AMZN customers at checkout. Amazon and Affirm are testing with select customers now, and in the coming months, Amazon plans to make Affirm more broadly available to its customers (shares of DFS, COF declined in sympathy)

·     ALB +2%; trades new all-time highs as Cowen upped tgt to $260.00 from $180.00 at Cowen, LAC to $19.00 (Prior $17.00) and LTHM to $25.00 (Prior $19.00) saying the next generation materials space is receiving increased investor interest amid constructive western policy and near-term supply limits driving lithium and rare earths pricing higher

·     AMD +2%; Philly semi-index (SOX) trading new highs, up 1.1% at 3,475 (tops prior ATH of 3,451), led by AMD shares up over 2% in push for chip names

·     DSPG +17%; agrees to be acquired by SYNA for $22 per share in cash in $538M deal. The combination is anticipated to generate annual run rate synergies of $30 million for the new entity to be realized within 12 months of closing https://bit.ly/3DtTCZR 

·     GNRC +3%; shares gain following the power outages for around 50% of Louisiana residents following Hurricane Ida impact

·     HRC +9%; WSJ reported that BAX is in advanced talks to buy the medical-equipment maker for around $10 billion in a deal that values Hill-Rom at around $150 https://on.wsj.com/38kIIY9

Stock LAGGARDS

·     ASTR -24%; falls after the test launch of its rocket LV0006 was ended prematurely about 2-and-a-half minutes after liftoff; said one of LV0006’s engines shut down less than a second after liftoff

·     CTLT -1%; agreed to buy gummy vitamins maker Bettera Holdings LLC for $1 bln in an all-cash deal to expand presence in nutritional supplements market/also reports Q4 earnings above estimates

·     MRNA -2%; after authorities in Japan suspended the use of a second batch of the drugmaker’s coronavirus vaccine following the discovery of contaminants

·     NTES -8%, BILI -5%; another day of weakness for U.S. listed Chinese stocks, particularly in the video gaming sector after China’s regulator announced a new set of tighter regulations over the country’s games industry, including limiting the number of hours that minors can play

·     PINS -2%; downgraded at Argus to Hold following the co’s disappointing sales guidance where mgmt now expects 3Q rev to grow in the “low-40% range,” down from 58% growth in 3Q20