Mid-Morning Look

Thursday, December 23, 2021

U.S. stocks melting higher on light volume, currently trading near the best levels of the morning as the S&P 500 approaches its all-time highs of 4,743 (only 20-points away), as the “Santa Claus” rally did not disappoint this year. Stock market news remain quiet as expected ahead of the Christmas holiday weekend (markets closed in the U.S. tomorrow), but plenty of economic data for investors to chew on today boosting sentiment. New home sales jump to 7-month-high, despite massive downward revisions, while orders for durable goods increased 2.5% in November (above views), weekly jobless claims were unchanged at 205,000, consumer spending and personal spending nudged higher and Michigan sentiment reading rises. Inflation data points also coming in above views, but still failing to dent investor enthusiasm, as they continue to snap up stocks across various sectors. The U.S. 10-year yield hit 1.5% for the first time since December 13^th, inching higher following the higher inflation data earlier this morning. Optimism that global economies won’t be derailed by the omicron variant of COVID has been a big theme this week as the reopen sectors among leaders (airlines, hotels, leisure, casinos).

Economic Data

·     Weekly jobless claims reported at 205K, in-line with consensus; the 4-week moving avg rose to 206,250 from 203,500 prior week; continued claims fell to 1.859M in latest week from 1.867M prior week; the U.S. unemployment rate unchanged at 1.4%

·     Personal Income for November rose +0.4%, in-line with estimates (vs. +0.5% in Oct), while Personal Spending rose +0.6% (vs. +1.4% in Oct), also in line with economist estimates; increase of $97.4 billion in spending for services and a $7.4 billion increase in spending for goods.

·     Inflation readings showed: PCE Price Index for Nov rises +0.6% MoM (in line w/consensus) and vs. upwardly revised +0.7% from +0.3% (hottest figures since 2008), while on YoY basis, PCE Price Index +5.7% (in-line) vs. +5.1% in October (revised) – both highest since 1982 – as energy prices increased 34.0% and food +5.6%; Core PCE Price Index MoM rose +0.5% vs. +0.4% consensus and rises +4.7% YoY vs. 4.5% consensus

·     Durable Goods Orders for Nov rises +2.5% vs. est. +1.5% as Oct revised to +0.1% from -0.5%; Durable Goods Ex Transportation rises +0.8% vs. est. +0.5% and Oct revised to +0.3% from +0.5%; Durables ex-defense orders +2.0%, & nondefense cap orders ex-aircraft -0.1% vs. est. +0.6%

·     New Home Sales for November rise 12.4% to 744K (but below est. 770K), improved from last months downwardly revised figure of 662K from 745K, or down -8.4%

·     University of Michigan Sentiment Dec-F reported at 70.6 vs. est. 70.4 and Nov-F 67.4; current conditions index final Dec 74.2 vs prelim Dec 74.6 and final Nov 73.6; the consumers expectations index final Dec 68.3 vs prelim Dec 67.8 and final Nov 63.5

Sector Movers Today

·     Vaccine movers; MRK said FDA authorizes its COVID-19 oral antiviral pill but is not authorized for use in patients younger than 18 years of age because molnupiravir may affect bone and cartilage growth; NVAX said data show broad immune responses against Omicron, citing broad response with two doses, more with three; said third dose of nvx-cov2373 produced a 9.3-fold igg rise and a 19.9-fold ace2 inhibition increase after booster dose; a third shot of the Covid-19 vaccine from AZN and the University of Oxford is shown to boost protection against the highly transmissible Omicron variant, according to a pair of laboratory studies from researchers at the University of Washington and Oxford; GILD’s Veklury (remdesivir) is effective at reducing the risk of COVID-19 hospitalization according to data published in the New England Journal of Medicine

·     Auto sector; NKLA said on Twitter that more deliveries were to come, posting photos of a previous event; TSLA disclosed in a regulatory filing overnight that its CEO Musk sold another $333.6M in common stock on December 22nd after exercising option for 2.1M shares; KXIN reached a strategic partnership agreement with Beijing Shencheng Biotechnology which agrees to purchase 10,000 customized new energy trucks from Kaixin over the next 5 years valued at around $250 million; NIO named new addition to the fresh money list at Deutsche Bank, calling it an attractive buying oppty heading into the New Year

·     Casinos, Gaming, Lodging & Leisure sector; SGMS announced that it has withdrawn its previously announced July 15, 2021 all-stock offer to acquire the remaining 19% equity interest in SCPL that it does not currently own; AMC announced it has reached lease agreements and plan to reopen theatres in the Los Angeles and Chicago market; casino stocks WYNN, MLCO, LVS advanced as the result of the 45-day forum held in Beijing to address regulatory oversight, gambling license limitations and employee welfare issues seen as positive by Morgan Stanley saying: We see status quo on number of licenses (6), duration (between 10 to 20 years), tax (same as before) and dividend (allowed).

Stock GAINERS

·     ALLK +27%; after plunging 89% on Wednesday after its Phase 3 trials of lirentelimab in EOE and EG/ED failed – shares upgraded at SMBC saying its short thesis played out

·     MLCO +6%; along with WYNN, LVS after he Macau government released results for gaming operators— Morgan Stanley said results were positive

·     NKLA +17%; after the electric-vehicle startup said on Twitter that more deliveries were to come, posting photos of a previous event.

·     OCDX +5%; as QDEL agreed to acquire OCDX for $24.68 per share of common stock for total equity value of nearly $6B, the companies announced https://on.mktw.net/3JdPpMN

Stock LAGGARDS

·     CROX -15%; after entered into a definitive agreement to acquire Heydude, a privately-owned casual shoe company, for $2.5 billion in cash and stock.

·     INNV -46%; after saying the Centers for Medicare & Medicaid Services (CMMS) suspended new enrollments at its Colorado centers because of deficiencies detected in a focused audit.

·     JD -7%; after Tencent Holdings (TCEHY said it would pay a $16.4 billion dividend to shareholders after reducing its stake in the e-commerce company to a little over 2% from the current 7% in a sale of about 457 mln shares

·     MRNA -3%; as vaccine makers seeing selling pressure all week, with declines in NVAX, MRK, VIR

·     QDEL -15%; after agreeing to acquire OCDX for $24.68 per share of common stock for total equity value of nearly $6B, the companies announced

·     SCPL -17%; after SGMS announced that it has withdrawn its previously announced July 15, 2021 all-stock offer to acquire the remaining 19% equity interest in SCPL that it does not currently own