Mid-Morning Look

Tuesday, February 16, 2021

Stocks are higher again, as the market narrative remains – buying momentum continues, hopes for new stimulus keeps buying going, Fed keeping rates low, vaccine rollout, earnings strong and economy recovering all market catalysts. Surging market multiples, inflation in commodity prices, bubble concerns (bitcoin), Covid-19 variant potential impact all failing to dent any investor sentiment. The reflation trade is back in full effect with energy and financials (sectors most sensitive to rate moves) leading the way, along with several “recovery” related sectors. Dow Transports touch new record highs, along with new records for Semiconductors (another record) as the S&P and Nasdaq Comp touch fresh highs. Energy also getting a boost from rising prices and natural gas given the deep freeze oil producing states such as Texas are dealing with (knocking out power for millions and reducing refining capacity. In the first 2-months of trading, the S&P 500 has recorded 10 all-time highs, copper at 9-year highs, oil prices at 13-month highs, lumber trades record all-time highs as commodity prices soaring (yest Fed says no inflation). Goldman Sachs today raised S&P 500 2021 EPS by 2% to $181 reflecting higher sales and profit margins that should overcome input cost pressures thanks to high operating leverage. Bitcoin leveraged names (MARA, WBAI, GBTC, NCTY, SI, XENT, RIOT) soar again as bitcoin prices topped $50,000 earlier as momentum continues to the upside. Homebuilders pressured this morning (while financials rising) as builders starting to feel the pinch of rising mortgage rates as Treasury yields moving higher – 10-yr up over 5 bps to 1.255% and 30-yr yield 2.06% up 5.8 bps.

Sector Movers Today

·     Energy stock movers; Multiple oil production and transport facilities along the U.S. Gulf Coast in Texas and Louisiana have halted operations due to a rare deep freeze, which left more than 5 million without power in Texas. Oil prices hovered near 13-month highs on Tuesday, supported by the cold snap that shut wells in Texas, the biggest U.S. producing state. More than 3 million barrels in refining capacity have been taken offline by the storm, according to reports. Refiners such as VLO, MRO, TOT, XOM, LYB, Citgo among those announcing impacts to output capacity; natural gas prices jumped over 10% to $3.21 mln btu on Texas cold front

·     Credit card monthly metrics; DFS credit card charge-off rate 1.69% at Jan 2021 end vs 1.58% at Dec 2020 end and credit card delinquency rate 1.32% at Jan 2021 end vs 1.31% at Dec 2020 end; COF credit card delinquency rate rises to 2.49% in January from 2.41% in December and declined from 4.10% in January 2020 while net charge-off rate of 2.54% increased from 2.42% in December and fell from 4.31% a year ago; SYF net charge-off rate of 3.1% is unchanged from 3.1% in December and compares with 5.2% a year ago and delinquency rate of 3.2% in January ticks up from 3.1% in December, but is still down from 4.5% in January 2020; JPM Net charge-off rate of 1.97% rises from 1.70% in the prior month and declines from 2.19% a year ago and credit card delinquency rate holds steady at 0.99% in January, unchanged from December

·     Auto sector; Ford (F) exited its stake in VLDR, according to a regulatory filing; Ford has held a passive stake of 7.6% of 13.07M shares at the end of Q3. Ford originally invested $75M in Velodyne in 2016; AAP mixed Q4 results as Q4 adj EPS misses at $1.87 vs. est. $1.96 with revs $2.4B vs. est. $2.36B and Q4 comp store sales rose 4.7%; AN authorized buyback up to additional $1B stock after Q4 EPS and rev beat ($2.43/$5.8B vs. est. $2.01/$5.56B); GT upgrade from Hold to Buy with $16 tgt at Argus as view Goodyear as a well-run company with a strong track record in its industry, and expect its products and services to be in demand on the other side

·     Consumer Staples & Restaurants; lots of updates with CAGNY conference (Consumer Analyst Group of New York) taking place this week; GIS reaffirms its 3Q and full-year guidance and outlines a growth strategy, targets mid- to high-single-digit adj. EPS growth long-term and targets organic net sales growth of 2% to 3%; USFD with EPS miss (5c vs. est. 10c) in in-line revenue $6.1B and does not provide outlook for the year; COTY mentioned positively in Barron’s noting the stock tumbled after earnings but it’s time to buy; MDLZ reaffirms its 2021 outlook, as well as its long-term annual financial targets and capital allocation priorities

·     Pharma movers; EXEL announced positive phase 2 results for CABOMETYX® in patients with metastatic papillary renal cell carcinoma; ZTS posts Q4 adj profit of $0.91 beating by 4c and forecasts 2021 adj profit of $4.36-$4.46 vs. est. $4.26 helped by higher sales of its animal products including Simparica Trio, its newly launched parasiticide for dogs; KALA said its Eysuvis 0.25% to treat signs and symptoms of dry eye disease now covered by CI’s pharmacy benefit manager Express Scripts, effective Feb. 5; CRTX slides after the FDA places partial clinical hold on mid-to-late-stage trials of its therapy, Atuzaginstat, to treat Alzheimer’s Disease

Stock GAINERS

·     APA +6%; as energy stocks, E&P, refiners, outperform with oil prices extending gains

·     CCL +3% as Aida cruises opens 2021 cruise season on March 20; all trips originally planned from March 6 up to and including March 19, 2021, are unable to take place

·     CLGX +6%; after CSGP offered to buy the company in a deal valued at $95.76 in stock/cash, topping the prior $80 offer that CoreLogic agreed to from Stone Point Capital earlier this month https://on.mktw.net/3jVXJnW

·     GLW +5%; mentioned positively in Barron’s noting the co now serves a diverse set of markets, from smartphones to auto manufacturing to vaccine vials and believes deserves more attention

·     GNRC +7%; as Texas’ power grid experienced a systemwide failure Monday morning as demand surged due to the historic winter conditions across the state

·     GTHX +3%; shares rose after saying the FDA approved its Cosela, a therapy that reduces the frequency of chemotherapy-induced bone marrow suppression in adults receiving chemotherapy

·     JCOM +4%; price tgt raised by several analysts including Street high $250 from $120 at Susquehanna see an easy pathway for the stock to more than double from here after monster quarter and outlook (Wedbush upped to $140, Barclays to $130);

·     WBAI +48%; enters share exchange agreement to acquire BTC.com businesses, while names leveraged to Bitcoin outperform again

Stock LAGGARDS

·     BLUE -33%; after saying it placed early-stage and late-stage studies of LentiGlobin gene therapy for sickle cell disease on a temporary suspension following a serious adverse reaction

·     CRTX -29%; after the FDA places partial clinical hold on mid-to-late-stage trials of its therapy, Atuzaginstat, to treat Alzheimer’s Disease

·     CVS -2%; posts better-than-expected Q4 profit and sales, helped by COVID-19 vaccinations and testing at its retail locations but sees 2021 adjusted EPS between $7.39-$7.55 vs. est. $7.54

·     DHI -3%; Homebuilders pressured this morning, starting to feel the pinch of rising mortgage rates as Treasury yields moving higher – 10-yr up over 5 bps to 1.255% and 30-yr yield 2.06% up 5.8 bps

·     PLTR -6%; despite reporting a 40% rise in sales (to $322M vs. est. $300M) in its second quarterly results since going public last year as signed 21 contracts each worth $5 million or more during the fourth quarter

·     SPCE -6%; follows 8% drop on Friday following the flight update possible delay