Mid-Morning Look: July 08, 2021
Mid-Morning Look
Thursday, July 08, 2021
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
-495.79 |
1.43% |
34,186 |
|||
S&P 500 |
-61.96 |
1.42% |
4,296 |
|||
Nasdaq |
-213.80 |
1.46% |
14,452 |
|||
Russell 2000 |
-32.55 |
1.45% |
2,220 |
|||
A rare stock market sell-off pulls the Nasdaq and S&P 500 off record closing highs, coming a day after the FOMC Meeting Minutes were released (overly dovish again – but officials saw a tightening of monetary policy potentially happening sooner than expected as the economy recovers) and amid growing anxiety that the spread of Covid-19 variants will hurt growth expectations, undoing popular reflation trades with airlines, restaurants, casinos, and leisure stocks slipping. Bonds rallied as the benchmark 10-year yield hit a session low of 1.25% before paring losses (lowest since February) while broader Asian and European markets also sunk. China ADRs extend declines (BIDU, BABA) after the country earlier this week said it will step up supervision of domestic firms listed offshore, which follows news this past weekend that regulators ordered DIDI’s app be taken down days after its U.S. listing and the CAC also recently announced probes into truck-hailing firm YMM and online recruitment BZ. Dow Transports drop sharply, falling over 3% or 500 points to 14,450, and slipping below its 100-day MA support of 14,785 earlier led by a drop in airlines on Covid variant fears to economy as well as rails after WSJ report that U.S. President Biden will call for regulators to address consolidation and possible anticompetitive pricing in ocean shipping and railroad industries. One theory for the decline in yields is that investors are worried about economic growth arriving weaker than expected, especially with increasing COVID Delta variant cases, which would hurt value and cyclical stocks. Mixed economic data, especially a bigger-than-expected drop in the ISM services added to the downward momentum. In Europe, policy makers agreed to raise their inflation target to 2% and allow more room for overshoot if necessary, according to officials familiar with the matter. The CBOE Volatility index (VIX), also known as Wall Street’s fear gauge, jumped 3.1 points to its highest level in over two weeks.
Economic Data
· U.S. jobless claims rose to 373,000 in latest week vs. est. 350,000 while prior week revised to 371,000 from 364,000; the 4-week moving average fell to 394,500 in latest week from 394,750; continued claims fell to 3.339M vs. est. 3.335M and prior 3.469M; U.S. insured unemployment rate fell to 2.4% from 2.5% prior
Macro |
Up/Down |
Last |
|
||
WTI Crude |
-0.55 |
71.65 |
|||
Brent |
-0.16 |
73.26 |
|||
Gold |
3.20 |
1,805.30 |
|||
EUR/USD |
0.0075 |
1.1864 |
|||
JPY/USD |
-1.12 |
109.53 |
|||
10-Year Note |
-0.051 |
1.27% |
|||
Sector Movers Today
· Transports; Dow Transports drop sharply, falling over 3% or 500 points to 14,450, falling below its 100-day MA support of 14,785 earlier; U.S. airlines pressured as concerns about the coronavirus continue to linger, especially due to the spread of the delta variant (AAL, DAL, UAL, JBLU, LUV); KSU shares slide after the WSJ reported U.S. President Biden will call for regulators to address consolidation and possible anticompetitive pricing in ocean shipping and railroad industries https://on.wsj.com/36n8o5m (also hitting other rail names CSX, NSC, UNP)
· Biotech movers; rebound early for biotech space, with the XBI partially recovering after falling six of the last seven trading sessions; AMGN said the U.S. FDA has accepted a Biologics License Application and granted Priority Review for Tezepelumab in the treatment of asthma (Tezepelumab is being developed by Amgen in collaboration with AZN); BIIB updated the label for its new Alzheimer’s disease treatment, Aduhelm, which now says that the therapy should be used in patients with “mild cognitive impairment or mild dementia stage of disease” (narrows tgt population); ARPO was upgraded to Buy with $22 tgt at HC Wainwright following recent acquisition of privately held Aadi Bioscience in May calling the deal “transformative”
· Oil Services & Equipment; Piper updates land driller (HP, PTEN, PDS) estimates with upwardly revised rig count template, with no significant change to expected ~in line Q2 results, but with 5-10% increases to ’22 activity levels based on the higher expected H2’21 baseline; Citigroup upgraded shares of HP to neutral from sell in services and up tgts on several (HP, NINE, GTLS, SLB, PTEN, RIG) saying they prefer the more internationally levered OFS names (SLB, BKR, NOV) along with WHD (rig leverage and M&A/cash return). Notes that Oil Service stock performance has been solid YTD (OIH up 33%) but has lagged E&P (XOP up 54%)
· Autos; RACE has three business lines that could potentially lead the Italian luxury carmaker’s stock to accelerate to a $265 price target, according to a report from Morgan Stanley; TSLA shares fall for the third straight day as the latest set of China data showed deliveries of its cars made in the country dropped in June; legacy carmaker STLA announced a big investment in electric vehicles (shares of rival EV names mixed on day – NIO, XPEV, LI)
Stock GAINERS
· BIIB +2%; rises despite saying its recently approved Aduhelm drug for people with Alzheimer’s disease will get updated labeling to emphasize the disease stages in which the drug’s use was studied
· FSTX +10%; after exclusive licensing agreement with AZN for STING inhibitors ($12M upfront; eligible for milestone payments of over $300M and single-digit % royalties)
· GAN +15%; after saying sees Q2 revs between $34-$35M, beating the consensus of $23.98M
· TESS +13%; after the company said Wednesday evening it expects 2022 1Q total revenue of $105M, 9% higher than a year earlier
· WDFC +3%; Q3 sales surged 39% amid unprecedented demand for maintenance products, with Q3 results well above views (EPS $1.52 vs. est. $1.15; Q3 sales rose 39% to $136.4M vs. est. $108.33M) and higher sales guidance for the year ($475M-$490M vs. est. $461.85M)
Stock LAGGARDS
· DAL -2%; U.S. airlines pressured as concerns about the coronavirus continue to linger, especially due to the spread of the delta variant (AAL, UAL, JBLU, LUV)
· DHI -3%; RBC Capital turns incrementally cautious on builders n-t and downgrades DHI to Sector Perform and TPH to Underperform as data shows a second consecutive month of deceleration with 72% of base plans seeing a m/m price increase in June, down from 79% last month
· FCX -4%; Barclay’s downgrades the industrial metals sector to Neutral from Positive, with miner margins now near record highs and stocks trading at relatively elevated price-to-NAV multiples – shares of FCX and FNV downgraded to Underweight
· HELE -9%; posted Q1 EPS/sales handily above consensus ($3.48/$541.2M vs. $2.62/$438.9M) but issued disappointing guidance as expects sales of $1.93B-$1.98B for FY22, below the $2.02B estimate and EPS $10.46-$10.97, missing the $11.64 estimate
· KSU -8%; shares slide after the WSJ reported U.S. President Biden will call for regulators to address consolidation and possible anticompetitive pricing in ocean shipping and railroad industries https://on.wsj.com/36n8o5m (shares of CSX, NSC, UNP also tumble)
· LPI -3%; raises FY21 capital expenditure forecast to $420M from $360M and lowers FY21 production outlook to 77,000 – 80,000 barrels of oil equivalent per day (boepd), from 80,000-85,000 boepd previously
· MSTR -4%; shares of Cryptocurrency-exposed stocks (RIOT, MARA) slide with Bitcoin sinking back below $33,000 per token, down over 5%, with Ethereum down over 10% to slip below $2,200
@media only screen and (max-width: 500px) {
td p.MsoNormal {
text-indent: 0!important;
margin: 0!important;
}
}
div[class*=WordSection]>p {line-height: inherit !important;}div[class*=WordSection] a:not([href]) {color: inherit !important;}
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.