Mid-Morning Look: March 19, 2021

Mid-Morning Look

Friday, March 19, 2021

Index

Up/Down

%

Last

 

DJ Industrials

-227.32

0.69%

32,634

S&P 500

-16.81

0.43%

3,898

Nasdaq

-25.29

0.19%

13,090

Russell 2000

-12.62

0.56%

2,255

 

 

U.S. stocks erase overnight gains, sliding on the open and extending yesterday’s declines amid further weakness in technology on rising Treasury yields as well as a drop in financials (WFC, JPM, C) after the Federal Reserve declined to extend exemption on a leverage rule that eased capital requirements for big banks. The U.S. Federal Reserve said it will let a temporary bank leverage rule exemption expire on March 31, but it will review the rule due to concerns it is no longer functioning as intended because of the central bank’s emergency pandemic monetary policy measures. Friday’s decision means banks will have to resume holding an extra layer of loss-absorbing capital against those assets. The news is currently offsetting another bounce in Treasury yields for financials, with the 10-year touching highs around 1.74%. Trading activity may be skewed today given options and futures on indexes and equities are scheduled to expire Friday, a quarterly event known as quadruple witching that typically spurs trading as large derivatives positions roll over. The Dow Jones Industrial Average, which recently topped the 33,000 level for the first time, just five trading days after the blue-chip average first closed above than 32,000, is falling today behind disappointing revenue figures from NKE overnight and on banks after the Fed news. Dow Transport index remains strong behind FDX earnings overnight as shares rise. Travel names extend losses after French PM said Thursday Paris will go into lockdown as COVID-19 variant rampages as the government imposes a 4-week lockdown on Paris and parts of the North.

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.85

59.15

Brent

-0.93

62.34

Gold

1.30

1,733.80

EUR/USD

-0.0038

1.1876

JPY/USD

0.05

108.93

10-Year Note

0.013

1.742%

 

 

Sector Movers Today

·     Financials; Bank stocks (JPM, WFC, MS, C, BAC, etc.) fell after the Federal Reserve said it will not extend a change to the supplementary leverage ratio past its March 31 expiration, which was introduced as a temporary measure for banks to expand their balance sheets during the pandemic; Baird downgraded USB to Neutral on valuation with a $55 price target; Citi said they now recommend closing the pair trades they recommended in mid-February of FITB vs. KEY and USB vs. MTB as the relative valuations have converged and become less compelling; Wells downgraded PFSI to Equal-Weight with a $70 price target from OW with a $75 pt, saying they are taking profits

·     Consumer Staples; JPMorgan upgraded KDP to overweight from neutral and forecasts double-digit earnings growth for company while raises PT to $39 from $33; firm downgraded TAP and KMB to Underweight as expects avg sales growth of HPC companies to be more than 4.2% in both 2021 and 2022 vs. a more than 8.2% avg growth in 2020; SMPL downgraded to Hold from Buy at Jefferies as continue to believe in the company’s strong fundamental outlook, including a higher-probability topline recovery and incremental deleverage due to cash generation; BYND initiated overweight at Stephens and $190 tgt saying Alt Protein went from a novelty to one of the most successful new food product launches in history in just two years; TAP also added to Deutsche Bank short term Sell catalyst list

·     Biotech movers; SRPT reported incremental data for its SRP-9003 Gene Therapy for the treatment of Limb-Girdle Muscular Dystrophy Type 2E to be presented at the MDA Conference; TRIL reports annual operating and financial results and sets date for R&D day for April 28, 2021, to provide data updates, and announce strategic priorities and clinical development plan; CLVS shares rise as its Rubraca® (rucaparib) significantly improves progression-free survival versus chemotherapy in patients with later-line ovarian cancer associated with a BRCA mutation as ARIEL4 study met its primary endpoint; INCY Phase 3 DEVENT study of patients on mechanical ventilation with COVID-19 associated Acute Respiratory Distress Syndrome (ARDS) showed a trend towards an improvement in mortality, though results were not statistically significant

·     Auto sector; Ford (F) was upgraded from Equal Weight to Overweight at Barclay’s and raises the price target from $9 to $16 saying they were on the sidelines due to the lack of a clear, aggressive BEV strategy – but the Ford Europe turnaround and use of VW’s dedicated BEV platform have left them more bullish; Bloomberg reported that TSLA cars banned from Chinese military complexes, housing compounds on concerns about data being collected by cameras in the vehicles; in auto retail, Wedbush said believe ~15% relative valuation discounts vs. historical averages for AZO, AAP and ORLY more than reflect a potentially lower perpetual growth rate for these retailers due to the increasing penetration of electric vehicles (EVs) that carry lower part repair needs

 

Stock GAINERS

·     CLVS +47%; as its Rubraca® (rucaparib) significantly improves progression-free survival versus chemotherapy in patients with later-line ovarian cancer associated with a BRCA mutation as ARIEL4 study met its primary endpoint

·     FDX +7%; Q3 EPS of $3.47 (+146% y/y) outperformed est. of $3.29 (Opco notes EPS would’ve slightly topped $4.00 excluding a $350M pre-tax income weather-related headwind, partly offset by a $108M tax benefit) while total revenue (+23% y/y) topped consensus by ~8%, or >$1.55B

·     NCTY +3%; signed a Bitcoin mining machine purchase agreement with Bitmain Technologies Limited to purchase 24,000 Antminer S19j Bitcoin mining machines

·     OLLI +4%; reported solid 4Q & QTD results aided by stimulus as comps of 8.8% top views and margins rise, announces $100M buyback, though issued no guidance

·     OXY +2%; seeing a rebound in some energy stocks after oil prices drop throughout the entire week; seeing bounce in MRO, APA

 

Stock LAGGARDS

·     AAL -2%; seeing further pullback in travel related names (UAL, BKNG, EXPE) after French PM said yesterday that Paris will go into lockdown as COVID-19 variant rampages as the French government imposing a 4-week lockdown on Paris and parts of the North

·     IDRA -60%; after its ILLUMINATE-301 did not meet its primary endpoint of objective response rate (ORR); said evaluating its next steps regarding continuation of the trial toward its overall survival (shares were downgraded by several analysts)

·     JPM -3%; financials (WFC, JPM, C, SIVB) slide after the Federal Reserve declined to extend exemption on a leverage rule that eased capital requirements for big banks

·     NKE -4%; the Dow component reported Q3 EPS of $0.90, topping the $0.76 estimate while Q4 revenue of $10.4B missed the est. $11.02B as analysts noted port congestion & a global container shortage weighed on sales results in North America

·     TAP -2%; added to Deutsche Bank short term Sell catalyst list as believes the company’s Q1 results are likely to come under material pressure amid adverse weather in February and a cybersecurity breach (also downgraded to underweight at JPMorgan)

 

Syndicate:

·     AFC Gamma (AFCG) 6.25M share IPO priced at $19.00

·     Array Technologies (ARRY) 31.05M share secondary priced at $28.00

·     Connect Biopharma (CNTB) 11.25M share IPO priced at $17.00

·     Construction Partners (ROAD) 2M share secondary priced at $31.25

·     Extra Space Storage (EXR) 1.6M share spot secondary priced at $129.80

·     Instil Bio (TIL) 16M share IPO priced at $20.00

·     MediaAlpha (MAX) 7M share secondary priced at $46.00

·     Stepstone Group (STEP) 8M share secondary priced at $29.50

·     Skillz Inc. (SKLZ) 32M share secondary prices at $24.00 (Skillz sold 17M Shares, and certain selling stockholders will sell 15m shares)

·     Solid Biosciences (SLDB) 21.74M share secondary priced at $5.75

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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.