Mid-Morning Look

Thursday, September 02, 2021

No follow through sell-off for stocks after closing at the lows on Wednesday, as there just appears to be an endless bid for U.S. stocks (though stocks have slowly pulled back off highs). Still no fear as the CBOE Volatility index continues to bleed lower, dropping below the 16 level. Another broad-based rally as Industrials, Energy, Technology stocks among leaders to start the day, with Treasury yields remaining lower (10-yr still around 1.3%) following the dovish Fed commentary over the last week. Weaker economic data has helped stock markets, keeping with the theme that the Fed can keep pushing out the bond asset taper talk and keep rates lower. Both the S&P 500 and Nasdaq hit record highs early. Oil prices jumping with WTI prices topping $70 on course for highest close since Aug. 3, supported by a sharp decline in U.S. crude stocks and a weaker dollar (dollar index falls to 4-week lows around 92.30). Busy night/day of tech earnings (ASAN, NTNX, OKTA, AI, VEEV, NCNO) and retail (AEO, FIVE, CHWY, SPWH, LE, GIII). Top story overnight regionally was the massive flash floods and tornadoes that impacted the Tristate area, as both New York and New Jersey called for State of Emergency. Bitcoin and other crypto assets seeing strength today, topping the $50,000 level again – nearby at 50.6k Aug 23 high.

Economic Data

·     Weekly jobless claims fell to 340K vs. est. 345K while the prior week revised to 354K from 353K; the 4-week moving average fell to 355,000 in latest week from 366,750 prior; continued claims fell to 2.748M from 2.908M prior and vs. est. 2.775M; the U.S. insured unemployment rate fell to 2.0% from 2.1% prior

·     U.S. Q2 non-farm productivity revised to +2.1% vs. est. +2.4%; and vs. +2.3% prior; U.S. Q2 non-farm unit labor costs revised to +1.3% vs. est. +0.9% (prior +1.0%)

·     International Trade in Goods and Services for July (-$70.1B) vs. (-$74.1B) consensus and -$73.2B prior (revised from -$75.7B).

·     Factory Orders rose +0.4% in July, slightly above consensus +0.3% while Factory Orders, Excluding Transportation, +0.8% and Factory Orders, Excluding Defense, -0.1%

Sector Movers Today

·     Infrastructure theme active today (materials, building materials such as X, FCX, NUE, MTZ, PWR, MAS, SUM, VMC, MLM following a brutal night across the Northeast that saw tornado watches and flash flood warnings for parts of the Tri-State Area as remnants of Hurricane Ida brought in heavy winds and drenching rains and even showed water rushing through Newark Liberty International Airport, canceling all flights there. The tail-end of hurricane Ida dumped a “record breaking” amount of rain over New York and New Jersey putting both areas into states of emergency. Hurricane Ida, which devastated Louisiana this week, could mobilize lawmakers to pass the bipartisan $1T infrastructure bill, which is making its way through Congress.

·     Auto sector; in EV charging sector, CHPT posted a larger than expected quarterly loss but revs of $56.1M topped the $49.1M estimate and raised its year rev view to $225-235M up from $195M-$205M prior and above est. $206.6M; TSLA temporarily halted some operations at shanghai plant – Bloomberg News reported; NKLA announced agreements with the Germany-based Bosch Group of companies for Nikola Class 7 and Class 8 fuel-cell electric vehicles; Ford (F) reports U.S. sales down 33.1% Y/Y to 124,176 vehicles in August, while truck sales fell 29.4% Y/Y to 73,610 units, Car sales squeezed 86% Y/Y to 2,369 unit

·     Software movers; AI shares tumble after mostly in-line quarterly results (larger EPS loss), and guidance midpoint, also in-line with views (sees FY22 revenue $243M-$247M vs. est. $245.4M); VEEV shares slide reported F2Q22 revenue growth of 25%+ y/y, which was modestly better than consensus, but it might be disappointing in the context of VEEV’s pattern of “beat and-raises” in recent quarters; ASAN rises as delivered another strong quarter, beating revenue by $7.2M vs. $6.6M last q, billings by $15M vs. $21M last q, and free cash flow by $34M, driven by better-than-expected demand from large customers as shares rose; NCNO shares jump on strong 2Q results that beat expectations on both the top and bottom line. RPO, an indicator of future growth, jumped 55% Y/Y on the back of strength in new bookings that included a commercial banking lending deal win with Wells Fargo; OKTA shares slipped initially despite reporting strong FQ2’22 results, beating Street billings estimates by 18%, total revenue by 6%, gross profit by 6%, and delivering much better than expected operating losses (RPO up 57% YoY, and billings up 83% with better-than-expected profitability and cash flow)

·     Aerospace & Defense; SPCE shares active after the U.S. Federal Aviation Administration (FAA) said on Wednesday it is investigating descent deviation of July 11 flight of SPCE rocket plane that carried British billionaire Richard Branson; BA is getting an order for five new 737-8 jets from Griffin Global Asset management as the aircraft leasing company anticipates a rebound in the travel market; BLDE initiated Buy and $15 tgt at Deutsche Bank as think the stock represents an attractive means to invest in a high-growth, emerging sector with a tremendous total addressable market (TAM) opportunity

·     Pharma movers; in vaccine news, (PFE, BNTX), the European Medicines Authority said Thursday that there is no “urgent need” for COVID-19 booster shots for fully vaccinated individuals across the general public. In a statement, it said additional shots, should “already be considered for people with severely weakened immune systems as part of their primary vaccination,” citing a technical report issued by the European Center for Disease Control and Prevention; Bernstein noted yesterday’s FDA responses to JAK inhibitor safety on the sharper side as they reduce Rinvoq estimates, ABBV price target

Stock GAINERS

·     ASAN +7%; delivered another strong quarter, beating revenue by $7.2M vs. $6.6M last q, billings by $15M vs. $21M last q, and free cash flow by $34M, driven by better-than-expected demand from large customers as shares rose

·     CHPT +8%; posted a larger than expected quarterly loss but revs of $56.1M topped the $49.1M estimate and raised its year rev view to $225-235M up from $195M-$205M prior and above est. $206.6M

·     COG +3%; among top leaders in the S&P 500 as WTI oil prices top $70 on course for highest close since Aug. 3, supported by a sharp decline in U.S. crude stocks and a weaker dollar

·     HRC +4%; BAX confirmed reports last week, by acquiring HRC for $156 per share for all-cash purchase $10.5B, and a total enterprise value of about https://on.mktw.net/2WO9J3V

·     NCNO +13%; strong 2Q results that beat expectations on both the top and bottom line. RPO, an indicator of future growth, jumped 55% Y/Y on the back of strength in new bookings that included a commercial banking lending deal win with Wells Fargo

·     NTNX +12%; Q4 results beat as multiple metrics (ACV billings, total billings, emerging product billings, million-dollar deals) all reached record levels (ACV up over 100% YoY and large-customer gains >$10M lifetime bookings +42%).

·     PWR +9%; entered an agreement to acquire Blattner Holding Co. for $2.7 billion in stock and cash, while also benefits from Hurricane Ida, which parts of the U.S. this week, and could mobilize lawmakers to pass the bipartisan $1T infrastructure bill, which is making its way through Congress

Stock LAGGARDS

·     AEO -7%; Q2 adj EPS 60c vs est. 55c on revs $1.19B that missed est. $1.23B; Aerie revenue rose 34% to $336 million and American Eagle revenue grew 35% to $846 million

·     AI -10%; reported mixed 1QFY22 results as revenue growth accelerated, but billings and non-GAAP RPO growth slowed, which weigh on shares in the near term

·     ASMB -20%; after announced its decision to discontinue development of ABI-H2158 (2158) following the observation of elevated ALT levels consistent with drug-induced hepatotoxicity in an ongoing Phase 2 trial

·     CHWY -9%; as Q2 results disappoint with 2Q adj EBITDA $23.3Mm vs est. 34.4Mm on sales $2.16B vs est. $2.2B and sees FY net sales $8.9B-$9.0B vs. est. $9.0B

·     FIVE -9%; shares slide (latest discount retailer to drop on earnings – DG, DLTR, BIG) after mixed Q2 as EPS beat but sales of $646.6M missed the $648.3M estimate and Q3 guidance was mixed as well; in firearms

·     HRL -3%; slips as Q3 adj EPS $0.39, in-line with estimates on better revs $2.86B, but organic volume down 2% and cuts FY21 EPS view to $1.65-$1.69 from $1.70-$1.82, while raises FY21 revenue view to $11B-$11.2B from $10.2B-$10.8B

·     SWBI -7%; posted a mixed quarter as EPS beat but revs of $274.6M misses by about $4M, though on record gross margins

·     TCBI -9%; downgraded by two firms (Janney and Wedbush) after announced a strategic plan aimed at transforming Texas Capital Bank into a flagship financial services firm in Texas, by expanding offerings and coverage in the co’s dynamic markets (Wedbush called it a “prove me” story and believe it will take longer to achieve)