Early Look

Monday, August 2, 2021

After notching its 6^th straight month of gains, the S&P 500, along with the Nasdaq and Dow, are looking to start August with a strong start. Stock futures rise as solid corporate earnings lift equities while progress on a massive U.S. infrastructure proposal also boosted sentiment, and concerns eased over China’s recent regulatory crackdown. Bipartisan Senators are putting the finishing touches on a $1T infrastructure package. In a 2,702-page measure, that is likely to pass before the end of the week includes $550B in new spending over five years, on top of $450B in previously approved funds. $110B would be allocated for roads and bridges, $66B for rail, $55B for water and wastewater infrastructure and $39B for public transit. Virus concerns remain as Dr. Anthony Fauci said over the weekend that the U.S. will not lock down again to curb COVID-19 but “things are going to get worse” as Delta fuels a surge in cases. U.S. stocks fell on Friday amid a slide in Amazon shares, but the S&P 500 notched its sixth straight positive month (longest streak since 2018). For the month, the S&P rose 2.28%, the Dow added 1.26%, and the Nasdaq gained 1.16%. For the week, though, the S&P fell 0.37%, the Dow lost 0.36%, and the Nasdaq shed 1.11%. In Asian markets, The Nikkei Index surged nearly 500-points to 27,781, the Shanghai Index jumped 66 points (about 2%) to settle at 3,464 and the Hang Seng Index climbed 275 points to 26,235. In Europe, the German DAX is little changed at 15,550, while the FTSE 100 rises 60 points to around the 7,100 level. Bitcoin prices are back below $40K after touching more than 2-month highs this weekend, while Ethereum prices jump; oil prices slide.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -23.89 points, or 0.54%, to 4,395.26

·     The Dow Jones Industrial Average fell -149.06 points, or 0.42%, to 34,935.47

·     The Nasdaq Composite slumped -105.59 points, or 0.71%, to 14,672.68

·     The Russell 2000 Index declined -13.78 points, or 0.62% to 2,226.25

Events Calendar for Today

·     9:45 AM ET         Markit Manufacturing PMI, July

·     10:00 AM ET      Construction Spending for June…est. 0.4%

·     10:00 AM ET      ISM Manufacturing PMI for July…est. 60.9

Earnings Calendar:

·     Earnings Before the Open: ARCB, CNA, DSPG, GPN, GPRE, HAYW, JELD, L, ON, RMBL, RMBS, TCPC, TGTX, TKR

·     Earnings After the Close: ACHC, ADUS, ANET, AWK, BCC, BRKR, BRX, BXMT, CLR, COLM, CVI, EMN, EVER, FANG, FRPT, GAIA, HLIT, HMN, IPI, IVAC, KMT, LEG, MG, MOS, O, OGS, OHI, OTTR, PLOW, PXD, RARE, REYN, RIG, SANM, SBAC, SPG, SPNE, TA, TREX, TTI, TTWO, UAN, UCTT, UIS, UNVR, VNO, VNOM, VRNZS, WMB, WWD, ZI

Other Key Events:

·     China NBS Manufacturing PMI for July

World News

·     Bipartisan Senators are putting the finishing touches on a $1T infrastructure package. In a 2,702-page measure, that is likely to pass before the end of the week includes $550B in new spending over five years, on top of $450B in previously approved funds. $110B would be allocated for roads and bridges, $66B for rail, $55B for water and wastewater infrastructure and $39B for public transit

·     China’s securities regulator called for talks with its American counterpart after the U.S. Securities and Exchange Commission halted the initial public offerings of Chinese companies. The China Securities Regulatory Commission is seeking to step up communication with the SEC to find a suitable resolution, it said on Sunday

·     A pandemic-related U.S. government ban on residential evictions expired at midnight on Saturday, putting millions of American renters at risk of being forced from their homes. On Friday, the U.S. House of Representatives adjourned without reviewing the tenant protections after a Republican congressman blocked a bid to extend it by unanimous consent until Oct. 18.

·     Bitcoin hit its highest level since mid-May and continues to build momentum, rising for an 11th day in the past 12 and traded up to $42,606, its highest since May 18.

Sector News Breakdown

Consumer

·     Li Auto (LI) delivered 8,589 Li ONEs in July 2021, up 11.4% M/M and 251.3% Y/Y and again hitting again an all-time high; YTD, total deliveries are 38,743, bringing cumulative deliveries of Li ONE to 72,340 since its market debut.

·     NIO (NIO) said it delivered 7,931 vehicles in July 2021, down 1.8% M/M, up a strong 124.5% Y/Y; YTD, cumulative deliveries of the ES8, ES6 and EC6 reached 125,528 vehicles

·     Xpeng (XPEV) said 8,040 smart EVs delivered in July, a 228% increase y/y and a 22% jump from June; has delivered 38,778 vehicles year-to-date, a 388% increase year-over-year

·     Bloomin’ Brands (BLMN) upgraded to Buy from Hold at Deutsche Bank

·     Jeld-Wen (JELD) Q2 adj EPS $0.59 vs. est. $0.61; Q2 revs $1.25B vs. est. $1.16B; raises FY21 revenue view to up 12%-14% from up 8%-11%; sees FY21 adjusted EBITDA $510M-$535M

Financials

·     Square Inc (SQ) will purchase buy now, pay later (BNPL) firm Afterpay Ltd for about $29 billion in Australia’s biggest-ever buyout, creating an online payments giant to tap into explosive growth in the niche payments sector. Afterpay shareholders will get 0.375 shares of Square class A stock for every share they own, implying a price of about A$126.21 per share

·     Square (SQ) Q2 adj EPS $0.66 vs. est. $0.30; Q2 revs of $4.68B missed the $5.05B est. and was down from $5.06B in Q1; Q2 gross payment volume of $42.8B, up from $33.1B in Q1 and $22.8B in Q2 2020; Cash App reached 40M monthly transacting active customers in June; ex: Bitcoin, total net revenue was $1.96B vs. $1.55B in Q1 and up 87% Y/Y

·     CNA Financial (CNA) Q2 core EPS $1.25 vs. est. $1.11; Q2 book value per share $46.69.

Healthcare

·     Glaxo (GSK) turnaround could be accelerated, according to Barron’s saying there is an opportunity for Glaxo to break out of its slump as it is spinning off the consumer-healthcare joint venture it created with Pfizer (PFE) in 2019. Glaxo has signaled those plans for years, but there’s something new now, namely the involvement of activist hedge fund Elliott Management

·     Pfizer (PFE) raised the price of its COVID-19 vaccine by more than a quarter and Moderna (MRNA) by more than a tenth in the latest EU supply contracts as Europe battled supply disruptions and concerns about side effects from rival products – Reuters

·     Exicure (XCUR) entering an exclusive agreement with Ipsen to research, develop, and commercialize novel Spherical Nucleic Acids as potential investigational treatments for Huntington’s disease and Angelman syndrome.

Industrials & Materials

·     Parker-Hannifin (PH) reached an agreement to buy British engineer Meggitt for 6.3 billion pounds ($8.8 billion) in cash to boost its aerospace operations

·     Canadian National Railway’s (CNI) more than $30B planned purchase of Kansas City Southern (KSU) is more likely to be rejected by the U.S. regulator that is deciding on the fate of the deal, according to a survey. The U.S. Surface Transportation Board could any time decide if it will allow the voting trust structure that Canadian National is asking for approval of the deal. Rival bidder Canadian Pacific (CP), which originally struck a deal with Kansas City Southern, won approval from the STB for the voting trust in May – Seeking Alpha

·     Atlas Technical (ATCX) is a cheap way to play infrastructure spending, according to Barron’s saying U.S. lawmakers appear to be on the cusp of passing a massive and long-awaited infrastructure-investment bill, totaling some $1 trillion. The legislation should be a boost to businesses like Vulcan Materials (VMC) and Martin Marietta Materials (MLM), which make concrete and asphalt; Caterpillar (CAT) and Terex (TEX), which make construction equipment; and United Rentals (URI), which rents the machinery.

·     Jacobs Engineering Group (J), Hubbell (HUBB), Insteel Industries (IIIN), and Union Pacific (UNP) are recommended by a research analyst at exchange-traded-fund sponsor Global X. Union Pacific stock is up just 5% this year, and could be boosted by robust raw materials and commodity volumes. Electric-vehicle-charger component providers Amphenol (APH), TE Connectivity (TEL) and Sensata Technologies Holding (ST) could also be winners, (more Barron’s)

Technology, Media & Telecom

·     Zoom Video (ZM) agreed to pay $85 million and bolster its security practices to settle a lawsuit claiming it violated users’ privacy rights by sharing personal data with Facebook (FB), Google (GOOGL) and LinkedIn (MSFT), and letting hackers disrupt Zoom meetings

·     SolarWinds (SWI) to pay one-time cash dividend $1.50/share