Early Look

Friday, July 9, 2021

Stock futures in the U.S. are looking higher, rebounding after yesterday’s broad losses that were fueled by worries global growth could be stalled by the spread of COVID-19 variants, reaction to Wednesday’s FOMC minutes, and an unexpected increase in weekly jobless claims. The yield on the benchmark 10-year Treasury is looking higher, rising to 1.34% (off 5-month lows of 1.255 on Thursday), hoping to snap its eight-day losing streak. In Asian markets, The Nikkei Index dropped -177 points to 27,940, the Shanghai Index slipped 1-point to 3,524, and the Hang Seng Index rebounded 191 points to 27,344. In Europe, the German DAX is higher by 130 points at 15,550, while the FTSE 100 rises 50 points to 7,085. A quiet day of economic data with only one small data point as investors prepare for the onslaught of earnings season kicking off next week, led by the large cap banks including JPM, BAC, WFC and Citi. The reflation trade has been hit hard this week amid indications that labor-market and raw-materials shortages were hampering growth in major economies around the world. European stock markets pushed higher after opening as the UK’s economic recovery slowed substantially in May. UK gross domestic product (GDP) increased just 0.8% over the month, falling short of the 1.7% expected by economists. It marked a significant slowdown compared to April’s 2.3% gain.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -37.31 points, or 0.86%, to 4,3520.82

·     The Dow Jones Industrial Average fell -259.86 points, or 0.75%, to 34,421.93

·     The Nasdaq Composite slumped -105.28 1.42 points, or 0.72%, to 14,559.78

·     The Russell 2000 Index declined -21.17 points, or 0.94% to 2,231.68

Events Calendar for Today

·     10:00 AM ET      Wholesale Inventories for May

·     1:00 PM EST       Baker Hughes Weekly rig count data

World News

·     The Biden administration is set as early as Friday to add more than 10 Chinese companies to its economic blacklist over alleged human rights abuses and high-tech surveillance in Xinjiang, two sources told Reuters. The U.S. Commerce Department action will follow its announcement last month adding five other companies to the blacklist.

·     The People’s Bank of China said it would lower the amount of funds banks have to set aside at the central bank, unleashing $154 billion worth of liquidity into the banking system to guide lenders to step up loans to the nation’s small businesses; PBOC said it would cut the reserve requirement ratio, or RRR, by 0.5 percentage point on July 15, the first cut since April 2020

Sector News Breakdown

Consumer

·     Costco (COST) June U.S. comp sales ex-gas, FX +7.8%, vs. est. +7.2%; net sales of $18.92 bln for retail month of June, five weeks ended July 4, 2021, an increase of 16.9%; June total co comp store sales +14.1% vs. est. 11.1%

·     General Motors (GM) initiated Outperform and $85 tgt at Wedbush

·     KB Home (KBH) Board of Directors authorized an expansion of the Company’s stock repurchase program from approximately two million shares to up to five million shares of the Company’s common stock

·     Levi Strauss (LEVI) 2Q adj EPS $0.23 vs. est. $0.09 on revs $1.3B vs. est. $1.21B, qtrly adj gr margin 58.2% vs. est. 55.7%, qtrly digital revs +75%; guides 3Q net revs above 2019 levels; currently 92% of doors open; guides FY adj EPS $1.29-1.33 vs. est. $1.15; says revenues in most markets are recovering faster than anticipated

·     PriceSmart (PSMT) 3Q EPS $0.73 vs. est. $0.65 on revs $895.3Mm vs. est. $848.4Mm, net merchandise sales +11.6%, T12M membership renewal rate 87.6%

·     John B. Sanfilippo & Son (JBSS) announces $2.30 per share special dividend

·     Philip Morris (PM) has agreed to buy U.K. pharma company Vectura, valuing it at GBP1.05 billion ($1.44 billion). Vectura’s board agreed to a GBP958 million ($1.36 billion) offer from Carlyle in May but the company’s directors said on Friday they had withdrawn their recommendation

Energy, Industrials and Materials

·     Greenbrier (GBX) Q3 adj EPS $0.69 vs. est. $0.13; Q3 revs $450.14M vs. est. $489.44M; Q3 new railcar orders for 3,800 units valued at $400M and deliveries of 3,300 units, resulted in a 1.2x book-to-bill; says expects Q4 to be strongest performance of the year

·     NOV Inc. (NOV) upgraded to Equal Weight from Underweight at Morgan Stanley and downgraded Core Laboratories (CLB) to Equal Weight from Overweight at Mor

·     Matson Inc. (MATX) issues updated guidance; sees Q2 net income and diluted eps to be $156.9-$163.6M and $3.58-$3.73, respectively; expects Q2 operating income for logistics to be $12M-$13M vs. $8.9 mln in 2q20

·     Terex (TEX) upgraded to Buy from Hold at Deutsche Bank

Financials

·     Circle Internet Financial Inc., one of the biggest companies in the cryptocurrency sector, is merging with a special-purpose acquisition company to go public in a deal that values the company at $4.5 billion. Circle said it is merging with Concord Acquisition Corp., a SPAC

·     Discover Financial Services (DFS) upgraded to Buy from Neutral with a price target of $150, up from $101 at Citigroup

·     Stripe has hired a law firm to help it prepare for its debut as a publicly traded company, Reuters reports, citing people familiar with the matter. The 11-year-old company’s March fundraising gave it a value of $95B

·     Riot Blockchain (RIOT) said in June 2021, it produced 243 BTC, an increase of approximately 406% over its June 2020 production of 48 BTC. Year to date through June 2021, the company produced a total of 1,167 BTC, an increase of approximately 130%

Healthcare

·     Accolade (ACCD) Q1 revs $59.5M vs. est. $55.7M; sees FY 22 res $300-$305M vs. est. $277.9M

·     Pfizer (PFE) and BioNTech (BNTX) said they are working on a COVID-19 booster shot meant to target the delta variant as concerns rise about the transmissible strain of the virus,

·     Transcode Therapeutics (RNAZ) 6.25M share IPO priced at $4.00

Technology, Media & Telecom

·     Cirrus Logic (CRUS) announced that it has entered into an agreement to acquire California-based Lion Semiconductor for $335M in cash; Lion is expected to be immediately accretive to GAAP and non-GAAP earnings per share

·     Duck Creek Technologies (DCT) 3Q adj EPS $0.03 vs. est. ($0.01) on revs $67.9Mm vs. est. $63.8Mm; guides 4Q revs $68.5-$69.5Mm vs. est. $67.5Mm; sees Q4 adjusted EBITDA $3.5M-$4.5M

·     Taiwan Semiconductor (TSM) reports revenue growth of 22.8% to NT$148.47B for the month of June

·     ChipMOS Technologies (IMOS) reports Q2 revenues rose 28.6% on a Y/Y basis to $250.2 million (+8% M/M) vs. a consensus of $248.84 million.