Early Look

Monday, May 17, 2021

Futures	Up/Down	%	Last
Dow	-125.00	0.36%	34,195
S&P 500	-14.25	0.34%	4,154
Nasdaq	-51.50	0.38%	13,336

 

 

U.S. stock futures are looking lower, pulling back after strong returns Friday (but declines for the week) as investors look to a big week of retail earnings (WMT, TGT, HD, LOW) and more Fed speakers. Stocks closed Friday near the highs (all eleven S&P sectors finished higher), rallying all day to provide a strong finale to a week filled by escalating fears of inflation, but still ended the week lower. For the week, the S&P 500 lost 1.4% and the Nasdaq dropped 2.3%, while the Dow Transports snapped its 14-week record winning streak. Even after Friday’s gains, the S&P 500 suffered its worst week since late February, with investors fretting about surging prices, despite assurances from the U.S. Federal Reserve that near-term spikes will be temporary. Wall Street will be paying close attention this week to minutes from the Fed’s meeting in April for the central bank’s thoughts on price pressures and hints on when it might begin pulling back support. Treasury yields extended declines, falling to 1.627% on Monday. In Asian markets, The Nikkei Index fell -259 points to 27,824, the Shanghai Index rose 27 points to 3,517 and the Hang Seng Index rose 166 points to 28,194. In Europe, the German DAX is down about -50 points to 15,465, while the FTSE 100 is down over -40 points to drop just under the 7,000 level. Coming into the week, the Nasdaq Composite has slipped 4-straight weeks while crypto currencies are pressured after a Twitter war broke out over the weekend between Musk and bitcoin fans, with SLA CEO Musk suggesting Sunday.

Market Closing Prices Yesterday

·     The S&P 500 Index spiked 61.35 points, or 1.49%, to 4,173.85

·     The Dow Jones Industrial Average rose 360.68 points, or 1.06%, to 34,382.13

·     The Nasdaq Composite surged 304.99 points, or 2.32%, to 13,429.98

·     The Russell 2000 Index advanced 53.68 points, or 2.47% to 2,224.63

 

Events Calendar for Today

·     8:30 AM EST      Empire Manufacturing Index for May

·     10:00 AM EST    NAHB Housing Market Index for May

·     4:00 PM EST       Net Long-term TIC Flows for March

 

Earnings Calendar:

·     Earnings Before the Open: ACTG, ALT, CLOV, COMS, IBIO, JAGX, LORL, MARK, ONDS, PAVM, PCT, PIRS, PRPL, RAIL, RIDE, RMBL, SRAX, TWNK, VEI

·     Earnings After the Close: ACRX, ADMP, AYTU, BMTX, CLSD, CWBR, DM, FSR, GOEV, HSDT, INVO, LUNA, MILE, OCX, ONTX, PCYG, REED, RIOT, RKDA, RMTI, VERO, XL, XONE, XSPA

 

Other Key Events:

·     Goldman Sachs 6th Annual Credit & Leveraged Finance Virtual Conference, 5/17

·     Piper Ohio Community Bank Field Trip (virtual), 5/17-5/18

·     RBC Capital Automotive, Industrials & Transportation Conference (virtual), 5/17-5/19

·     Virtual American Thoracic Society Conference, 5/14-5/19

·     Virtual Display Week 2021, 5/17-5/21

 

 

Macro	Up/Down	Last
Nymex	-0.07	65.30
Brent	-0.06	68.65
Gold	6.50	1,850.00
EUR/USD	0.0023	1.2164
JPY/USD	-0.21	109.14
10-Year Note	-0.01	1.625%

 

 

Global News

·     Bitcoin prices drop around 8% to $45K (off earlier lows around $42,200), along with a plunge in other crypto currencies ($ETH Ethereum down over 12% at $3,475 and Bitcoin cash $BCH down over 12% to around $1,100) after a Twitter war broke out over the weekend between Musk and bitcoin fans, with TSLA CEO Musk suggesting Sunday that Tesla has already or intends to unload its $1.5B in bitcoin holdings – Musk clarified comments overnight in a tweet saying he has not sold any Bitcoin

·     China will extend a tariff exemption for 79 products imported from the United States that is due to expire on May 18, the finance ministry said; products include rare earth ore, gold ore, and silver ore and concentrate, an attached list shows; exemption will be extended until Dec. 25, it said

 

Sector News Breakdown

Consumer

·     At Home Group Inc. (HOME) top shareholder CAS Investments Partners plans to oppose a deal to take the retailer private because it says the $36 per share sale price is too low, the WSJ reported. CAS Investment Partners LLC, which owns around 17% of the company’s shares, wrote in the letter Sunday that it plans to vote against a roughly $2.4 billion sale to private-equity firm Hellman & Friedman LLC https://on.wsj.com/3tSS59B

·     Used cars and online car dealers mentioned favorably in Barron’s saying given the ongoing shortage of semiconductor components, there’s suddenly a rip-roaring bull market in used cars, and with dealers not able to keep enough supply, car shoppers are considering other options. That’s good news for a trio of players in the emerging online used-car business-in order by size, Carvana (CVNA), Vroom (VRM), and Shift Technologies (SFT)

·     Whirlpool (WHR) positive mention in Barron’s calling the stock the way to play home appliances demand while noting limited supply has allowed the global appliance leader to pass along price increases in steel and other raw materials to its customers (notes is increasing prices 5% to 12% across the board)

 

Energy

·      The Colonial Pipeline said it has returned its entire 5,500-mile system to normal operations, although widespread fuel shortages remain along the Atlantic coast. The pipeline is now servicing all markets, including Texas, Louisiana, Mississippi, Alabama, Tennessee, Georgia, South and North Carolina, Virginia, Maryland, D.C., Delaware, Pennsylvania and New Jersey.

·     DuPont (DD) mentioned positively in Barron’s saying the stock looks like a buy/smart play on the coming phase of the economic recovery as it begins to play catch-up

·     Cummins (CMI) upgraded to Buy from Neutral at Bank America

 

Financials

·     Capital One Financial (COF) April domestic credit card net charge-offs rate 2.40 % vs 2.41% in March; 30+ day performing delinquencies rate for domestic credit card 1.92% at April end vs 2.24% at March end

·     Clarivate plc (CLVT) inks an agreement to acquire ProQuest, a global software and analytics company from Cambridge Information; the purchase price is ~$5.3 billion ($4.0B cash and $1.3B equity), including refinancing of ProQuest debt. https://bit.ly/3yjBq2i

·     Discover Financial (DFS) reported charge-offs for April of 2.55% vs. 3.98% YoY; April delinquencies 1.69% vs. 2.56% YoY and April total card loans $67.0 billion, -5.6% YoY

·     KKR (KKR) is nearing a deal to acquire ERM Group from its Canadian owners in a deal that potentially values the sustainability consultancy at as much as $3B – Bloomberg reported

·     Realogy (RLGY) shares look cheap according to Barron’s saying the owner of familiar brands like Century 21, Coldwell Banker, and Corcoran, has rebounded from pandemic lows but still trades at just a third of its all-time high,

·     Blackstone Mortgage Trust (BXMT) and KKR Real Estate Finance Trust (KREF) will benefit from the reopening, Barron’s said. Blackstone has a number of loans in Hawaii, which will see pent-up travel demand. While neither company offers much growth potential, they each yield about 8% and should be able to maintain or lift the distributions as commercial real estate improves.

 

Healthcare

·     PerkinElmer (PKI) will acquire and Immunodiagnostic Systems Holdings in an all cash offer of ~$155M (£110M).

 

Media & Telecom

·     AT&T Inc. (T) is in talks to combine its WarnerMedia division with Discovery Inc. (DISCA), according to people familiar with the matter, as pressure on the traditional entertainment business mounts. The talks, which likely value the AT&T business at well over $50 billion with debt, could lead to an agreement by Monday, though the deal could still fall apart. (AT&T had bought Time Warner Inc. in 2018 for around $81 billion) – https://on.wsj.com/3fkWo8B

·     Disneyland Paris (DIS) announced on the park’s website and social media to re-open on June 17, as French bars, restaurants and tourism sites gradually resume their operations

 

Technology

·     Online marketplace Etsy (ETSY) said its June-quarter revenue growth would slow to 15% to 25% on a year-over-year basis, which would mean a nearly 10% drop from the March quarter. Zoom (ZM) shares are down by half from their peak, but the stock still trades 22 times estimated current year sales, versus Microsoft’s (MSFT) 11 times multiple.

·     HP Inc. (HPQ), which saw its PC sales spike during the pandemic, is far cheaper than most other tech stocks. Its printer business should benefit as offices reopen, and the company continues to buy back shares “aggressively,” Barron’s says.

·     Online shopping accelerated in the past year, and some will likely stick. Chewy (CHWY) is a cheaper e-commerce play than Shopify (SHOP), as the pet-food seller trades for only three times current year sales, says Barron’s.

·     A safer and cheaper way to bet on the cloud is to buy the big companies: Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL). Analysts have begun cutting price targets for cloud-data stocks, as investors bid up companies such as Okta (OKTA), Datadog (DDOG), Snowflake (SNOW) and e-signature company DocuSign (DOCU).