Market Review: August 11, 2021

Closing Recap

Wednesday, August 11, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks finish mixed again in similar trading action to Tuesday as industrials, financials, and materials (along with defensive utilities) helped lift the benchmark S&P 500 and Dow Jones Industrial Average to fresh record highs, while the Nasdaq Composite dropped behind weakness in technology and biotech names. Industrial outperformance led behind the Senate passing a $1 trillion infrastructure plan yesterday, voting to approve the bill that includes $550B in new funding, and it will now move to the House. Early this morning the Senate Democrats passed the $3.5 trillion budget framework. Inflation fears eased after the CPI report failed to boost technology shares with the Nasdaq finishing lower (July PPI report tomorrow morning).

·     Bond asset purchases: Two Federal Reserve officials said Wednesday it is time for the central bank to start reversing the easy money policies put in place to support the economy after the coronavirus pandemic hit the U.S. in March 2020. Kansas City Fed President Esther George said the central bank has made enough progress toward its objectives of boosting growth and employment to end its $120 billion in monthly purchases of Treasury and mortgage securities. Separately, Dallas Fed President Robert Kaplan argued that the central bank should begin reducing the pace of asset purchases by October.

·     One of the big stories (that didn’t get a lot of press) was the 10-year Treasury auction which saw record high indirect bidders and record low dealers in strongest auction on record. Treasury yields tumbled following a strong auction as the U.S. treasury sold $41B in 10-year notes at a yield of 1.34%, more than 3bps below the 1.372% when-issued prior, at a high bid-to-cover of 2.65, showing high demand for the notes (10-year tumbled 6 bps after the auction).

·     Stock/sector movers: COIN rises to its highest since May 12 after Q2 trading volume, revenue, adj EBITDA, users all beat consensus and Bitcoin, Ethereum extend their recent gains; Industrials, Materials and Utilities help keep the S&P higher while tech underperforms (S&P 500 and Dow touch fresh ATH); in FinTech, UPST surges after its blowout quarter/guidance, LPRO spikes on its strong quarterly results; FUBO, U, MCFE, WEN among other stocks seeing outsized gains after their earnings beats; airlines held up well despite LUV warning it may not be profitable in Q3, and now sees Q3 revs to be down 15% to 20% vs. 2019; SPCE declines after Morgan Stanley downgrades to UW ahead of its heavy maintenance period with no flights; shares are now down over 44% after Richard Branson’s flight 1 month ago.


Economic Data:

·     Consumer Price Index (CPI) for July shows headline reading MoM rise 0.5% vs. est. +0.5%, while on a YoY basis, headline CPI rises 5.4% vs. est. 5.3%. On the core reading (excludes food & energy), Mom CPI rises 0.3% vs. est. 0.5% and on a YoY basis rises 4.3% vs. est. 4.3%.

·     The U.S. government posted a July budget deficit of $302 billion, a record for that month, as COVID-19 relief spending stayed elevated while receipts returned to a more normal pace after a delayed July tax deadline last year. The Treasury Department said the July deficit compared to a year-earlier $63 billion budget gap. Receipts for the month totaled $262 billion, down 54% percent from July 2020, while outlays were $564 billion, down 10% YoY.

·     More calls from the Fed for tapering as Dallas Fed President Rob Kaplan said Wednesday that he will press his colleagues at the central bank to announce a plan to taper bond purchases at its next meeting in late September. In an interview on CNBC, Kaplan said he wanted the slowdown in purchases to start in October and last until June. Kaplan has been pressing his colleagues to start to pull back on its $120 billion in monthly bond and mortgage-related securities since late April. Asked if he had a lot of support from his colleagues for his position, Kaplan said there was a "range of views" but the committee is in a much better place than it was two months.



·     Gold prices post the best daily gain in about 2-weeks, rising 1.2% or $21.60 to settle at $1,753.30 an ounce, getting a boost as Treasury yields tumble following a strong 10-year auction as the July CPI data came in better than feared (higher prices, but in-line with estimates). Oil prices rebounded from earlier losses, as WTI crude rises $0.96 or 1.41% to settle at $69.25 per barrel (off lows $66.67) despite mostly bearish weekly oil inventory data. Prices dropped initially after reports that the White House will call on OPEC and its oil-producing allies to boost oil production. However, midday, the White House said this afternoon that it has not asked U.S. oil producers to increase output, which helped push prices higher.


Currencies & Treasuries

·     The U.S. dollar was on the defensive today following a “tamer” CPI inflation reading than economists had forecast, pulling back from multi-week highs, with some pressure taken off the Fed to announce tapering as soon as September. That did not change the tune of some Fed members which suggested tapering should happen sooner. Treasury yields tumbled on strong auction results. The U.S. Treasury sold $41B in 10-year notes at a yield of 1.34% vs. 1.372% when issued prior, with the bid-to-cover (demand) at 2.65 and indirect bidders awarded 77.25% and directs 13.12%. treasury yields tumbled immediately following the 10-yr auction. The CPI inflation data also kept Treasury yields lower (ahead of PPI tomorrow).






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; POSH Q2 GMV and revenues modestly ahead of estimates while Q3 revenue largely below estimates and warned that its marketing efforts were taking a hit from Apple Inc’s new privacy controls over digital advertising tracking; GOOS adjusted EPS of -C$0.45, beats by C$0.11, and adjusted EBIT of -C$60.2M from -$C39.9M in the prior year but shares fell as gross margins fell sequentially to 54.5% from 66.4% in the company’s prior quarter.

·     Auto sector; HYRE tumbles as Q2 rev up 62% YoY to $9.1M, above views, but posts larger EPS loss (-$0.36) and Q2 gross margin of 8.9% well below Davidson estimate of 43.5% on higher insurance claim expenses (downgraded at Ladenburg); SFT handily exceeded estimates, with e-commerce units sold and GPU both demonstrating strength. E-commerce units sold came in at 5,871, up 222% y/y and beating our 5,150 estimate. GPU was $2,809 and rose sequentially by over $1,130; CHPT acquires Amsterdam-based ViriCiti, which provides vehicle electrification solutions, for ~75M euros ($87.84M)

·     Consumer Staples; WW shares tumble on top and bottom-line miss (Q2 EPS $0.12 vs. est. $0.65; Q2 revs $311.4M vs. est. $337M) and lower guidance (sees year EPS $1.10-$1.25 below est. $2.00) saying end of period subscribers in Q2 2021 were down 1.9%; GO shares slide after EPS of 23c missed consensus by 1c, comps of -10% vs. est. -10.6% but QTD (6%) and outlook for 3Q & 4Q down mid-single digit was below expectations (downgraded at MKM); ACI was upgraded to equal-weight at Barclay’s and up tgt to $27 from $19 on mgmt changes

·     Restaurants; WEN Q2 adj EPS $0.27 tops $0.18 estimate on better sales $493.3M as restaurant margin 20.3% vs. 14.4% y/y and Q2 global comp sales above views: +17.4% vs. est. +15.2% and U.S. comp sales rise +16.1% vs. est. +13.7% and raises year outlook; GTIM posts rise in Q3 profit to $1.04 per share from $0.02 in the previous year, thanks to debt extinguishment as revs jump 39.4% yoy as sales for Bad Daddy’s restaurants rise ~64% and issues upbeat guidance (net profit between $16.5M-$17M) for FY21; ARCO posts Q2 revenues that topped consensus



·     Inventory data: the weekly API report showed that crude inventories fell 816,000 barrels last week, gasoline inventories fell 1.11M barrels, ahead of EIA weekly data later this morning; Crude oil and gasoline stocks fell in the most recent week while distillate inventories were higher, the U.S. Energy Information Administration said. Crude inventories fell by -447,000 barrels in the latest week, less than the expected draw of -1.3M barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 325,000 barrels in the last week, EIA said.

·     E&P and Majors; CHK to acquire VEI for $614.2Min cash and stock, as Vine shareholders will receive 0.2486 shares of Chesapeake and $1.20 in cash for each unit held, implying a per-share value of $15 in a total deal valued at about $2.2B; energy stocks finished the day mixed following mixed messages in the space as the White House refuted earlier reports, saying they had not asked OPEC oil producers to increase output.

·     Utilities & Solar; NEE announced that Florida Power & Light (FPL) had filed a settlement agreement in the ongoing rate case before the Florida Public Service Commission (FL PSC) for the combined FPL and Gulf Power rate case in that state. Hearings in the case had been set to begin on 8/17



·     Bank & Asset managers; IVZ preliminary month-end assets under management (AUM) of $1,528.4B, an increase of 0.2% versus previous month-end; TFC said its wholly owned bank subsidiary, Truist Bank, has signed a definitive agreement to acquire Service Finance Company, LLC, a leading national provider of point-of-sale (POS) financing solutions for the home improvement industry, for $2 billion

·     Bitcoin, FinTech & Payments; COIN Q2 EPS of $3.45 topped ests of $2.33, as trading volumes surge through the quarter on growing adoption of digital assets (trading volume in Q2 was $462B, an increase of 38% compared to Q1) – said sees lower volumes in Q3 from Q2; RIOT said in July 2021 produced 444 Bitcoin, an increase of approximately 771% over its July 2020 production of 51 Bitcoin; as of July 31, 2021, riot held approximately 2,687 Bitcoin; MOGO Q2 revenue growth of 29% to C$13.7M and said it expects growth of 100% to 110% in subscription and services revenue in Q4 2021 (above prior view); EPAY 4Q core EPS $0.27 vs est. $0.26 on revs $122.1Mm vs est. $122.9Mm, subscription revs +15% to $101Mm

·     Consumer Finance; UPST delivered impressive beats across revenues & margins and raised its FY21 revenue guide to +321% or $750M vs. Street 159% through robust loan volume growth (+1,605% to $2.8B) and improving conversion rates on requests (24% vs. 9% y/y) – upgraded at Citigroup; LPRO reported Q2 revenue of $61.1M, well above the $49.2M estimate as it more than doubled the income from its program fees (EPS beat $0.60 vs est. $0.17); FLT slides after the FTC files a new complaint to keep its case against the fuel card marketer and CEO Clarke going.



·     Pharma movers; PRGO slides after Q2 profit and revenue came in below consensus, hurt by lower sales of over-the-counter drugs in the U.S. citing a weak cough/cold season and also sees year EPS at the lower end of its forecast range of $2.50-$2.70 (est. $2.58); LTRN said the FDA granted orphan-drug designation to LP-184 for the treatment of pancreatic cancer; ALT posts a bigger-than-expected Q2 loss, hurt by an $8.1M impairment charge related to commercial scale manufacturing of its COVID-19 vaccine (scrapped plans in June)

·     Biotech movers; FGEN said the FDA has issued a complete response letter regarding the new drug application (NDA) for roxadustat for the treatment of anemia of chronic kidney disease (CKD); BCRX has withdrawn its public offering of common stock, previously announced on August 9; MRVI said it sees 2021 profit in the range of $1.30-$1.36 per share, above estimates of $1.16 after posted better-than-expected Q2 profit, revenue; IMAB announces positive interim data from its U.S. phase 2/3 study of plonmarlimab (also known as TJM2 or TJ003234) for the treatment of cytokine release syndrome (CRS) in patients with severe COVID-19; vaccine names slipped today; MRNA and PFE shares fell after a recently published non-peer reviewed manuscript on the preprint server MedRxiv, showed slightly lower vaccine efficacy vs the Delta variant, effectiveness against associated hospitalizations remains high

·     Healthcare Services; in hospitals, Truist said they remain bullish as reiterate Buy and $290 tgt on HCA following a call with management that focused on recent COVID utilization, acuity/payer mix, labor trends, and attractive growth opportunities; HCAT 4.245M share Secondary priced at $53.00


Industrials & Materials

·     Aerospace & Defense; SPCE downgraded to underweight at Morgan Stanley, saying its shares may move down toward a long-term valuation of $25 as it completes a catalyst- heavy period including successful launch and moves into a prolonged period of no flights; LHX downgraded at Morgan Stanley after 22% rise YTD saying risk/reward appears balanced; TDG confirms it had approached Meggitt (MEGFF) about acquisition for cash, though there can be no certainty an offer will be made

·     Transports; airlines in focus after LUV warned it may not be profitable in Q3, as the more infectious Delta variant of the coronavirus hits bookings – now sees Q3 revs to be down 15% to 20% vs. 2019, a cut of about three to four points from its prior outlook issued three weeks ago; DHT upgraded to Buy with $7 tgt at Stifel saying it has proven to be an exceptional operator, has a best in class balance sheet, and with shares having sold off recently we finally believe it represents an attractive entry point


Technology, Media & Telecom

·     Internet; WIX shares fell on weak guidance – Q2 EPS loss (-$0.28) vs. est. loss (-$0.37); Q2 revs $316.41M vs. est. $311.66M; Q2 total collections were $342.9M, up 29% y/y; online commerce accounted for 35% of Q2 total collections; sees Q3 revenue $311M-$317M vs. est. $325.32M; commentary weighed on shares of SHOP, BIGC as well; large cap Internet names also saw weakness with AMZN dropping below its $3,300 level near 200-day MA support, along with weakness in PINS, FB, NFLX and TWTR

·     Software movers; MCFE reported better than expected results, as 2Q revenue growth of 22% easily exceeded our and the Street’s 13-14% growth forecast while adjusted EBITDA and operating margins, CFFO, and uFCF all showed good upside; Unity (U) delivered better than expected 2Q results with sales 13% above consensus and significantly narrowed operating losses while also raised 2021 annual guidance to account for the strong 2Q results; PUBM reported strong 2Q21 results, with revenue and EBITDA above expectations, driven by mobile and video strength (+108% y/y combined). Guidance for the remainder of 2021 was also strong, implying robust follow-through for the rest of the year; TUFN posted Q2 EPS beat and revs $25.7M vs. est. $23.1M, but guides Q3 revs $23.5-27.5M below consensus of $27.96M; SPLK upgraded to Buy at UBS as encouraged by the AWS hires, the Silver Lake investment, the likely return to out-period guidance and stable industry checks; NLOK agreed to merge with the antivirus software provider Avast in a stock and cash deal valued at up to $8.6 billion ; ONTF shares tumble after mixed Q2 results and revised 2H guidance of 5% y/y (vs. 12% prior estimate) was disappointing to investors, as Canaccord downgraded to Hold

·     Media & Telecom movers; FUBO rises on results as Q2 revenue up 196% to $130.9M tops the $118.3M estimate and said net subscriber additions during Q2 increased by ~91,000 vs a decline of ~1,000 YoY and issued better year rev outlook of $560M-$570M vs. est. $530M; TME was downgraded to neutral at JPMorgan and tgt cut to 12 stating the weakening financial outlook on competition and investment

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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.