Market Review: January 14, 2021

Closing Recap

Thursday, January 14, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Markets slipped in the final hour of trading, but major averages still recorded intraday all-time highs for the Dow Industrials, Dow Transports, Nasdaq Composite, Russell 2000 Smallcaps and the Philadelphia Semiconductor index (SOX) in what as another strong rally and rotation into cyclicals and out of defensive (Staples, Utilities). Markets await confirmation and details of the additional stimulus relief bill from President elect-Biden expected tonight at 7:15 PM EST. Biden is expected to unveil a major Covid-19 relief package with a price tag in the ballpark of $2 trillion according to reports. Investors have piled into global equities over the last few months on stimulus news (and hopes for more), upbeat earnings/guidance ahead of earnings season, a continuing dovish and accommodative Fed and ongoing rollout of the vaccine. At the same time, investors have ignored the slowing economic data (jobs), soaring stock valuations and multiples, surging coronavirus cases and political drama in Washington. The U.S. dollar erased earlier gains after Fed Chairman Powell said they are not hiking rates anytime soon (not exactly a surprising revelation – but the buck did reverse following comments). Momentum name still leading with IPO’s surging, SPAC’s still all the rage and Bitcoin grabbing every headline.

·     Sector movers; Semiconductors the standout with record highs for the Philly semi index after TSM beat and capex raise, lifting semi-equipment stocks (AMAT, LRCX, KLAC); Transports record highs, led by airlines after DAL posts better Q4 revenue (AAL, UAL, JBLU rise); mall REITs outperform (SPG, KIM, MAC) as market expects big stimulus, but also worth noting YoY recovery in mall traffic trends; energy stocks soar as analyst getting more positive, economic recovery hopes (APA, MRO, OXY); reopen trades such as cruise (CCL, NCLH), entertainment (LYV, WWE); theme park (SEAS, SIX) rise; cannabis stocks rally behind better APHA results (TLRY, CGC); stocks leveraged to blockchain or Bitcoin saw strong gains as Bitcoin tops $40K again (MSTR, RIOT, OSTK, GBTC); POSH jumps over $100 after IPO priced at $42, WOOF jumps over 60% in its IPO debut after pricing 48M shares at $18 with other IPOs tonight include DRVN, PLTK; banks in focus tomorrow with JPM, WFC, Citi, PNC earnings to unofficially kick off earnings season (JPM rises 7th straight day of gains ahead of earnings tomorrow – trading at all-time highs).

Economic Data

·     Weekly Jobless Claims jumped 181K to 965K, above the 790K consensus while prior week revised to 784K from 787K; the 4-week moving averages rose to 834,250 in latest week from 816,000; continuing claims rose to 5.271Mm from 5.072Mm prior and est. 5.061M and U.S. insured unemployment rate rose to 3.7% from 3.5%

·     Import Prices for December rose +0.9%, beating the 0.7% estimate and Nov +0.2% reading; Dec export prices +1.1%, topping the +0.4% estimate and Nov +0.7% reading; Dec year-over-year import prices -0.3%, export prices +0.2%



·     Oil prices reversed off earlier losses as WTI crude gained 66c or 1.3% to settle at $53.57 per barrel (highest since February of last year) while Brent rises 36c to $56.42 per barrel. Prices were initially lower after a decline in December China crude imports. Riskier assets such as stocks and commodity prices have outperformed on expectations that the looming stimulus package announcement from President-elect Joe Biden will further lift the economic recovery. OPEC said in its monthly report that 2021 oil demand will be 4% below 2019 levels, and that rising Covid cases and accompanying restrictions will keep economic growth contained. Gold prices edge lower, as February gold drops -$3.50 or 0.2% to settle at $1,851.40 an ounce, off earlier lows below $1,834 an ounce as another weak jobs reading (jobless claims) further bolstered bets for more government stimulus. Prices were choppy during Fed Chairman Powell Q&A about the economy, briefly turning positive before ending lower.


Currencies & Treasuries

·     The U.S. dollar reversed earlier gains to end lower, vs. most rival currencies, extending its modest recovery off recent three-year lows amid upbeat expectations about President-elect Joe Biden’s fiscal stimulus. Weaker economic data hasn’t helped the buck of late, following a recent round of softer jobs reports/data. Meanwhile Bitcoin prices moved back above $40,000, rising over 7.5% as the momentum trade continues.

·     The U.S. 10-year Treasury yield edged higher after slipping from post pandemic best levels of 1.18% earlier this week. Markets prepare for Biden to unveil a stimulus package proposal later today designed to jump-start the economy during the coronavirus pandemic. Since the beginning of the month, 10-year yields have climbed more than 20 basis points (have pared gains of late). The buck has risen in six of the last seven trading sessions, as the prospect of more stimulus has weighed on U.S. government bonds. Strong demand for the Treasury Department’s auctions of 10-year and 30-year debt this week helped soften the bond sell-off and pull yields lower.






WTI Crude















10-Year Note





Sector News Breakdown


·     Apparel Retailers; EXPR surges after reaches agreement for $140 mln in new financing from Sycamore Partners, Wells Fargo and Bank of America Merrill Lynch to boost liquidity; URBN downgraded to underweight from neutral at JPMorgan amid weak store traffic trends and calling compensation payout an incremental headwind; raises tgt on BOOT to $63, pointing to strong full price selling trends and the even larger TAM for the retailer and ups tgt on ANF to $26; JWN said overall holiday sales declined -22% in the nine-week holiday period, but digital sales increased 23% and comprised 54% of total sales.

·     Special retailers/non apparel; POSH 6.6M share IPO priced at $42.00, but shares opened at $97.50 as the IPO market remains red hot; GME shares jumping again after yesterday’s +57% move, shares looking higher again – (holiday sales, big recent jump in e-comm revenue and the recent announcement of 3 new e-commerce directors including Ryan Cohen (founder of RC Ventures and CHWY) are being looked at as the main reasons for the massive, short squeeze/chase in shares this week; OLLI downgrade to Underperform with an $82 tgt at Bank America given the availability of closeout merchandise is lower than expected and expect shortages to persist through mid-2021; SIG rises prelim holiday season same store sales +5.6% (also expected on CNBC Mad Money program tonight)

·     Auto sector; TSLA active again – the National Highway Traffic Safety Administration (NHTSA) asked TSLA to recall 158,000 Model S and Model X vehicles over media control unit failures that could pose safety risks by leading to touchscreen displays not working – Reuters; GM upgraded to Buy and $56 tgt at Argus as company continues to diversify its business as it expands into electric and autonomous vehicles; CCIV shares pared gains after CNBC’s David Faber says potential deal with Lucid Motors is "far from a done deal"

·     Housing & Building Products; Loop Capital said residential roofing remains great, commercial is getting less bad as they remain BUY-rated on OC and BECN as see earnings momentum as driving the shares higher over the next several quarters; BMO Capital initiated BLDR, AZEK, FBHS with Outperform and MAS, BECN, TREX Market Perform as bullish on new residential construction; Wayfair (W) spiked over to highs, rising over 12% after Motley Fool pick

·     Consumer Staples; Truist note rebounding buying rates for private label food (positive for THS), strong calendar 4Q trends for the battery category despite above average growth prior to the holidays (positive for ENR), a resurgence of the healthy living trend in the later stages of the pandemic (positive for BRBR, HAIN) and further evidence that consumer interest in hard seltzers is as strong as ever (positive for STZ, KO); BYND rises after YUM’s taco Bell says exploring a new plant-based protein with Beyond Meat with plans to start testing in the next year

·     Restaurants; CMG upgraded to Outperform from Sector Perform at RBC Capital and raises tgt to $1650 from $1320 as see further upside from improving new restaurant returns, supporting accelerating CMG unit development against a backdrop of broader restaurant industry supply contraction in 2021; casual dining was strong with EAT, DENN, RRGB, DIN rising

·     Leisure and Gaming; PENN downgraded to Sell from Hold at Loop Capital as believe the magnitude of the stock’s outperformance is unwarranted, however, particularly given PENN’s Barstool app is still only live in one state, PA, where PENN is losing share; in gaming at Truist, adjust estimates (mostly reflecting Q4 specific COVID impacts) and price targets, while upgrading IGT to a Buy rating from Hold and favor Buy rated operators BALY, RRR, BYD, MCRI, CZR and PENN as their casinos should all benefit in this pent-up demand environment; DASH extends gains in food delivery, now up 55% during its 6-day winning streak



·     Energy stock movers; energy stocks among the main market leaders again, as investors pile into the sector after several years of underperformance and hopes of an economic recovery; CVX was upgraded to Buy with a $105 pt from Hold at HSBC after its recent underperformance and retains Buy ratings on RDS and TOT; Truist upgraded MRO and APA to Buy as part of their new Democrat Darlings group who offer solid FCF/EV upside with limited to no federal acreage, potential tax issues upcoming, or upcoming infrastructure issues; APA also discovered oil offshore Suriname with its partner TOT; Scotiabank upgraded COP to Sector Outperform with a $56 pt on its overwhelmingly positive deal to acquire CXO, and they also upgraded CVX to Sector Perform with a $110 target; CHKAQ Chapter 11 bankruptcy plan was approved by a U.S. judge yesterday, and the company will emerge from bankruptcy with about $3 billion in new financing, a $7 billion reduction in debt, and $1.7 billion cut from gas processing and pipeline costs; Goldman sees fundamental challenges on crude spreads and refining margins but also sees pockets of value and lists MPC, PSX, PKIand SU as their top North American buys; HAL announced it deployed the industry’s first electric grid-powered fracturing operation for XEC in the Permian Basin

·     Utilities & Solar; ES, AEE, CMS, NI, LNT among the top S&P decliners as defensive utilities underperformed; JPMorgan says hydrogen stocks’ elevated EV/sales multiples may make sense given the massive long-term growth prospects and look for pullbacks as entry opportunities for long-term position, and they view PLUG as best in class but initiated the stock at Neutral on valuation, raise their pt on Neutral-rated BE to $35 from $26, downgrade FCEL to Underweight on valuation, and keep NKLA as their only OW with a $35 pt as the news flow should be positive in 2021; SRE was upgraded at Wells who says the current share price offers an attractive entry point ahead of the expected sale of a noncontrolling stake in the LNG/Mexico infrastructure platform and already reflects a somewhat bearish view, meaning that the risk/reward is now tilted in investors’ favor; solar names extend recent gains (SPWR, FSLR, SEDG, ENPH)



·     Bank movers; earnings kick into gear tomorrow with JPM, C and WFC expected to report; BXS forecasts EPS accretion in the first year after combining operations with Alabama-based FNSB in deal announced last night, driven by 30% cost savings, and also forecasts a TBV earn-back period of about 2 years and will mark the acquired loan book by about 2%; Raymond James upgraded CMA to Outperform with a $71 target ahead of the sharp economic rebound on improving risk-reward that will continue driving the bank’s outperformance versus peers until the Fed raises rates; Keefe Bruyette downgraded LAZ to Market Perform from Outperform and upgraded DB to MP from Underperform; FRC reported net interest margin 2.73% vs est. 2.70% and EPS $1.60 vs est. $1.51; JPM, C (Citi), WFC, PNC report earnings tomorrow pre-market; in asset managers, BLK reports 20% jump in Q4 profit as earnings and revs beat, driven by increased activity in financial markets that pushed its assets under management soaring

·     Insurance; LMND 4.524M share Secondary priced at $165.00 (shares fell further after a negative call by Citron Research); RBC is positive on Canadian lifecos and forecast core EPS to rebound by about 13% after falling about 1% last year, and they upgrade IAG to Outperform and downgrade SLF to Sector Perform

·     Consumer Finance; RPAY 5.43M share Secondary priced at $24.00; RBC favors ALLY and cards DFS and SYF near-term fundamentals and longer-term business model heading into Q4 results; Piper named INTU and QTWO as their top 2021 picks in SaaS as companies who could drive levers to the upside and will benefit from elevated digital spend, as well as companies whose fundamentals have been strengthened from the pandemic accelerating tech shifts; Barclays downgraded SI to Equal-Weight with a $76 target after shares have soared +470% since its Nov 7, 2019 IPO, though their investment thesis remains unchanged and recent investor activity and price momentum in digital currencies underscore the efficacy of the company’s business model

·     REITs; SKT reinstated their dividend at 17.75c/share, above the estimated 15c; UMH increased their quarterly dividend by 6% to 19c/shr; Mizuho says they are Equal-Weight on the sector for 2021 and list their top pans in the sector as NHI, PGREand MAC and their top picks are DLR, EQR, INVH, MPW and VER, which they upgraded to Buy and lifted its price target to $39 from $35 given its risk-reward and reward potential given its liquidity profile, resilient portfolio with leading rent collections and cash flow diversification, and its valuation discount compared to peers; Piper is bullish on shopping centers and upgraded SITC to OW and raised its pt to $13 from $11 as their rent collections improved in Q4, which was also its highest leasing quarter since 3Q18, and they also downgrade HPP to Neutral from OW on weak office fundamentals, though they are more positive on Office REITs versus Coastal Apartments on a relative basis; Janney upgraded HIW to Buy with a $43 pt and they also downgraded EPR to Equal-Weight on valuation



·     Pharma movers; JNJ one-dose coronavirus vaccine is safe and appears to generate a promising immune response in both young and elderly volunteers; ORGO CFO said he expects to beat its previously issued guidance for PCR tests for Covid-19 for 4Q and confirmed its revenue guidance; VNDA was downgraded to Neutral at Citigroup noting the stock is up ~50% since September, with relatively little change to the stock’s fundamental value in our view; LXRX receives positive FDA feedback for diabetes drug; EVOK 5M share Spot Secondary priced at $2.50; in cannabis, APHA posted better-than-expected revenue for its November quarter (boosts TLRY, CGC, ACB); WOOF 48M share IPO priced at $18.00 (above expected range of $14-$17)

·     Biotech movers; BCYC provides pipeline updates on its early and mid-stage cancer trials and announces plans to start recruitment for its first clinical site outside the United States to test its tumor antigen BT8009; PRVB 6.25M share Secondary priced at $16.00; NK and privately held ImmunityBio Inc. said they saw positive interim results from its PD-L1 t-haNK protocols/the two co’s said the data showed median survival rates more than doubled that of the historic rate in patients with advanced metastatic pancreatic cancer for which no other FDA-approved treatment exists

·     MedTech and Equipment; MASI sees preliminary full-year 2020 product revenue of approximately $1.139 bln to $1.144 bln vs. est. $1.17 bln; ISRG issued strong revenue beat on 6% procedure growth and surprisingly robust systems placements at 362, nearly 50% ahead of Bernstein estimate (250); VAPO reported preliminary Q4 revenue of $40.6M – this compares to our estimate of $31.7M, consensus estimate of $32.2M, and company’s already intra-quarter lifted revenue guidance of $30-33M (was previously $18-20M).


Industrials & Materials

·     Industrial & Machinery; Citigroup raised estimates for DE and AGCO on a stronger row crop price outlook and resultant farmer capex; RXN t to $50 from $44 and maintain Outperform on attractive risk/reward at Oppenheimer; KeyBanc downgraded RBC to Sector Weight based on price being susceptible to near-term downside if there is no merger as current levels are pricing in value creation via merger

·     Transports; Dow Transports back at record highs after better earnings/positive analyst comments; in airlines, DAL reported better-than-expected Q4 revenue ( down 65% to $3.97B vs. est. $3.6B), boosted by strength in its cargo business, although losses were wider than forecast, as passenger revenue fell 74% to $2.70 billion to miss expectations; ALK reported Q4 load factor that was below expectations, and provided a downbeat outlook for January, as the air carrier saw revenue passengers decline during the quarter after reaching a pandemic peak in October; in trucking, ODFL upgraded to neutral from sell at Goldman Sachs with a new price target of $214 (from $187) and was also upgraded to Hold at Stifel with upped $194 tgt; for rails, (CSX, CNI, UNP) Association of American Railroads (AAR) reports total weekly US rail traffic up 4.7% to 525,253 carloads and intermodal units for the week ending Jan. 9, 2021

·     Aerospace & Defense; AVAV entered into a definitive agreement to acquire Arcturus UAV for a total purchase price of $405M, including $355M in cash and $50M in AeroVironment stock; SPCE rises after ARK Investment Management filed with the SEC to launch a space exploration exchange-traded fund; ARK didn’t identify what companies it would hold in the fund (shares of MAXR, ROKT, UFO also advanced early in sympathy); TDG subsidiary proposes $1.2B notes offering; separately, TDG downgraded to Neutral at Bank America


Technology, Media & Telecom

·     Internet; VIPS shares slide on reports China’s market regulator launched a probe into cos linked to VIPS over possible unfair competition – co’s include Vipshop (China) Co Ltd and Guangzhou Vipshop E-Commerce Co Ltd; AMZN, NFLX, FB, SNAP, TWTR, SNAP – online social media and Internet names lagged the broader market recovery

·     Semiconductors; the Philly semi-index (SOX) new record highs above 3,070 (over 2.7%); TSM posted its best-ever quarterly profit and hiked revenue and capital spending estimates to record levels; now expects to lift capital spending on the production and development of advanced chips to between $25B-$28B as much as 60% higher than the amount it spent in 2020; also revised up its compound annual growth rate targets for revenue during the 2020 to 2025 period to 10%-15% from an earlier estimate of 5%-10%; shares of semi equipment names KLAC, LRCX, AMAT, ENTG, TER, MKSI benefit from the higher cap-ex spending by TSM; INTC rises again upgraded by several analysts (BMO, Cowen, Needham, Morgan Stanley) as analysts applaud the hiring of former VMW CEO after INTC chief stepped down

·     Software movers; TTWO downgraded to neutral from buy at MKM amid concerns about co’s FY 2022 growth, a lack of near-term catalysts and a missed M&A opportunity; Oppenheimer upgraded SHOP and NOW to outperform and downgrading EGAN to Perform as expect limited multiples expansion in 2021 and recommend investors to focus on SaaS businesses that have good upside-to-estimates potential based on our surveys, field work, and financial analysis; AYX and SNOW announce partnership to further integrate their platforms to enable faster data processing and analytics for customers

·     Media & Telecom movers; NFLX tgt raised to $580 at Citigroup ahead of earnings and raise DIS tgt to $205 from $175 but continue to prefer Disney as think Disney has a quicker and easier path to sub growth over the next three years and suspect Netflix may have some hiccups over the next few quarters as price hikes potentially dampen quarterly net adds; CCI upgraded to Buy at Citigroup based on the combination of improving domestic site leasing growth in 2021, potential upside in future years from C Band and DISH; Bernstein believes that the Democratic Senate victory has pressured cable share prices but see no appetite for outright rate regulation despite the potential reclassification of broadband as a Title 2 service (CMCSA, CHTR); SBAC announces offering of $1.5 billion of senior notes due 2029; to use proceeds of offering to fully redeem all of 2017 notes, to pay all premiums and costs associated with such redemption

·     Communication & Networking; ACIA surges as CSCO announces a new deal to acquire the company valued at $4.5B, paying $115 per share (comes just a few days after the two terminated their merger pact which was valued at $2.6B and $70 per share); ; JNPR upgraded to overweight at Barclay’s with $28 tgt as believe initial signs of success in a number of key markets are poised to continue, including benefits from new WLAN products, growth in cloud and a recovery in telco

·     Hardware & Component news; GLW upgraded to overweight from equal-weight and tgt to $44 from $31 at Barclay’s as see a number of potential upside catalysts in 2021, including for upside surprise to estimates; HPQ downgraded to underweight with $22 tgt at Barclay’s noting shares have been strong over the last few months, as believe the recent strength will be short lived; BB shares advanced over 20% on no particular news

·     IT Services and Consulting; GLOB downgraded to Neutral at Piper as believe that 2020 was an accelerant to digital (which was already seeing robust growth), and GLOB and EPAM are key beneficiaries of this secular shift. While we continue to view GLOB as a key Digital services company, we would look for a better entry point

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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.