Market Review: July 26, 2021

Closing Recap

Monday, July 26, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks trade sideways this afternoon as investors await the onslaught of quarterly with more than 1/3 of S&P 500 companies expected to report in the next five-days as major averages hold near their closing all-time highs Friday. Top stories of the day include the resurgence of bitcoin (rises over 20% to top the $40K level for first time since mid-June) and Chinese corporate worries weighing on risk sentiment as investors price in risks from an intensifying and widening government crackdown. The CSI 300 and Hang Seng fell more than 3%. Also, senior U.S. and Chinese diplomats held "frank and direct" talks on Monday during which the United States laid out its views, although the two sides did not come away with specific agreements. Monthly New Home Sales data disappointed investors, coming in well below consensus views. The Federal Reserve begins a two-day policy meeting on Tuesday, followed by a press conference by Chair Jerome Powell on Wednesday, where investors will by listening for any comments on when tapering of the central bank’s asset purchases could begin. Earnings dominate all week with TSLA tonight 7/26, for Tuesday 7/27 morning: GE, MMM and Tuesday night AAPL, AMD, GOOGL, MSFT, SBUX, V; on Wednesday morning 7/28: BA, MCD, PFE and at night F, FB, LRCX, PYPL, QCOM; on Thursday 7/29 morning: CMCSA, HLT, MA, MO, MRK and at night AMZN, SWKS and Friday: ABBV, CAT, CVX, PG, XOM. The dollar edges lower while gold settles below $1,800.


Economic Data:

·     New Home Sales for June rose 6.6% MoM to 676K, well below the 800K expected and downwardly revised 724K (from 769K) for May; June single-family home sales -6.6% vs. May -7.8%; June home sales northeast -27.9%, Midwest +5.7%, South -7.8%, West -5.1 pct; June new home supply 6.3 months’ worth at current pace vs May 5.5 months; the median sale price $361,800, +6.1% from June 2020 ($341,100)


Commodities, Currencies & Treasury’s

·     Oil prices slipped with WTI crude down -$0.16 or 0.22% to settle at $71.91 per barrel due to concerns over fuel demand caused by the spread of COVID-19 variants and as changes to import rules in China offset expectations of tight supplies through the rest of the year. Gold prices slip -$2.60 to settle just below the $1,800 an ounce level, marking its lowest close in about three weeks.

·     U.S. Treasury yields recover off morning lows with the 10-year around 1.27% (off morning lows of 1.22%) ahead of the FOMC policy meeting mid-week. Earlier in the session, U.S. yields dropped following steep losses in Chinese stocks on worries over tighter regulations. The U.S. central bank meets on Tuesday and Wednesday and, while no change in policy is expected, market participants will look to Fed Chairman Jerome Powell to clarify what "substantial further progress" on employment would look like.

·     The U.S. Treasury sold $60B in 2-year notes at a yield of 0.213% vs. 0.215% when issued prior, with the bid-to-cover (demand) at 2.7 as indirect bidders awarded 52.76% and directs 21.26% of the auction ahead of several upcoming Treasury auctions this week: The U.S. Treasury is selling $183 billion in notes (includes today’s $60 billion in 2-year notes) with $61 billion in 5-year notes on Tuesday, and $62 billion in 7-year notes on Thursday.

·     The U.S. dollar edged lower against a basket of other currencies as investors’ focus turned to this week’s U.S. Federal Reserve meeting, while cryptocurrency prices rose to their highest in weeks. The dollar index (DXY) slips around the 92.50 level, under pressure from the euro and yen but was still close to last week’s 3-1/2-month high of 93.194. The euro rises despite German business sentiment unexpectedly falling in July on continuing supply chain worries and rising coronavirus infections, an Ifo Institute survey showed. The buck has gained nearly 4% since late May as an improving U.S. economy bolstered the outlook for the Fed to start paring asset purchases.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; AMZN tgt raised to $4,850 from $4,000 at Credit Suisse and keeps Outperform rating ahead of quarterly results as believes the co should be entering a relative harvest cycle after a period of intense investment in capacity; GPS upgraded to Buy at Deutsche Bank on its view that some of the volatile trends are behind for the retailer; toy retailer HAS among top gainers in the S&P as reported Q2 profit that was more than double what was expected, as revenue got boosts from strength in franchise brands and Wizards of the Coast and digital gaming

·     Auto sector; TSLA kicks off auto earnings with results after the close; GM and its Cruise robo-taxi subsidiary have filed a lawsuit to stop Ford Motor (F) from using the name "BlueCruise" to market its hands-free driving technology; RIDE said it received a $400 million equity investment from hedge fund YA II PN Ltd; LCID shares open at $25.24 after deal completion with Churchill Capital; EZGO shares rise after a bill was proposed offering an electronic bicycle tax credit.

·     Housing & Building Products; DHI upgraded to Outperform at Wedbush and up tgt to $125 saying it expected current-quarter orders to be even lower than Q3 as it limits new bookings amid slowdown in homebuilding due to high material and labor costs; LOW downgraded to Neutral from Outperform at Wedbush and maintain neutral on HD saying they see the most risk to more cautious view should the Pro home improvement project backlog prove to be so large that home improvement spending driven by housing $ turnover extends well beyond the normal period; FBHS announces additional $400M share repurchase authorization

·     Education and Services; China confirmed that the country is banning for-profit school tutoring companies after a report on the possible move sent shares of tutoring firms TAL, EDU, GOTU plunging again after Friday’s more than 50% drop. Companies that teach school subjects can no longer accept overseas investments, according to a Bloomberg report, which cited a notice from China’s State Council. Listed firms can no longer raise capital through stock markets

·     Consumer Staples; CASY was upgraded to Outperform at BMO Capital and raise target price to $235 as expect valuation expansion as investors gain comfort in a more sustainably strong fuel margin outlook; BYND said Monday that toppings including Beyond Italian Style Sausage and Beyond Beef Crumbles have become a permanent part of the Pizza Hut delivery menu in the U.K.; Bank America notes YoY retail sales for hard seltzers continues to decelerate w/ sales for the 4wks ending July 3rd up +8.1% (echoing SAM’s results last week)

·     Casinos, Gaming, Lodging & Leisure sector; SIX upgraded to Outperform and up tgt to $50 at Wedbush saying despite a sharp selloff in recent months, they continue to think that the theme park industry is a compelling reopening play, and that SIX represents an intriguing combination of massive underperformance over the course of the pandemic, Bloomberg reported the recreational vehicle (RV) industry set a new record for RV shipments in any quarter, as 151,760 units were shipped for the three months ended June. That’s 2% higher than the previous record set in the first quarter of 2021 (CWH, THO, WGO); Barron’s said travel and leisure stocks rallied in the initial reopening stage of the pandemic, but the surge has fizzled with the spread of the delta variant – but article identifies six stocks that can be bargains during the next leg of the reopening (HLT, WH, RCL, MGP, HST, TNL); WYNN falls a third straight session at the open at a six-month low of $100 after CFRA downgrades ND cuts PT by $24 to $118



·     U.S. natural gas futures rose to a 31-month high on forecasts for higher demand this week than previously expected with the weather expected to remain hotter than normal through at least mid-August. Front-month gas futures rose 8c, or 2.0%, to $4.140 per million British thermal units, putting the contract on track for its highest close since December 2018 for a sixth day in a row.

·     Refiners: MUSA was upgraded to Outperform at Raymond James saying CY21 industry fuel margins are trending nicely above CY19, despite rising oil prices, illustrating smaller operators are leaving more margin at the pump to offset other cost pressures

·     Utilities & Solar; REGI tgt cut to $70 from $85 at Truist saying near-Term uncertainties are 1) EPA’s release of 2021/2022 biofuel blending mandates and 2) Movement of meaningfully inflated feedstock prices into the back half of the year



·     Bank, brokers movers; HOOD IPO coming soon, and Barron’s cautious on shares; notes Robinhood is a truly transformational company, but its problem is the quality and sustainability of its revenue, notes is also highly dependent on cryptocurrency trading, another area under close review by the SEC; in insurance; AON and WLTW announced today that the firms have agreed to terminate their business combination agreement and end litigation with the U.S. Department of Justice (DOJ). The proposed combination was first announced on March 9, 2020

·     Bitcoin, FinTech & Payments; cryptocurrency-exposed stocks surge (RIOT, MSTR, MARA, NCTY, COIN) after a weekend rally for Bitcoin extended, with the token now trading above $38K and coming close to hitting the $40K level. Prices rose after comments from Ark Investment Management LLC’s Cathie Wood and Tesla Inc. CEO Elon Musk late last week/jumps further after London’s City A.M. newspaper said Amazon is looking to accept bitcoin payments by year-end. Little luster off crypto after Bloomberg News reported the U.S. Department of Justice is probing whether executives behind the Tether digital token committed bank fraud during the nascent stages of its cryptocurrency business.



·     Pharma movers; ABEO said it saw positive magnetic resonance imaging data from its Phase 1/2 clinical study for ABO-102; TNXP shares slide after saying it will stop enrollment in the Phase 3 Rally study of TNX-102 SL 5.6 mg for the management of fibromyalgia, sending shares lower; PCRX upgraded to Overweight at JPMorgan calling it an attractive valuation case, noting that the shares of the Exparel maker have slumped more than a quarter from the peak in 2021; INCY disclosed that it received a Complete Response Letter (CRL) for its BLA for retifanlimab in SCAC, consistent with the vote on the 6/24/21 Oncologic Drug AdCom; DNLI slides following 6-month interim DNL310 data at the MPS 2021 conference

·     Biotech movers; MDWD announces initiation of U.S. phase I/II study of mw005 for the treatment of basal cell carcinoma/expects that data from studies will be available by end of 2021; XBIO rises after entering into a definitive agreement with a single healthcare-focused institutional investor for the purchase of 4.63M shares at $2.7/share in a private placement; ITRM says the U.S. FDA declined to approve its oral drug candidate, sulopenem, for the treatment of adult women with uncomplicated urinary tract infections; SAVA said it had positive clinical data with SavaDx, an investigational diagnostic/biomarker to detect Alzheimer’s disease (AD) with a simple blood test

·     MedTech Equipment; PHG Q2 beat analysts’ expectations with a jump in core earnings, boosted by its personal health and diagnosis businesses; also announced a 1.5 billion euro share buyback set to start in the third quarter and take up to three years, but announced a device recall sending shares lower; QDEL announces agreement with Beckman Coulter that terminates ongoing litigation and transitions BNP business to Beckman; PKI entered into an agreement to acquire BioLegend, a leading, global provider of life science antibodies and reagents, for approximately $5.25 billion in a combination of cash and stock, subject to certain adjustments


Industrials & Materials

·     Aerospace & Defense; LMT reported Q2 EPS mostly in-line ($6.52 vs. est. $6.53) on slightly better sales of $17.03B, up 5% YoY while backlog fell -5.7% YoY to $141.66B while guides FY sales $67.30B-$68.70B vs. est. $68.35B; KTOS upgraded from Neutral to Buy with $32 tgt at FBR and raise tgt from $28 to $32 as believe the right combination of recent awards, corralled consensus, and expected new program wins has tumbled into place to position the company to unlock additional shareholder value in the remainder of 2021

·     Industrial & Machinery; ABB agrees to sell its Dodge mechanical power transmission business to ROLL for $2.9B in cash, confirming reports this weekend; OTIS Q2 adj EPS 79c vs. est. 71c; Q2 revs $3.7B vs. est. $3.45B; Q2 new equipment orders were up 23.9% and backlog was up 10% and raises FY21 adjusted EPS and revs view; FLOW rises after announces exploration of strategic alternatives; LII 2Q adj EPS $4.57 vs est. $4.39 on revs $1.24B vs est. $1.18B, raising repurchase guide to total of $600Mm after $400Mm in 1H; GNRC tgt raised to $500 from $400 at KeyBanc saying per checks, distributors communicated Residential demand continues on its record-setting path, with most contacts building backlog well into 2022

·     Transports; for airlines, after a pop around 4th of July, TSA checkpoint trends have settled back to about -21% vs 2019 on a 7-day avg basis; still better than the -25% 7-day avg a month ago; in rail cars, Susquehanna upgraded GBX, TRN and GATX to positive with higher estimates

·     Metals & Materials; LAC rises after a U.S. federal judge ruled that LAC may conduct excavation work at its Thacker Pass lithium mine site in Nevada, which could become one of the country’s biggest lithium mines producing 30,000 tonnes; RS was upgraded to Buy at Citigroup with $200 tgt saying it is the largest metals service center in N. America and is a clear winner from the current US manufacturing boom; GPK active after Greenlight discloses owning in Q2 letter

Technology, Media & Telecom

·     Internet; big week for earnings with AMZN, GOOGL, FB all this week (follows good reports from SNAP, TWTR last week); in online travel, TRIP positive mention in Barron’s calling it the cheapest online travel stock to buy saying while it has struggled to make the most of its hundreds of millions of users, that could soon change as the company has started a new travel subscription service that offers discounted hotel rates and other benefits

·     Semiconductors; SLAB announced today the completion of the divestiture of its Infrastructure & Automotive business to SWKS for $2.75 billion in an all-cash asset transaction; big week of earnings this week – MXIM, AMD, MPWR, SLAB, XLNX, QCOM, CRUS, and SWKS among those in the semi space with expected earnings

·     Software movers; MDLA entered into a definitive agreement to be acquired by Thoma Bravo in an all-cash transaction that values Medallia at $6.4B, with holders to receive $34 per share in cash (shares of XM, MNTV seen as comps to MDLA); Loop Capital downgraded PANW, ZS, MIME and QLYS to hold from buy saying recent industry checks into the security software industry revealed what we believe to be an incremental change in cybersecurity spending priority for many large organizations; CHKP posted bigger than expected rise in Q2 net profit and revenue as a sharp increase in sophisticated cyber-attacks boosted demand for its products.

·     Media & Telecom movers; TME shares fall after Chinese regulators ordered the company to give up exclusive music streaming rights and pay half a million yuan in fines; LUMN said it has agreed to sell its Latin American business to investment firm Stonepeak for $2.7 billion; DISH upgraded to Neutral at MoffettNathanson, now seeing bankruptcy risk abate after a key network services pact with AT

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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.