Closing Recap

Thursday, July 29, 2021

Index	Up/Down	%	Last
DJ Industrials	153.21	0.44%	35,084
S&P 500	18.37	0.42%	4,419
Nasdaq	15.68	0.11%	14,778
Russell 2000	15.09	0.68%	2,240

 

Equity Market Recap

·     U.S. stocks finish the day higher, with the S&P 500 and Dow Jones Industrials touching fresh intraday record highs as the Smallcap Russell 2000 outperformed for a second day. Strong earnings have helped buoy markets higher along with continued optimism that an accommodative Fed will continue to bolster stock investments by keeping rates at record lows and avoiding a timeframe for tapering of asset purchases. Commodities surged, led by precious metals (gold up 1.5%) and oil as the dollar dropped behind the Fed statement yesterday. Disappointing economic data failed to rattle investors as Q2 GDP growth fell short of consensus and jobless claims missed. Tech lagged after Facebook shares fall on cautious comments, though semi chip makers neared record highs again behind AMD, QCOM. Amazon earnings up next after the bell. The highly anticipated Robinhood (HOOD) offering opened at $38, the same level where its 55M share IPO priced (which was low end of expected $38-$42 range), but promptly traded below deal price to hit lows below $34 per share.

·     Sector/stock movers: PYPL weak guidance sends shares lower and FB also slides after warning that revenue growth is expected to significantly decelerate over the next 2 quarters; Ford jumps after delivering a surprise quarterly profit and increasing its FY adj EBIT guidance; MTH rises double digits to lift other homebuilders on a strong report; semis outperform despite mixed earnings from companies – QCOM soars on its beat with strong guidance, AMD adds to yesterday’s 7% gain after earnings to hit ATHs and its pending acquisition XLNX also rises on its own beat, but CRUS MKSI LRCX slide after their earnings/guidance; NOW, TPX, YUM, CMCSA, HLT each trade at record highs, OSTK, IRBT both shed their initial double-digit declines after their earnings, RDS.A outperforms on its beat and new $2B buyback, VSTO climbs, and MRK, ORLY, EXAS slide in other earnings movers

·     After a big day for new issues coming to market (led by HOOD) – another busy round expected to price again tonight: DOLE 30.3M share IPO expected tonight now (range $16-$17); IMRX 7M share IPO tonight (range $14-$16); INAB 4M share IPO (range $10-$12); MXCT 12M share IPO (range $11.50-$13.50); OCEA 6.3M share IPO (range $7-$9); OMGA 7.4M share IPO (range $16-$18); RANI 6.67M share IPO (range $14-$16); RXST 7.35M share IPO (range $16-$18); TNYA 10M share IPO (range $14-$16)

·     New variant impact: Twitter is closing its newly reopened offices in San Francisco and New York and indefinitely postponing other reopening plans, the NYT reported. Lyft postponed the date for employees to return to most of its offices by six months. Apple plans to restore a mask requirement at most of its U.S. retail stores. Disney is requiring masks again at its theme parks in Florida and California (most of these announced late yesterday). Today, Washington D.C. reinstates indoor mask mandate as virus cases rise. Disney to require guests ages 2 & up to wear face coverings indoors at Walt Disney World, Disneyland resort regardless of vaccination status.

·     Yesterday’s July FOMC meeting offered little new information, as the Fed stayed the course, adding language to its post-meeting statement that “the economy has made progress toward” its employment and inflation goals since December, but this likely arose as a compromise among participants and was balanced by language noting that the FOMC “will continue to assess progress in coming meetings.”

 

Economic Data:

·     U.S. GDP for Q2 initial estimate came in well below consensus, rising 6.5% vs. est. 8.5% (vs. 6.4% in Q1) as core PCE prices rose +6.1% vs. +5.9% consensus and 2.5% prior; PCE price index rises +6.4% vs. 3.8% prior (revised); Personal consumption rose 11.8% from 11.4% previously, with spending on goods at a 11.6% pace, and 12.0% on services.

·     Weekly jobless claims fell to 400K from prior week reading of 424K but was above consensus for a 380K reading; the 4-week moving average rose to 394,500 in latest week from 386,500 prior; continued claims rose to 3.269 mln from 3.262M; the U.S. insured unemployment rate unchanged at 2.4%.

 

Commodities

·     December gold gains $31.20, or 1.7%, to settle at $1,835.80/oz (highest closing level in over 6-weeks) as precious metals getting a boost post FOMC meeting yesterday as Fed remains accommodative for market – the dollar falls -0.35% under 92 level for DXY. Silver prices also shoot higher. Oil prices rose on Thursday, up $1.23 or 1.7% to settle at $73.62 per barrel, notching further gains a day after the U.S. government reported that crude stockpiles fell to their lowest since January 2020. Crude inventories fell by 4.1 million barrels in the week to July 23, the EIA said. Brent prices rose $1.31 or 1.75% to settle at $76.05 per barrel.

 

Currencies & Treasuries

·     Treasury yields again in a narrow trading range; as the 10-year yield held around 1.26% most of the day, barely moving despite weaker than expected GDP and disappointing weekly jobless claims data. The Fed dovish commentary at its policy meeting yesterday helping support lower yields as Fed remains unconcerned by inflation spikes. The U.S. Treasury sold $62B in 7-year notes at a yield of 1.05% vs. 1.04% (1 bps tail) when issued prior (weak auction), with the bid-to-cover (demand) at 2.23 and indirect bidders awarded 58.37% and directs 19.45%.

·     The U.S. dollar was broadly lower after the dovish Fed comments yesterday, downplaying inflation (again), saying will continue asset purchases and keep rates lower, while noting the economy is strengthening. The pound hit its highest in over a month against the dollar, extending gains driven by a fall in coronavirus cases in Britain and as a dovish U.S. Federal Reserve weighed on the greenback. The British currency has gained for five consecutive sessions.

 

 

Macro	Up/Down	Last
WTI Crude	1.23	73.62
Brent	1.31	76.05
Gold	31.20	1,835.80
EUR/USD	0.0043	1.1885
JPY/USD	-0.48	109.42
10-Year Note	0.005	1.268%

 

 

Sector News Breakdown

Consumer

·     Retailers; IRBT shares slide initially as Q2 non-GAAP EPS $0.27 vs. est. $0.31 and lowers both its year EPS and sales outlook (lowers FY21 EPS view to $2.25-$3.15 from $3.00-$3.25); TPX beat and raise as EBITDA beat by $50m and raised by over $100m; VSTO helps sporting goods as Q1 adj EPS $1.74 vs. est. $0.90; Q1 revs $662.91M, consensus $615.6M; Q1 Gross profit rose 93% to $241M and gross profit margin improved by 1025 bps; WWW Q2 EPS/sales above views and raises FY21 adjusted EPS to $2.20-$2.30 from $1.95-$2.10 and up sales guidance as well

·     Auto sector; Ford (F) EPS of $0.13 beat consensus of -$0.10 driven by Ford Credit (+$0.24) & Int’l (+$0.08) partially offset by other items (-$0.09) and Ford raised FY guidance on adj EBIT to $9-10bn from $5.5-6.5B; DIDI rises after a report that the company is considering going private to ease investor concerns as Chinese crackdown widens; https://on.wsj.com/3i82o7g (DIDI later provided a statement refuting the overnight WSJ report); ORLY Q2 EPS and sales topped views though Wells Fargo notes +9.9% comps landed just short of +LDD% buyside expectations; VWAGY raises the outlook for its operating return on sales by 0.5 ppts to 6.0% to 7.5%; auto retail, SAH rises on results (AN, PAG, GPI move in reaction early); NKLA slides as Trevor Milton, founder of the EV company, has been indicted on three counts of fraud by the U.S. Attorney’s Office in Manhattan for making deceptive and false claims to investors; WKHS names a new CEO

·     Housing & Building Products; CCS upgraded to Hold at Zelman after EPS and underperformance; MTH 2Q21 results exceeded guidance ($4.36 vs. guidance ~$3.17) led by 27.3% gross margins (guidance was 25%) and higher closings (3,273 vs. 2,900 guidance midpoint); FBHS s 2Q21 beat ($1.56 on sales, margins), and raised FY21 outlook (EPS up 4% on 3% sales lift) reflects upward home prices; FIX reported 2Q21 EPS of $0.90, which slightly missed consensus of $0.91 as results reflected an operating miss primarily on gross margin coming in 170 bps below forecast; EXP exceeded expectations on revenue ($476M vs. $466M)and EPS ($2.25 vs. $2.06 Street), driven by strong residential activity

·     Consumer Staples; MO beat profit and revenue expectations, and raised its full-year outlook in tobacco space with Total cigarette shipments rose 1.4% to 25.31 billion sticks; in grocers, ACI sees identical sales growth of -5% to -6% vs. -6% to -7.5% prior view. EPS of $2.20 to $2.30 is expected vs. $1.80 consensus which follows Q2 EPS/sales beat; In beverages, TAP and BUD both pressured early after quarterly results; KDP top and bottom-line beat and raised net sales outlook to +6-7% from 4-6% but reaffirmed EPS outlook at +13-15% citing reinvestment; Stifel said more positive on HPC names ahead of June quarter earnings reflecting increasing earnings visibility (PG, CL, REYN, FRPT); in food, HSY beat and raise but eps unchanged, sales upside offset by higher tax and supply chain costs; PPC EBITDA beat on higher sales and margins in U.S.; LNDC Q4 revs $139.8M vs. $125.4M estimate and adj. EBITDA was $12.1M vs $9M

·     Lodging & Leisure sector; WH reported Q2 adj EPS 95c vs est. 66c on revs $406M that missed est. $413.6M, REVPAR +110%, and guides FY adj EPS $2.60-2.70 (est. $2.33), REVPAR +40%, and fee-related and other revs $1.16-1.19B; RRR posted Q2 EPS $1.12 vs est. $0.38 on revs $428.2M vs est. $373.3M; VAC Q2 adj EPS 85c was below est. 91c on revs $979M that topped est. $920.2M; VICI posted Q2 adj FFO 46c vs consensus 47c on revs $376.4-368.6M, and guides FY adj FFO $1.82-1.87 (est. $1.87); CHDN results came in solidly above consensus, with EBITDA +$35.3M and sales +$31.3M. The beat was again primarily driven by record Gaming EBITDA (+$38.0M vs. +$27.3M vs. consensus), with wholly-owned margins +10 points vs. 2019, and very strong Rivers/MV results; HLT reported Q2 adj EPS 56c vs est. 39c on revs $1.33B vs est. $1.38B, adj EBITDA $400M vs est. $335.8M, RevPAR $73.03 beat est. $67.80, system-wide comp RevPAR +233.8%, and raised FY unit growth view 50bps to 5-5.5%

 

Energy

·     E&P and Majors; 2Q21 earnings has been solid so far based on pre-earnings/earnings reports from HES, MTDR, OVV, RRC, and TALO as per KeyBanc this morning; in refiners: VLO says Q2 adjusted profit rose 41% from Q1 on improvement in fuel consumption as coronavirus-related travel restrictions were eased; in oil Services; earnings overnight for: CHX as EBITDA beat and solid guidance; WHD small EBITDA upside, market share stable, 11% dividend hike; OIS EBITDA beat, solid bookings but lackluster Downhole margins; CLB lackluster Reservoir Description performance offsets strong Production Enhancement results; SOI small sequential growth and modest EBITDA beat, higher capital spending for new technology

 

Financials

·     Bank movers; Robinhood (HOOD) 55M share IPO priced at $38.00, the low end of $38-$42 range; ICE reported Q2 adj EPS $1.16 and revs $1.71B that matched analysts’ expectations and sees Q3 recurring revs $870-885M and operating expenses $930-940M; CS posted Q2 revs CHF 5.1B (-17.6% YoY) vs est. CHF 4.99B that includes a loss of CHF 594M due to Archegos’ collapse, consisting of CHF 493M from trading losses during the closing of positions, CHF 70M in provisions for credit losses, and CHF 31M in costs and professional service fees; RJF Q2 adj EPS $2.74 vs est. $2.27 on revs $2.47B vs est. $2.38B, AUM $1.17T (+33% YoY)

·     Insurance; AFL Q2 results exceed consensus s its business in Japan reflected the launch of a new medical product and said sees stronger second half of 2021; CINF Q2 EPS $1.79 vs est. $0.95 on revs $2.3B vs est. $1.71B; HIG Q2 core EPS $2.33 vs. est. $1.34 on revs $5.59B vs est. $5.21B, Commercial Lines written premiums $2.5B (+15% YoY), and continues to expect full year pre-tax savings of approximately $540M in 2022 and $625M in 2023; GSHD posted Q2 adj eps 13c vs est. 18c on revs $38.17M vs est. $37.66M, announced a special $60M dividend that will be approximately $1.63/share, sees FY21 revs $146-156M (est. $154.8M), FY total written premiums $1.5-1.56B; SIGI Q2 EPS $1.85 vs est. $1.21 on revs $840.5M vs est. $804.4M, annualized ROE 18.3%, net premiums written +15% YoY

·     Asset managers; TROW reported a rise in Q2 earnings and net revenue, as its assets under management were $1.62 trillion, rising 33% from a year ago and 6.9% from the first quarter; AB Q2 adj EPS 91c vs est. 82c on revs $1.08B (+24% YoY), AUM $738.4B (+23% YoY), net inflows $6.2B; ARES Q2 EPS 69c vs est. 50c on revs $1.29B that more than doubled YoY, AUM $247.9B as of June 30 (+56.5% YoY); CG Q2 revs also more than doubled YoY to $2.71B, segment revs $919M vs est. $665M, and Q2 AUM $276B (+25%) vs est. $263.07B; CBRE Q2 adj EPS $1.36 vs est. $0.78 on revs $6.46B vs est. $6.46B; JHG posted Q2 adj EPS $1.16 vs est. $0.96 on revs $738.4M vs est. $677.8M, AUM $427.6B (+27% YoY) vs est. $419.3B, and authorized a $200M share buyback program through April 2022

·     FinTech & Payments; MA delivered Q2 adj EPS $1.95 that bested est. $1.72 on revs $4.5B that was also better than est. $4.34B, purchase volume $1.47T (+36%) vs est. $1.37T, gross dollar volume +33%, cross-border volume +58%; PYPL shares fell after forecasting Q3 adj EPS $1.07 and revs $6.15-6.25B that were below est. $1.14 and $6.45B, and Q2 results were mixed as adj EPS $1.15 topped est. $1.12 and revs $6.24B missed est. $6.29B, and the company processed $311B in payments during the quarter, +40% YoY and above est. $297.08B, though 11.4M new active accounts missed est. 12.8M

·     Consumer Finance and Lending; LC shares surge after Q2 EPS $0.09 vs. est. loss (-$0.43) on better revs $204.4M vs. est. $134.5M and sees FY21 revenue $750M-$780M above est. $542.96M; ADS Net charge-offs as a percentage of average receivables for the month ended June 30 was 4.8%; delinquency rate as of June 30, 2021 was 3.3%; Q2 EPS $5.47 vs. est. $3.85; Q2 revs $1.01B vs. est. $1.04B; NAVI downgraded to Neutral from Buy at Citigroup following its strong stock performance YTD (up 103%) and over the past year (up 143%); TREE reported Q2 adj EPS 76c vs est. 16c on in-line revs $270M, sees Q3 revs $285-298M (est. $285.4M); ARCC 12.5M share Spot Secondary priced at $20.00; COOP Q2 EPS $4.85 was better than expected $1.57 but sales $574M missed est. $684M

·     Services; RBC lowered their price target on RDFN to $68 from $70 as channel checks with real estate agents cause them to downtick expectations somewhat into earnings, and they believe there’s likely more downside vs. upside risk to forward gross margin expectations which is a meaningful driver for the stock; MCO posted Q2 adj EPS $3.22 and revs $1.55B that both beat consensus of $2.79 on $1.49B, and raised FY adj EPS guidance to $11.55-11.85 from $11-11.30, though UBS downgraded the stock to Neutral despite the solid results as they are concerned that the medium-term outlook can only soften from here after two years of outsized debt issuance levels and their checks suggest C-suite execs intend to borrow less over the next 12 months and strength has waned from Q1; SPGI reported Q2 adj EPS $3.62 vs est. $3.29 on revs $2.11B vs est. $2B, and raised its FY adj EPS outlook to $12.95-13.15 (est. $12.81) from $12.55-12.75; TW Q2 adj EPS 39c revs $260.8M matched consensus

·     REITs; EQIX 1Q beat was supported by solid MRR activity, with a boost from better-than-expected nonrecurring revenues (NRR) and raised guidance; CONE 2Q report overshadowed by yet another change in the C-Suite, with the announced departure of CEO Bruce Duncan after ~1 year; AKR 2Q beat and management increased the midpoint of the FY FFO range by 2.3%; AVB Q2 Core FFO beat consensus by $0.06 (over 3%) and management’s initial 2021 Core FFO guidance was also above consensus expectations (+2.4%); GTY 2Q21 “adjusted FFO” beat, and management raised FY21 guidance 1.6% at the midpoint; KRC 2Q FFO beat and providing above consensus initial 2021 FFO guidance; MAA FFO beat expectations by 3% and Management increased 2021 Core FFO guidance by ~4% at the midpoint; ROIC in-line 2Q results and management increased FY21 FFO guidance 1.5% at the midpoint; UDR in-line 2Q21, but management increased 2021 FFOA guidance that was 1.5% above consensus expectation

 

Healthcare

·     Pharma movers; MRK Q2 adj EPS $1.31 vs. est. $1.44; Q2 revs $11.4B vs. est. $11.54B; cuts FY21 adjusted EPS view to $5.47-$5.57 from $6.48-$6.68 and cuts FY21 revenue view to $46.4B-$47.4B from $51.8B-$53.8B vs. est. $48.59B; EBS said the U.S. FDA has allowed the co to resume production of JNJ’s COVID-19 vaccine at its Baltimore facility

·     Biotech movers; SAVA shares dropped after the company reported clinical data from an interim analysis of an open-label study with simufilam, its investigational drug for the treatment of Alzheimer’s disease; BMRN strong 2Q21 beat and raise with total revenue of $502mn, above consensus of $448mn, partly due to timing of orders for Vimizim and Naglazyme; ICVX 12.13M share IPO priced at $15.00; RLYB 6.2M share IPO priced at $13.00

·     MedTech Equipment; HOLX reported a F3Q21 beat with revenue of $1.17bn coming in above estimate, driven by a ~$50mn beat in the base business and a ~$75mn beat in COVID testing revenues relative to our estimates; EXAS strong quarter was somewhat offset by a modest guidance raise and lowering of expectations for Screening revenue in the back half of the year; BAX 2Q results, with revenue generally inline (better Med Delivery, Advanced Surgery), while better Op Margins drove EPS of $0.80 (vs. $0.75 cons).

·     Healthcare Services; CYH saw its Q2 2021 net income plummet to $6M from $70M in the year-ago period, but EPS still beat for the quarter on better revs of $3B; ALGN Q2 cases/revenue exceeded consensus by 5%/7%, and management raised its revenue guidance for the year, with 2H21 growth now expected to be above 25% growth yoy

 

Industrials & Materials

·     Aerospace & Defense; NOC Q2 results topped estimates as Q2 net awards totaled $6.5B, resulting in total backlog of $76.6B and guides year EPS of $24.40-$24.80 ($24.00-$24.50 prior) and higher than $24.58 consensus at the mid-point while sales of $35.8B-$36.2B ($35.3B-$35.7B prior) and versus a $35.81B consensus; CACI awarded $496 million contract to provide automated test system support to the U.S. air force

·     Industrial & Machinery; IR Q2 EPS and revs top consensus and raising full-year 2021 revenue growth to mid-teens from low double-digits prior; CARR 2Q adj EPS $0.64 vs est. $0.55 on sales $5.4B vs est. $4.94B; guides FY sales +14-16% (was +7-10%) vs est. +11%, sees FY adj EPS $2.10-2.20 vs est. $2.08; agricultural equipment makers rise after AGCO Q2 results and 2021 profit target top expectations and said it sees demand growing across all major markets in 2021 (shares of DE, CNHI among those moving); URI posted mixed adjusted 2Q as total revenue was in line with consensus, but EPS and EBITDA both missed on higher than expected SG&A expense

·     Transports; index outperforms after two rocky days following weaker UPS, JBLU results; ALGT with adj EPS of $3.46 vs est. $2.88 driven by slightly better cost control and a lower tax rate and is guiding to Sep Q total revenue up 3.5% to 7.5% vs. 2019; SAVE adj EPS loss of ($0.34) better than est. ($0.79), primarily driven by better revenue trends; the company’s adjusted EBITDA margin came in at 7.2%, significantly better than guidance of break-even to -5%; UBER slips as SoftBank sells 45M Uber shares to cover for DIDI losses

 

Technology, Media & Telecom

·     Internet; after stellar reports from TWTR and SNAP last week in social media space, FB comes in solid for Q2 results, but warned revenue growth in Q3 and Q4 to "decelerate significantly" which overshadowed Q2 rev beat and MAU’s rising 7% yoy to 2.9B (below est. 2.92B); SPOT upgraded to Neutral from Sell at UBS given better financial results, expectations for improving MAU trends post-pandemic, traction with new initiatives and a more attractive valuation given the stock’s underperformance

·     Semiconductors; QCOM reported a solid JunQ rev/EPS of $8.0B/$1.92 and guided to a strong SepQ at $8.8B/$2.25, above consensus $8.5B/$2.07 with strong premium and high tier launches and good 5G adoption – also files automatic mixed securities shelf; AMD to new highs, extending yesterday’s gains after better earnings; LRCX reported Strong JunQ above consensus and guided to a solid SepQ top line of $4.3B, also better than consensus $4.1B with strength in 3D-NAND, EUV patterning, and etch tool traction and also increased its 2021 WFE forecast to ~$80B+, up >31% y/y; CRUS delivered stronger than expected June quarter results that came in near the high-end of the Company’s guidance range and exceeded consensus estimates; FORM mixed results and guidance with Jun-Q EPS above Street expectations and Sept-Q EPS guidance below expectations; in semi-equipment, LRCX Q4 results topped consensus but only issued in-line guidance for Q1 ($4.3B plus or minus $250M vs. est. $4.16B)

·     Software movers; CTXS tumbles as posted Q2 EPS beat but revs of $812M miss the $846M estimate and cuts FY21 EPS view to $4.75-$4.95 from $5.60-$5.80 (est. $5.71) and sales view; RSKD 17.5M share IPO priced at $21.00; ZM upgraded to Overweight at KeyBanc with a $428PT as see the Company benefiting from a future hybrid work state in which video and cloud communications stand as long-term priorities in enterprise IT budgets; NOW strong 2Q beat, 3Q/FY21 raise/subscription rev. beat by 3%, accelerating to 27% CC and subscription billings (+26% CC adj.) beat by 5%; PI posted better-than-expected Q2 results, handily beating on the top- and bottom-line and provided in-line guidance for Q3; PTC with in-line Q3 ARR/FCF and reaffirmed FY ARR/FCF guidance

·     Media & Telecom movers; CMCSA beat across key Financial and Subscriber Metrics – total Revenue of $28.55B above est. $27.16B and EBTIDA of $8.93B vs. est. $7.93B; in Cable segment, High-Speed Internet Adds beat (+354k vs. cons +270k) and video losses less steep than consensus; in towers, AMT Q2 EPS $1.65 vs. est. $1.27 on better revenue $2.3B; ATUS downgraded at Raymond James following 2Q results, as elevated broadband churn is pressuring operating performance

·     Hardware, Networking, and Components; AAPL announces four-part debt issuance of paper due 2028, 2031, 2051, and 2061; EXTR reported fourth-quarter results that beat expectations, prompts update at Needham; UMC rises, follows upgrades from Citi and GS after the company beat guidance and market expectations