Closing Recap

Monday, June 14, 2021

Equity Market Recap

·     Stocks finished mixed as caution reigns ahead of the June Federal Reserve policy meeting results Wednesday with the Dow & Russell 2000 pulling back on the day, while the tech heavy Nasdaq Composite advanced behind strength in large caps. With a late day push, the S&P 500 finished at a new all-time high in what was a quiet day overall as investors await Fed Chairman Jerome Powell comments Wednesday, with all eyes on inflation and potential asset tapering comments. The Nasdaq Composite came into with a 4-week winning streak (and up six of the last seven trading day) at the highest levels since end of April. Healthcare and financials were the biggest drag on the S&P 500 today, while technology and consumer discretionary the biggest boost. Other factors to watch over the next week/month include quadruple witching this Friday and the U.S. debt ceiling which comes into effect at the end of July.

·     Hedge-funder Paul Tudor Jones, appearing on CNBC this morning as the FOMC gets set to meet this week said, "this is the most important Fed meeting we’ve had in 5 years." Jones said will be watching carefully, and if Fed boss Jay Powell "shrugs off " the perky inflation numbers, that would be a "green light" for heavy bets on every inflation trade. Paul Tudor Jones said in his interview on CNBC that his view is different on inflation, saying the Fed’s transitory stance is being "nonchalant." While the U.S. central bank isn’t expected to take any action with respect to rates or a tapering of monthly asset purchases, Wall Street will be monitoring the meeting closely for the Fed’s forecasts on inflation and the strength of the economic recovery.

·     Stocks/sector movers; JPM slides after CEO Jamie Dimon warns of a larger decline in trading rev than previously expected and NII forecast, weighs on other banks; Bitcoin soars, recaptures $40K level for the 1st time in more than 2 weeks after Elon Musk said Tesla could resume accepting it for payment once mining utilizes more clean energy and Paul Tudor Jones said he likes it as a diversifier, sending shares of COIN, SI, RIOT, MARA, MSTR higher; RIDE plummets after CEO and CFO both resign; RDS.A gains after reports it is mulling selling its Permian Basin assets that could be worth more than $10B as part of its energy transition; NVAX opens at the highest level since 5/3 after late-stage trial data shows its vaccine is effective against several Covid strains, putting it on track for U.S EUA, though shares pare all gains; MRNA BNTX stumble on the news.

Busy IPO Calendar this week:

·     Expected Monday night pricing 6/14: AMTD Digital (HKD) 16M share ADS (price range $6.80-$8.20)

·     Expected Tuesday night pricing 6/15: Convey Holding Parent (CNVY) 13.3M share IPO (price range $14-$16), Molecular Partners (MOLN) 3M share ADS, WalkMe Ltd. (WKME) 9.25M share IPO (price range $29-$32)

·     Expected Wednesday night pricing 6/16: Angel Oak Mortgage (AOMR) 8.05M shares IPO (price range $20-$21); Lyell Immunopharma Inc. (LYEL) 25M share IPO (price range ($16-$18); Verve Therapeutics (VERV) 11.8M share IPO (price range $16-$18)

·     Expected Thursday night pricing 6/17: Ambrx BioPharma (AMAM) 7.0M ADS IPO (price range $17-$19); ATAI Life Sciences (ATAI) 14.3M share IPO (price range $13-$15); Cyteir Therapeutics (CYT) 7.4M share IPO (price range $16-$18); Unicycive Therapeutics Inc. (UNCY) 2.6M share IPO (price range $8.50-$10.50)

Commodities

·     Oil prices touched new 32-month highs of $71.78 before fading, as WTI crude dipped -$0.03 to settle at $70.88 per barrel. Oil prices initially touched their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate. Iran said it has reached a broad agreement with the U.S. over the lifting of sanctions on its industrial sectors, including energy, but warned there was “very little time left” for world powers to revive a 2015 nuclear deal. The skyrocketing shipping costs may hit prices from coffee to toys. Gold prices end lower falling -$13.70 or 0.7% to settle at $1,865.90 an ounce, but well-off morning lows around $1,845 an ounce (lowest since about May 17^th) ahead of the U.S. Fed policy meeting this week on rising concern the FOMC may outline a path for scaling back (tapering) its asset purchases monetary policy at its two-day meeting this week (starts tomorrow, concludes Wednesday).

Currencies & Treasuries

·     Bitcoin surged, topping the $40K level for first time in 2 1/2 weeks, leading the crypto space while Ethereum above $2,570 in broad bounce in crypto assets. Hedge fund manager Paul Tudor Jones said this morning in a CNBC interview that he likes a mix of 5% bitcoin, 5% commodities, and 5% cash, but that leaves 85% that he is unsure of what to do with. Also boosting Bitcoin, CEO Elon Musk said this weekend his electric-vehicle company would resume transactions with Bitcoin when mining is done with more "clean energy usage." "When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions," Musk said in a tweet.

·     The U.S. dollar was mixed as the overall dollar index (DXY) was little changed on the day around the 90.50 level; the dollar/yen rose to almost 2-week highs above 110 as a little bounce in Treasury yields supportive of the rate-sensitive pairing this morning. Treasury yields remain near lowest levels in months, but slowly inching higher today (10-year back above 1.5% after lows 1.45%) ahead of the FOMC meeting this week where Fed asset tapering comments are possible, giving a small boost to yields.

Sector News Breakdown

Consumer

·     Auto sector; TSLA CEO Elon Musk said this weekend his electric-vehicle company would resume transactions with Bitcoin when mining is done with more "clean energy usage." "When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions," Musk said in a tweet; RIDE falls after saying CEO Steve Burns and CFO Julio Rodriguez have resigned – move follows comments last week by the company that there was "substantial doubt" about its ability to continue as a going concern in the next year; NKLA announced a purchase agreement with Tumim Stone Cap committing to buy up to $300M in NKLA shares; RACE downgraded to Sell at Goldman Sachs following the announcement of a BEV by 2025 and appointment of the new CEO with a tech background, as expect Ferrari to accelerate its transition to technologies of the future

·     Housing & Building Products; Lumber futures posted their biggest-ever weekly loss last week, extending a tumble from all-time highs reached last month as sawmills ramp up output and buyers hold off on purchases. Prices fell 18% this week, and has now dropped almost 40% from the record high reached on May 10 – Bloomberg (impact on housing names)

·     Consumer Staples; in European beverage sector, Bernstein downgraded shares of Campari (DVCMY), Diageo (DEO), and Pernod Ricard (PDRDY)to Market Perform and downgrading Rémy Cointreau (REMYY) to Underperform saying the impact of COVID and the associated restrictions was initially the biggest blow to the beverage alcohol industry since the introduction of US prohibition. However, the industry is slowly but steadily recovering.

·     Restaurants; CMG was upgraded from Outperform to Strong Buy with $1,800 tgt at Raymond James as believe recently announced menu price increases create 1) significant upside to 2H consensus comp expectations and increased confidence in their above-Street ’22 EPS estimates; CAKE was added to the Wedbush Best Ideas list after recent sell-off as expect post-COVID market share opportunities to result in higher growth vs. pre-COVID growth rates; WEN was upgraded from Neutral to Buy with $30 tgt at Northcoast; Cowen positive on shares of JACK saying foresee opportunities for JACK to exceed consensus 2024E EBITDA, as well as undergo multiple expansion from continued top-line execution as new management revamps marketing, menu innovation, and operations

Energy

·     E&P and Majors; RDSA is reviewing its holdings in the largest U.S. oil field for a potential sale, people familiar with the matter told Reuters. The sale could be for part or all of Shell’s position in the U.S. Permian Basin, which accounted for around 6% of the Anglo-Dutch company’s total oil and gas output last year. The holdings could be worth more than $10 billion; PBR says it plans to sell its remaining 37.5% stake in fuel distributor BR Distribuidora in a follow-on public offering; Citi downgraded CLB to Sell on valuation as their new $36 target implies about 25% downside following the stock’s 80% YTD rise that has outperformed all of its SMID cap peers and large cap names under their coverage despite the stock currently trading at one of the lowest 2022 FCF yield within OFS, at ~3.3%; CRK announces private offering of new senior notes due in 2030; Tudor downgraded RRC to Hold with a $16 pt; RCON priced its $55M direct offering at $6.24 for shares + warrants; ESTE purchased working interests in assets it operates in southern Gonzales County, Texas, from four separate sellers for $48M that increase its working interest in the assets to 96% from 34%; E (Eni) announced it discovered oil in the North Sea’s Garantiana field with preliminary estimates putting the between 35-65k barrels of oil equivalent hydrocarbons in place; SM filed a potential secondary offering of up to 5.3M shares by certain shareholders

·     MLPs & Pipelines: Goldman increased their coverage baseline multiple to reflect an improving fundamental backdrop that is driven mostly by high continued oil prices as they remain constructive on midstream stocks even after their material YTD outperformance, and downgraded KMI to Sell and upgraded CQP to Buy; Raymond James downgraded DCP to Outperform from Strong Buy, though they continue to see the stock as one of the more mis-priced names due to broader under-appreciation of its integrated assets and operating leverage within its G&P and L&S segments, and it has the most NGL price sensitivity in their coverage universe and they are increasingly optimistic around higher U.S. NGL prices later this year and into 2022, and they also upgraded ENLC to OP from MP as they see more room to run even after the stock moved higher following its upward revision to 2021 EBITDA guidance run due to the combination of upstream activity improvements in 2021 and ENLC’s NGL price exposure via Midland basin POP G&P contracts; Goldman started HESM with a buy rating and $30 target

Financials

·     Bank movers; banking stocks fell midday after JPM CEO Jamie Dimon warned at a conference of sliding trading revenues – Dimon said trading revenue at the largest U.S. bank will drop to just over $6 billion in the second quarter, a 38% decline from a year ago, and a far bigger drop than previously expected (which is around $6.5B) – the comments dragged other big banks GS, MS, C, WFC said May total client assets $7.40t, +85% YoY; AXP puts Kabbage acquisition to work with card company’s first checking account; in REITs; WPG shares tumbled as announced that it and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code; EQIX, GIC to add $3.9B to expand xScale data center program in additional 20-80 joint venture

Healthcare

·     Pharma movers; ITOS shares jumped as GSK agreed to pay up to $2 billion to the co to develop and sell a potential cancer treatment together/ITOS will receive a $625 million upfront payment and is eligible to get up to $1.45 billion more if the program meets certain milestones; ASND said the FDA extended the PDUFA date for TransCon hGH by three months to September 25, 2021, only ~2 weeks before the original date for the potential approval; LPCN said the FDA cleared its Investigational New Drug Application to initiate a Phase 2 study to evaluate LPCN 1154, an oral neuro-steroid product candidate, for the treatment of postpartum depression in adults; RAPT rises after positive topline results from phase 1b trial of rpt193 monotherapy in atopic dermatitis

·     Biotech movers; CRSP was upgraded to Neutral from Sell with a price target of $132 up from $55 at Citigroup saying with today’s data in more patients and with meaningful follow-up (up to 26 months), it is becoming increasingly clear to us that CTX001 is demonstrating consistent durable increases in HbF that are yielding prolonged therapeutic benefit on transfusion-independence in beta-thalassemia and freedom from VOCs in sickle-cell; ALXO announces update on aspen-03 and aspen-04, the ALX148 phase 2 head and neck cancer studies; NOVN adds to last Friday’s 62% advance following positive topline efficacy and safety results for the phase 3 clinical study of SB206 (analysts positive this morning with HC Wainwright raising tgt to $28)

·     Covid treatments; MRNA submits authorization application for its covid-19 vaccine in adolescents in Switzerland; NVAX shares jump after reporting late-stage trial data showing its COVID-19 vaccine candidate is more than 90% effective against a variety of variants of the virus as the study puts NVAX on track for filing for U.S. emergency authorization; COVID-19 vaccines made by PFE and AZN offer high protection of more than 90% against hospitalisation from the Delta coronavirus variant, a new analysis by Public Health England (PHE) showed on Monday.

·     MedTech Equipment; PHG announced a voluntary recall in its Sleep & Respiratory division relating to certain CPAP, BiPAP, and mechanical ventilator machines. In association with the recall, Philips has announced a further €250m provision in addition to the €250m provision announced at Q1, bringing the total provision amount to €500m; TWST collaborates with REGN for production of genotyping by sequencing panel to enable diverse genome-wide screening

·     In cannabis, HEXO Q3 revenue fell short of estimates due to a decline in adult-use non-beverage sales and co said it had no international medical cannabis sales due to revised prerequisite testing and an additional certification by the Israeli government; FLGC to buy Swiss hemp products maker Koch & Gsell for 20 mln Swiss francs ($22 mln) in FLGC shares; CRON unit to buy ~10.5% ownership stake in U.S. cannabis co PharmaCann for $110.4 mln

Industrials & Materials

·     Metals & Materials; AEM, NEM, GOLD, AUY gold miners slide as gold prices drop 1%, weighed down by a stronger dollar and easing concerns about inflation, ahead of the FOMC meeting this week; in containerboard sector (IP, PKG, WRK), Citigroup notes P&PW confirmed Friday that WRK has launched a $50/ton increase for domestic linerboard, effective July 15. This represents the third US containerboard price increase in the last twelve months.

Technology, Media & Telecom

·     Semiconductors; quiet on the day for the most part as index outperforms other tech as the Philly semi index (SOX) rises as much as 1% around the 3,240 level; QCOM said it would be willing to invest in ARM Holdings if Nvidia’s (NVDA) planned $40B acquisition of the Softbank-owned chipmaker isn’t able to be completed due to antitrust concerns – The Telegraph; VLDR introduced the next generation of its Velabit™ sensor, which addresses the cost, safety, and design challenges of autonomous solutions while delivering state-of-the-art performance

·     Software, Hardware, Components & Services; ADBE touches new 52-week highs; no specific news on GLW but was among the top decliners in the S&P most of the day; May 2020 videogame sales had risen 52% from 2019. Now the pro forma comparison from NPD Group shows overall May 2021 sales up 3% from 2020, to $4.45B (ATVI, EA, TTWO); CRSR the latest name in the Reddit rooms as shares jumped on the day