Market Review: June 23, 2021

Closing Recap

Wednesday, June 23, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks slid into the close after trading in positive territory the majority of the day, snapping the S&P 500-win streak at a modest 2-days, while the Nasdaq Composite reaches a fresh all-time closing high for a second straight day. Fed Chair Powell on Tuesday continued to stress inflation as "transitory" in his testimony to Congress (reiterated by Treasury Secretary Yellen again today) despite acknowledging that "inflation effects from reopening are larger than expected" while the labor market, improving, still shows weak participation. Powell had reiterated the central bank would not hurry to lift borrowing costs, adding that price increases may be bigger than expected but will likely decrease. Economic data was mixed with better manufacturing data, but new home sales data disappoints. Stocks pared gains early afternoon following comments from Atlanta Federal Reserve Bank President Raphael Bostic saying the central bank would likely need to begin raising interest rates late next year, with stronger than expected inflation and the U.S. "well on its way to recovering from the pandemic."

·     Sector/stocks mover: PDCO tumbles on its EPS miss and $SDC slips after Loop downgrade in dental stocks; TSLA recaptures the $650 level for the 1st time since May 10 after opening its first charging station in China, XPEV jumps after receiving approval to list on Hong Kong stock exchange in a move that could raise as much as $2B, and NKLA rises after investing in hydrogen project for zero-emission trucks; CHPT, BLNK, WKHS also outperform in auto/EV space; MRNA, BNTX, PFE slide on reports their vaccines "likely linked" to rare cases of heart inflammation in adolescents and young adults – advisers to the U.S. CDC said; energy stocks lead on lowest crude stocks in EIA data since March 2020 as oil tops 2-year highs; LEN, DHI, KBH homebuilders tumble after New Home Sales for May fell -5.9% MoM to 769K, well below the 868K expected; FNMA, FMCC shares tumble after mixed ruling from Supreme Court on government seizure of the GSEs.


Economic Data:

·     U.S. Markit manufacturing PMI flash actual 62.6 (forecast 61.5, previous 62.1) and Markit services PMI flash actual 64.8 (forecast 70, previous 70.4); U.S. flash composite input prices index for June at 76.1 vs final May 77.3

·     New Home Sales for May fell -5.9% MoM to 769K, well below the 868K expected and 817K prior (which was revised down from 863K); new home supply 5.1 months’ worth at current pace vs April 4.6 months; May median sale price $374,400, +18.1% from May 2020 ($317,100)

·     Volume in the U.S. Federal Reserve’s reverse repurchase operation reached a record $813.573 billion on Wednesday as financial institutions continued to pour cash into the overnight facility. The daily operation, which included 73 bidders, was up from $791.6 billion on Tuesday.



·     Oil prices finish higher, but well-off session bests as WTI crude gains $0.23 or 0.32% to settle at $73.08 per barrel (earlier highs of $74.25 per barrel – Oct ’18 highs), with Brent climbing above $76 a barrel to its highest since late 2018 as well, after data showed U.S. crude inventories declined and reinforced views of a tightening market. U.S. crude inventories fell by 7.6M barrels last week to June 18 to 459.1M barrels, the U.S. EIA said. Stockpiles at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell by 1.8M barrels to the lowest since March 2020. Separately, Iran said on Wednesday the United States had agreed to remove all sanctions on Iran’s oil and shipping, although Germany cautioned that major issues remained at talks between Tehran and world powers to revive a 2015 nuclear deal. Gold prices gained $6.00 or 0.3% to settle at $1,783.40 an ounce, off earlier highs of $1,795.60 an ounce.


Currencies & Treasuries

·     The U.S. dollar slipped on Wednesday, before paring losses to end little changed (dollar index finished around 91.70 off highs of 91.90 and lows 91.50) after Fed Chair Powell on Tuesday said that rising inflation is likely temporary and showed no signs of being in a hurry to tighten monetary policy. Prior to his comments, the buck had risen in recent days after the Fed surprised markets on June 16 by saying that policymakers are forecasting two interest rate hikes in 2023. Powell downplayed the comments in testimony about the economy to Congress Tuesday saying that prices are rising due to a "perfect storm" of rising demand for goods and services and bottlenecks in supplying them and that those price pressures should ease on their own.

·     Treasury yields remain depressed as the benchmark 10-yr topped out at 1.49%, as Fed Chair Powell downplayed last week FOMC comments about rate hikes. The U.S. Treasury sold $61B in 5-year notes at a yield of 0.904% (16-month high) vs. 0.902% when issued prior as the bid-to-cover (demand) was 2.36 and indirect bidders awarded 57.62% of auction and directs 18.09%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; WWW announces next steps in planned CEO succession saying Brendan Hoffman, Pres & a member of the co’s board of Directors will also become CEO at the end of the year; PVH lowers FY revs to 22%-24%, down from prior view 24%-26% in Connection w announcement of the sale of Its IZOD, Van Heusen, ARROW and Geoffrey Beene Brands to Authentic Brands; PTON reportedly disabled a free running feature on its treadmills, forcing owners to pay up.

·     Auto sector; TSLA says it opened its first charging station in China that has its own solar and energy storage facilities; XPEV shares rise upon receiving approval to list on Hong Kong stock exchange; the company could raise as much as $2B in Hong Kong as soon as this year; SOLO files for shelf offering of up to $750 million of mixed securities; Embark Trucks Inc., a maker of self-driving technology for the trucking industry, said it is going public via a merger with special purpose acquisition corporation Norther Genesis Acquisition Corp. II (NGAB), in a deal with a pro forma implied enterprise value of about $4.55 billion; NKLA said it is investing $50 million in cash and stock in exchange for a 20% equity interest in a clean hydrogen project being developed in West Terre Haute, Indiana, by Wabash Valley Resources.

·     Casinos, Gaming, Lodging & Leisure sector; in RV space, WGO Q3 adj EPS $2.16 (est. $1.76) and revs $960.7M (est. $835.7M) both topped even the most optimistic estimate and reported a backlog of 46,646 units and $1.52B at the end of the quarter in late May; VAC raises Q2 contract sales view to $345M-$355M from $320M-$340M as it continues to experience a strong recovery during Q2 with occupancies and tours that continued to grow sequentially in Q2 from Q1; UBS sees cruise yields (RCL, CCL, NCLH) continuing to grow as new millennial demand is added to the Baby Boomer demographic and believes cruise operators could still deliver strong yield growth over the medium to longer term with measured supply growth and improved technology enhancing revenue management; DASH underperforms after rising 30% the last 10-trading days.



·     Energy stock movers; oil prices jumped following the EIA inventory data which showed a 7.6M per barrel fall in crude stocks (vs. ests for 4M barrel draw) while the API had reported a 7.2M per barrel draw after the close on Tuesday. Gasoline supplies fell 2.9M barrels vs. expected build. The data helped push oil to its highest since late 2018 and lift energy stocks in return. Also helping, earlier reports that OPEC+ mulls easing output curbs by 500,000 b/d in August. Inventory data; the American Petroleum Institute (API) showed a draw of 7.2M barrels of oil in the latest week, gasoline inventories show a build of 959K barrels, distillate inventories show a build of 992K barrels and Cushing inventories show a draw of 2.55M barrels. In solar space, strength across the board, paced by big gains in RUN, SPWR – rapid growth in Electric Vehicle (EV) adoption will be a major source of upside for RUN said Morgan Stanley last week (street high $91 tgt) and also last week, Sen Ossoff (D-GA) to introduce bill that would give tax break to solar manufacturers.



·     Bank movers; Raymond James upgraded HBAN to Strong Buy from Outperform on the belief that recent weakness is undeserved given solid fundamentals and they say the current discounted valuation represents an attractive entry point; Wolfe issued a double-upgrade of SF to Outperform from Underperform as shares have lagged peers YTD (+23% vs. Retail Broker peers +34%) despite fundamentals that have been better than anticipated; Goldman upgraded ICE to Conviction Buy from Buy with a 12-month price target of $141 (24% upside from current levels) as YTD underperformance (essentially flat vs. SPX +12%/XLF +21%), and they also downgraded LPLA to Buy from Conviction Buy as risks to spreads paid by the banks for sweep deposits amid significant liquidity in the system pose risks to 2022 EPS estimates; ICBK downgraded to Hold at Maxim and to Neutral at Piper who lifted their price target to $37.50; Wedbush raised their price target on CUBI to $51 from $42 after raising their EPS and TBV estimates ahead of Q2 earnings; FNMA, FMCC shares tumble after mixed ruling from Supreme Court saying that a U.S. agency overseeing the two lenders was structured unconstitutionally, but the court declined to void a government decision to channel the mortgage giants’ profits into the Treasury Department.

·     Insurance; Jefferies initiated UWMC with a Hold rating and $9.50 pt given fair current valuation and fierce competition in the growing wholesale market; RE lifted its total shareholder return goal for 2023 to exceed 13%, up from its near-term total shareholder return performance of ~11%, according to the company’s investor day presentation, and is now targeting 10-15% CAGR from 8-12% under its three-year strategic plan

·     Financial Services; INFO reported Q2 adj EPS 81c vs. est. 80c on revs $1.18B vs. est. $1.13B, and raised full-year views for adj EPS to $3.15-$3.17 from $3.11-$3.16, revenue to $4.635B-$4.675B from $4.535B-$4.635B, and adj EBITDA to $2.02B-$2.03B from $2B-$2.03B; Cowen reiterated PAYC at Outperform as they believe the Street is not factoring in the revenue uplift from their rollout of BETI (Better Employee Transaction Interface) and also say YTD underperformance that has affected high-multiple growth names has occurred despite strengthening fundamentals on economic reopening and their leading execution; INTU plans to introduce 14 – 20% pricing hikes to its QBO subscriptions beginning in July (Mizuho says these increases suggest consensus FY22 revenue estimates for QuickBooks Online ecosystem revs could be conservative)

·     REITs; Scotiabank upgraded WELL to Sector Perform from Underperform; FB Riley initiated SAFE at Buy with a $100 pt due to their first-mover advantage, strong balance sheet, and industry-leading position, and they concurrently initiate STAR at Buy with a $35 pt given the ties between the two companies (STAR owns a 65% stake in SAFE) and expectation that they merge by mid-2023; Stifel resumed coverage on BKD at Buy with a $9.80 target as they see a secular bottom in senior housing and the company should benefit from significant operating and financial leverage; SELF priced its 1.12M share offering at $5.35 for gross proceeds of approximately $6M; Following its first investor day, DBRG had its price target raised to $11 at Truist who is confident the stock’s momentum will continue with estimates likely to grind higher as their longer-term objectives imply it might be the fastest growing tech REIT in their coverage and was also affirmed at OW by Wells; Truist raised their PTs on KIM (to $23 from $20) and SPG (to $130 from $102); WSC 14M share Spot Secondary priced at $27.95.



·     Pharma movers; MRNA, BNTX, PFE slide on reports their vaccines "likely linked" to rare cases of heart inflammation in adolescents and young adults – advisers to the U.S. CDC said; GSK said that it expects growth in sales and adjusted operating profit over the next five years to be underpinned by new vaccines and specialty medicines, as it set targets for the medium and l-t following planned 2022 demerger of its consumer healthcare business; GMTX shares slide after announced initial data from its Phase 2a ReGAtta study of GEM103 in patients with geographic atrophy secondary to dry age-related macular degeneration

·     Biotech movers; EDIT announces enrollment of the first pediatric cohort in the brilliance clinical trial of edit-101 for the treatment of lca10 following IDMC endorsement; ENTX announces topline phase 2 BMD data for eb613, the study met its primary and key secondary endpoints; TTNP reports positive TP-2021 implant results in animal model of chronic pruritus; BTAI 3.155M share Spot Secondary priced at $31.70; ENTX said it saw positive results from its final 6-month bone mineral density results from the completed Phase 2 clinical trial of EB613 for osteoporosis; BIIB slips following FDA documents showing struggle over approval of its Alzheimer’s drug, Aduhelm as the agency released on Tuesday a sweeping series of memos revealing a clear struggle within the agency ahead of its controversial decision to approve Aduhelm

·     MedTech Equipment; BDX announces Expanded 510(k) Clearance for At-Home System for AscitesPeritX™ Peritoneal Catheter System is the first and only at-home system indicated for malignant and non-malignant ascites drainage in the United States; UTHR and MDT agreed to stop further efforts to develop and commercialize the implantable system for Remodulin, or ISR; EYES 10M share Spot Secondary priced at $5.00; HOLX receives CE Mark for molecular assay to quantify human cytomegalovirus

·     Healthcare Services; dental and animal health product stocks slip after PDCO missed Q4 profit estimates ($0.38 EPS vs. est. $0.52) on better revs, but guides FY22 adj EPS of $1.90-$2.05, below the current consensus of $2.10 (shares of HSIC, ALGN, ZTS, XRAY active in sympathy); SDC was downgraded from Buy to Hold with $9 tgt at Loop Capital to account for what they see as an inflationary environment for everything from shipping to digital marketing


Industrials & Materials

·     Aerospace & Defense; in defense, Credit Suisse downgraded BWXT to Neutral from Outperform with an updated target price of $67 from $74 premised on flattish estimate revisions over the next twelve months and a lack of multiple expansion catalysts. The deferral of BWXT’s cash harvest to 2023 is key to our downgrade. Firm increases our TP on NOC to $423 (from $400) and LHX to $243 (from $223) as provide a comprehensive update to our overall defense outlook.; LDOS awarded a $470M prime contract by the Transportation Security Authority to provide services related to the deployment of Transportation Screening Equipment.

·     Industrial & Machinery; GNRC ests and tgt raised to $440 at Bank America on increased confidence in the core home standby business following their dealer calls, further growth opportunity in Clean Energy, and the recent Deep-Sea acquisition; URI upgraded to Buy at Citigroup saying that positive estimate revisions can support further room for share gains in the equipment rental company; PH upgraded to Overweight from Sector Weight with $350 tgt at Keybanc; KBR won a follow-on $58.1 million task order to provide sustainment engineering services for U.S. Air Force systems

·     Metals & Materials; metals rebounding (FCX, SCCO in copper), from last week sharp materials declines after China stepped up its campaign to rein in commodity prices and reduce speculation in a bid to ease the threat to its pandemic rebound from soaring raw material costs; GEF announces $50/ton price increase on paperboard grades; CE estimates raised at Wells Fargo (reit OW and $183 tgt) following continued strength in acetic acid prices through the quarter; RPM downgraded to underweight at JPMorgan saying the company is likely to contend with raw material, packaging, and logistics cost inflation in the upcoming two quarters, pressuring its gross margins; LOOP enters ~$56.5M Securities Purchase Agreement with SK global chemical Co; KGC upgraded to Outperform from Neutral at Credit Suisse

Technology, Media & Telecom

·     Internet; in online travel, SABR said it expects Q2 revenue of $400-420M, up on the quarter due to higher travel volumes (above $392.5M consensus); CVNA downgraded to Neutral at JPMorgan saying while continue to like CVNA’s disruptive business model and related L-T growth potential, they believe the recent rebound in shares coupled with a meaningful pull back in brick & mortar auto retailers, makes the near-term relative risk-reward less favorable; Streaming service Peacock (:CMCSA) has its long-awaited distribution deal with AMZN Fire TV.

·     Semiconductors, Software; INTC said it would create two new business units that would focus separately on software and high-performance computing and graphics; CXM 16.625M share IPO priced at $16.00; EA acquires Playdemic, makers of the successful golf clash mobile game, from Warner Bros. Games and AT&T for $1.4B; Media & Telecom movers

·     Telecom, Media; VZ added to Citi positive catalyst -30-day watch list, taking a positive view on Verizon’s upcoming C2Q results and raising C2Q postpaid phone net add outlook from 125k to 215k vs. VA consensus at 152k; ROKU and VIAC shares outperformed, Dow Jones reported that CMCSA CEO Mr. Roberts, known as an aggressive deal maker in his two decades atop Comcast, has told people close to him that he doesn’t feel a need to seek a merger. But he is scoping out options, and ideas on the table include a potential tie-up with ViacomCBS Inc. or an acquisition of Roku Inc., one of the people said.

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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.