Market Review: March 19, 2021

Closing Recap

Friday, March 19, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished mixed on Friday, ending the week with a strong rebound off morning lows despite elevated Treasury yields (1.73% – off highest levels in over a year) as financials lagged and technology outperformed. Banking stocks dipped after the Federal Reserve declined to extend exemption on a leverage rule that eased capital requirements for big banks. Friday’s decision means banks will have to resume holding an extra layer of loss-absorbing capital against those assets. Volume was higher ahead of “quad-witch” as options and futures on indexes and equities expired Friday as large derivatives positions roll over. The Dow Jones Industrial Average, which has recorded multiple record highs this week, slipped behind bank weakness (JPM), softer NKE quarterly revenues and reports that the Justice Dept was investigating Visa (V) over its debit-credit card practices. Dow Transports were strong behind FDX earnings overnight as shares rise, though airlines/travel related names extend losses after French PM said Thursday Paris will go into lockdown as COVID-19 variant rampages as the government imposes a 4-week lockdown on Paris and parts of the North. Oil prices rebounded from morning lows, snapping a 6-day losing streak to settle the day higher by over 2% but ends the week losing about 6%.

·     Stocks recovered off morning lows after a Wall Street Journal op-ed piece from Federal Reserve Board Chair Jerome Powell noted "At the Fed, we used all the tools at our disposal to prevent a financial meltdown and ensure that credit could continue to flow to households and businesses." As he said during his press conference after the FOMC meeting this week, the economy has improved since then, but the "recovery is far from complete." The comments were released when markets were at the lowest levels of the session and subsequently rose all day. Europe is seeing a new wave of Covid-19 cases, and France imposed new restrictions on trips outside the home. Germany may be forced to stall its reopening, too, as cases rise.

·     In sector news; FDX surges after earnings beat, lifts UPS; Dow component NKE slides on its revenue miss; Visa (V) stumbles after the DOJ announces a probe into its debit card business, dragging shares of MA lower with it; banks JPM, WFC, BAC slide despite yields rising as high as 1.75% after the Fed announces it will let a temporary leverage rule expire at the end of the month; VIAC, DKNG, PENN all rise as NCAA March Madness begins today; ETSY, PINS, FB, W, OSTK, CHWY e-commerce a pocket of strength on the day; DG among top S&P gainers, reverses yesterday’s earnings-related selloff after analysts defend the stock today.

Central bank News

·     The U.S. Federal Reserve said it will let a temporary bank leverage rule exemption expire on March 31, but it will review the rule due to concerns it is no longer functioning as intended because of the central bank’s emergency pandemic monetary policy measures. Friday’s decision means banks will have to resume holding an extra layer of loss-absorbing capital against those assets. Fed officials said they were confident that allowing the exemption to expire would not impair Treasury market liquidity or cause market disruption because the Treasury market had stabilized, and big banks have high levels of capital.

·     The Bank of Japan slightly loosened its grip on long-term interest rates and laid the groundwork to taper its huge asset purchases. In a review of its policy tools announced after a two-day meeting, the BOJ said it would allow long-term interest rates to move up and down by 0.25% around its 0% target, instead of by the current implicit band of 0.2%. To give itself more room to wind down its massive stimulus, the central bank also removed an explicit guidance to buy exchange-traded funds (ETF) at an annual pace of roughly 6 trillion yen ($55.21 billion).


Commodities, Currencies and Treasury’s

·     Oil prices rebounded off earlier lows, recovering after a report of an air attack on an oil refinery in the Saudi capital Riyadh caused a fire that was brought under control, the energy ministry said, after Yemen’s Houthi group said it targeted the site with six drones. WTI oil prices rose $1.42, or 2.37% to settle at $61.42 per barrel (well off earlier lows $58.94 per barrel). Nine more oil rigs were put into service in US oilfields this week, putting the total number of active oil rigs at a 10-month-high 318 rigs, according to data from oilfield services company Baker Hughes. The oil-rig count has risen 15 of the past 16 weeks. Despite today’s gain, prices posted a weekly decline of about 6% after a sell-off driven by inflation concerns and a cooling physical market.

·     Gold prices finished higher, rising $9.20 or 0.5% to settle at $1,741.70 an ounce, managing a 1.3% gain on the week despite a rise in Treasury yields and a rebound in the dollar. Gold could be getting a boost on expected growth prospects and continuation of the relatively low interest rate environment which could bring some fears of inflation, which is generally supportive for gold.

·     Treasury yields jumped earlier this morning, with the 10-year touching weekly highs of 1.75% after the Fed said it will not extend a change to the supplementary leverage ratio past its March 31 expiration, but yields slipped modestly in the afternoon, helping support equities. Yields had dropped to as low as 1.671% during Asian and European trading hours as foreign investors bought Treasury’s after Thursday’s selloff that sent the yield on the 10-year Treasury note to its highest close since January 2020. The dollar was mixed on the day but ended the day mostly higher as the dollar index (DXY) neared the 92 level again, moving with the bounce in Treasury yields and better economic data this week.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; Dow component NKE reported Q3 EPS of $0.90, topping the $0.76 estimate while Q4 revenue of $10.4B missed the est. $11.02B as analysts noted port congestion & a global container shortage weighed on sales results in North America (posted an 11% decline in North American sales in FQ3), EBIT margins were +440 bps to 16.2%–marking the highest Q3-level ever and qtrly Nike brand digital sales increased 59%, or 54% on a currency-neutral basis; OLLI reported solid 4Q & QTD results aided by stimulus as comps of 8.8% top views and margins rise, announces $100M buyback, though issued no guidance; SCVL announced planned CEO succession; increases quarterly dividend by 55.6% to $0.14 from $0.09

·     Auto sector; Ford (F) was upgraded from Equal Weight to Overweight at Barclay’s and raises the price target from $9 to $16 saying they were on the sidelines due to the lack of a clear, aggressive BEV strategy – but the Ford Europe turnaround and use of VW’s dedicated BEV platform have left them more bullish; Bloomberg reported that TSLA cars banned from Chinese military complexes, housing compounds on concerns about data being collected by cameras in the vehicles; in auto retail, Wedbush said believe ~15% relative valuation discounts vs. historical averages for AZO, AAP and ORLY more than reflect a potentially lower perpetual growth rate for these retailers due to the increasing penetration of electric vehicles (EVs) that carry lower part repair needs

·     Consumer Staples; JPMorgan upgraded KDP to overweight from neutral and forecasts double-digit earnings growth for company while raises PT to $39 from $33; firm downgraded TAP and KMB to Underweight as expects avg sales growth of HPC companies to be more than 4.2% in both 2021 and 2022 vs. a more than 8.2% avg growth in 2020; SMPL downgraded to Hold from Buy at Jefferies as continue to believe in the company’s strong fundamental outlook, including a higher-probability topline recovery and incremental deleverage due to cash generation; BYND initiated overweight at Stephens and $190 tgt saying Alt Protein went from a novelty to one of the most successful new food product launches in history in just two years; TAP also added to Deutsche Bank short term Sell catalyst list

·     Restaurants; SBUX upgraded to Outperform from Neutral with $124 tgt at Wedbush as believe upside exists to current FQ2 and FY21 estimates – says checks point to FQ2:21 upside as U.S. FQ2:20 comp sales growth was 8% through the first 10 weeks of the quarter, implying comp growth of -40% during the final 3 weeks, for a full-quarter comp of -3%



·     Energy stock movers; Oil stocks rebound after a big sell-off in the previous session as a new wave of coronavirus infections across Europe triggered fresh lockdowns and dampened expectations of any imminent recovery in fuel demand; energy stocks overall were mixed after falling this week behind a sharp decline in oil prices on demand fears and oversupply issues following another week of rising stockpiles

·     Utilities & Solar; NEE and NEP said members of the senior management team will participate in various investor meetings throughout March and early April and plan to discuss, among other things, that NextEra Energy’s long-term financial expectations remain unchanged, subject to the usual caveats; SEDG upgraded to Positive at Susquehanna with $345 tgt saying the alternative energy sector has seen a recent multiple de-rating on concerns of rising interest rates, but believes that the outlook for the sector remains robust; ARRY 31.05M share secondary priced at $28.00; BTU said CEO Glenn Kellow would be leaving the company at the end of August, as part of a planned succession process



·     Bank movers; Bank stocks (JPM, WFC, MS, C, BAC, etc.) fell after the Federal Reserve said it will not extend a change to the supplementary leverage ratio past its March 31 expiration, which was introduced as a temporary measure for banks to expand their balance sheets during the pandemic; Baird downgraded USB to Neutral on valuation with a $55 price target; Citi said they now recommend closing the pair trades they recommended in mid-February of FITB vs. KEY and USB vs. MTB as the relative valuations have converged and become less compelling; Wells downgraded PFSI to Equal-Weight with a $70 price target from OW with a $75 pt, saying they are taking profits (stock +92% since beginning of 2020 vs Consumer Finance index +17%) given a less favorable macro backdrop for the mortgage industry as interest rates continue to rise; Wells also reiterated their bullish view on ARES after hosting investor meetings with the company, saying the stock remains undervalued despite being among the best performers in financial services as their $68 price target implies further 25% upside potential

·     Canaccord with a strategy downgrade of financials today saying "this is not a complicated call — the rise in the 10-year has likely seen an intermediate term rate of change peak, and since that rise has driven the Financials we expect a relative performance correction. The S&P 500 Financial Sector has rallied 46% over the past five months as the 10-year U.S. Treasury (UST) yield rose from 0.75% to 1.70% and the 2-10-year U.S. Treasury Yield Curve steepened to 154 basis points. In fact, the rise in the 10-year UST Bond Yield has been the sharpest in history using a 10-week rate-of-change (ROC) indicator. It appears that despite this week’s rise in the 10-year yield the ROC peaked at near 80 and has begun to pull back."

·     Private equity, Asset managers; OpCo downgraded BX to Perform from Outperform and removed their $71 price target as shares are now trading above it and they do bit anticipate raising their target in the near-term; UBS initiated LPLA at Buy with a $160 price target given its best in class growth profile and consistent ranking among the top RIA platforms in UBS’s annual survey; Goldman added EVR to its Conviction List and upped its price target to $162 from $139

·     Insurance; After yesterday’s close, CB disclosed their offer price to HIG of $65/share, which Wells said was too low as they see HIG attracting a much higher price if it is to be sold, even saying the company could warrant a price over $80/share; Credit Suisse upgraded HIG to Outperform with a similar rationale, as they say Chubb would be willing to pay closer to $81.50/share for the company, which is 20% above its current share price and 25% above yesterday’s offer; Edward Jones upgraded PGR to Buy

·     Consumer Finance and Services; Visa (V) shares dipped after the WSJ reported the Justice Department is investigating whether Visa Inc. is engaging in anticompetitive practices in the debit-card market; Jefferies upgraded NAVI upgraded to Buy from Hold and raised their tgt to $19 as they believe the stock’s current valuation represents an attractive level and the market is overly-discounting the potential impacts from the regulatory overhang; Wedbush raised their price target on LC for the second time this week, setting it at $25 today (had raised it to $20.50 from $14 pre-market Wednesday), after they reduced the discount rate in their valuation models given the Fed’s commitment to an extended period of 0% interest rates and UPST stock +89% yesterday on its own eps/guidance, and they also say it is stock likely that the stock trades at a valuation between $33-37 per share over the next 3 years

·     REITs; Truist lowered FFO estimates on most apartment REITs but raised most of the price targets as they see fundamentals recovering amid stimulus, vaccinations, reopenings of amenities, and returns to work/cities, and they also downgraded EQR to Hold as they slightly favor Sunbelt stocks; Mizuho upgraded PGRE to Neutral with an $11 target; BMO said they remain positive on storage and reiterated their Outperform ratings on LSI (top pick in group), EXR, NSA after storage REITs provided positive updates at a recent industry conference, stronger-than-expected YTD occupancy rates, and moderating local and national supply which is supportive of a re-acceleration in core growth; Piper called SITC a solid recovery play after meeting with them, as they see growing tailwinds for shopping centers which are seeing rent growth for the first time in more than a decade; EXR 1.6M share spot secondary priced at $129.80



·     Vaccine news; JNJ is working on several next-generation versions of its Covid-19 vaccine that may be needed to bolster protection against some of the coronavirus variants that have emerged, the WSJ reported; in Europe, several EU countries are said to restart AZN vaccinations after EMA says jab is safe as Italy, France, Germany, and Spain to restart AZN jabs after the EMA concluded that the vaccine is safe and effective

·     Pharma movers; IDRA shares tumble after its ILLUMINATE-301 did not meet its primary endpoint of objective response rate (ORR); said evaluating its next steps regarding continuation of the trial toward its overall survival (OS) endpoint, which includes evaluating the full data set when it is available (downgraded by several analysts); KNSA said the FDA approved its drug Arcalyst for the treatment of recurrent pericarditis; MRK said it’s late-stage study testing the combination of its blockbuster cancer drug Keytruda with tyrosine kinase inhibitor LENVIMA in certain patients with endometrial cancer, met the main goals; MRKR rises after Cantor initiates with Overweight and $6 tgt and after filing showed several insider purchases of shares; ELAN said it has no plans to recall its Seresto flea-and-tick collars, calling recent media reports about the collars misleading; FNCH rises in IPO debut shares open at $20.45 vs IPO price of $17.00/share

·     Biotech movers; SRPT reported incremental data for its SRP-9003 Gene Therapy for the treatment of Limb-Girdle Muscular Dystrophy Type 2E to be presented at the MDA Conference; TRIL reports annual operating and financial results and sets date for R&D day for April 28, 2021, to provide data updates, and announce strategic priorities and clinical development plan; CLVS shares rise as its Rubraca® (rucaparib) significantly improves progression-free survival versus chemotherapy in patients with later-line ovarian cancer associated with a BRCA mutation as ARIEL4 study met its primary endpoint; INCY Phase 3 DEVENT study of patients on mechanical ventilation with COVID-19 associated Acute Respiratory Distress Syndrome (ARDS) showed a trend towards an improvement in mortality, though results were not statistically significant

·     Cannabis; Stifel said they continue buy ratings on both HYFM, GRWG, maintaining $67 target price for GrowGeneration, while increasing tgt for Hydrofarm to $70 per share (from $65), based on 5.5x EV/Sales on our updated outlook as believe the revenue growth prospects alongside each company’s position to profitably capitalize on the cannabis category’s growth both drive our continued positive approach

·     Healthcare services and providers; WOOF upgraded to Buy at Bank America but leave tgt at $28 after a strong Q4 as believe the Pet boom still favors WOOF and there are fewer near-term risks; SPCB rises after co wins covid-19 quarantine compliance project with Israeli government; in MedTech and Equipment; PODD was upgraded to Buy from Hold at Canaccord, noting it comes a day before the release of pivotal trial data for the Omnipod5, however, this is less a call on the puts/takes of O5’s time-in-range and patient outcomes and more around the set-up vs. consensus expectations in 2022+


Industrials & Materials

·     Transports; FDX Q3 adjusted EPS of $3.47 (+146% y/y) outperformed consensus of $3.29 (Opco notes EPS would’ve slightly topped $4.00 excluding a $350M pre-tax income weather-related headwind, partly offset by a $108M tax benefit) while total revenue (+23% y/y) topped consensus by ~8%, or >$1.55B, nicely distributed across FedEx’s segments; seeing further pullback in travel related names (AAL, UAL, BKNG, EXPE) after French PM said yesterday that Paris will go into lockdown as COVID-19 variant rampages as the French government imposing a 4-week lockdown on Paris and parts of the North

·     Aerospace & Defense; BA tgt raised to $310 from $285 and SPR to $57 from $52 at UBS following 737MAX tracking and updates noting over the last several week’s we’ve not only seen strong improvement in traffic trends (most notably in the domestic US and China markets) but commentary and actions in the marketplace have also been incrementally positive especially regarding the 737-MAX

·     Metals & Materials; NUE was upgraded to Buy from Hold at Argus with $85 tgt noting the company has a strong balance sheet and offers a solid dividend yield in a low-interest-rate environment; AA announced new agreements with multiple power generators for the Portland aluminum smelter in the Australian state of Victoria; GRA issues downside Q1 EPS guidance to $0.72-$0.74, down from prior guidance of $0.77-$0.80 and below $0.79 consensus to reflects lower fixed cost absorption during the downtime caused by last month’s winter storm

Technology, Media & Telecom

·     Internet; tech in general outperformed broader markets on the day despite Treasury yields pushing near the highs of the week (10-year neared 1.75%), led by large cap social media and online retail including FB, ETSY, PINS, W, OSTK, and AMZN; no specific news in the mega cap tech sector that enjoyed a rebound after falling 3% yesterday in bloodbath day for tech amid rising inflation fears with quick spike in Treasury yields.

·     Media & Telecom movers; the NFL announced it has signed long-term agreements with media partners AMZN, VIAC, DIS, DIS, FOXA and CMCSA NBC to distribute NFL games across television and digital platforms, along with additional media rights. The agreements will commence at the start of the 2023 season and run through the 2033 season; LIVX, IHRT announced Album release party with Justin Bieber; AT to sell $6 billion of bonds in three-part deal

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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.