Market Review: March 22, 2021

Closing Recap

Monday, March 22, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks “melt” higher most of the trading amid strength in technology stocks (though saw some profit taking late day), as cyclicals and Smallcaps slipped in another stock market rotation as Treasury yields dipped over 6 bps to 1.68%. A sharp run-up in Treasury yields since mid-February has weighed on high-flying technology stocks that benefit from low yields and led to a rotation into underpriced value stocks from growth stocks that have fueled the past year’s rally – but unwound a bit today. There is also zero fear in the marketplace as the CBOE Volatility index (VIX) fell over 8% on the day, hitting lows of 18.95 as stocks extended gains. Yields dropped as the 30-year yield was down on back-to-back days for the first time since February 12th. Meanwhile Washington still opening its purse as the New York Times reported that U.S. President Joe Biden will consider spending $3 trillion for infrastructure – though the White House said later the reports are premature and does not reflect White House thinking. Over the weekend, Fed Chair Powell reiterated in a WSJ editorial that they will provide assistance “for as long as it takes” and Fed member Barkin said there “is no sign yet” of unwanted inflation pressures. Positive vaccine news lifted sentiment as AZN’s U.S. trial showed 79% efficacy in preventing covid and 100% effective at preventing severe disease/hospitalization. It was an overall quiet day, but a strong one for U.S. equities outside of weakness in the SmallCap (Russell 2000) and cyclical spaces as financials dropped. M&A news dominated the transport sector after a mega-merger in the railroad space with CP buying KSU in a $25B deal). Lot of attention in currency markets to start the week after Turkey’s currency tumbled 9% on Monday following the abrupt ouster of the central bank governor last week. The lira fell to as low as 8.280 a dollar from 7.219, before regaining some ground.

Economic Data

·     Existing Home Sales for February declined -6.6% to 6.220M vs. 6.500M consensus and 6.660M prior (revised from 6.690M). The median existing-home sales price rose to $313,000, 15.8% higher from one year ago, with all regions posting double-digit price gains. As of the end of February, housing inventory remained at a record-low of 1.03 million units, down by 29.5% year-over-year — a record decline. Properties typically sold in 20 days, also a record low.


Commodities, Currencies and Treasury’s

·     Oil prices edged higher, with WTI crude up 13c to $61.55 following a broad sell-off last week (oil dropped over 6%) as market participants remain hopeful for a rebound in demand later this year. Prices dipped last week on higher inventory data and as new European coronavirus lockdowns announced by France renewed demand concerns. Both WTI and Brent contracts fell more than 6% last week after making steady gains for months on the back of output cuts and an expected demand recovery, a falling dollar and momentum buying.

·     Gold prices end lower, slipping -$3.60 or 0.2% to settle at $1,738.10 an ounce in quiet trading, ending lower despite a weaker dollar as U.S. equities gained and U.S. Treasury yields pulled back from recent 1-year highs late last week of 1.75%. Gold fell as much as 1% to $1,727.01 earlier as investors flocked to the dollar and government bonds, spooked by Turkey’s abrupt decision to replace its central bank head with a critic of high interest rates.

·     The U.S. dollar slipped vs. most major currencies as the dollar index (DXY) drops -0.4% to 91.75 as stocks rallied and Treasury yields pulled back from 52-week highs; the dollar fell to 108.60 at the Asian open, later rallying back to around the 109 level; the euro was up slightly, and the British Pound was little changed late day at 1.3865. U.S. Treasury yields dipped, with the 10-year yield back down below 1.7% (down 5 bps) and the 30-yr dipped 7 bps to 2.38%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; several analyst research calls after earnings/ahead of others; DG upgraded from Inline to Outperform with $205 tgt at Evercore with the risk/reward compelling at a 20% discount to the S&P on building initiative traction, Washington policy aid, and a positive inflection in traffic forthcoming; Evercore downgraded FIVE to In Line with the risk reward balanced at 38x, or nearly 2x the S&P on our CY22 EPS; VRA was downgraded to Market Perform at Cowen saying they remain excited about VRA’s product innovation & partnerships, digital-first mindset, and attractive M&A prospects but note valuation appears fair; COLM upgraded to Buy at Bank America saying it sees a stronger recovery than originally anticipated for the retailer given recent management commentary and supportive debit/credit card data; Bank America also upped RL tgt to $135 and PVH to $120 ahead of 4Q earnings and lowering ests on PVH to reflect the pandemic disruption on its European business (35%E sales) while raising estimates on RL to reflect additional retention of the costs cut through its recent cost cut actions; as for the warehouse clubs (COST, BJ, WMT), UBS said they think they will emerge from the pandemic even better positioned than they were before

·     Consumer Staples; for SAM, Bank America said its Hard Seltzer Tracker showed the category grew 71.4% the 4 weeks ending March 6th, which is a deceleration from Jan but still captured 8.5% of share (+20bps m/m); ELF was mentioned positively in Barron’s saying the stock will benefit from the return to work and play, after demand for makeup products crashed during the pandemic; MDLZ announced an agreement to acquire a significant majority interest in Grenade, a leading UK performance nutrition pioneer in the fast-growing high protein bar segment; BGS was downgraded to neutral from overweight at Piper; RLX shares fell following news China mulls bringing e-cigarette regulation in line with traditional tobacco products after 2 Chinese gov’t ministries posted online the draft regulations that could potentially curb a fast-growing industry.

·     Restaurants; WEN was downgraded to hold from buy at Argus saying the company continues to benefit from new product launches, domestic and international unit expansion, and investments in its digital business…but expect customer traffic to remain relatively weak in the n-t due to the pandemic, and are concerned about the company’s high debt/cap ratio; PLAY tgt raised to $55 from $45 at Raymond James on its view that the restaurant chain will be a key beneficiary as the economy re-opens; TXRH tgt raised to $109 from $92 at BTIG as expect the company will benefit from significant pent-up demand as industry conditions improve in the coming months

·     Casinos, Lodging & Leisure sector; SIX flags great America parks will open to public April 24; CZR disclosed Monday that it has filed suit against its property insurers for refusing to cover losses estimated to be more than $2 billion resulting from the COVID-19 pandemic; TSLA shares rise early after Cathie Wood of Ark investment set a new price target, saying she expects Tesla to hit $3,000 a share in 2025; cruise lines dipped as CCL pushed back the restart of its Costa Cruises out of Italy by about a month to May 1. Last month, Carnival had said Costa Smeralda planned to restart cruises on March 27 – Costa Luminosa’s restart was postponed to May 16 from May 2.



·     Energy stock movers; Saudi Aramco lowered its guidance for 2021 cap-ex to around $35 bln from a range of $40-$35 bln previously, (capital spending in 2020 was $27 bln); the world’s largest oil exporter said net profit fell 44.4% to 183.76 bln riyals ($49 bln) for the year ended from 330.69 bln YoY; Aramco CEO said was optimistic about the oil market and bullish about demand recovery. The U.S. SEC has directed COP and OXY to hold shareholder votes on far-reaching new emissions targets, the Financial Times reported; in research, CNQ was downgraded at Credit Suisse noting there are better yield normalization stories in energy,

·     Utilities & Solar; OGS downgraded to neutral from buy at UBS noting since late February, OGS’ stock price has increased ~12% despite a near term overhang in a form of incurred $2.2B cost of gas due to the winter storm and uncertainty on when it will be recovered. UBS upgraded NI to buy from neutral as NI’s stock price remains over 20% below the pre-pandemic level despite the acceleration of the renewable capex and long-term earnings outlook above peer group average. Solar names rebound (ENPH, SPWR, DQ, FSLR) as Truist noted saw pressure last week as utilities in the largest solar state proposed changes to rooftop solar policy. Firm emphasizes the changes are part of an initial proposal and changes to policy by the California state regulator, if any, will likely look much different / less adverse. Truist reiterates favorable outlook for rooftop solar and see the weakness as largely headline risk.



·     Bank movers; banks leading to the downside, pulling back off 52-week highs as rotation back into tech and out of recent winners such as banks and insurance; also follow through weakness from Friday after the Fed declined to extend exemption on a leverage rule that eased capital requirements for big banks; co-founder of Apollo Global Management Inc. Leon Black is stepping down as chairman of the investment giant in an unexpected move; Janney downgraded AX, FIBK to Neutral from Buy; RDFN offering $500M in convertible senior notes due 2027; Credit Suisse raised their price target on JPM to $165 from $150 and their 2021-22 EPS estimates given the quickening pace of economic recovery, which includes yield curve steepening, prospects for a healthy pick up in the pace of loan growth, strength in capital markets activity, and lower credit costs – those same reasons have been catalysts for the spike in banks overall with regional banks (KRE) recently at all-time highs



·     Pharma movers; AZN said its Covid-19 vaccine was shown to be safe and 79% effective in preventing symptomatic disease in U.S. clinical trials involving more than 32,000 people and the U.S. trials identified no increased risk of serious blood clotting; RHHBY said that a Phase III study on its monoclonal antibody drug Tecentriq met the primary endpoint of providing disease-free survival to lung cancer patients and was statistically significant improvement in disease-free survival for patients suffering non-small-cell lung cancer; ODT said it will wind down its operations after determining that tesetaxel, a drug it was developing, was unlikely to earn FDA approval; ACER enters into agreement with Relief Therapeutics Holding for worldwide development and commercialization of its experimental metabolic disorders treatment ACER-001/Relief to potentially pay ACER up to $36 mln and royalties; SNDL files to sell up to $800 mln of shares from time to time through distribution agreement

·     Biotech movers; BCRX announced that its oral Factor D inhibitor, BCX9930, significantly increased hemoglobin and reduced transfusions in an ongoing dose-ranging trial while was safe and generally well-tolerated in the trial; CVAC expands CVnCoV #COVID19 vaccine candidate clinical trial analyses to include Phase 2b/3 variant specification and efficacy secondary endpoint to Phase 2a; MRNA announces that the Philippines has secured 7M additional doses of the company’s COVID-19 Vaccine through a new supply agreement; SBBP announced the detailed results from the Phase 3 LOGICS study of Recorlev in patients with Cushing’s syndrome; CTIC rises after medical journal Clinical Cancer Research published results from an early-stage study testing co’s experimental drug, pacritinib, with two immune-suppressing drugs for the prevention of acute graft-versus-host disease

·     Healthcare services and providers; INOV and HUM announced expansion of collaboration in focus on vaccine adherence; ALC was upgraded from Neutral to Buy with $78 pt at BTIG noting since the 2019 spin out from NVS, shares have generally underperformed the S&P 500 and IHI despite carrying a healthy valuation premium and beating expectations in 3 of the last 4 Qs.

·     MedTech and Equipment; PODD tgt was raised to $300 from $270 at Stifel after the co presented data from its pivotal three-month trial of Omnipod 5 this weekend as 55% of adults and 66% of children in trial achieved HbA1c or average blood glucose levels of below 7%; time in range (TIR) or time spent in target blood glucose range also improved; CSII acquires peripheral support catheters from WavePoint Medical


Industrials & Materials

·     Transports; big day in railroad space as CP agreed to buy KSU for $25 billion in a cash-and-share deal with KSU holders to receive 0.489 of a CP share and $90 in cash which values KSU at $275 per share, representing a 23% premium ; in airlines, JBLU announces $650 million convertible senior notes offering; Brazilian airlines AZUL, CPA both downgraded to underweight at JPMorgan with an overall cautious view for the sector noting Latin America airline stocks have rallied massively since last year on the vaccine news without a significant shift on business fundamentals

·     Aerospace & Defense; CUB rises after saying it received an unsolicited buyout bid for $76 a share from Singapore Technologies valued at $2.42B – Cubic said it expects to determine STE’s bid to be a "superior proposal" to current buyout deal for $70 from affiliates of Veritas Capital and Elliott Investment ; LMT mentioned positively in Barron’s saying it might be the safest way to bet in space, saying its seen as a defense stock and a legacy player in the "old space”; Barron’s also noted new companies have emerged with hopes of taking on SpaceX, as favors the soon-to-be publicly traded Rocket Lab USA, with its current valuation is $5.5 billion, based on its merger with VACQ; also the number and diversity of satellites will rise as the industry remains a $20B-$30B business a year, meaning risks could increase for companies like MAXR and IRDM

·     Metals & Materials; paper stocks (WRK, IP, PKG), slipped after Jefferies and Keybanc both noted surprisingly, RISI reflected only $20-35/ton of the $60 linerboard price increase for March…but says given tight market conditions they expect the majority/all of the increase realized in April; CSTM was upgraded from Market Perform to Outperform w/ $21 pt at Northland as had expected CSTM’s CY21 estimates to come down due to an auto chip shortage. Post earnings, estimates moved up even with multiple Q1 headwinds

Technology, Media & Telecom

·     Internet; social media giant FB outperforms as rises to YTD highs; PINS was downgraded to neutral from buy at Bank America and cut tgt to $78 from $94 and downgraded SNAP to neutral and cut tgt to $67 from $78 as continue to see Snap and Pinterest as strong secular growers, expect strong 1Q channel checks to aid stocks ahead of 1Q results, and anticipate acceleration in growth in 2Q, but think investors may becoming increasingly concerned on tougher 2H comps; BKNG was upgraded to Buy and tgt raised to $2,950 at Bank America in online travel; TRIP announces $300 million convertible notes offering; GRPN proposed private offering of $200 mln of convertible senior notes

·     Semiconductors; Philly semi index (SOX) rises more than 3%, back above 3,100 and topping its 50-day MA of 3,034; AMAT board of directors approved a new $7.5B stock buyback authorization and said its planned $3.5B acquisition of Kokusai Electric Corp. from KKR is on the brink after the companies were unable to confirm timely regulatory approval in China by last week’s deadline; MTSI said intends to offer $400 mln convertible senior notes due 2026; STX tgt raised to $86 from $75 at Argus saying given the company’s shift toward growing, high-value-added markets, they believe that STX shares are undervalued at current levels; ASML upgraded to Outperform at Cowen and raising tgt from €430 to €550 as model ASML earnings growing >50% in 2023

·     Software movers; ORCL files prospectus supplement related to a potential notes due 2041, notes due 2051, notes due 2061 offering; SPLK mentioned positively in Barron’s saying the software company that helps customers improve computing systems, could be a win for investors after its late and painful transition to the cloud

·     Hardware & Component news; SNX and Tech Data have entered into a definitive merger agreement valued at approximately $7.2B, including net debt. The transaction is expected to close in the second half of this year. ; ST remains top pick among the broad-based suppliers at Morgan Stanley, with secular tailwinds yet to be fully reflected in the stock as raises tgt to $72 from $68 and is trading only 30% and 15% above its long-term P/E and EV/EBITDA multiples compared to peer TEL; BOX shares jumped after Reuters reported the cloud service provider is exploring a sale amid pressure from hedge fund Starboard Value LP over its stock performance, according to people familiar with the matter.

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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.