Market Review: March 29, 2021

Closing Recap

Monday, March 29, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     What looked like a bleak day for major U.S. averages to start, as banking stocks drop after a large investment fund last week unwound billions of dollars in holdings, triggering concern that global banks that dealt with the firm could face sharp losses – turned out to be just another buy the dip opportunity as the S&P neared its all-time highs again late day. The Dow Jones Industrials ended higher amid gains in pharma (MRK, AMGN, JNJ) and staples (KO, MCD, PG), which helped offset weakness in banks today (GS, AXP, JPM). Smallcaps were down the most as the Russell 2000 drops around 2% while the tech heavy Nasdaq lagged amid rising yields. Financials fell after hedge fund Archegos Capital Management was forced to liquidate positions at the end of last week in several technology, China ADR, and media related stocks (VIAC, DISCA, GSX, FTCH, IG, BIDU) as the moves caused a wave of selling pressure Friday. Credit Suisse (CS) warned of a “highly significant” hit to its Q1 results, after the bank began exiting positions with a large U.S. hedge fund that melted down on margin calls last week. Japanese firm Nomura said it is evaluating a potential loss estimated at $2 billion, in just a few instances. Deutsche Bank, Goldman Sachs and Morgan Stanley downplayed the impact, helping shares recover midday.

·     Treasury yields inched to the high’s late day with the 10-year above 1.71%, nearing its recent 14-month highs of 1.75% 2-weeks ago. Commodity prices were mixed with gold down off the spike in yields, though oil prices rebounded despite news the container ship blocking the Suez Canal refloated early Monday, days after the vessel got stuck and brought a vital global trade route to a standstill. Markets await Biden to unveil the first part of his infrastructure plan Wednesday which has helped pushed shares of industrial and material stocks such as steel names higher the last few days. Food and beverage stocks (consumer staples) outperform in rotation into defensive sectors (PEP, TAP, K, CPB). Transportation stocks touched intraday record highs, closing near all-time bests after reports Biden to announce transportation-focused stimulus on Wednesday.


Commodities, Currencies & Treasury’s

·     Oil prices with a solid rebound in afternoon trade, as WTI crude rises $0.59 or 0.97% to settle at $61.56 per barrel after touching session lows at $59.41 earlier. The rise in oil prices followed a brief decline when the Suez Canal blockage ended as that gigantic stuck cargo ship was re-floated and moved out of the way. Next up for oil, market participants weigh whether OPEC will decide to maintain current production cuts when it meets later this week. Gold prices sink -$20.10 or 1.2% to settle at $1,712.20 an ounce, but finish off the lows, holding above $1,700, weighed down by a bounce in Treasury yields and a small gain in the dollar as precious metals fade.

·     Treasury yields popped to best levels in over a week, as the benchmark 10-year moved above 1.70% (just below its recent 14-month highs of 1.75%), steepening the yield curve on investor expectations that U.S. President Joe Biden’s $3-$4 trillion infrastructure initiative (expected Wednesday in Pittsburgh), will boost economic growth and a dramatic increase in Treasury bond issuance. The rapid rise in yields has hurt for growth stocks such as tech as higher interest rates erode the value of future profits and squeeze market valuations. Risk aversion hit overnight amid concerns over bank exposure to losses at Archegos. Concerns over rising virus cases in several European countries and uncertainties over vaccines also weighing on sentiment. Bitcoin prices jump over 7%, back above the $58,000 level after Visa (V) said it will allow the use of the cryptocurrency USD Coin to settle transactions on its payment network.






WTI Crude















10-Year Note





Sector News Breakdown


·     Consumer Staples & restaurants; NOMD said it would acquire Fortenova Group’s Frozen Food Business Group for about 615 million euros on a debt-free, cash free basis; TAP reaffirms its key financial guidance for full year 2021 as it continues to expect a mid-single digit increase in net sales revenue in 2021 on a constant currency basis; CALM Q3 EPS of 28c topped the 8c estimate on better sales, benefitting from strong demand for shell eggs

·     Casinos, Gaming, Lodging & Leisure sector; DKNG will become an official gaming partner of WWE, subject to regulatory approval in all applicable jurisdictions; electric vehicle stocks pressured again as sell-off intensifies for one of the best performing sectors over the last few months – TSLA shares dropped below the $600 level early; online betting stocks tumbled with weakness in PENN, DKNG along with casino weakness (WYNN)

·     Retailers; BBBY said it has made two hires to drive its $3 billion digital business as Jill Pavlovich (15 years’ experience – last at Wayfair) has been named senior vice president of digital commerce and Jake Griffith (also 15 years’ experience – prior GM of sports/fitness at WMT) is the home goods retailer’s new vice president of product management.



·     Trade channel opens: the huge container ship blocking Egypt’s Suez Canal for nearly a week has been partially refloated, the Suez Canal Authority said, raising hopes the busy waterway will soon be reopened for a big backlog of ships. The 400-metre long Ever Given became jammed across a southern section of the canal in high winds early last week, halting traffic on the shortest shipping route between Europe and Asia

·     Stock movers: DVN said Q1 production is estimated to be reduced by 8% due to the impact of severe winter weather; said it restored its production to pre-storm levels and expects the weather-related downtime to be confined to the first quarter; CVX has emerged as a leading contender to buy an RDS refinery in the U.S. Pacific Northwest, Reuters reported saying Shell has been trying to sell its 145,000 barrel-per-day (bpd) Puget Sound refinery for at least a year; SNP said it plans to increase capital spending by 24% to 167.2B yuan ($25.55B) from 135.1B yuan in 2020 while raising refinery throughput by 5.5% this year to 250M metric tons



·     Bank movers; Hedge fund liquidation pressures banks on the day as the sharp sell-off in media names on Friday explained: A liquidation of holdings in Archegos Capital Management, which is run by Tiger cub Bill Hwang and was estimated to have managed about $10B, led to a major sell off in VIAC and DISCA shares Friday according to Bloomberg and IPO Edge (ViacomCBS fell 26%, while Discovery dropped 27%). The liquidation in Archegos may have been precipitated by a margin call that the fund received from an investment bank that couldn’t be met. An email to clients seen by Bloomberg News said Goldman sold $6.6 billion worth of shares of BIDU, TME and VIPS, before the U.S. market opened on Friday. Following this, Goldman sold $3.9 billion worth of shares in VIAC, DISCA, FTCH, IQ and GSX. The Financial Times reported that MS sold $4 billion worth of shares earlier in the day, followed by another $4 bln the afternoon. . All in all, Archegos Capital was forced to sell more than $20B in stocks on Friday through block trades offered by GS, MS, and DB, and the Wall St Journal reported the sales have ultimately approached $30B in value and that most of the selling has been completed

·     Impact of Archegos Capital on specific banks: CS warned of a “highly significant” hit to its Q1 results, after the bank began exiting positions with a large U.S. hedge fund that melted down on margin calls last week. Japanese firm Nomura said it is evaluating a potential loss estimated at $2 billion. Goldman Sachs (GS) told shareholders that any losses it faces from the unwinding of trades by Archegos Capital Management are likely to be immaterial as per Bloomberg. Shares of other banks (MS, JPM, WFC, BAC) also dropped after Credit Suisse said other banks were affected by the hedge fund defaulting and were in the process of exiting positions with the fund.

·     Banking news: Compass Point upgraded COWN to Buy as its $43 price target implies 26% upside from current levels after shares have declined 20% since it initiated coverage on March 11 at Neutral (SPX -0.3% in same time) on profit-taking, weakness in the biotech sector, and concerns on SPAC exposure, which Compass Point says is overblown; PEBO will merge with PFSI in an all-stock deal valued at about $292.3M, and PFSI holders will receive about 0.58 PEBO shares for each PFSI share; Stephens raised its price target on OW-rated WAL to $108 from $93

·     Insurance; ALL agreed to a transaction in which Wilton Re will pay $220 million to acquire Allstate Life Insurance Company of New York in a deal that is expected to close in the second half of 2021, subject to regulatory approval and other closing conditions; Boenning initiated THG at Outperform with a $145 target; Deutsche upgraded RE to Buy with a $305 price target; GL increased its dividend 5.3% to 19.75c/share from 18.75c; CB said on Monday it was "disappointed" that smaller rival HIG had declined to engage in talks on its $23.24 billion takeover offer/Chubb made an offer of $65 per share on March 18, a premium of about 13%

·     PE & Asset Managers; BMO upgraded BEN to Outperform with a $36 pt from $22 given their belief that the firm’s recent net flows improvement are sustainable, and they downgraded ARES to Market Perform with a $59 pt on valuation after its 5x P/E re-rating since their upgrade in May, and say they KKR and APO

·     Cryptocurrency; Bitcoin prices rose above $58,000; Visa (V) launched a pilot program with to allow the use of the cryptocurrency USD Coin to settle transactions on its payment network and said it plans to offer the option to more partners later this year; FTFT shares gained after they purchased Antminer Bitcoin mining machines; MOGO launched the first Bitcoin cashback mortgage

·     Financial Services; Barron’s said Tax Day comes and Tax Day goes, but HRB might someday be a stock for all seasons, noting it is diversifying its business following years of underperformance; BR signed a deal to acquire Itiviti Holding AB in an all-cash transaction valued at EU2.143B (about $2.5B) from Nordic Capital; Stephens lifted its target on LPRO to $47 from $40 and kept its OW rating; Northland maintained WU at Outperform and upped its price target to $32 from $28, saying the stock is still under appreciated with only 3 Buy ratings out of 22 coverage ratings given robust digital/online growth, improving margins, recovery in retail, stimulus, and the company resuming buybacks and offering a 4% dividend yield

·     REITs; Wells said Tower and Data Center REITs face pressure from rising rates, though they believe towers are better positioned to withstand the impact from rising rates and listed EQIX, SBAC as its top picks in towers; Loop raised its price target on VICI to $33 from $32 after its deal for the Venetian Resort in Las Vegas, which they say is accretive to AFFO/share and diversifies its tenant base, and reiterated the stock at Buy as its top Gaming REIT pick with approximately 25% upside including its dividend



·     Pharma movers; LLY, VIR, and GSK announce positive topline data from the phase 2 blaze-4 trial evaluating bamlanivimab with vir-7831 in low-risk adults with covid-19; HGEN reports positive phase III topline results showing lenzilumab improves survival without need for mechanical ventilation in hospitalized patients with covid-19 as it achieved primary endpoint of study; BMY said the European Medicines Agency validated its application seeking expanded approval of its cancer drug Opdivo for the adjuvant treatment of patients with surgically resected, high-risk muscle-invasive urothelial carcinoma; QURE rises after saying an independent investigation found that its experimental blood disorder therapy was unlikely to be the cause of an adverse event in its pivotal late-stage study

·     Biotech movers; MRNA announces shipment of 100 millionth dose of its covid-19 vaccine to the U.S. government; BLUE and BMY received FDA approval for Abecma in relapsed/refractory multiple myeloma (first BCMA-directed CAR-T cell therapy) after four or more prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody; Cantor said view this approval as also positive for companies that are developing drugs to treat heme malignancies, including JNJ, PFE, LLY, MRK, HCM, IMAB and HGEN upgraded to Sector Perform from Underperform with $47 price target at RBC Capital after 30% drop from highs as believe the current share price now better balances potential reward/risk for ‘518 and the rest of PTCT’s pipeline, as well as the fundamental value of their commercial programs; IONS reports positive topline phase II study results of its novel antisense treatment for hereditary angioedema


Industrials & Materials

·     Industrial & Machinery; WBT shares mentioned positively in Barron’s saying shares could soar as restaurants recover noting COVID-19 hammered the restaurant business-and its suppliers, but with the economy recovering and eateries reopening, Welbilt stock looks like a buy; CARR upgraded to Overweight from Equal Weight at Morgan Stanley and firm also upgraded JCI to Overweight from Equal Weight

·     Aerospace & Defense; FLY agrees to be acquired by an affiliate of Carlyle Aviation Partners in a deal valued at around $2.36 bln, with FLY shareholders to receive $17.05 per share in cash, representing a total equity valuation of ~$520M; LUV confirms an agreement with Boeing (BA) on 100 firm orders for MAX 7 aircraft, with the first 30 scheduled to be delivered in 2022; GD pt raise from $183 to $210 at Cowen as see further upside on extended Gulfstream lift starting in 2022, GD IT turnaround and accelerating cash flow/deployment, which together, suggest 2022-23 EPS gains of ~10% in line with/above big cap defense peers; CUB confirmed on March 22 that it received an unsolicited proposal from Singapore Technologies Engineering to acquire all outstanding stock for $76 per share


Technology, Media & Telecom

·     Internet; large cap names such as AMZN, GOOGL, FB, SNAP, NFLX among leaders in broader weak tech tape; BIDU was upgraded to buy with $290 tgt at Loop Capital saying they think the automotive industry is on the cusp of drastic transformation/bullish on Baidu’s Apollo business, leading the pace of AV commercialization in China by a wide margin across many metrics; TWTR was upgraded to Buy from Hold at Truist with $74 tgt predicated on higher revenue growth ests, exciting product roadmap with Topics, Fleets etc., double digit growth in mDAUs and attractive valuation with the stock off 22%+ since AD on 2/25

·     Semiconductors; AMAT said its $2.2 bln July 2019 agreement to purchase Kokusai Electric Corp. has been terminated because the company didn’t obtain approval for the deal by Chinese regulators in time/AMAT to pay KKR a $154 million termination fee; SYNA shares slipped with broader semiconductor profit taking pullback, despite Needham raising its tgt to Street high $180 as remains constructive on the long-term transition to higher-margin, IoT edge computing SoCs.

·     Software movers; SE upgrade from Outperform to Buy with $275 tgt noting growth stocks continue to feel the pressure of rising long-term interest rates, weighing on multiples in both of Sea’s key businesses – but remain bullish on the longer-term prospects; SEAC secures a multi-year, multi-million-dollar contract with one of the largest broadband service providers in the U.S.; ORCL shares outperformed in an overall weak software showing

·     Media & Telecom movers; NWSA agreed to buy the consumer arm of educational publisher HMHC for $349 million, marking the media company’s second deal in less than a week; TME board approved a share buyback to repurchase up to $1B of its Class A ordinary shares; VIAC, DISCA, FOXA, other media names tried to rebound after block trades last Friday sunk shares of several media names; CMCSA announced the start of the rollout of Disney+ and ESPN+ on Xfinity, giving X1 and Flex customers access to the Disney+ library of movies and shows

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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.