Market Review: May 10, 2021

Closing Recap

Monday, May 10, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Two vastly different stories being told in equity markets today as the Dow Jones Industrial Average jumped to a record high for the sixth consecutive session (led by gains in defensive healthcare, consumer, and energy), alongside a 6th straight day of gains for the Dow Transport index (also record highs), while the dollar turned to fresh 2-1/2-month lows (a weaker dollar helped boost gold prices). However, they couldn’t hold those levels, sliding to the lows late day with broader selling pressure. At the same time, the tech heavy Nasdaq Composite got decimated, starting the week lower by over 2.5%, after falling for a 3rd-streaight week on Friday as investors flee high growth/high multiple stocks in search of upward momentum in cyclicals. Oil prices pared earlier gains as concerns that rising COVID-19 cases in Asia will dampen demand outweighed the impact of the shutdown of a major fuel pipeline. Longer-dated U.S. Treasury yields edged higher as investors eyed inflation data due this week (CPI on Wed, PPI on Thursday). Crypto currencies were volatile with Ethereum hitting new highs above $4,000 while Bitcoin dipped. The weaker-than-expected jobs report on Friday temporarily assured investors that the Federal Reserve will maintain its patience and keep its monetary policy accommodative to support the U.S. economy lifting markets sharply – but market participants continue to see surging prices everywhere (copper, lumber, corn, etc.), with investors turning their attention to commodities. 

·     Top stock/sector movers: Nasdaq starting the week lower after falling each of the past 3 weeks, led by a decline in big tech on Citi’s FB, GOOGL downgrade and Semis with QRVO, MU, LRCX comprising some of the S&P’s worst laggards on the day; TTD plummets after reporting the pandemic has significantly impacted advertiser demand and shares are now down over 34% YTD as another tech name to pullback from substantial gains since the pandemic began; COTY slides after its breakeven quarter disappoints and MAR slips after its revenue and EBITDA misses estimates; WKHS plunges on its wide sales miss, dragging other EV stocks; HD, LOW, TGT, BBY, GPS each trade at respective record highs, LB at its 52-week highs, and M among the S&P leaders as retail outperforms; DKNG drops over 8% after several analysts cut their price targets in response to Friday’s earnings and subsequent move before the stock pares some losses; AA, FCX, CLF, NUE rise industrial and precious metals among the biggest gainers early as commodity prices continue to surge; Dow Transports rise for a 6th straight day to new record highs.


Treasuries and Currencies:

·     The U.S. dollar (DXY) sunk to a 2 ½ month low vs. major counterparts, falling to around the 90 level before holding and ending modestly higher with the euro around the 1.215 level, though the British Pound was up above 1.413 (its highest levels since late February). Treasury yields opened the day at the lows but found themselves pushing to the highs by day’s end with the 10-year yield moving above the 1.6% level (off morning lows 1.56%).

·     Longer-dated U.S. Treasury yields dipped initially on the heels of Friday’s disappointing payrolls report as investors eyed data later this week on inflation and auctions. The central bank has repeatedly said it views any inflation that occurs to be transitory. Chicago Federal Reserve president Charles Evans said on Monday that inflation rates of 2.5% would not be a concern if they lead to an average of 2% over time. A big week of supply is expected this week, with the U.S. Treasury auctioning $58 billion of three-year notes on Tuesday, $41 billion of 10-year notes on Wednesday, and $27 billion of 30-year bonds on Thursday.



·     Oil prices rebound along with other commodity prices as WTI crude gains 2c to settle at $64.92 per barrel. Gasoline futures had surged overnight in the wake of the Colonial Pipeline shutdown triggered by a cyberattack. At about midday New York time, the company said the pipeline will be "substantially restored" the end of the week.

·     Gold prices climbed a 4th straight session on Monday (along with other precious metals) rising $6.30 or 0.3% to settle at $1,837.60 an ounce, back near 3-month highs following Friday’s missed jobs report which boosted expectations that interest rates will remain low for some time, denting the dollar and boosting non-yielding metal’s appeal. Reports indicated that also supporting the precious metal was the return of discretionary capital flowing into gold alongside strong physical demand from China and India prior to the recent lockdowns.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; ENR 2Q adj EPS $0.77 tops $0.60 est. on revs $685.1Mm vs. est. $625.9Mm, guides FY adj EPS $3.30-3.50 vs. est. $3.35; PRTY reported adj Q1 EPS (5c) loss, narrower than est. (17c) loss on revs $426.8M vs est. $405M and adj EBITDA $32.4M that more than doubled consensus, and sees Q2 revs $475-490M (est. $382.7M); Barron’s was positive on AEO, NKE, RVLV, and TJX as the pandemic brought cultural fashion changes and people will use these to get dressed for the reopen; Guggenheim raised their pt on ASO to $38 from $30 after they pre-announced comp sales +39%, the strongest under Ken Hicks (since May 2018); SPG and Authentic Brands Group agreed to buy Eddie Bauer, adding the outdoor gear and apparel retailer to a brand marquee housing Aéropostale, Forever 21 and Brooks Brothers

·     Housing & Building Products; BLD, IBP downgraded to in-line from outperform at ISI/Evercore; Telsey; HD and LOW price tgts raised at Telsey ahead of earnings saying they should remain winners amid expansion of high-margin installation materials and decorative products; FND tgt to $135 from $110 at Guggenheim, significantly raising their estimates on the top and bottom line after the company’s Q1 earnings exceeded expectations and offered strong QTD commentary; Craig Hallum initiated MLHR at Buy with a $60 target; Loop raised their estimates on RH and target to $800 from $600 given continued strength in the high-end housing market and stock market, both of which present tailwinds to the company’s customer base

·     Consumer Staples; food companies out with earnings as USFD Q1 adj EPS of 12c beats the est. 5c on better sales of $6.3B vs. est. $5.95B though is not issuing 2021 guidance; TSN Q3 sales beat on higher prices and as demand for meat recovers in retail stores and reopening restaurants as sales rose to $11.30B, slightly better than the $11.19B est. on better earnings; COTY Q3 EPS missed estimates while sales of $1.03B was in-line with views and reaffirmed FY21 net revs $4.5-4.6B vs est. $4.57B, sees FY adj EBITDA $750Mm

·     Restaurants; CMG increasing restaurant wages resulting in a $15 average hourly wage by June end, looking to hire 20,000 new team members across U.S.; WEN plans another attempt to enter the U.K. market, creating as many as 12,000 jobs, and over 400 stores

·     Casinos, Gaming, Lodging & Leisure sector; BALY reported Q1 EPS of 28c, missing the 34c estimate but revs better at $192.2M vs. est. $171.7M and Ebitda jumped 138% YoY; in lodging, MAR 1Q adj EPS of $0.10 beat the $0.03 estimate on revs $2.32B missing the $2.36B est. but said saw demand improve meaningfully during 1Q, especially in mainland China where occupancy is near pre-pandemic level; SGMS beat across every segment, gross and EBITDA margins really good across segments and overall, $80m FCF; for gaming (WYNN, MLCO) Bernstein noted Macau daily GGR during the first nine days (including May 1-5 Golden Week) jumped 92% w/w from the last week of April (ADR MOP500mm vs. 260mm). The five days of Golden Week had ADR of ~MOP 600mm (-43% in May 1-5, 2019 with this year having better mass mix)



·     Energy stock movers; energy stocks outperformed early despite a pullback in oil prices, getting a boost with a broader rotation into commodity related stocks; oil prices initially advanced after a cyberattack forced pipeline operator Colonial Pipeline to halt operations on Friday. Colonial Pipeline said Sunday it was still working to restart operations. The Colonial network is the main source of gasoline, diesel, and jet fuel for the East Coast, with capacity of about 2.5 million barrels a day on its system from Houston as far as North Carolina, and another 900,000 barrels to New York, according to Bloomberg.

·     E&P and Majors; BCEI and XOG to combine in a $1.1 billion all-stock merger of equals to create one of Colorado’s largest oil and gas drillers – the combined company, Civitas Resources Inc, will be the largest pure-play oil and gas company in the Denver-Julesburg Basin in Colorado; TGLS upgraded from Outperform to Strong Buy at Raymond James as believe the stock’s recent performance only begins to capture the enviable position in which Tecnoglass currently finds itself from a competitive, margin, and cash flow perspective.

·     Utilities & Solar; DUK Q1 adj EPS $1.26 beat by 6c on mostly in-line revs of $6.15B vs. est. $6.19B while affirms year EPS view of $5.00-$5.30 and l-t growth rate (WSJ later reported that Elliott Management took a stake); SEDG upgrade from Neutral to Buy with $276 tgt at Bank America as perceives share underperformance to be driven by investor worries around near-term chip shortages and associated impact for not just ’21 but concerns on potential systemic shortage persisting into ’22 – driving further downward consensus revisions – but emphasize the dramatic downturn for SEDG post earnings as well overdone on exacerbated supply chain concerns.



·     Bank movers; banks held up relatively well despite the pullback in Treasury yields, as JPM, GS, WFC, C outperformed most of the day; TFC downgrade from Outperform to Market Perform at Raymond James given limited upside to previous price target and lack of identifiable catalysts that would drive nearer-term outperformance or multiple expansion; WBS tgt raised at UBS after a mixed first impression about the merger with Sterling Bancorp, we believe the MOE not only pencils relative to the merger math but makes strategic sense as well; in asset managers, APO tgt raised to $72 and open positive 90-day positive catalyst watch at Citigroup

·     Insurance; in mortgage insurance, CSFB raised EPS estimates for ESNT, MTG, and NMIH and lowering estimates for RDN saying lower incurred losses is the primary positive for EPS with slower revenue growth the main drag on earnings power – raise target prices on ESNT to $52 (from $48), MTG to $15 (from $14), and NMIH to $29 (from $27) to reflect higher EPS estimates

·     Consumer Finance; MGI was upgraded from Underweight to Neutral at JPMorgan saying with 8-year DPA obligations fulfilled, sponsor share overhang removed and Walmart risk/concentration understood/reduced, they have less of a case to stay Underweight

·     Bitcoin news; Bitcoin prices slipped while Ethereum hits all-time highs above $4,000 and Bitcoin cash (BCH) and Litecoin rising; however several stocks that surged in the early part of 2021 that are leveraged to Bitcoin (mining, investing, etc.) saw extended declines again today: SI shares not more than cut by half from $187.86 Feb 17 highs; MSTR shares down at $580 (52-week highs $1,315 on Feb 9th); RIOT down under $31 (52-week highs $79.50 on Feb 17)

·     REITs; Evercore ISI upgraded ACC to outperform from in line; raises target price to $50 from $48; SBRA upgraded to Buy from Hold at Stifel and up tgt to $21.00/share saying while don’t expect much earnings growth over the next two years, the REIT has a strong balance sheet, attractive dividend yield, and trades at extremely low relative valuations



·     Cannabis space; TCNNF said it has struck an agreement to acquire Harvest Health (HRVSF), another U.S.-focused operator, as holders in Harvest Health & Recreation Inc. would receive 0.117 of its stock for each Harvest share they own, a ratio that values the stock at $4.79 a share (shares closed last week at $3.58), in a deal valued at about $2.1B

·     Pharma movers; BNTX rises after announcing a 1.8B order for vaccine for ’21 to ’23 from the EU and announcing a JV with Fosun Pharma to produce its vaccine in China/also announced plans for a regional HQ and vaccine manufacturing site in Singapore; AZN could skip seeking the emergency use authorization and instead apply for full FDA approval of the COVID-19 vaccine it co-developed with the University of Oxford, The Wall Street Journal reported this weekend, citing people familiar with the matter; SNGX said in a filing that it decided not to pursue a rolling NDA submission at this time for its HyBryte (SGX301) drug application.

·     Biotech movers; AXSM Q1 EPS loss (78c) vs. est. (87c); said that its cash at March 31, 2021, along with the remaining committed capital from the $225M term loan facility, is sufficient to fund anticipated operations into at least 2024; MBIO said the FDA accepts its application to begin an early stage clinical trial for its experimental treatment, MB-106, for a type of non-Hodgkin lymphoma and chronic lymphocytic leukemia; INO said its experimental COVID-19 vaccine was safe and also triggered antibody titers in 400 or so adult participants in a Phase 2 clinical trial; GILD this weekend at ESMO, AZN and Daiichi Sankyo presented phase I data from their TROP-2 ADC DS-1062 in mTNBC, showing competitive results to Trodelvy according to RBC; NVAX shares slid on Washington Post article that the co is not likely to seek emergency use authorization (EUA) for its COVID-19 vaccine in the United States until June at the earliest

·     Healthcare Services; CAH downgraded to neutral from outperform at Baird with $64 tgt saying CAH is no longer along for the ride on our positive drug distributor sector call. The valuation discount exists for a reason – e.g., chronic underperformance in Pharmaceutical and a Medical segment with low transparency that may take years to re-build investor confidence; GDRX tgt cut to $58 from $70 at Cowen as expects GDRX to report Q1 revenue and adj. EPS in line with Wall Street estimates, but sees softer-than-expected Q2 forecast on lighter prescription revenue; BFAM was upgraded to Buy at Citigroup noting fears over permanent destruction of some child-care demand due to WFH and Universal Pre-K have weighed on BFAM’s stock


Industrials & Materials

·     Industrial & Machinery; CTVA, FMC, DE, AGCO, MOS, NTR active as Barron’s bullish on six ag stocks saying prices of corn and other agricultural commodities have been soaring, but some closely-linked stocks have not kept pace, which says has created a buying opportunity in shares; Jacobs Engineering (J) 2Q adj EPS $1.66 vs. est. $1.38 on revs $#3.5B vs est. $3.49B, qtr-end backlog increased $2.3B; expects robust FY22 growth from national security priorities and global infrastructure modernization; guides FY21 adj EPS $6.00-6.30 vs. est. $5.89

·     Metals; Copper and iron ore prices extend gains as the commodity space continues to see higher pricing; Keybanc raise 2021E-2022E on MT on stronger global steel spreads, along with higher Mining (iron ore) pricing expectations while reit OW and raise tgt to $37; shares of copper producers (FCX), aluminum (AA), iron ore (CLF) and steels (NUE) again leading the gains in the S&P 500 with furth rotation in materials; in chemicals and Materials; APD slightly missed Q2 estimates for earnings while beating forecasts for revenues and issuing in-line guidance the current quarter and full year (said Q2 net income fell slightly to $473.1M, or $2.13/share, compared with $477.8M, or $2.15/share YoY)


Technology, Media & Telecom

·     Internet; FB and GOOGL downgraded to neutral from buy at Citigroup saying three things that make them nervous 1) among the top 10 Internet ad firms, in absolute dollar terms, sell side expects ~2x the annual growth from ’21 to ’25 versus ’18 to ’20, 2) many investors believe ad intensity per dollar of economic activity is rising (see little evidence of this) and 3) even if the sell side estimates are right, growth will likely decelerate after 2Q21 (on tougher comps)

·     Semiconductors; sector was pressured after reports Apple’s long-rumored first foray into cellular modem technology could debut as soon as 2023, according to analyst Ming-Chi Kuo. ; INTC downgrade from Neutral to Underweight with $45 tgt by Atlantic Securities saying does not believe IDM 2.0 provides an answer to market share losses to AMD; CREE upgraded to neutral from Underweight at JPMorgan as risk reward looks more balanced after stock decline of 15% since Q3 print on April 28; SWKS files potential mixed shelf offering

·     Software movers; Defense officials are considering pulling the plug on the $10B JEDI cloud-computing project, which was awarded to MSFT in 2019 over AMZN, which has contested the award in court ever since ; ORCL was downgraded to Equal-weight from Overweight at Barclay’s after the shares hit its tgt price (valuation); CRWD and Google cloud extend strategic partnership to deliver defense-in-depth protection across hybrid cloud environments; TTD plunges as reports Q1 EPS and slight revs beat $219.8M vs. est. $216.9M) but shares slide after the co said its business has been impacted by the COVID-19 pandemic that has significantly impacted advertiser demand – also announced a 10-for-1 stock split (shares of MGNI, PERI declined in sympathy on advertising comments); cyber security stocks (CRWD, FEYE) in focus following the ransomware attack on the Colonial Pipeline Co that forced the shutdown of pipelines that supply the East Coast with much of its refined fuel

·     Media & Telecom movers; Jefferies upgrades LYV to Buy from Hold, price target $96 saying the pullback in the shares (-13% from 3/2, vs ~+11% for the index) provides a compelling entry point for a premium, pure-play recovery, long-term growth story; IHRT upgraded to Overweight and raises tgt by $11 to $29 at JPMorgan as remains bullish citing higher digital revenue growth led by its podcasting business, continued rebound in ad trends as the economy re-opens, and strong revenue flow amid recent cost-cutting efforts; CCOI was upgraded to Outperform and $84 tgt at RBC, positive on the stock amid the early signs of a potential recovery in the Corporate market

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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.