Market Review: October 11, 2021

Closing Recap

Monday, October 11, 2021





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stock averages plunged into the bell in choppy trading on Monday, settling at the lows of the day after earlier shrugging off inflation worries in the run up to third-quarter earnings reports later this week. Heading into the start of earnings season, shares of energy, financials, industrials, and materials have been the big winners recently on rising commodity prices (oil, copper, aluminum, iron ore, coal) amid higher demand, while rising rates lifting banks. Tech names were mixed, while retailers dropped on rising commodity price fears. Banks in focus ahead of key earnings Wednesday-Friday with JPM, GS, Citi, MS, WFC among those expected to report. Refinitiv notes analysts expect a 29.6% YoY increase in profit for S&P 500 companies in Q3, down from 96.3% growth in the second quarter. U.S. bond markets were closed for the Columbus Day holiday, after the 10-year yield touched its highest levels since mid-June after closing last Friday at 1.61%. Oil with another fresh 7-year high above $80 while the dollar gained, and gold prices finished little changed. U.S. stocks remain unphased by the jobs report miss on Friday, as it helped bolster investment hopes that the Fed will delay its asset tapering timeframe.

·     Stock and Sector movers: LUV slides after cancelling almost 2,000 flights over the weekend and another 355 today with over 500 delays on air traffic control issues, weather, and staff shortages; oil prices extend recent climb, hits $82/barrel as energy stocks again among S&P leaders HAL, SLB, FANG; FCX also among S&P leaders, CENX spikes, AA, X, CLF jump as metals/commodities outperform with rising prices; SOFI surges to highest in over 3-months after Morgan Stanley initiates at OW on its powerful revenue growth story; AZPN shoots higher after announcing a merger with two of $EMR’s software businesses in a deal worth about $11B; GPS was the worst in the S&P as cotton prices hit their highest in more than a decade, impacting LEVI, RL, UAA.



·     Oil prices rise for the 7th time in the last 8-sessions, as WTI crude gained $1.17 or 1.47% to settle at $80.52 per barrel, off earlier highs of $82.18 (its first settlement above $80 per barrel since late 2014) as an energy crisis grips major economies amid a pick-up in economic activity. Brent crude rose $1.26 to settle at $83.65 (touched $84.60 earlier in the session).

·     Gold prices edge lower in quiet trade, down -$1.70 to settle at $1,755.70 an ounce, edging lower into the close as the dollar moves higher. Copper prices rise 2.1% to settle at $4.3745 per lb., while silver prices dip -0.17% at $22.64 in a generally positive day for metals.

·     U.S. natural gas futures fell 4% to a two-week low on Monday on rising output and forecasts milder than normal weather will continue through late October. Front-month gas futures fell 22c, or 4.0%, to settle at $5.345 per million MMBtu their lowest close since Sept. 24.


Currencies & Treasuries

·     Bond markets were closed in observance of Columbus Day with the 10-year having closed at 1.61% on Friday, best levels since mid-June. The U.S. dollar was mixed as the dollar index (DXY) held above the 94 level (off highs 94.30), surging further against the Japanese yen at 113.40 (best levels since 2018) while slipping slightly vs. the euro. The British pound rose against vs. the euro and the dollar after the Bank of England said inflation levels were concerning and urged Britons, in interviews published over the weekend, to get ready for earlier interest rate increases. Bitcoin extends its gains, rising over 6% to a five-month high of $57,500 while other crypt assets (Ethereum, Litecoin, other) also finding strength.






WTI Crude















10-Year Note

Bond mkt

Was closed



Sector News Breakdown


·     Retailers; GPS was the worst in the S&P as cotton prices hit their highest in more than a decade, also impacting of LEVI, RL, UAA; HAS said company CEO Brian Goldner will take a leave of absence for medical care; for PTON, KeyBanc cut its tgt to $155 from $185 but said while acknowledge NT concerns about reopening and Tread, they think recent weakness presents a compelling LT entry opportunity; for sporting goods (DKS, BGFV, HIBB), Bank America said sporting goods spending (strong correlation with DKS comps) is still up y/y despite tough comps from delayed BTS spending LY

·     Auto sector; MGA downgraded, ALV upgraded in auto-suppliers at Barclays while saying they are looking for underperformance at the key GM exposed suppliers/says while Ford underperformed overall NA LVP in 2Q, and hence drove weakness at the Ford suppliers (e.g. VC, BWA), GM bore the brunt of its production stoppages this quarter (GM NALVP -46%, vs. total NA -23%)/still expect misses from the key GM suppliers, e.g. MGA, LEA, and to a lesser extent AXL and APTV downgraded to Sell from neutral at UBS on expectations of a slower and more costly ramp-up for the electric-power provider; APTV guided FY21 sales to $15.1B-$15.5B, down 6% at the midpoint vs. prior range of $16.1B-$16.4B on lower margin view of 7.6%-8.4% vs. prior 9.9%-10.2%; CVNA upgraded at Wedbush citing the company’s recent share-price underperformance, as well as strength in its retail and finance units

·     Consumer Staples; in grocers, ACI downgraded to Perform from Outperform at Oppenheimer and removing their $25 PT and top pick ranking following the meaningful outperformance YTD (ACI +59% vs. S&P 500 +17%), as believe the upside case is now reflected in shares; CHEF announced that it has acquired certain assets of Martin Preferred Foods, based in Houston, Texas; in food & beverage, bank America lowered its tgt on CCEP while highlight companies with greatest exposure to inflation, which include: TSN, HRL, CAG, THS, KHC, LW, SJM and CPB

·     Restaurants; SBUX was upgraded to Buy from Hold at Deutsche Bank with an unchanged price target of $127 saying they believe to be a reasonable degree of confidence that one can start to "leg in" here and ultimately be rewarded; SBUX was also reinstated Buy and $135 tgt at Bank America saying growth in the specialty coffee segment continues to outpace that of overall foodservice globally and in the U.S.; BROS rises after Wall Street initiates coverage: Jeff and Piper tgt high of $60 with at least 7 firms picking up coverage with Buy rating equivalent

·     Casinos, Gaming, Lodging & Leisure sector; in casinos, Bernstein noted Macau daily GGR for the first 10 days of October (1-10) was down 85% vs. Oct’19, due to the city’s effective border closure with China since Sept 26 caused by Macau’s COVID outbreaks. Golden Week visitation (Oct 1-7) was miniscule averaging only ~1,200 arrivals per day (~1% of Golden Week 2019 level); in the online sports betting sector, Bank America noted BetMGM (MGM) and CZR showed the most market share improvement while PENN and FanDuel declined; Citigroup initiated the OSB market with Buy ratings on DKNG ($66 tgt), GENI ($22 tgt), SRAD ($30 tgt)

·     Housing & Building Products; Wells Fargo said they believe the seasonal trade has good potential to work, and DHI and NVR have the best record regarding the Nov-April trade followed by LGIH and MTH – would add LEN and KBH to the consideration list this time based on field work



·     Energy stock movers; Energy producers were getting a boost from the run up in prices for crude and natural gas, with shares of OXY, DVN, SLB, HES rising (oil prices fresh new 7-year highs); last week, US E&P stocks rose ~6%, outperforming the S&P 500 which was up ~1% WoW following the OPEC+ decision to maintain its gradual output increase amid continued attention on tightening global supplies; in research, COP downgraded from Buy to Neutral with $76 tgt at Goldman Sachs noting since it reinstated with a Buy rating in February 2021, shares are up +73% vs. the S&P +15% and the XLE +36%, with the spread driven by the oil price rally, solid earnings execution, reduced federal lands risk and value creation from recent M&A, including Concho; Chinese natural gas distribution company ENN Natural Gas Co said it signed a 13-year deal to buy liquefied natural gas from U.S. LNG company Cheniere Energy Inc (LNG) beginning in July 2022.

·     Utilities & Solar; DQ shares jumped after Jefferies initiates China Solar names including poly player DAQO New Energy (DQ) as their Top Pick with a $139/share target and $208/share upside PT; ATO was downgraded to Hold at Argus reflecting expectations for rising interest rates and weaker near-term prospects for Utility stocks, offset by the company’s strong fundamentals and rising U.S. demand for natural gas



·     Bank movers; financials and banks hit new highs last week as bond yields closed the week at its highest levels since mid-June (10-yr 1.611%), but focus turns to earnings with JPM, BLK kicking off earnings this Wednesday (10/13), BAC, C, MS, USB, WFC on Thursday (10/14) and GS, PNC, SCHW, TFC on Friday 10/15; KKR named Joe Bae and Scott Nuttall as co-CEOs of the 45-year-old private equity firm, effective immediately as founders Henry Kravis and George Roberts step down, but will remain involved with the firm as executive co-chairmen; in research, Citigroup provides Q3 EPS preview for brokers, remain overweight Retail B/Ds and Asset Managers, while move up Traditionals and demote the Alts adding RJF to its U.S. Focus List, remove AMG; open a 30-Day positive catalyst watch on BEN ahead of earnings; shutter a 90-Day Positive Catalyst Watch on SCU.

·     Lending, Bitcoin, FinTech & Payments; another day and another rally in Bitcoin leveraged stocks (RIOT, MARA, COIN, MSTR, BTBT, NCTY, SI) following another spike in Bitcoin and other crypto prices on upward momentum and positive sentiment; SOFI was initiated with and Overweight and $25 tgt at Morgan Stanley saying competition is rising among challenger FinTechs for Gen Y & Z, but SOFI has a leg up given its roots in the hardest part of consumer finance, lending, along with a robust digital offering; regarding Ant Group, the WSJ reported Chinese President Xi Jinping is zeroing in on the ties that China’s state banks and other financial stalwarts have developed with big private-sector players, expanding his push to curb capitalist forces in the economy (the headlines pressured shares of Chinese listed stocks after rallying earlier in the session).



·     Pharma movers; MRK submitted an Emergency Use Authorization (EUA) application to the U.S. FDA for molnupiravir, an investigational oral antiviral medicine, for the treatment of mild-to-moderate COVID-19 who are at risk for progressing to severe COVID-19 and/or hospitalization; AZN Phase 3 trial met its primary end point; trial showed a reduced risk of death & severe C-19 by 67% in a trial where 90% of participants were from high-risk categories; only long acting antibody combination that can both prevent & treat C-19; PTGX surges as the FDA has lifted its clinical hold on its blood cancer drug Rusfertide, allowing trials using the drug to resume as no other unexpected safety signals surfaced from the review that followed; SRPT shares dropped early after the company highlighted new analysis and data from multiple studies of its Duchenne muscular dystrophy (DMD) treatment SRP-9001; BIIB settled a patent lawsuit over the multiple sclerosis drug Vumerity (diroximel fumarate); OCUL received FDA approval for its supplemental new drug application (sNDA) to add ocular itching linked to allergic conjunctivitis to its eye treatment label; gene editing stocks (EDIT, NTLA, CRSP) defended at Truist noting all of ALLOs’ programs were put on halt by the FDA which seems excessively punitive at face value. We think FDA may be worried about the use of lentivirus in ALLO’s programs (firm noted none of their covered CRSP, NTLA or EDIT use lentivirus so there is no read-through)

·     Biotech & Pharma M&A news today: ADMS to be acquired by SUPN through a tender offer for $8.10 per share in cash (or an aggregate of approximately $400M), payable at closing plus two non-tradable contingent value rights (CVR) collectively worth up to $1.00 per share in cash (or about $50M), for a total consideration of $9.10 per share in cash (about $450M). ; FLXN to be acquired by PCRX for roughly $427.5M, to gain access to co’s non-opioid pain treatment as FLXN holders to receive $8.50 per share, a 47% premium to their last closing price and the deal also includes a "contingent value right" where Flexion shareholders will get up to $8 per share, based on if co’s drug Zilretta achieves certain sales milestones


Industrials & Materials

·     Industrial & Machinery; HON raised its business outlook for jet deliveries as travel restrictions ease as they now see 7,400 new business jet deliveries worth $238 bln over the next 10 years, up 1% from the same 10-year forecast a year ago; most DE workers voted against a six-year labor contract that was tentatively agreed with the United Auto Workers (UAW) earlier this month, the U.S. tractor maker said; EMR to own 55% of AZPN following $11B transaction as Aspen holders will receive $87 per share in cash and 0.42 shares of the new AspenTech, implying a total consideration of $160 a share

·     Transports; LUV the big story of the day/weekend after the company canceled more than 1,000 flights on Sunday (after over 800 on Saturday), which the company blamed on air-traffic control issues and disruptive weather; UPS and FDX notable underperformers in transports

·     Metals & Materials; U.S.-listed shares of iron ore miners, steel companies, copper and aluminum companies jump, tracking commodity prices as China’s production, already curbed by a government anti-pollution drive, has been further hit by power shortages gripping the country; aluminum prices jump to the highest since 2008 as a deepening power crisis squeezes supplies of the energy- intensive metal (shares of AA, CENX active); CLF agreed to acquire Ferrous Processing and Trading, one of the largest processors and distributors of prime ferrous scrap in the U.S., in a deal with an enterprise value of ~$775M.

·     Chemicals; KeyBanc downgraded FMC to sector-weight from overweight while cut tgt on EMN to $119 from $137, and raised ALB tgt to $131 from $127 saying ahead of 3Q21 reports, they see fewer fundamental reasons for the chemicals sector to outperform the broader market in the ST. Still, there are several pockets of strength: for most commodity names, China’s dual-control policies are likely to result in an exceptionally strong 4Q21/1H22.

·     Aerospace & Defense; BA shares topped its rolling 100 and 200 day moving average resistance levels, as shares moved higher (shares later slip back below on stock market pullback); ERJ signed a deal to sell an additional 100 aircraft to NetJets, the Brazilian plane maker said, delivering the Phenom 300E jets from the second quarter of 2023 valued at more than $1.2 billion; OSIS announced that its Optoelectronics and Manufacturing division has received an order for approximately $6 million to provide electronic sub-assemblies to a wireless communication technology original equipment manufacturer


Technology, Media & Telecom

·     Internet; NFLX tgt raised from $643 to $740, primarily due to rolling forward to YE22, but also slightly higher 2023+ estimates given APAC content success/investment; U.S.-listed Chinese tech stocks (BABA, JD, NTES, BIDU, DIDI) advanced amid continued general buying in the space continues for a 2nd week after shares have tumbled the last few months on stricter government regulatory issues

·     Semiconductors; WDC tgt trimmed by $20 to $120 at Susquehanna and cuts profit estimates, citing weakness in near-term average selling price (ASP) trend for NAND Flash products; IPGP was downgraded to neutral at Bank America from Buy noting China is its largest region by a wide margin and the country’s government’s ambition towards higher levels of industrial manufacturing and high adoption of laser technology presents a range of risks near-term; broad strength in semi-equipment stocks early (AMAT, LRCX, KLAC)

·     Software movers; ZUO assumed/upgraded from Hold to Buy with $24 tgt at Needham as believe Zuora will accelerate billings growth thanks to changes to its go-to-market and product strategy; Wells Fargo said top 2H picks are CRM, WDAY, PLAN, TWLO and FIVN as expect volatility to persist into Q3 as questions around peak growth and sustainability of margin profiles loom, recommend investors lean into large cap; KPLT announced it has become an Accelerate partner in the Adobe Exchange Program; NET downgraded at Piper; FORG with at least six, Buy rated related initiations today on Wall Street with Cowen high tgt at $45

·     Media & Telecom movers; cable space mentioned negatively again as Raymond James downgraded CHTR and CMCSA to Market Perform from Outperform as believe two forces are going to keep cable multiples from expanding over the next few years: 1) competitive expansion, 2) regulatory encroachment (recall CHTR and CABO were downgraded in cable space by Wells Fargo on Friday as believe co’s growth will be far less impacted by competition and its premium multiple is unlikely to go unscathed); Oppenheimer noted that CHTR’s Spectrum Mobile unit lowered its multi-line unlimited plan pricing from $45 per month to $29.99, approximately a one-third discount for new and existing customers; GTN a positive mention in Barron’s saying at about $23.50 a share, it has a price/earnings ratio of five based on 2022 estimates. It looks like an inexpensive way to bet on broadcast as Gray’s strength in local news helps it make a killing in political ads; FUBO rises after signing a carriage deal with AT&T SportsNet Rocky Mountain

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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.