Mid-Morning Look

Monday, June 21, 2021

U.S. equity futures are higher to start the day as last week’s losers (energy, financials, materials) are among the early leaders, pushing the S&P 500 and Dow higher while last week’s top performers (technology) are up the least as major averages rebound. The S&P 500 index is looking to snap its 4-day losing streak (longest since in 4-months) after posting a closing high last Monday, while the Dow rebounds after falling every day last week. The market relief rally comes following the more hawkish than expected FOMC outcome last week that sunk cyclical stocks, while technology shares jumped as Treasury yields plunged to lowest levels since February. Asian markets were mostly lower, playing catch-up, while European bourses started on a softer footing. Morning so far dominated by yet more headlines from Fed speakers (Fed’s Kaplan and Bullard) as stocks grind higher. Oil prices rebound after last week commodity pullback, while Bitcoin, and other crypto asset names (Ethereum, Litecoin, etc.) plunge following reports of a further crackdown in China as authorities in the southwest province of Sichuan on Friday ordered cryptocurrency mining projects to close. Treasury yields slip initially as the benchmark 10-year U.S. yield fell to its lowest since Feb. 24 at 1.354%, before recovering back to 1.48% now.

Sector Movers Today

·     Bitcoin news; Bitcoin and other crypto asset names (Ethereum, Litecoin, etc.) plunged following reports of a further crackdown in China as authorities in the southwest province of Sichuan on Friday ordered cryptocurrency mining projects to close. China has ordered payment platform Alipay and domestic banks to not to provide services linked to trading of virtual currencies (shares of stocks that invest, take payment, or mine bitcoin such as MSTR, SI, COIN, MOGO, NCTY, MARA, RIOT, SBNY, OSTK, SQ) were all under pressure early

·     Energy stock movers; after trading lower last week, energy stocks seeing a strong rebound to start the new week; Bank America upgraded MRO to neutral (up tgt to $16 from $12), amid the firm raising its oil deck for 2021-2023 and acknowledging the prospects that oil price strength may be sustained beyond its current view, while downgraded RRC to Underperform; Bernstein raised their price deck to $75 per barrel for Brent and to $73 per for WTI and logically find all covered names attractive as argue for a new paradigm for oil markets as they upgrade several names including PXD, DVN, KOS to outperform (in contrast to ‘just’ an inflationary cycle or a ‘next super-cycle’); Mizuho raised its tgts on COP to $82 from $73 and on OXY to $37 from $36 saying in a higher oil price environment driven by supply constraint, they believe that large-cap operators with scale are best positioned to succeed

·     Containerboard & Packaging sector: KeyBanc noted Fastmarkets RISI’s PPI Pulp & Paper Week recognized a substantial $30-$50/ton of additional boxboard price increases in June, a favorable development for producers (IP, WRK, PKG, GEF); Wells said they believe domestic containerboard producers are best positioned heading into H2 2021, saying IP remains their top packaging idea as raise ests and tgt

·     Metals & Mining; group looks to recover after last week’s drubbing after the Federal Reserve said Wednesday it expects to raise interest rates by late 2023, sooner than previously projected. Note shares of NUE fell ~13% in tough week for steel stocks, while FCX fell 14%, and gold miner NEM dropped 11%; RIO was downgraded to Sell from Neutral at UBS saying current free cash flow and dividend returns are not sustainable with near-term risks rising for the commodities rally

Stock GAINERS

·     APA +5%; energy stocks among the top gainers in the S&P 500 early, rebounding from last week as commodity names recover – EOG, DVN, OXY among top gainers

·     AVXL +19%; said he predictive biomarker of response established with SIGMAR1 mRNA expression correlates significantly with responses in primary clinical efficacy endpoints from the U.S. Phase 2 trial of Anavex2-73 blarcamesine

·     C +1%; shares rebound, snapping its 12-day losing streak as overall banks (JPM, GS, BAC) trying to rebound after recent pullbacks on plunging Treasury yields

·     JOBS +4%; will go private in a $5.7 billion deal, with shareholders getting $79.05 per share ADS in the consortium purchase https://on.mktw.net/3qcNJKr

·     LDL +83%; after Clearlake capital-backed Unifrax to acquire the co for $62.10 per share in deal valued at approx $1.3B https://bit.ly/3wMpAN5

·     MNOV +25%; after data from an experimental medicine in alcohol use disorder reduced the odds of heavy drinking by 45% compared to placebo with no effect on negative mood

·     NTRA +4%; Wells Fargo said “reimbursement environment for spec diagnostics has gotten a lot better, believe Fridays announced advanced diagnostic lab test stats for NTRA’s Signatera is underappreciated and supports this view, raise tgts for all, NTRA, GH, EXAS and NVTA”

·     RAVN +48%; as CNHI agreed to acquire RAVN for $58.00 per share, in a transaction valued at $2.1B https://bit.ly/3iXZByo

·     SHOP +2%; is rolling out a new service that will allow content publishers to link to merchants in the Shopify network in exchange for a cut of transaction revenue, the Information reported

Stock LAGGARDS

·     AMRN -8%; slides as the U.S. Supreme Court rejected a bid by the co’s subsidiary to revive patents on its heart drug Vascepa in a legal battle against generic drugmakers Hikma Pharmaceuticals and Dr. Reddy’s Laboratories Ltd

·     CRWD -4%; pullback in tech/software space after leafing last week; also competitor SentinelOne (S) priced its IPO at $26-29 per share, with a potential $7.36B valuation.

·     ENPH -4%; downgraded to Equal-weight from Overweight at Capital One

·     MSTR -7%; announced that it had purchased an additional approximately 13,005 bitcoins for approximately $489 million in cash at an average price of approximately $37,617 per bitcoin

·     RIDE -5%; shares pressured early after the WSJ reported several top executives at the co sold off chunks of stock ahead of reporting financial results, according to regulatory filings disclosing the transactions https://on.wsj.com/3xHN0n3

·     TBPH -7%; after saying a trial of its drug nezulcitinib in hospitalized patients with acute lung injury caused by Covid-19 had failed, and that patients who received the drug didn’t have more days without respiratory failure than those who received a placebo