Mid-Morning Look

Wednesday, March 10, 2021

U.S. equity markets extend yesterday’s rally as investors breathe a sigh of relief following “dovish” inflation data earlier this morning in the form of monthly Consumer Prices (CPI), pushing bonds yields lower. However, a key 10-year Treasury auction later this afternoon (1:00 PM) remains a potential market catalyst, with stocks coming off their highs into it. The February CPI rose 1.7% YoY, right in line with forecasts, while the core CPI was up 1.3% YoY, a little cooler than anticipated. Market participants have been raising concerns lately about inflation spiking as stimulus and vaccines prompt the economy to heat up. Congress is expected to pass the latest economic stimulus plan for $1.9 trillion later today, which includes $1,400 payments for most Americans, expanded unemployment insurance, funding for schools and public health, and state and local government aid. Stocks have been extremely volatile over the last few weeks (note the Phill semiconductor index has posted a closing gain/loss of over 3% for 7-consecutive days heading into today. The S&P 500 seeks its first back-to-back gains since Feb 23-24^th, having lost momentum early today. Bitcoin prices jump again, topping the $56K level, oil rebounds, gold slips and the dollar is mixed – in stock news, Reddit “meme” stocks active again (GME, KOSS, AMC).

Economic Data

·     Inflation data in-line as February Consumer Prices (CPI) rose +0.4% MoM, in-line with consensus and up from +0.3% prior, while rises 1.7% YoY; Core CPI (ex food & energy) rose 0.1% vs. est. +0.2% and compared to prior unchanged (rose 1.3% YoY, slowing from 1.4%); gasoline index rose 6.4% in Feb, more than half of the seasonally adjusted increase in the all-items index

Sector Movers Today

·     Asset Managers; WDR reported preliminary AUM of $75.5 bln for month ended Feb. 28, 2021, compared to $74.3 bln on Jan 31, 2021; LAZ reported assets under management of $260.68 billion vs. $226.8 billion YoY; AB prelim assets under management increased to $688 billion during February 2021 from $683 billion at the end of January; APAM assets under management as of February 28, 2021 totaled $161.5 billion and separate accounts accounted for $83.2 billion of total firm AUM; BEN reports preliminary AUM $1.5T as of February 28 compared to $1.49T at January 31; IVZ reported preliminary month-end assets under management (AUM) of $1,391.5 billion, an increase of 1.8% versus previous month-end; TROW prelim assets under management of $1.50T at Feb. 28, 2021 increased from$1.46T at Jan. 31.

·     Vaccine news; LLY antibody-based drugs reduced Covid-19-related hospitalizations and deaths among recently diagnosed patients when given at lower doses than previously tested, a new study found (bamlanivimab at 700 mgs together with 1,400 mgs of etesevimab cut hospitalizations and deaths by 87% compared with a placebo); BNTX and PFE said the European Commission enters into a deal with the two companies for supply of additional 4 mln COVID-19 vaccine doses to be delivered this month; PFE had previously committed to supply 500 mln doses to EU by end of 2021; President Biden today will announce a plan for the federal government to purchase an additional 100 million doses of JNJ’s Covid vaccine as per NBC News

·     Transports; in airlines (AAL, DAL, JBLU, UAL), air fares in the U.S. fell 5.1% in February on a month-to-month comparison, according to data compiled by the Bureau of Transportation Statistics. Fares were down more than the 3.2% decline seen in January and 2.5% drop in December. Air fares were off 25.6% in February compared to a year ago on an unadjusted basis; Goldman Sachs downgraded LSTR to sell, downgraded KNX, WERN, SNDR to neutral and upgrade ODFL, CNI in transports saying as the US reopens, the service sector is likely to see a bigger surge in demand than goods – they see limited upside in Trucking stocks following a strong run for the group and as spot truck rates in 2021 face tough YoY comparisons

·     Auto sector; electric vehicle stocks extend massive gains from Tuesday, as investors still piling into high growth sectors after last week’s sell-off (TSLA, LI, NIO); Guggenheim said they continue to favor auto dealer unique product growth stories that are less reliant on near-term volume trends, including BUY rated GNTX and VC as raise tgt on AN, KMX and LAD to $108, $143, and $462 (from $93, $117, and $390), but says this backdrop will continue to pose a headwind to wholesale auction volumes with a 2H recovery unlikely, which supports their sell rating on KAR;

·     Utilities & Solar; RUN was upgraded to Overweight from Equal-weight at Morgan Stanley with an $86 price target and to Neutral from Sell at UBS, both of which are on valuation after falling off of Jan 12’s high above $100, and Morgan Stanley also recommends AES, AY, SEDG, TPIC as stocks with strong growth and cash flow following the industry-wide stock price pullback; CLNE reported Q4 adj EPS loss (1c) vs. est. flat on revenue $75M vs. est. $71.3M, delivered 96M gallons (-7% YoY); ARRY posted Q4 adj EPS 93c incl items and 8c ex items vs est 6c on revs $180.6M vs est $164M, and guided FY21 revs $1.025-1.125B (est $989.9M), and Roth, Barclays, and Guggenheim each reiterated their bullish view on the stock but lowered their price target after the results; Barclays upgraded CMS to OW with a $67 target as its valuation has been disproportionately impacted by sector outflows despite its upcoming growth drivers; BLDP said their fuel cell modules will be employed to provide 1.2 megawatts of electricity by CP for their pioneering Hydrogen Locomotive Program

Stock GAINERS

·     AFMD +15%; in reaction to its announcement to continue enrollment in the REDIRECT trial, which is evaluating AFM13 as a monotherapy for the treatment of relapsed or refractory CD30-positive peripheral T-cell lymphoma (PTCL)

·     BBW +14%; reported Q4 earnings that surpassed expectations as adj EPS 47c topped est. 16c and revs $93.7M also beat consensus $90.5M as e-commerce sales more than doubled

·     BEN +7%; asset managers showing strength after strong AUM data for the month

·     BLUE +8%; said the case of AML that earlier forced the company to halt two clinical trials in sickle cell disease was unlikely due to BB305 lentiviral vector

·     CDXC +12%; after saying its healthy aging nutrient, Tru Niagen, will be available in 3,000 WMT stores beginning in June 2021

·     DKNG +9%; several positive analyst comments following its investor day presentation Tuesday saying TAM, market share and long-term growth profile continue to exceed expectations.

·     MNOV +60%; said it partnered with the Biomedical Advanced Research and Development Authority to repurpose its candidate MN-166 as a potential medical countermeasure (MCM) against chlorine gas-induced lung damage

·     NARI +15%; reported Q4/20 revenue of $48.6M (+144% Y/Y), coming in on the higher side of its preannounced revenue range of $47.9-$48.9M and guided 2021 revenue guide of $225-$235M, which is ~65% YoY growth

·     TLND +29%; to be acquired by Thoma Bravo for $66.00 per ordinary share and ADS, or a 29% premium to its closing price of $51.30 on Tuesday; all-together, the proposed deal values Talend at ~$2.4B. https://bit.ly/3l39YQb

·     UNFI +16%; posted mixed Q2 results as EPS beat, but sales of $6.89B misses views, while said it expects its FY21 Ebitda to be at the upper end of its guidance

Stock LAGGARDS

·     AVID -4%; after EPS miss for Q4 and softer guidance as sees Q1 EPS 17c-24c vs. est. 20c; sees Q1 revenue $88M-$94M vs. est. $93.69M

·     CPB -2%; posted in-line Q4 EPS while revs of $2.28B just fell short of consensus and sees 2021 EPS to be $3.03-$3.11 vs. consensus of $3.03, reflecting growth of 3% to 5% YoY

·     GE -6%; sells its aircraft-leasing unit in an over $30B deal to AER and will use proceed to reduce debt after closing in Q4 and allows it to focus on its industrial core; reiterates 2021 forecast to generate $2.5B-44.5B in free cash flow and guides year EPS 15c-25c vs. est. 26c

·     MPLN -12%; after swinging to a loss in Q4 of $182.4M vs. a profit of $11.8M YoY while revenue rose to $255.3 million from $246.4 million/said it didn’t provide annual or quarterly guidance due to Covid-19 uncertainty

·     TER -2%; as semiconductors pullback after a 6% advance in Philly semi index (SOX) Tuesday

·     TUP -24%; Q4 EPS 14c missed est. 77c but sales $489.6M beat est. $449M

Syndicate:

·     Cactus (WHD) 5.5M share $173.3M Secondary priced at implied $31.50

·     CAE (CAE) 9.09M share Secondary priced at $27.50

·     Jounce Therapeutics (JNCE) 5M share Spot Secondary priced at $11.25

·     Roblox (RBLX) coming public in a direct listing and filed to sell 198.9M shares – NYSE set direct listing reference price at $45

·     Xenon Pharmaceuticals (XENE) 4.32M share Spot Secondary priced at $18.50