Mid-Morning Look: March 23, 2021

Mid-Morning Look

Tuesday, March 23, 2021






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are down to start the day, erasing an initial rebound from overnight declines, amid a handful of worrisome comments and developments related to Covid and mixed commentary from Fed speakers. There were several negative data points, or events that weighed on sentiment initially including: 1) Nymex crude oil dropping back toward a 1-month low amid more European lockdowns as Germany is extending its lockdown until April 18 and calling on citizens to stay at home for five days over the Easter holidays to try to break a third wave of the COVID-19 pandemic, Chancellor Angela Merkel said. 2) AstraZeneca (AZN) shares slid after a U.S. health agency raised fresh doubt on the results of the drugmakers large-scale COVID-19 vaccine trials. 3) Moderately “hawkish” comments from Dallas Fed President Kaplan who said in a CNBC interview this morning that he predicts the FOMC will start raising rates next year as growth and inflation heat up. 4) New Home Sales plunged in February, with weakness in many regions, but was likely for a factor of poor weather. The dollar index (DXY) rises to 2-week highs, up 0.5% topping 92.25 on Kaplan comments earlier, pushing gold and oil lower as well. Despite the weakness overnight, market participants again look to buy on early weakness. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell will enter a heatedly partisan arena on Tuesday to kick off two days of congressional hearings assessing the economic policy response to the Covid-19 crisis.


Dallas Fed President Robert Kaplan said in a CNBC interview this morning that he predicts the FOMC will start raising rates next year as growth and inflation heat up. Kaplan said that year-over-year inflation will likely be 2.25% to 2.5% this year and the 10-year Treasury yield will rise to 1.75% to 2% but notes this not a bad thing as the economy improves. Kaplan says his forecast has improved meaningfully, with 6.5% GDP growth this year and unemployment falling to 4.5%.


Economic Data

·     The U.S. current account deficit raced to a 12-year high in 2020, surging 34.8% to $647.2 billion last year – the largest shortfall since 2008. The current account gap represented 3.1% of gross domestic product last year, also the largest share since 2008 and up from 2.2% in 2019. Exports of goods and services to, and income received from foreign residents dropped $578.3 billion to $3.23 trillion in 2020. Imports of goods fell $411.3 billion, to $3.87 trillion.

·     New Home Sales for February fell –18.2% MoM to 775K vs. 875K expected and 948K prior (revised from 923K) as home sales in Northeast -11.6%, Midwest -37.5%, South -14.7% and West -16.4%; Feb new home supply 4.8 months’ worth at current pace vs. Jan 3.8 months; Feb median sale price $349,400, +5.3% from Feb 2020 ($331,800)

·     Philadelphia Fed non-manufacturing regional business activity index 38.6 in March vs 3.9 in Feb; non-manufacturing new orders index 19.9 in March vs 4.0 in Feb; non-manufacturing firm-level business activity index 33.5 in March vs 7.5 in Feb

·     Richmond Fed composite manufacturing index +17 in March vs +14 in Feb and shipments index +22 in March vs +12 in Feb







WTI Crude















10-Year Note





Sector Movers Today

·     Pharma movers; NVS said that a phase 3 study with radioligand therapy 177Lu-PSMA-617 in patients with advanced prostate cancer met both primary endpoints of overall survival and radiographic progression-free survival; HEPA said it saw positive results from an in vivo study of CRV431 in a diet-induced animal model of non-alcoholic fatty liver disease; VRCA 2.034M share Spot Secondary priced at $14.75; XOMA purchased potential future milestones & royalties associated with VIRX existing licenses relating to 2 clinical-stage drug candidates; Viracta Therapeutics to receive $13.5 million upfront cash payment

·     Semiconductors; LITE increased their bid for COHR to $230/share in cash and 0.6724 shares of LITE for each COHR share held in a $7B deal from $220/share and 0.61 shares of stock to contend with IIVI’s proposal last week of $220/share in cash and 0.91 shares of IIVI for each COHR share held; Longbow upgraded MCHP to Buy with a $188 target as they say the company can reach its recently raised GM and EBIT margins a year earlier than the Street’s current forecast of March 2023 given the favorable industry environment, and they also upgraded TXN to Buy as the company has the highest internal capacity among diversified semis and should gain market share given its increase in DTC sales (63% of Q4 sales vs <40% YoY); Bank of America raised their price target to $150 from $150 and maintained the stock as a Buy as they see their semi sales accelerating and EPS approaching $9 by 2025; Jim Cramer called MRVL the ultimate 5G wireless play last night on “Mad Money”

·     Media & Telecom movers; VIAC shares fall after it started an offering of $3 billion worth of equity securities which follows a 55.6% month to date to close Monday at a record of $100.34, marking a 12th record close so far this month (equity offering includes $2.0 billion of Class B common stock and $1.0 billion of Series A mandatory convertible preferred stock); DISCA downgraded to Sell from neutral saying they see the streaming opportunity as more than priced in, but nearly doubles the price target from $24 to $46 – says early app data shows Discovery+ as the fifth most downloaded SVOD app, and Nielsen data shows that about 14M U.S. SVOD homes watch at least 20 hours of flagship Discovery brands per month

·     Utilities & Solar; WES 10M share Spot Secondary priced at $17.35; Goldman downgraded SPWR to Neutral with a $32 target from Buy as they see less upside versus other solar residential peers after shares have increased almost eight-fold over the past year, and they also upgraded RUN to Buy with a $77 target, reversing their 9/30 downgrade on valuation as they see attractive risk-reward now after the stock’s recent sell-off on macro factors; Roth reiterated their Buy rating on CSIQ and upped their price target to $55 from $50 on valuation and Citi also kept the name at a Buy but lowered their target to $63 from $71; Bank of America upgraded NWE to Neutral from Underperform; JE shares were suspended from trading on the NYSE after the close yesterday and are now trading on the OTC Pink Market under the symbol JENGQ; BLDP filed a registration statement covering the potential sale of various securities totaling up to $1.5B



·     ADBE +2%; rebound in software stocks and stay at home winners

·     DG +2%; extending gains from last week post earnings – positive analyst calls last two days as well as expectations to benefit from latest round of fiscal stimulus for discount stores

·     EHTH +2%; as Starboard Value LP reports 6.9% stake as of March 11, 2021 based on belief that shares were undervalued

·     NFLX +2%; upgraded to Buy from Hold with $650 tgt at Argus noting the company is expanding globally, adding new subscribers, and strengthening its industry position

·     ZM +4%; stay at home winners seeing strength with Europe increased lockdowns



·     AZN -3%; shares volatile as the company, responding to charges (from the National Institute of Allergy and Infectious Diseases) that they had provided outdated information regarding its Phase 3 U.S. trial for COVID-19 vaccine, issued a statement saying that the results published yesterday had a data cut-off of 17 February

·     CCL -5%; lockdowns in Europe (France, Germany) taking toll on reopen related stocks and sectors such as cruise lines and travel (WYNN, NCLH, UAL, CZR)

·     DISCA -5%; pullback in media names as UBS cut rating to sell saying they see the streaming opportunity as more than priced in, but nearly doubles the price target from $24 to $46

·     HIG -2%; its board unanimously rejected CB’s March 11, 2021, unsolicited proposal to acquire Hartford, deciding that entering merger talks wouldn’t be in the best interests of the company or its shareholders

·     IONS -20%; after its partner Roche decided to discontinue dosing in the Phase III GENERATION HD1 study of tominersen in manifest Huntington’s disease (HD) – shares of WVE and QURE down in sympathy which are other players in the HD space

·     VIAC 7%; after it started an offering of $3 billion worth of equity securities which follows a 55.6% month to date to close Monday at a record of $100.34

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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.