Mid-Morning Look

Thursday, September 16, 2021

U.S. stocks open flat to slightly higher following a strong round of economic data, but much like trading action earlier in the week, markets sell off the first half hour before rebounding off lows. Treasury yields rise following the data as retail sales post an upside surprise (rises +0.8% vs. expected -0.7% decline) along with a big Philly Fed beat of 30.7 above est. 18.8 and prior month of 19.4; jobless claims were mostly in-line. The data raises view of taper timeline pushed up by Fed, which pressured sentiment intiially. Major averages continue to hold short-term technical support levels as major averages remain not far off record highs just a few weeks ago. Big moves in AAII sentiment survey this week as bullish sentiment down to lowest level since June 2020 and bearish highest since last October as AAII Bulls -17 to 22.4%. Bears +12 to 39.3% (usually a contra indicator), with markets awaiting the FOMC meeting next week. Casino stocks again pressured (LVS, MGM, WYNN) following the Macau Government’s announcement to tighten its casino regulatory oversight this week. Gold prices hammered early as the dollar rises following the economic data.

Economic Data

·     Weekly jobless claims reported at 332K vs. est. 330K, while prior month revised to 312K from 310K; continued claims reported at 2.665M from 2.852M last week (est. 2.785M); the 4-week moving average was 335.75K, down 4.25K from the previous week’s average of 340K; the U.S. insured unemployment rate fell to 1.9% from 2.1%prior week 

·     Philly Fed for Sept reported at 30.7 above est. 18.8 and prior month of 19.4; fed new orders index 15.9 in September vs August 22.8; prices paid index 67.3 in September vs August 71.2; employment index 26.3 in September vs August 32.6

·     Retail sales for Aug rises a surprise +0.7% vs. expected decline of (-0.8%); last month revised to (-1.8%) vs. (-1.1%); Retail sales ex autos jump +1.8% vs. est. (-0.1%) and prior (-0.4%)

Sector Movers Today

·     Consumer Finance; AXP upgraded to Neutral from Underperform at Bank America with a $169 price target saying risk-reward has turned more balanced after its recent underperformance that was driven by fear that COVID-19 Delta-wave would slow the economic recovery; Bank America noted that total credit card spending, based on aggregated BAC card data, increased 17% over a 2-year period, an upward surprise as they see evidence of people getting back out and spending outside of their home metro area, a good sign for mobility.

·     Metals & Materials; steel producers get second positive earnings outlook in as many days as NUE guides Q3 EPS $7.30-$7.40, above estimate $6.60 saying earnings of steel mills segment and products segments expected to increase significantly in QoQ (follows upbeat guidance from STLD yesterday which boosted shares); SBSW is buying half of Australia’s Ioneer Ltd.’s Nevada lithium mine project for $490M; TKR said it expects lower sales and earnings in second half of 2021; said underlying customer demand and end-market momentum remain strong across most sectors; gold miners (NEM, AEM, GOLD, AU) pressured as gold prices dropped on the U.S. dollar bounce following a round of upbeat economic data – raises expectations of Fed to taper assets sooner.

·     Software movers; EA rebounds after selling pressure Wednesday, despite Battlefield 2042 delayed from October 22 release by least several weeks to November (company noted while reaffirmed its outlook); FORG 11M share IPO priced at $25.00; JMP Securities said they believe trends noted by CSCO yesterday at analyst day bode well for ZS but could represent a risk to ANET and PANW citing the company’s ongoing shift to software-based revenues and subscription sales, as well as the breadth and depth of Cisco’s platform strengths across networking, security, infrastructure, and full-stack observability

·     Casinos, Gaming, Lodging & Leisure sector; LVS, WYNN, MLCO downgraded to Neutral from Overweight at JPMorgan following the Macau Government’s announcement to tighten its casino regulatory oversight, which could have potential implications on gaming patron spend, as well as reduce the casinos’ ability to repatriate Macau FCF back to the U.S. Firm said they are not overly concerned about licensing renewal terms (impossible to predict but nothing new) and we expect a renewal term that’s less than the current 20 years; DASH rises after Bank America upgraded to Buy from neutral and upped tgt to $255 from $190 as expects strong growth for the next five years (2021-2026), driven by the rapid shift of local commerce to delivery via mobile apps

Stock GAINERS

·     DASH +5%; after Bank America upgraded to Buy from neutral and upped tgt to $255 from $190 as expects strong growth for the next five years (2021-2026), driven by the rapid shift of local commerce to delivery via mobile apps

·     EA +3%; analysts remain positive on the video-game maker, despite news that it is delaying the launch of Battlefield 2042 to Nov. 19 after they reaffirmed bookings outlook

·     GWB +15%; to be acquired by FIBK in an all-stock deal valued at $2.0 billion, where GWB holders will receive 0.8425 First Interstate shares at $35.655 each, or a 24.7% premium.

·     MRNA +2%; said a study of breakthrough COVID-19 cases among vaccinated individuals supports the need for a booster shot

·     NTLA +4%; said the FDA has accepted its application seeking permission to start clinical trial of NTLA-5001, an experimental therapy for treatment of acute myeloid leukemia

·     SYF +2%; strength in credit card names (DFS) Bank America noted that total credit card spending, based on aggregated BAC card data, increased 17% over a 2-year period, an upward surprise as they see evidence of people getting back out and spending

·     ZYME +5%; as Zanidatamab phase 2 clinical trial demonstrates promising response rate and durability in first-line her2-positive gastroesophageal adenocarcinoma (at ESMO conference)

Stock LAGGARDS

·     AERI -23%; as a Phase 2b study of the company’s experimental treatment for dry eye disease failed to meet the main goal of the trial

·     BYND -4%; downgraded to Underweight from Neutral with a price target of $95, down from $120 at Piper saying the company’s current all-channel retail momentum will lag consensus expectations and foodservice consensus estimates may be high

·     NEM -3%; gold miners (NEM, AEM, GOLD, HL, AU) pressured as gold prices dropped on the U.S. dollar bounce following a round of upbeat economic data – raises expectations of Fed to taper assets sooner

·     RIDE -4%, FSR -6%, VC -3%, LEA -4%; after Bank America downgraded shares in auto space as expect stocks may remain volatile over the next 3- 6+ months as visibility is significantly lacking

·     SBTX -27%; after presenting interim Ph 1/1B study data in trial for advanced or metastatic HER2-expressing solid tumors

·     TKR -4%; said it expects lower sales and earnings in second half of 2021; said underlying customer demand and end-market momentum remain strong across most sectors

·     WYNN -2%; as bleeding continues in Macau names after reports Tuesday that Macau wants to increase supervision and local ownership of the companies; LVS, MLCO, WYNN downgraded at JPMorgan today

Syndicate:

·     Callaway Golf (ELY) 4M share Secondary priced at $29.25

·     Enact Holdings (ACT) 13.31M share IPO priced at $19.00

·     Figs (FIGS) 8.92M share Secondary priced at $40.25

·     ForgeRock (FORG) 11M share IPO priced at $25.00