Mid-Morning Look: September 29, 2021

Mid-Morning Look
Wednesday, September 29, 2021
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
159.49 |
0.46% |
34,459 |
|||
S&P 500 |
22.71 |
0.52% |
4,375 |
|||
Nasdaq |
76.60 |
0.52% |
14,625 |
|||
Russell 2000 |
6.28 |
0.29% |
2,236 |
|||
A bit of a relief rally for stocks early, recovering a small portion of yesterday’s sharp market sell-off that saw major averages fall over 2% on rising Treasury yields (topped 1.56% before sliding back to 1.5% this morning), raising inflation concerns which particularly pressured growth stocks. The outlook appears to have changed at the Fed (in addition to no confidence comments from Elizabeth Warren yesterday on Fed Chairman Powell, saying she will not vote for renomination when his term comes up in January), with expectations of asset tapering shortly and the timeline of rate hikes moving up in 2022. There also remain concerns amid the drama in D.C. regarding the debt ceiling deadline and upcoming infrastructure bill vote later this week. Gold and silver prices pressured amid trouble with China, a slowing economy, and a stalemate in Congress. Energy stocks seeing modest profit after surging the last few days on rising oil prices. Tech mixed following earnings results from MU and outlook from ASML.
Economic Data
· Pending home sales for August rose +8.1%, topping the 1.4% estimate
· Oil prices slip after weekly oil inventory data bearish: the EIA posted a surprise weekly crude build of +4.6M barrels vs. -1.7M estimates (last week fell -3.5M barrels), while gasoline rose 200K barrels vs. +1.4M consensus, (+3.5M last week) and Distillates also a surprise build of 400K barrels vs. expected draw of -1.6M barrels
Macro |
Up/Down |
Last |
|
||
WTI Crude |
-0.01 |
75.28 |
|||
Brent |
-0.35 |
78.74 |
|||
Gold |
-11.20 |
1,728.30 |
|||
EUR/USD |
-0.0067 |
1.1614 |
|||
JPY/USD |
0.34 |
111.84 |
|||
10-Year Note |
-0.026 |
1.51% |
|||
Sector Movers Today
· Aerospace & Defense; BA, SPR and EADSY all upgraded to outperform by Bernstein on travel finally heading to inflection point (Boeing and Sprit rises on an increased traffic and capacity forecast as well as raised delivery outlooks). Says there is more upside if Airbus delivers on its 2023-25 production guidance. Boeing has more company-specific issues as it works to raise 737MAX rates, return to 787 deliveries, and address program issues in defense; LMT downgraded from Outperform to Market Perform with $375 pt at Cowen saying short of a rotation into big cap defense, its relative upside looks capped by pared F-35 delivery plans; LDOS awarded DARPA contract with $19.3M ceiling value; KTOS receives approximate $50M, single award, sole source high performance jet drone system related IDIQ contract
· Retailers; Warby Parker (WRBY) hit the NYSE via a direct listing, assigned a reference price of $40 to $WRBY with 111.5M outstanding shares (valuation of around $4.6B); DLTR approves an increase in its share repurchase authorization of $1.05B to take the total buyback firepower to $2.5B. In a separate announcement, DLTR disclosed that it plans to begin adding new price points above $1 across all Dollar Tree Plus stores; GPS shares active after Kanye West announced a new product launch this morning; LEVI positive mention at Stifel saying ahead of F3Q results they see strong potential for upside to our above consensus FY3Q estimates and an upward revision to guidance led by Wholesale strength; FL to raise $400M of senior notes due 2029
· E&P and Majors; APA shares slumped after the company said it has plugged and abandoned the Keskesi South-1 well offshore Suriname after encountering non-commercial quantities of hydrocarbons; in research, PXD raised to top pick in E&P, upgrade CLR and MRO to Buy at Citigroup and refresh rank with a focus on incremental cash return and thus our top picks are PXD, DVN, EOG, FANG, PDCE and OVV saying natural gas and LNG prices are spiking around the world, and this is happening during the shoulder season suggesting upside could continue if winter weather is colder than normal; OXY upgrade from In Line to Outperform at Evercore; EQT 5.93M share Spot Secondary priced at $20.00
· Bank movers; OpCo downgraded MS to Perform from Outperform purely on valuation as their forward estimates are unchanged but their valuation model shows just 7% upside, and they say bank stocks still only trade at a 61% relative P/E based on 2022E consensus even after its recent outperformance, and stocks on their recommended list include BAC, C, GS, JEF, USBRBC upgraded UBS to Outperform with a new CHF19 target due to its discounted valuation, several catalysts, and a strategic position that should deliver high returns, earnings growth and attractive capital distributions; SF said it agreed to buy institutional fixed-income broker-dealer Vining Sparks for an undisclosed amount; Wedbush remains positive on bank stocks ahead of Q3 earnings given tremendous earnings leverage with so much excess liquidity sitting on bank balance sheet and line utilization rates at near record low levels, with compelling valuations that are not fully reflecting potential earnings upside, and they see regional banks CMA, FITB, ZION, RF and mid-cap banks SI, CFR, SBNY as the biggest beneficiaries from reduced excess liquidity
· Materials & Chemicals; SHW forecasted adjusted Q3 EPS missed the average analyst estimate (guiding lower for the 2nd time in less than a month), but shares rebounded early; SQM upgraded to Neutral from Underperform at Bank America citing much higher lithium and potash price assumptions as well has strong lithium volume given the faster ramp-up of new capacity and solid demand (raised tgt to $67); NGLOY upgraded to Outperform and raises PT to 3450p at RBC Capital saying with the shares having pulled back and PGM prices stabilizing, Anglo’s diversified and growth-heavy portfolio of assets returns to their Outperform list; WOR reported Q1 EPS beat $2.46 vs. est. $1.90 while sales were in-line with consensus at $1.1B
Stock GAINERS
· AFRM +3%; after investor forum yesterday, which showed it is planning to debut a debit card and allow customers to buy and sell crypto directly from savings accounts they have with the company
· DLTR +13%; approves an increase in its share repurchase authorization of $1.05B to take the total buyback firepower to $2.5B. In a separate announcement, DLTR disclosed that it plans to begin adding new price points above $1 across all Dollar Tree Plus stores
· FBIO +11%; after AZN’s newly acquired Alexion unit to buy Caelum Biosciences Inc, company founded by FBIO about $150M and up to $350M in potential milestone payments (FBIO gets about 43% from transaction)
· FOLD +12%; as the U.S. FDA has accepted for review cipaglucosidase alfa and migalastat, two components that make up AT-GAA, FOLD’S experimental therapy for the treatment of Pompe disease as agency’s target action date for migalastat is May 29 and July 29 for cipaglucosidase alfa
· MRNA +1%; after Bloomberg reported the FDA is leaning toward authorizing half-dose booster shots of MRNA’s COVID-19 vaccine
· NCNA +30%; as the FDA granted Fast Track designation to its Acelarin, currently being evaluated in a late-stage study for the first-line treatment of patients with advanced biliary tract cancer
· NFLX +3%; following the viral success of a South Korean show, Squid Game, less than two-weeks after its release
· SPR +4%; BA, SPR and EADSY all upgraded to outperform by Bernstein on an increased traffic and capacity forecast as well as raised delivery outlooks
Stock LAGGARDS
· APA -3%; after the company said it has plugged and abandoned the Keskesi South-1 well offshore Suriname after encountering non-commercial quantities of hydrocarbons
· CDE 3%; as silver mining names (PAAS, AG, SVM) following the sharp decline in silver prices – silver futures collapse below $22/oz. to their lowest since July 2020, attributed to trouble with China, a slowing economy, and a stalemate in Congress.
· EDIT -13%; following data earlier which disclosed early-stage data for its gene-editing candidate EDIT-101 (a rival to PRQR sepofarsen which is undergoing a pivotal Phase 2/3 study called Illuminate trial)
· JBL -4%; reports Q4 revenue of $7.4B, up from $7.3B but missing the $7.67B estimate and guides Q1 revs between $8B-$8.6B compared to $8.25B estimate (EPS beat views)
· LMT -1%; downgraded from Outperform to Market Perform with $375 pt at Cowen saying short of a rotation into big cap defense, its relative upside looks capped by pared F-35 delivery plans
· LSPD -8%; after Spruce Point Capital Management Issues “Strong Sell” opinion with 60% – 80% long-term downside risk
· MU ; after better Q4 results, but weaker Q1 guidance – reported an in-line Q4 of $8.3B/$2.42, and guided to a weaker NovQ revenue to $7.65B, down 8% q/q, with GM a bright spot down only ~90bps q/q to 47.0% and up ~1,600 bps y/y
@media only screen and (max-width: 500px) {
td p.MsoNormal {
text-indent: 0!important;
margin: 0!important;
}
}
div[class*=WordSection]>p {line-height: inherit !important;}div[class*=WordSection] a:not([href]) {color: inherit !important;}
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.