Early Look

Friday, May 21, 2021

U.S. stocks are looking higher to end the week, adding to yesterday’s massive gains that saw major averages snap their 3-day losing streak, led by technology shares as Treasury yields remained subdued and on increased economic optimism after Americans filing for first-time unemployment benefits fell last week to a pandemic low of 444,000. It was another “buy the dip” reaction for major averages as the S&P avoided its longest losing streak since February with yesterday’s advance. Oil prices are looking higher, trying to snap its 3-day losing streak, while gold is little changed after a strong week of gains. Inflation fears still linger for markets as pricing fears remain as the economy improves, keeping gains in check for now. The U.S. Treasury, meanwhile, proposed a minimum global corporate tax rate of 15%, lower than earlier proposals of 21% that received pushback from other countries. Crypto currencies are steady after three days of extreme volatility. Yesterday’s big Nasdaq gains (1.77%) gave it a chance to avoid its fifth straight weekly decline heading into the trading week, which would be its longest in nine years (is up 0.8% heading into today). In Asian markets, The Nikkei Index rose 219 points to 28,317, the Shanghai Index slipped -20 points to 3,486, the Hang Seng Index edged higher 8 points to 28,458. In Europe, the German DAX is up about 25 points to 15,394, while the FTSE 100 is little changed at 7,015.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 43.44 points, or 1.06%, to 4,159.12

·     The Dow Jones Industrial Average rose 188.11 points, or 0.55%, to 34,084.15

·     The Nasdaq Composite surged 236.00 points, or 1.77%, to 13,535.74

·     The Russell 2000 Index advanced 14.12 points, or 0.64% to 2,207.76

Events Calendar for Today

·     9:45 AM EST      Markit Composite Flash PMI, May

·     9:45 AM EST      Markit Manufacturing PMI…est. 60.2

·     9:45 AM EST      Markit Services PMI, Flash…est. 64.5

·     10:00 AM EST    Existing Home Sales MoM for April…est. 6.09M

·     1:00 PM EST       Baker Hughes Weekly rig count data

Earnings Calendar:

·     Earnings Before the Open: BAH, DE, FL, FLO, ROLL, VFC

Other Key Events:

·     UBS Financial Institutions Conference (virtual), 5/19-5/21

·     Virtual Display Week 2021, 5/17-5/21

·     Oppenheimer Rare & Orphan Disease Summit (virtual), 5/21

Sector News Breakdown

Consumer

·     Home Depot (HD) announces $20B share buyback

·     Decker’s Outdoors (DECK) 4Q EPS $1.18 vs. est. $0.64 on sales $561.2Mm vs. est. $437.1Mm; approved additional $750Mm share repurchase auth; guides FY22 net sales $2.95-3.0B vs. est. $2.7B, gross margin approx 53.3%, SG&A exp rt about 35.5%, effective tax rt 23%, EPS $14.05-14.65 excl additional repurchase (vs. est. $14.50); Q4 UGG net sales +53.1%, HOKA net sales +74.2% and Teva net sales +1%

·     Flowers Foods (FLO) Q1 adj EPS 41c vs. est. 39c; Q1 revs $1.30B vs. est. $1.33B; Q1 adjusted EBITDA decreased 1.0% to $161.6M; adj EBITDA represented 12.4% of sales, a 30-basis point increase; sees year EPS $1.10-$1.17 vs. est. $1.13 on revs $4.23B-$4.3B vs. est. $4.26B

·     Ross Stores (ROST) 1Q EPS $1.34 vs. est. $0.88 on sales $4.5B vs. est. $3.87B; guides 2Q comps +5-7% and EPS $0.80-0.89 vs. est. $1.04; plans FY comps +7-9% and EPS $3.93-4.20 vs. est. $4.22; announces new $1.5B repurchase program

Energy, Industrials and Materials

·     Deere & Co (DE) Q2 $5.68 vs. est. $5.17 and Q2 sales $12.06B (up from prior year $9.25B); raised its full-year profit forecast and posted a 169% surge in quarterly profit; said it expects to see increased supply-chain pressures through the balance of the year; raises net income for 2021 to be between $5.3B-$5.7B from prior forecast of $4.6B-$5.0B

·     Virgin Galactic (SPCE) upgraded to Buy from Neutral at UBS with a price target of $36, down from $40

·     Maxeon Solar (MAXN) Q1 EPS loss ($1.14) vs. est. loss ($1.48); Q1 revs $165M vs. est. $160.28M; sees Q2 revs $165M-$185M vs. est. $218.6M

·     EnerSys (ENS) Q4 adj EPS $1.30 vs. est. $1.29; Q4 sales $813.5M vs. est. $801M

Financials

·     LPL Financial (LPLA) reported $1.063T total advisory and brokerage assets at the end of April, indicating a 10.9% increase from March 2021; total net new assets were $73.8B

·     Apollo Investment (AINV) Q4 Net investment income per share 39c vs. 42c est.; total investment income $50.8M, -29% YoY; net asset value per share $15.88 vs. $15.70 YoY

·     American Homes 4 Rent (AMH) 16.3M share Spot Secondary priced at $36.75

Healthcare

·     Inspire Medical Systems (INSP) announced last night Anthem (ANTM) will provide coverage for the company’s Inspire therapy, effective May 20

Technology, Media & Telecom

·     Applied Materials (AMAT) 2Q adj EPS $1.63 vs. est. $1.51 on revs $5.58B vs. est. $5.41B; guides 3Q net sales approx $5.92B vs. est. $5.54B, sees 3Q adj EPS $1.70-1.82 vs. est. $1.56

·     Palo Alto Networks (PANW) Q3 adj EPS $1.38 vs. est. $1.28; Q3 revs $1.1B vs. est. $1.06B; Q4 Total billings in the range of $1.695B-$1.715B, representing YoY growth of between 22% and 23% (and year total billings growth over 23%); sees Q4 adj EPS $1.42-$1.44 vs. est. $1.42; guides Q4 revs $1.165B-$1.175B vs. est. $1.16B; raises year EPS, revs and billings growth outlook

·     ePlus (PLUS) 4Q adj EPS $1.41 vs. est. $1.20 on sales $325.6Mm vs. est. $390.8Mm

·     Splunk (SPLK) upgrade from Sell to Neutral with $125 tgt at UBS saying with shares down 45% since the weak 3QF21/Oct print in early Dec 2020 and given profoundly weak investor sentiment, Splunk shares are looking washed-out and in our view the justification for holding on to our Sell rating has weakened

·     AT&T (T) upgraded to Buy from Neutral at UBS and raise target to $35 from $32

·     Yalla Group Limited (YALA) has authorized a buyback program to repurchase up to $150M (follows three negative short reports in the last two days)