The large-cap indices closed slightly higher on Thursday, holding onto their recent rebound gains largely due to strength in the mega-cap stocks. The S&P 500 (+0.2%), Nasdaq Composite (+0.4%), and Dow Jones Industrial Average (+0.1%) increased between 0.1-0.4% while the Russell 2000 pulled back 1.6%.
The large-cap indices closed slightly higher on Thursday, holding onto their recent rebound gains largely due to strength in the mega-cap stocks. The S&P 500 (+0.2%), Nasdaq Composite (+0.4%), and Dow Jones Industrial Average (+0.1%) increased between 0.1-0.4% while the Russell 2000 pulled back 1.6%.
Overall price action was a bit sluggish, at least compared to the prior two days, as the market appeared to be consolidating its rebound rally while signs of peak growth lingered. Weekly initial claims reached their highest level since mid-May at 419,000 (Briefing.com consensus 360,000), and the Conference Board’s Leading Economic Index increased at its slowest pace since February at 0.7% (Briefing.com consensus 0.9%).
Declining issues outpaced advancing issues by a 2:1 margin at the NYSE and Nasdaq, with energy and financial stocks being among the biggest losers after being the biggest winners yesterday. The S&P 500 financials (-1.0%) and energy (-1.1%) sectors each declined about 1%. Energy stocks struggled despite higher oil prices ($71.92/bbl, +1.64, +2.3%).
The mega-caps, however, kept the market in there — potentially as a byproduct of the peak growth narrative. Microsoft (MSFT 286.14, +4.74, +1.7%) drew additional support from Citigroup after the firm raised its MSFT price target to a Street-high $378 from $310. The Vanguard Mega Cap Growth ETF (MGK 239.25, +1.96, +0.8%) rose 0.8%.
The health care sector (+0.7%) was another difference marker, joining the information technology sector (+0.7%) atop the leaderboard with a 0.7% gain.
Texas Instruments (TXN 183.91, -10.33, -5.3%), meanwhile, kept on a lid on many of the semiconductor stocks after providing conservative guidance for Q3, feeding into the narrative that corporate earnings are also subject to the slower growth narrative. TXN shares fell 5%, and the Philadelphia Semiconductor Index declined 0.9%.
To be fair, some companies like AT&T (T 28.01, +0.11, +0.4%) did provide upbeat guidance. Union Pacific (UNP 219.54, +2.35, +1.1%), CSX (CSX 32.67, +1.10, +3.5%), Blackstone (BX 110.13, +4.34, +4.1%), and Dow Inc. (DOW 60.48, +0.75, +1.3%) closed higher following their earnings reports.
In the Treasury market, the 10-yr yield flirted with 1.32%, then slipped to 1.23% in the hours following the weekly initial claims report, and finally settled two basis points below yesterday’s settlement at 1.27%. The 2-yr yield was unchanged at 0.21%. The U.S. Dollar Index increased 0.1% to 92.85.
Reviewing Thursday’s economic data:
- Initial claims for the week ending July 17 increased by 51,000 to 419,000 (Briefing.com consensus 360,000). Continuing claims for the week ending July 10 decreased by 29,000 to 3.236 million, which is the lowest level since March 21, 2020.
- The key takeaway from the report is the disappointment of the initial claims number, which was the highest it has been since mid-May and clearly misaligned with an improving economy; accordingly, it is likely to pour a little fuel on the peak growth narrative fire.
- Existing home sales increased 1.4% m/m in June to a seasonally adjusted annual rate of 5.86 million (Briefing.com consensus 5.90 million) from a downwardly revised 5.78 million (from 5.80 million) in May. Total sales in June were up 22.9% from a year ago.
- The key takeaway from the report is that the supply of existing homes for sale remains extremely limited. That is driving up the pace of price increases well beyond the pace of income growth, which is creating affordability pressures for prospective buyers, particularly first-time buyers.
- The Conference Board’s Leading Economic Index (LEI) increased 0.7% in June (Briefing.com consensus 0.9%) after increasing a downwardly revised 1.2% (from 1.3%) in May.
- The key takeaway from the report is that overall growth remained widespread; however, the pace of growth in the leading indicators is slowing, having gone from 1.4% in March to 0.7% in June. The latter is the slowest pace since February.
Looking ahead, investors will receive the preliminary IHS Markit Manufacturing and Services PMis for July on Friday.
- S&P 500 +16.3% YTD
- Nasdaq Composite +13.9% YTD
- Dow Jones Industrial Average +13.8% YTD
- Russell 2000 +11.4% YTD
Overseas:
- Europe: DAX +0.6%, FTSE -0.4%, CAC +0.3%
- Asia: Nikkei CLOSED, Hang Seng +1.8%, Shanghai +0.3%
Commodities:
- Crude Oil +1.71 @ 71.99
- Nat Gas +0.05 @ 4.00
- Gold +3.60 @ 1807.10
- Silver +0.16 @ 25.43
- Copper +0.05 @ 4.33
After-Hours Spotlight:
- Bank OZK (OZK) beats by $0.24, beats on revs… OZK up 1.4%
- Boston Beer Co (SAM) misses by $1.93, misses on revs; lowers FY21 EPS below consensus… SAM down 17.3%
- Capital One (COF) beats by $3.19, beats on revs… COF down 1.3%
- Carlisle Cos (CSL) beats by $0.04, beats on revs… no indication for CSL
- Celanese (CE) beats by $0.53, beats on revs; guides Q3 EPS above consensus; guides FY21 EPS above consensus… CE up 5.5%
- Clearfield (CLFD) beats by $0.13, beats on revs… CLFD up 10.2%
- DMC Global (BOOM) misses by $0.05, misses on revs; guides Q3 revs below consensus… BOOM down 11.0%
- Ethan Allen (ETH) guides Q4 EPS above consensus… ETH down 0.9%
- FirstEnergy (FE) beats by $0.02, misses on revs; guides Q3 EPS below consensus; guides FY21 EPS in-line… FE down 0.1%
- Intel (INTC) beats by $0.21, beats on revs; guides Q3 EPS above consensus, revs in-line; raises FY21 guidance… INTC down 2.9%
- RenaissanceRe (RNR) beats by $0.87, reports revs in-line… no indication for RNR
- Robert Half (RHI) beats by $0.29, beats on revs… RHI 5.2%
- Skechers USA (SKX) beats by $0.30, beats on revs; guides Q3 EPS above consensus, revs above consensus; guides FY21 EPS above consensus, revs above consensus… SKX up 7.4%
- Snap (SNAP) beats by $0.11, beats on revs; guides Q3 revs above consensus… SNAP up 15.0%
- SVB Financial Group (SIVB) beats by $2.57, beats on revs… SIVB up 1.8%
- TPI Composites (TPIC) reports select prelim Q2 results, updates FY21 guidance… TPIC down 7.0%
- Twitter (TWTR) beats by $0.13, beats on revs; guides Q3 revs above consensus… TWTR up 4.9%
- VeriSign (VRSN) misses by $0.07, reports revs in-line… VRSN down 5.8%
- W.R. Berkley (WRB) beats by $0.17, beats on revs… no indication for WRB
Fair Value for Friday, July 23:
- S&P 500: 4,359
- Nasdaq 100: 14,928
- DJIA: 34,712
Today’s News Summary:
For a full rundown of today’s market and after hours developments, see Live In Play
- Earnings/Guidance (Full Earnings Calendar):
- ABB Ltd (ABB) misses by $0.03, beats on revs; guides Q3 revs below consensus; guides FY21 revs in-line
- Abbott Labs (ABT) beats by $0.15, beats on revs; reaffirms FY21 EPS guidance
- Alaska Air (ALK) beats by $0.15, reports revs in-line
- American Airlines (AAL) beats by $0.03, reports revs in-line
- American Electric (AEP) beats by $0.04, misses on revs; reaffirms FY21 EPS guidance
- AT&T (T) beats by $0.10, beats on revs; guides FY21 EPS above consensus, revs above consensus
- Biogen (BIIB) beats by $1.08, beats on revs; reaffirms FY21 EPS guidance, guides FY21 revs above consensus
- Blackstone (BX) beats by $0.05, beats on revs
- Cardinal Health (CAH) expects to record pre-tax charge of ~$140 mln in the three months ended June 30, 2021 in litigation (recoveries)/charges, net, in the consolidated statement of earnings/(loss) for opioid-related matters
- Cleveland-Cliffs (CLF) misses by $0.02, beats on revs
- Crown Castle (CCI) beats by $0.08, beats on revs; guides FY21 FFO above consensus
- Crocs (CROX) beats by $0.66, beats on revs; guides Q3 revs above consensus; guides FY21 revs above consensus
- CSX (CSX) beats by $0.03, beats on revs
- Danaher (DHR) beats by $0.41, beats on revs
- Discover Financial Services (DFS) beats by $1.81, beats on revs
- Domino’s Pizza (DPZ) beats by $0.24, beats on revs; US comps +3.5%, intl comps +13.9%
- Dow (DOW) beats by $0.29, beats on revs
- D.R. Horton (DHI) beats by $0.25, beats on revs; Home closings in line with company’s guidance for spring selling season; sees Q4 homes closed from 23,000-24,500; sees Q4 revs of $7.9-8.4 bln; raises FY21 revenue and home closed guidance
- Fifth Third (FITB) beats by $0.13
- Freeport-McMoRan (FCX) beats by $0.02, misses on revs
- Genuine Parts (GPC) beats by $0.20, beats on revs; raises FY21 guidance
- Kaiser Alum (KALU) misses by $0.02, beats on revs
- Kinder Morgan (KMI) beats by $0.04, beats on revs; hikes dividend
- Las Vegas Sands (LVS) misses by $0.08, misses on revs
- Marsh McLennan (MMC) beats by $0.33, beats on revs
- NETGEAR (NTGR) misses by $0.05, misses on revs; guides Q3 revs below consensus
- Newmont Goldcorp (NEM) beats by $0.07, misses on revs
- Nucor (NUE) beats by $0.26, beats on revs
- Plexus (PLXS) beats by $0.25, beats on revs; guides Q4 EPS in-line, revs in-line
- Pool (POOL) beats by $0.70, beats on revs; guides FY21 EPS above consensus
- Quest Diagnostics (DGX) beats by $0.32, beats on revs; guides FY21 EPS in-line, revs above consensus
- Reliance Steel (RS) beats by $0.17, beats on revs; guides Q3 EPS above consensus
- Sallie Mae (SLM) beats by $0.08, beats on revs; guides FY21 EPS above consensus
- Snap-On (SNA) beats by $0.52, beats on revs
- Sonoco Products (SON) misses by $0.02, beats on revs; guides Q3 EPS in-line; reaffirms FY21 EPS guidance
- Southwest Air (LUV) misses by $0.12, beats on revs
- TechnipFMC (FTI) misses by $0.05, beats on revs; raises FY21 revs in-line
- Tenet Healthcare (THC) beats by $0.52, beats on revs; guides Q3 EPS below consensus, revs in-line; guides FY21 EPS above consensus, revs in-line
- Texas Instruments (TXN) beats by $0.16, beats on revs; guides Q3 EPS in-line, revs in-line
- Trinity Industries (TRN) beats by $0.06, misses on revs
- TRI Pointe Homes (TPH) beats by $0.18, beats on revs
- Unilever PLC (UL) beats on top and bottom lines
- Union Pacific (UNP) beats by $0.18, beats on revs
- Valmont (VMI) beats by $0.56, beats on revs; guides FY21 EPS above consensus
- Whirlpool (WHR) beats by $0.64, beats on revs; guides FY21 EPS, revs above consensus<
- General News:
- White House considering recommendations that Americans wear masks in more settings, according to Washington Post
- Local officials are infuriated about Los Angeles County’s new mask mandate and some towns in the county are choosing not to enforce the mandate, according to Washington Post
- CDC Director Dr. Rochelle Walensky warns that US is at “another pivotal moment in this pandemic”; urges everyone to get vaccinated; guidance that fully vaccinated Americans do not need to wear masks has not changed
- Senate negotiators believe agreement will be in place by Monday and would like to vote on $1.2 trillion bipartisan infrastructure package at that time, according to The Wall Street Journal
- Senator Joe Manchin (D-WV) says he has not made any commitment regarding $3.5 trillion budget reconciliation bill; repeats opposition to climate change related provisions – CNN
- Senate Armed Services Committee approves increase in defense spending, as expected
- ECB leaves rates unchanged, as widely expected; Net purchases under the APP will continue at a monthly pace of €20 billion
- President Biden expects “near term inflation”, but he said it’s “highly unlikely” long term inflation will occur, according to Bloomberg
- President Biden expects full FDA approval for coronavirus vaccines in the fall, according to NY Times
- Dr. Anthony Fauci CNBC interview: He does not think there will be another national mask mandate because there will be a lot of pushback against that; he does not think there will be future lockdowns either; all three vaccines are very effective against Delta variant
- Dr. Scott Gottlieb CNBC interview: He expects this wave of COVID-19 will peak in late August and early September
- Akamai Tech (AKAM): company says a software configuration update caused bug in DNS system earlier today
- Arvinas (ARVN) announces global collaboration with Pfizer (PFE) to develop and commercialize ARV-471
- Bank of America (BAC) increases quarterly dividend to $0.21/share from $0.18/share
- BHP Group (BHP) enters into nickel supply agreement with Tesla
- Daimler AG (DDAIF): Mercedes-Benz announces plans to go all-electric by the end of the decade, where market conditions allow
- D.R. Horton (DHI) says because of extremely high demand, the company will continue to restrict sales in Q4 (Sep) based on the number of homes in inventory, construction time, and lot position; sales restrictions are made on a community level basis; if starts accelerate, there will be less restrictions
- Ford Motor (F): Rivian planning a second U.S. assembly plant, according to Reuters
- General Electric (GE): EU regulators to announce unconditional approval of AerCap’s (AER) GECAS deal, according to Reuters
- Illumina (ILMN) affirms its commitment to re-acquire GRAIL
- Intl Game Tech. PLC (IGT) extended its lottery gaming systems contract to deploy next-generation cashless lottery technology for Washington’s Lottery
- Merck (MRK) and Eisai (ESALY) announce that the FDA has approved the combination of KEYTRUDA plus LENVIMA for the treatment of patients with advanced endometrial carcinoma
- Moderna (MRNA) announces a new supply agreement with Taiwan for 20 mln doses of Moderna’s COVID-19 vaccine and its updated variant booster vaccine candidate, if authorized, to begin delivery in 2022 and an additional 15 mln doses in 2023
- NASDAQ (NDAQ) enters into $475 mln accelerated stock repurchase program with Goldman Sachs
- Parsons (PSN) awarded $950 mln Air Force contract
- Penske Auto (PAG) increases quarterly dividend to $0.45/share from $0.44/share
- Pfizer (PFE) announces that the U.S. Food and Drug Administration has notified the company that it will not meet the Prescription Drug User Fee Act goal dates for the New Drug Application for abrocitinib for the treatment of adults and adolescents with moderate to severe atopic dermatitis and the supplemental New Drug Application for XELJANZ/XELJANZ XR for the treatment of adults with active ankylosing spondylitis
- PG&E (PCG) aiming to bury power lines to prevent wildfires, according to The Wall Street Journal
- Plug Power (PLUG) appoints Tesla (TSLA) alum David Mindnich as EVP of global manufacturing
- Poshmark (POSH): Point72 (Steven A. Cohen) discloses 5.7% passive stake
- PQ Group (PQG) to change corporate name to Ecovyst following closing of Performance Chemicals business sale; expected to trade on NYSE under ticker EVCT occur on or about August 3, 2021
- Regions Fincl (RF) increases quarterly cash dividend to $0.17/share from $0.155/share
- Seres Therapeutics (MCRB) provides top-line results for SER-287 Phase 2b study in mild-to-moderate ulcerative colitis; primary endpoint not achieved
- Shell Midstream Partners (SHLX) decreases quarterly cash distribution to $0.30/share from $0.46/share
- Southwest Air (LUV) CEO Gary Kelly CNBC interview: There is no demand impact from the Delta variant; co has a “good shot” to be profitable in Q3
- Stanley Black & Decker (SWK) increases quarterly cash dividend to $0.79/share from $0.70/share
- Tesla (TSLA): Elon Musk says company would most likely accept bitcoin again, according to NY Post
- Tesla (TSLA) Berlin factory is being delayed amid issues
- Toyota Motor (TM) halts operations at 3 factories in Thailand amid COVID-19 outbreaks, according to Nikkei
- Uber (UBER): Uber Freight to acquire Transplace for approx. $2.25 bln in cash and stock
- UPS (UPS) testing out same day delivery, according to Business Insider
- Zoom Video (ZM) in talks to invest in blank-check deal that would take Cvent public, according to Bloomberg
Notable Ratings
(see Upgrades/Downgrades calendar for full list):
- Upgrades:
- Interpublic (IPG) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $37
- Northern Oil & Gas (NOG) upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $23
- STMicroelectronics (STM) upgraded to Neutral from Sell at Goldman
- Downgrades:
- Atlassian (TEAM) downgraded to Market Perform from Outperform at Cowen; tgt $260
- Chevron (CVX) downgraded to Hold from Buy at HSBC Securities; tgt lowered to $112
- Eni S.p.A. (E) downgraded to Hold from Buy at HSBC Securities
- Royal Dutch Shell (RDS.A) downgraded to Hold from Buy at HSBC Securities
- Texas Instruments (TXN) downgraded to Hold from Buy at Summit Insights
- Travelers (TRV) downgraded to Underperform from Buy at BofA Securities; tgt lowered to $161
- Others:
- Academy Sports + Outdoors (ASO) initiated with a Neutral at Goldman; tgt $40
- AT&T (T) assumed with a Sector Perform at RBC Capital Mkts; tgt $30
- Aviat Networks (AVNW) initiated with a Buy at B. Riley Securities; tgt $50
- Carrier Global (CARR) initiated with a Neutral at Robert W. Baird; tgt $55
- Foot Locker (FL) initiated with a Buy at Goldman; tgt $70
- Missfresh Ltd. (MF) initiated with a Buy at China Renaissance; tgt $17.59
- Missfresh Ltd. (MF) initiated with a Buy at Needham; tgt $12
- Payoneer (PAYO) initiated with a Buy at Needham; tgt $13
- Roche Hldg (RHHBY) initiated with an Outperform at Cowen
- Sunlight Financial (SUNL) initiated with an Outperform at Cowen; tgt $15
- T-Mobile US (TMUS) assumed with a Sector Perform at RBC Capital Mkts; tgt $133
- Verizon (VZ) assumed with a Sector Perform at RBC Capital Mkts; tgt $57
- Vimeo (VMEO) initiated with a Neutral at JP Morgan; tgt $50
Upcoming Events:
- Econ data (Friday):
- 09:45 ET: Preliminary July IHS Markit Manufacturing PMI (prior 62.1) and preliminary July IHS Markit Services PMI (prior 64.6)
- Earnings:
- Monday (July 19)
- Pre-Market: AN CALM PLD TSC
- After-Hours: CCK ELS FNB IBM JBHT PPG STLD WTFC ZION
- Tuesday (July 20)
- Pre-Market: ALLY BMI CFG DOV FMBI GATX HAL HCA IRDM KEY MAN NEOG ONB OMC PM SBNY SI SYF SNV TRV UBS
- After-Hours: AIR AGR CNI CMG FULT HWC HOPE IBKR ISRG NFLX PNFP XM SNBR UAL UCBI
- Wednesday (July 21)
- Pre-Market: ANTM ASML BKR BOKF KO CMA FCFS HOG IPG JNJ KNX LAD MTB MKTX NDAQ NTRS NVS NVR RCI SAP STX VZ
- After-Hours: BXS CNS CCI CSX DFS EFX FR GL GGG ICLR KALU KMI LSTR LVS MC NTGR OMF PLXS RGP REXR RLI SLM SEIC SLG STL FTI THC TCBI TXN UFPI UMPQ VMI WHR
- Thursday (July 22)
- Pre-Market: ABB ABT ALK ALLE AAL AEP T AUB BANC BKU BIIB BX BCO CADE GTLS CLF CROX DHI DHR DPZ DOW EWBC FITB FAF FCX GPC HRI HZO MMC NEM NUE POOL BPOP PDS DGX RS SASR SNA SON LUV TPH TRN UNP VLY WSO WBS
- After-Hours: ABCB ASB OZK SAM COF CSL CE BOOM FFBC FE GBCI HTH INTC RNR RHI SKX SNAP SIVB TWTR VRSN VICR WRB WSFS
- Friday (July 23)
- Pre-Market: AIMC AXP FBP FHB GNTX HON KMB NEE NEP RF ROP SLB SXT SBSI
- After-Hours: None of note
- Full Earnings Calendar
- Monday (July 19)
