Weekly Market Update: Rates continue rising in anticipation of economic recovery, spurring inflation jitters
Global equity markets hit a notable rough patch this week as investors’ uneasiness with rising interest rates came to the forefront. The VIX volatility index surged back to 30 as growth stocks in particular took a beating, and the S&P tested its 50-day moving average for the first time in a month. Adding to the consternation was another eye-popping move in the Reddit stocks, led by GameStop, once again on little if any apparent news. Economic data came in generally better than expectations, while various vaccine developments remained encouraging, which supported a narrative growth is poised to surge later this year. On Thursday the Treasury’s 7-year note auction saw anemic demand despite the discount participants enjoyed, exacerbating the tail wind for rising rates. The US 10-year yield briefly spiked to 1.6% before holding ground at 1.5% which is also roughly the dividend yield of the S&P 500, yet still below where it traded less than year ago heading into the pandemic. A chorus of Fed officials were eager to downplay the move up in Treasury yields and any associated concerns about inflation. Nevertheless debates surrounding the likely effects of the incoming US fiscal stimulus and central bank policies as they relate to the neutral level of real interest rates raged on Wall Street. Gold prices slipped to the lowest levels since last summer while WTI crude pushed further above $60/barrel, retracing levels not seen in about a year. For the week, the S&P lost 2.5%, the DJIA fell 1.8%, and the Nasdaq tumbled 4.9%.
In corporate news this week, Home Depot shares jumped after reporting Q4 top and bottom line beats, as comp sales surged 25%. Toll Brothers quarterly results came in above already high analyst expectations, and the homebuilder said it expects very strong market conditions to continue for the "foreseeable future.” Nvidia EPS and Rev topped estimates again, with the chipmaker guiding well above consensus, though shares fell amid a broad market sell off on Thursday. Macy’s holiday sales beat estimates with a look to build momentum in the back half of 2021. Twitter announced ahead of its analyst day a new target to double its annual revenue from $3.7B in FY20 to $7.5B or more by 2023. Facebook reversed its ban on providing news content in Australia, striking a deal to pay three news publishers as the government passed an amended version of its digital news payment law. AT&T announced plans to spin off its DirecTV, AT&T TV, and U-verse video services into a $16B separate entity as part of a deal with private equity firm TPG. Goodyear said it would acquire rival Cooper Tires in a $2.8B cash and stock deal, merging two of the largest remaining American-owned tire manufacturers. AMC will reopen all of its 13 theaters in NYC beginning March 5th after Governor Cuomo loosened COVID restrictions in the city. Beyond Meat announced it has inked long-term deals with McDonald's and YUM Brands, helping to shore up the plant-based foodmaker’s future despite posting a wider loss in Q4 than anticipated.
MON 2/22 5.HK Reports FY20 Adj pretax $12.1B v $22.1B y/y, Adj Rev $50.4B v $54.9B y/y; resumes interim dividend at $0.15/shr, no stock buybacks in near term (HK) Hong Kong Chief Exec Lam: 42K have registered for COVID vaccine as of 9AM MRNA President Hoge: FDA has given positive feedback on proposal that may allow up to 15 doses to be drawn from each vial - press citing testimony CCIV Confirms Lucid Motors to go public in merger with Churchill Capital Corp IV; transaction valued at $11.8B EZJ.UK Says travel bookings surge as UK announces reopening plan; summer flight bookings up 337% w/w and holiday bookings up 630% - press AMC To reopen all 13 of our theaters in New York City beginning March 5th NY Gov Cuomo confirms movie theaters in New York City can reopen at 25% capacity beginning March 15th - press (US) NJ Gov Murphy confirms signing Cannabis legislation for state into law as expected *(US) FEB DALLAS FED MANUFACTURING ACTIVITY: 17.2 V 8.5E *(US) JAN LEADING INDEX: 0.5% V 0.4%E PFPT Enters into definitive agreement to acquire data loss protection managed services provider InteliSecure for $62.5M in cash PENN Secures sports betting and online casino market access in New York through strategic partnership with Rivers Casino BHVN BHV-1200, A Multimodal Antibody Therapy Enhancer (MATE), Demonstrates Effective Neutralization Of Multiple Strains Of COVID-19 CTB To be acquired by Goodyear at $54.36/shr in $2.8B in cash and shares in deal valued at $2.5B *(DE) GERMANY FEB IFO BUSINESS CLIMATE SURVEY: 92.4 V 90.5E
TUES 2/23 880.HK Reports FY20 (HK$) Net -3.03B v +3.2B y/y, adj EBITDA -2.1B v +4.2B y/y; Rev 7.3B v 33.2B y/y *(EU) EURO ZONE JAN FINAL CPI Y/Y: 0.9% V 0.9%E; CPI CORE Y/Y: % V 1.4%E HD Reports Q4 $2.74 adj v $2.61e, Rev $32.3B v $30.7Be; Raises Quarterly dividend 10% to $1.65 from $1.50 (indicated yield 2.39%) M Reports Q4 $0.80 v $0.19e, Rev $6.78B v $6.55Be; Repaid ~$530M of debt in January 2021 at maturity; Sees momentum building in back half of 2021 USAP Announces base price increase of 3-10% on all products, effective next week GOOGL Google partners with Intel to accelerate cloud-native 5G - press *(US) FEB RICHMOND FED MANUFACTURING INDEX: 14 V 16E *(US) FEB CONSUMER CONFIDENCE: 91.3 V 90.0E (US) Feb Philadelphia Fed Non-Manufacturing Index: +3.9 v -17.5 prior (US) Sen Maj Leader Schumer: senators will offer a bill to strengthen the tech sector and limit Beijing's unfair practices; Looking at funding for semiconductor program in the US TOL Reports Q1 $0.76 v $0.49e, Rev $1.56B v $1.37Be; Sees very strong mkt conditions to continue for "foreseeable future" NKE Tiger Woods involved in a serious car accident; car sustained 'major damage'; Woods was extricated from wreck with 'jaws of life' and has been transported to local hospital - LA County Sheriff's Department (HK) Hong Kong confirms increase to stamp duty on stock trading from 0.1% to 0.13% - 2021/22 budget (*8Note: 1st increase since 1993)
WEDS 2/24 *(DE) GERMANY Q4 FINAL GDP Q/Q: 0.3% V 0.1%E; Y/Y: -3.7% V -3.9%E EXC To separate Utility and Competitive Energy Businesses Into two Industry-Leading Companies (ZA) South Africa Fin Min Mboweni 2021/22 budget presentation: Abandon plans to raise ZAR40B in extra taxes JNJ Vaccines and Related Biological Products Advisory Committee (VRBPAC) February 26, 2021 Meeting Briefing Document Posted for review related to Emergency Use Authorization (EUA) of Janssen's Ad26.COV2.S, investigational single-shot COVID-19 vaccine candidate *(US) JAN NEW HOME SALES: 923K V 856KE *(US) DOE CRUDE: +1.3M V -5ME; GASOLINE: +0.0M V -3ME; DISTILLATE: -5.0M V -4.5ME (US) National Retail Federation (NRF): sees fastest economic growth in two decades 27.HK Reports FY20 (HK$) Net -3.8B v +13.3B y/y; adj EBITDA -1.0B v +16.5B y/y; Rev 12.88B v 51.9B y/y
THURS 2/25 BA.UK Reports FY20 adj EPS 46.8p v 50.8p, adj EBITA £2.13B v £2.12B, Rev £20.9B v £20.1B y/y (IN) India to implement rules for social media, digital media and streaming operations in 3 months time; calls need for level playing field *(EU) EURO ZONE FEB ECONOMIC CONFIDENCE: 93.4 V 92.1E V Intuit files suit against Visa, MA over "unlawful" price fixing - blog BBY Reports Q4 $3.48 v $3.47e, Rev $16.9B v $17.2Be; Raises Quarterly dividend 27.3% to $0.70 from $0.55 (indicated yield 2.47%); Approves new $5.0B share buyback *(US) JAN PRELIMINARY DURABLE GOODS ORDERS: 3.4% V 1.1%E; DURABLE GOODS (EX-TRANSPORTATION: 1.4% V 0.7%E *(US) INITIAL JOBLESS CLAIMS: 730K V 825KE; CONTINUING CLAIMS: 4.42M V 4.46ME *(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.1% V 2.0%E; CORE PCE 1.4% V 1.4%E (US) Nevada reports Jan casino gaming Rev $761.8M, -27% y/y; Las Vegas strip Rev $321.5M, -44% y/y *(US) JAN PENDING HOME SALES M/M: -2.8% V 0.0%E; Y/Y: 8.2% V 22.8% PRIOR *(US) TREASURY $62B 7-YEAR NOTE AUCTION RESULTS: DRAWS 1.195%; BID-TO-COVER: 2.04 V 2.30 PRIOR (US) 10-year note yield jumps above S&P div yield of 1.5% after very poor 7-year auction BYND Announces Strategic Global Agreement with McDonald’s; preferred supplier for the patty in the McPlant BYND Announces Global Strategic Partnership with Yum! Brands to Offer Signature Plant-Based Menu Items PFE Coronavirus (COVID-19) Update: FDA Allows More Flexible Storage, Transportation Conditions for Pfizer-BioNTech COVID-19 Vaccine; FDA allowing Undiluted Frozen Vials of Pfizer-BioNTech Vaccine to be Transported and Stored at Conventional Temperatures Commonly Found in Pharmaceutical Freezers for Up to Two Weeks T AT&T & TPG to form new entity to operate AT&T’s U.S. video unit, consisting of the DIRECTV, AT&T TV and U-verse video services *(AU) RESERVE BANK OF AUSTRALIA (RBA) TO BUY UP TO A$3.0B IN GOVT SECURITIES TO DEFEND 3-YEAR YIELD TARGET (Unscheduled operation) *(US) SENATE PARLIMENTARIAN: MINIMUM WAGE INCREASE TO $15/HR RULED OUT OF ORDER FOR CORONAVIRUS STIMULUS
FRI 2/26 VOW3.DE Reports FY20 Net €8.82B v €13.4B y/y, adj Op €10.6B v €10B prelim, Rev €222.9B v €221.6Be *(US) JAN PERSONAL INCOME: 10.0% V 9.5%E; PERSONAL SPENDING: 2.4% V 2.5%E *(US) JAN PCE DEFLATOR M/M: 0.3% V 0.3%E; Y/Y: 1.5% V 1.4%E (US) FEB FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 76.8 V 76.5E (US) New York Fed Nowcast: raises Q1 forecast to 8.7% from 8.3% (SA) US issues report on killing of journalist Jamal Khashoggi; assesses that Saudi Arabia Prince MBS "approved an operation in Istanbul, Turkey to capture or kill journalist Khashoggi"