Weekly Market Update: Renewed optimism on vaccines and the economy hold up investor sentiment
Stocks trading was choppy this week as sentiment wavered between concerns about fresh waves of Covid-19 infections around the world and optimism prompted by promising economic data. Investors were afforded an ability to comb through a swath of companies' projections and other key indicators to gauge whether the economic recovery can stay on track and justify current valuations. Headlines from Europe were largely constructive. The ECB indicated they were not even discussing tapering the PEPP program to this point, while a German court ruled in favor of the EU recovery fund clearing a path to German ratification. The Euro rallied to the best levels since March back above 1.2050.
US equity markets rebounded Friday recovering all of Thursday's jolt lower, after reports surfaced that President Biden is considering nearly doubling capital-gains taxes on the wealthy to pay for his American Families plan. Crypto markets sold off hard on the tax headlines but too rebounded on Friday. Interest rates remained relatively stable with the US 10-year yield staying in the mid 1.5% range. S&P futures touched a new all-high before Friday’s closing bell, but the Dow, S&P and NASDAQ all finished the week marginally lower.
In corporate news this week, as earnings season ramps up, IBM reported a Q1 above estimates and affirmed its FY outlook, notching revenue growth for the first time in five quarters. Netflix shares fell after subscription numbers saw a slowdown and its forecast missed expectations. Canadian National made a $325/shr rival bid for Kansas City Southern, higher than Canadian Pacific’s earlier offer, and reports late in the week suggested KSU would consider CN’s the superior proposal with both offers expected to face regulatory scrutiny. The UK government said it planned to look into the national security implications of Nvidia’s purchase of British semiconductor design ARM Holdings, casting a pall over the likelihood of the deal’s closure. Herman Miller announced it planned to acquire rival furniture retailer Knoll in a $25/shr cash and stock deal. Shares of Phillip Morris and Altria took a hit on reports the Biden administration is considering a rule to lower allowable nicotine levels in cigarettes, as well as a law to ban menthol brands.
SUN 4/18 GXY.AU Orocobre to acquire Galaxy in all share transaction, merger valued at A$4.0B
MON 4/19 KO Reports Q1 $0.55 v $0.50e, Rev $9.02B v $8.47Be KNL To be acquired by Herman Miller for ~$25.06 in cash and stock deal valued at ~$1.8B BMW.DE Reports prelim Q1 Pretax €3.76B v €798M y/y; ahead of market expectations XXII Biden administration said to consider rule to lower allowable nicotine levels in cigarettes, as well as law to ban menthol cigarettes - press IBM Reports Q1 $1.77 v $1.67e, Rev $17.7B v $17.4Be UAL Reports Q1 -$7.50 v -$6.97e, Rev $3.22B v $3.25Be STLD Reports Q1 $2.10 v $1.98e, Rev $3.54B v $3.28Be RIO.AU Reports Q1 Pilbara iron ore shipments 77.8Mt v 72.9Mt y/y; Pilbara iron production 76.4Mt v 77.8Mt y/y
TUES 4/20 PG Reports Q3 $1.26 v $1.19e, Rev $18.1B v $17.8Be; Began broadly raising prices in mid-to-high single digit percentages MAN Guides Q2 Rev +36-40% (+27-31% cc), gross profit margin 15.5-15.7%, op profit margin 2.3-2.5% - earnings slides (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -0.1% v +0.3% prior *(US) JURY IN GEORGE FLOYD CASE FINDS DEFENDANT CHAUVIN GUILTY ON ALL COUNTS DISCORD.IPO Discord reportedly ends deal talks with Microsoft; Discord plans to remain independent and to consider potential IPO - press
WEDS 4/21 ROG.CH Reports Q1 (CHF) Rev 14.9B v 15.1B y/y; affirms outlook ERICB.SE Reports Q1 (SEK) Net 3.2B v 2.3B y/y; adj Op 5.3B v 5.0Be; Rev 49.8B v 52.7Be HEIA.NL Reports Q1 Net €168M v €94M y/y; Organic beer volume 0.0% v -4.1%e ASML.NL Raises FY21; Strong demand across markets drives expected Rev growth towards 30% (prior 'low double-digit growth, but could be increased') - earnings slides (EU) German Court said to reject EU Recovery Fund related injunction - press KNX Reports Q1 $0.83 v $0.70e, Rev $1.22B v $1.19Be; Demand is at unprecedented levels and expected to continue into 2022 *(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED; Announces taper process for QE bond buying *(US) DOE CRUDE: +0.6M V -2.5ME; GASOLINE: +0.1M V 0ME; DISTILLATE: -1.1M V -0.5ME (US) TREASURY $24B 20-YEAR BOND REOPENING DRAWS 2.144%, BID-TO-COVER 2.42 v 2.51 PRIOR CACI Reports Q3 $4.78 v $3.69e, Rev $1.55B v $1.58Be (update) EFX Reports Q1 $1.97 v $1.52e, Rev $1.21B v $1.12Be 2303.TW Said to be increasing prices for chips with 8-inch and 12-inch wafers by ~15% in July; IC sources say the co. plans to raise prices by 40% in 2022 - Press
THURS 4/22 CSGN.CH Reports Q1 (CHF) Net -252M v +1.31B y/y, Pretax -757M* (ex-everything 3.6B) v 1.20B y/y, Rev 7.57B v 5.78B y/y; Sees CHF600M impact US hedge fund matter in Q2 SAP.DE Reports final Q1 (Non-IFRS) EPS €1.40 v €1.04 prelim, Op €1.74B v €1.48B y/y, Rev €6.35B v €6.35B prelim; affirms outlook NESN.CH Reports Q1 (CHF) Rev 21.1B v 20.3Be; Affirms outlook *(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED *(US) MAR EXISTING HOME SALES: 6.01M V 6.11ME (US) Pres Biden reportedly to propose capital gains taxes as high as 39.6% for those making over $1M per year (current capital gains rate is 20%); would add up to 43.4% if you include already-enacted 3.8% investment income tax - press
FRI 4/23 *(UK) DMO UPDATES ITS FY21/22 FINANCING REMIT: Cuts issuance from £295.9B to £252.6B *(FR) FRANCE APR PRELIMINARY PMI MANUFACTURING: 59.2 V 59.0E (5th month of expansion) *(EU) EURO ZONE APR PRELIMINARY PMI MANUFACTURING: 63.3 V 62.0E (10th month of expansion and record high) (EU) ECB, BOE, SNB, BoJ, Fed and other central banks said to discontinue 3-month USD liquidity operations from July 1st - press *(UK) APR PRELIMINARY PMI MANUFACTURING: 60.7 V 59.0E (11th straight expansion and highest reading since July 1994) *(RU) RUSSIA CENTRAL BANK (CBR) RAISES KEY 1-WEEK AUCTION RATE BY 50BPS TO 5.00%; MORE-THAN-EXPECTED HON Reports Q1 $1.92 v $1.80e, Rev $8.45B v $8.13Be; Seeing promising signs of rapid recovery in some markets