Wednesday Morning Reads

Wednesday Morning Reads










The S&P 500 futures trade five points, or 0.1%, above fair value ahead of President Biden's speech this afternoon in which he will unveil a $2 trillion infrastructure spending plan. The Nasdaq 100 futures outperform and trade 0.6% above fair value.

The relative strength in the Nasdaq futures suggests some of the infrastructure news has been priced in already since the plan includes a corporate tax hike to 28% from 21% and higher taxes on foreign earnings, which aren't necessarily bullish for stocks. Reports indicate there could be pushback in Congress to the tax changes.

New positive factors this morning include Apple (AAPL 121.81, +1.91, +1.6%) being upgraded to Buy from Neutral at UBS, top-line results for Pfizer's (PFE 36.35, +0.24, +0.7%) COVID-19 vaccine trial demonstrating 100% efficacy and robust antibody responses in kids aged 12-15, and Walgreens Boots Alliance (WBA 54.28, +1.30, +2.5%) beating EPS estimates.

In economic data, the ADP Employment Change Report for March ( consensus 525,000) will be released at 8:15 a.m. ET, followed by the Chicago PMI for March ( consensus 60.0) at 9:45 a.m. ET and Pending Home Sales for February ( consensus -2.6%) at 10:00 a.m. ET.

U.S. Treasuries trade little changed. The 2-yr yield is up one basis point to 0.15%, and the 10-yr yield is down one basis point to 1.72%. The U.S. Dollar Index is down 0.1% to 93.22. WTI crude futures are down 0.2% to $60.45/bbl.

In U.S. Corporate news:

  • Apple (AAPL 121.81, +1.91): +1.6% after the stock was upgraded to Buy from Neutral at UBS.
  • Walgreens Boots Alliance (WBA 54.28, +1.30): +2.5% after beating EPS estimates on below-consensus revenue. WBA also raised its fiscal 2021 guidance.
  • Pfizer (PFE 36.35, +0.24): +0.7% top-line results for its COVID-19 vaccine trial demonstrated 100% efficacy and robust antibody responses in kids aged 12-15.
  • lululemon athletica (LULU 312.20, -4.89): -1.5% after guiding FY21 EPS below consensus, although it beat top and bottom-line estimates, issued upbeat guidance for its April quarter, and issued upbeat FY21 revenue guidance.
  • Chewy (CHWY 88.55, +8.17): +10.2% after beating top and bottom-line estimates and issuing upside Q1 revenue guidance.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Wednesday on a mostly lower note. Japan's Nikkei: -0.9% Hong Kong's Hang Seng: -0.7% China's Shanghai Composite: -0.4% India's Sensex: -1.3% South Korea's Kospi: -0.3% Australia's ASX All Ordinaries: +0.7%.
    • In economic data:
      • China's March Manufacturing PMI 51.9 (expected 51.0; last 50.6) and Non-Manufacturing PMI 56.3 (last 51.4)
      • Japan's February Industrial Production -2.1% m/m (expected -1.2%; last 4.3%). February Housing Starts -3.7% yr/yr (expected -4.8%; last -3.1%) and Construction Orders 2.5% yr/yr (last 14.1%)
      • South Korea's February Industrial Production 4.3% m/m (expected -0.1%; last -1.2%); 0.9% yr/yr (expected 2.5%; last 7.8%). February Retail Sales -0.8% m/m (last 1.6%). April Manufacturing BSI Index 91 (last 83)
      • Australia's February Building Approvals 21.6% m/m (expected 5.0%; last -19.4%) and Private House Approvals 15.1% m/m (last -12.2%). February Private Sector Credit 0.2% m/m (last 0.3%)
      • New Zealand's March ANZ Business Confidence -4.1 (last 7.0)
    • In news:
      • Today marked the end of Japan's fiscal year.
      • Renesas Electronics expects to restart production within a month after a fire halted activity at the company's chip plant. A company executive said that the fire had a large short-term impact, which will diminish in the mid-term.
      • Japanese press reported that Foxconn expects the chip shortage to reduce shipments by 10%.
      • The Reserve Bank of New Zealand eased a dividend payment restriction on banks. A full removal of restrictions is planned for July 2022.
  • Major European indices trade near their flat lines. STOXX Europe 600: +0.1% Germany's DAX: UNCH U.K.'s FTSE 100: -0.2% France's CAC 40: -0.2% Italy's FTSE MIB: +0.3% Spain's IBEX 35: +0.2%.
    • In economic data:
      • Eurozone's March CPI 0.9% m/m (last 0.2%); 1.3% yr/yr, as expected (last 0.9%). March Core CPI 0.3% m/m (last 0.1%); 0.9% yr/yr (last 1.1%)
      • Germany's February Unemployment Change -8,000 (expected -13,000; last -36,000). March Unemployment Rate 6.0%, as expected (last 6.0%)
      • U.K.'s Q4 GDP 1.3% qtr/qtr (expected 1.0%; last 16.0%); -7.3% yr/yr (expected -7.8%; last -7.8%). Q4 Business Investment 5.9% qtr/qtr (last 1.3%); -7.4% yr/yr (last -10.3%). Q4 Current Account deficit GBP26.30 bln (expected deficit of GBP33.00 bln; last deficit of GBP14.30 bln). March Nationwide HPI -0.2% m/m (expected 0.4%; last 0.7%); 5.7% yr/yr (expected 6.4%; last 6.9%)
      • France's February Consumer Spending 0.0% m/m (expected 2.0%; last -4.9%). February PPI 0.8% m/m (last 1.2%). March CPI 0.6% m/m (last 0.0%); 1.1% yr/yr (last 0.6%)
      • Italy's March CPI 0.3% m/m (last 0.1%); 0.8% yr/yr, as expected (last 0.6%)
      • Spain's January Current Account deficit EUR1.01 bln (last surplus of EUR530 mln)
    • In news:
      • French officials are reportedly looking at imposing another nationwide lockdown.
      • Germany's Institute for Economic Research expects the country's Q1 GDP to contract 1.5%.
      • Amazon-backed Deliveroo fell 30% in its London debut.
      • European Central Bank President Lagarde reiterated that the ECB intends to provide maximum support and that the pandemic bond buying scheme will be reevaluated at a quarterly pace.

Seeking Alpha

Eyes on infrastructure

Stock index futures are mixed in early morning trading with politics in focus. Nasdaq 100 futures (NDX:IND) are up 0.1%, while Dow futures (INDU) are off 0.2% and S&P futures (SPX) are flat. Treasury yields are also little changed, with the 10-year up 1 basis point to 1.73%.

President Joe Biden will travel to Pittsburgh today to unveil plans for an overhaul of infrastructure and manufacturing. Details are reportedly still being ironed out, but the plan would be another injection of stimulus into the economy. The cost is a major concern for GOP lawmakers, though, as are plans to partially pay for the plan with tax increases.

ADP will report its measure of private sector employment before the bell, with economists predicting a rise of 550K in March payrolls.

Shortly after the open, numbers on February pending home sales arrive, with a drop of 2.6% forecast.

Cannabis stocks could be active today after the New York State Senate and Assembly Tuesday evening approved a bill that would legalize marijuana for recreational use.

BofA seeks chip industry winners from massive infrastructure spending

With President Biden set to queue up a massive infrastructure plan (ranging to $2 trillion in cost over eight years), BofA zooms in on the semiconductor segment to highlight companies it says could be important beneficiaries as "key building blocks of the digital economy."

BofA calls out four areas ripe for change in a digital infrastructure push: Semicap equipment; 5G infrastructure/broadband; Smart industrial/automation; and Clean energy/electric vehicles. Semicap equipment vendors are ideally positioned to benefit from "silicon nationalism," the BofA team writes, referring to the push to enhance domestic remanufacturing to become more self-sufficient in chips.

U.S. semiconductor manufacturing capacity as a percentage of the total world has fallen from 37% to about 12%, it notes, but the fiscal 2021 defense reauthorization features the CHIPS for America Act as an incentive for domestic manufacturing, with billions in matches to state and local incentives for foundries, along with money for new R&D streams and equipment purchases.

The recent increase in capital expenditures from Intel (NASDAQ:INTC) - and its longer-term plans to rejuvenate the foundry model - is also a positive for semicap vendors, BofA says. Its top pick in the sector is Applied Materials (NASDAQ:AMAT), though other beneficiaries include KLA (NASDAQ:KLAC), Lam Research (NASDAQ:LRCX) and Teradyne (NASDAQ:TER).

Turning to 5G, the Biden administration could use funds to incentivize deployment in the U.S. in order to catch up to China, BofA says. The U.S. has been behind, but the record C-band spectrum auction combined with government support should offer a shot in the arm.

Key beneficiaries in that area include Marvell Technology Group (MRVL) as the leading supplier to Samsung, Nokia and Ericsson; Analog Devices (ADI) a leader in 5G radio; Qorvo (QRVO) a leader in RF radio; and RF power amp suppliers NXP Semiconductors (NASDAQ:NXPI) and Cree (NASDAQ:CREE). Also likely to benefit from increased broadband rollouts are Broadcom (NASDAQ:AVGO), Skyworks Solutions (NASDAQ:SWKS) and MACOM Technology Solutions Holdings (NASDAQ:MTSI), it says. (13 comments)

Amazon-backed Deliveroo tumbles in market debut

Food delivery service Deliveroo's initial public offering continues to see trouble as shares sank on their first day of trading on the London Stock Exchange.

The company priced shares this morning at £3.90 ($5.36), the bottom of its expected range. That gave Deliveroo a market value of £7.59B ($10.44B). Shares slumped as much as 30% in early trading. Retail investors will not be able to buy shares until April 7.

Last year, Amazon increased its stake in a move that prompted an antitrust investigation. Regulators ultimately determined that Deliveroo, before the pandemic-driven delivery boom, couldn't meet its financial commitments without the infusion. Amazon (NASDAQ:AMZN) is selling 23.3M shares.

The IPO has been plagued by concerns about driver working conditions at the company and also whether Deliveroo will have to classify them as workers owed a minimum wage, as recently occurred with Uber, leading to higher costs for the company,

The company is trading under the symbol "ROO" and narrowed its IPO price range. It cited volatile market conditions, but also said the price point would offer better value for long-term investors. (3 comments)

Germany to ban AstraZeneca vaccine for those under 60

In a fresh blow to AstraZeneca's (NASDAQ:AZN) COVID-19 vaccine, Germany says it will halt its use for people under 60 starting Wednesday. The move, endorsed by regional health ministers and announced by Chancellor Angela Merkel, comes after new cases of blood clots associated with the vaccine. The clots mainly occur in those under 60.

“These are findings that we cannot ignore,” Merkel said late Tuesday, according to Bloomberg. “We all know that vaccination is the most important tool against the coronavirus - that we have different vaccines at our disposal is our good fortune.”

The Paul Ehrlich Institute reported that as of March 29, a total of 31 cases of blood clots have been reported out of 2.7M AstraZeneca vaccine doses administered in Germany. The vaccine was already suspended in regions of Germany yesterday.

On the other hand, the U.K. declared the vaccine safe, with Cabinet Minister Robert Jenrick saying the government is "100% confident" in its efficacy.

Shares of AstraZeneca are down 0.3% in premarket trading. (3 comments)

New York State Legislature approves recreational marijuana bill

The New York State Senate and Assembly Tuesday evening approved a bill that would legalize marijuana for recreational use. The Senate vote was 40-23 and the Assembly vote was 100-49.

Gov. Andrew Cuomo (Dem.) has said he will sign the legislation, the Marijuana and Taxation Act, which would take effect immediately. However, marijuana sales in stores would take 18 months to two years to start, according to State Assembly Majority Leader Crystal Peoples-Stokes.

Cuomo's office has said that once fully implemented, marijuana legalization is expected to rake in $350M annually in tax revenue. (57 comments)

Cathie Wood’s new ETF ARKX saw $295 million in value traded in debut

Cathie Wood’s latest actively managed ETF has completed its trading debut. On its first day, the exchange-traded fund ARK Space Exploration & Innovation ETF (NYSEARCA:ARKX) closed -1.07% and saw $295 million in value traded.

Just under 14.5 million shares exchanged hands on the ARKX launch. To put that into perspective, the total volume of shares traded was higher than ARK's flagship fund, ARK Innovation ETF (NYSEARCA:ARKK) +2.92%, which exchanged 14 million shares and that was above its daily average of 12 million.

ARKX, with its 41 holdings, will invest in domestic and foreign equity securities of companies engaged in the fund’s investment theme of space exploration and innovation.

What else is happening...

BlackBerry (NYSE:BB) anticipates a double-digit billings growth for cybersecurity and BTS for FY 2022.
Regeneron's (NASDAQ:REGN) Eylea reduces vision loss by 68% after two years in diabetic retinopathy. (AMZNis developing a chip to power the hardware switches used in networking.
Reports generated out of China indicate that Tesla (NASDAQ:TSLA) and Toyota (TMare considering working together on developing a small SUV platform.
National Football League owners filed paperwork Monday for an initial public offering to raise as much as $460M for its eighth SPAC.

Tuesday's Key Earnings

BlackBerry (BB-8.1% AH as Q4 revenue falls short.
Chewy (NYSE:CHWY) 10.5% AH after earnings beat, setting guidance ahead of expectations.
Voxeljet (NASDAQ:VJET) -11.8% AH as Q4 sales decline amid weak 3D printer demand.
Lululemon (NASDAQ:LULU) -1.8% AH after Q4 results.

Today's Markets

In Asia, Japan -0.9%. Hong Kong -0.7%. China -0.7%. India -1.1%.
In Europe, at midday, London -0.3%. Paris -0.1%. Frankfurt +0.1%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq +0.2%. Crude -0.3% to $60.30. Gold -0.1% at $1685.10. Bitcoin +0.2% to $58091.
Ten-year Treasury Yield +1.1 bps to 1.735%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 Chicago PMI
10:00 Pending Home Sales
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
10:45 Fed's Bostic Speech
3:00 PM Farm Prices

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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