May 14th 2021: Market Overview; Pre Opening Bell #27
Everything you need to know to get your day started on the market
Equity Markets
US Equity Market
US index movements for Wednesday:
S&P 500 +1.2%
Dow +1.29%
Nasdaq +0.83%
Russell 2000 +1.7%
S&P Volume flat vs. 20 day MA
10yr yields and breakevens close on the lows as equities rally broadly, while constructive mega-cap tech flows continue and the short term community remains extremely quiet.
Morgan Stanley prime broker data highlights average performance of US Long Short Hedge Funds was -1.2% on Wednesday, bringing performance to -3.5% MTD and +2.7% YTD.
Goldman Sachs prime broker data highlights US Long Short Hedge Funds +2.8% YTD
There was a clear rotation to Value (+1.7%) driven by strength in the long leg as Banks (+2.5%).
Unprofitable Tech basket (-2.5%, -22% YTD) and Expensive Tech basket (-1.9% -21% YTD) continued their slide
Growth factor ended (-1.75%) lower.
FAAMNG names up with Semis outperforming the Tech tape and many brokers are highlighting continued buying of long only funds for mega cap tech.
S&P futures +24, or +0.59%, vs prior close
(Source: FinViz)
European Equity Markets higher
European equity markets have opened higher, tracking gains across Asian markets.
Attention on April ECB minutes. ECB-speak since April has played down inflation risk, though there are mixed comments on prospect of slowing down pace of asset purchases. Policy discussion suggest most council members are happy with market developments.
On the coronavirus front, in the UK, local and regional restrictions to tackle the Indian Covid variant cannot be ruled out; however, The Telegraph reported PM Johnson vowed to push ahead with Monday's lockdown easing despite a spike in Indian variant cases of coronavirus. Besides, Bloomberg reported that Germany's pandemic restrictions could ease further in the coming days after contagion rate fell below a key level for the first time in nearly two months.
Outperformers:
Banks +0.94%, Technology +0.86%, Retail +0.78%, Oil & Gas +0.77%, Insurance +0.73%, Utilities +0.69%, Persnl & HHold Goods +0.65%, Financial Svcs +0.62%, Ind Goods & Svcs +0.60%, Autos & Parts +0.52%, Media +0.51%,
Underperformers:
Basic Resources (1.23%), Travel & Leisure (0.03%), Health Care +0.04%, Chemicals +0.31%, Real Estate+0.35%, Telecom +0.39%, Food & Beverage +0.43%, Construct & Mtls +0.46%,
Asia Equity Markets higher
Asian markets finished higher Friday though all but mainland China posted losses for the week.
Strongest performance came from Japan, followed by sharp gains in mainland China, Hong Kong, South Korea and Taiwan.
Australia advanced moderately
Singapore tightened Covid-19 restrictions on Friday with Health Ministry announcing people will only be allowed out in groups of two from 16-May to 13-Jun and households cannot have more than two visitors per day
Bloomberg noted MSCI China Index fell 3% Thursday, extending losses from its mid February high to more than 20%, placing it into a bear market
HK reports Japan will declare a state of emergency for Hokkaido, Okayama, and Hiroshima prefectures.
News Stories Moving the Markets
Walt Disney signs new seven-year agreement with Major League Baseball and eight-year pact with Spain's LaLiga - Bloomberg
The article reports that Disney will broadcast 30 regular MLB games per season, 25 of them on Sunday nights, while the LaLiga agreement gives ESPN+ rights to the English- and Spanish-language coverage of LaLiga Santander and LaLiga SmartBank, the country's premiere and second-tier circuits, through the 2028-2029 season
Disney will pay $175M a year for soccer, and could be paying as much as $150M a year less for the baseball package than its previous eight-year deal worth $5.8B, which was for considerably more games, according to a report in The Athletic earlier this year
Taiwan Semiconductor Manufacturing may add tens of billions of dollars to its US factory investment - Reuters
People familiar with the matter say that talks about setting up a factory in Europe have gone "very poorly," and as a result, TSMC is looking at spending $23-25B to put a more advanced factory in Phoenix, Arizona, rather than the $10-12B it announced it would spend last year.
TSMC also have plans for the company to manufacture smaller chips as it expands its Phoenix operation to be as many as six factories.
Sources say that TSMC may still set up an older-gen chip plant in Europe for automobile customers.
The article notes that the US factories are likely to pit TSMC against Intel and Samsung Electronics in the battle to secure US-government subsidies.
Offers for Reebok start at far less than Adidas originally paid - NY Post
Sources tell the NY Post that Authentic Brands Group and Wolverine World Wide have put in a bid for a bit more than $1B, and Apollo Global Management has also lodged a non-binding offer, the terms of which are unknown.
The article reminds readers that Adidas paid $3.8B for Reebok in 2006.
Reebok is posting annual EBITDA of less than ($100M), which is making it impossible for potential buyers to borrow to fund the purchase; a source close to the sales process tells the NY Post that Reebok posted revenue of $1.5B in 2020 vs $1.8B in 2019.
The sources tell the NY Post that after making the sale, Adidas will stop making Reebok shoes, which means whoever buys the brand will need to find new manufacturing partners.
Without giving any information on whether they have put offers in, the article reminds readers that Reuters reported last week that Anta Sports, Li Ning, and Fila were interested, and sources tell the NY Post that Cerberus Capital Management is looking at Reebok.
Reckitt Benckiser shortlists bidders to submit binding offers for its Greater China infant formula business - Reuters
Bidders including Bain Capital, Carlyle Group, KKR and Yili have been shortlisted, while Sequoia Capital China is teaming up with its portfolio company Shijiazhuang Junlebao Dairy Co
The sources add that Carlyle is bidding jointly with CITIC Capital, noting that the deal could fetch over $2B, with shortlisted bidders to submit binding bids by 11-Jun
According to the sources, some investors are wary of how China's demographic shift is going to impact the infant formula industry
Earnings Calendar
Overnight
BABA (Alibaba) Q1 Earnings
FTCH (Farfetch) Q1 Earnings
ABNB (AirBNB) Q1 Earnings
Gross Booking Value (GBV) $10.29B vs Cons $7.87B
Nights & Experiences Booked 64.4M vs CONS 62540.0M
GBV per night $160 vs CONS $128
Revenue $887M vs Cons $720.8M [26 est, $672.5-887.0M]
GAAP net income ($1.17B)
EBITDA margin (6.7%) vs CONS (49.5%)
Q2 Guidance
GBV in Q2 2021 to be higher than that of Q2 2019
Q2 2021 to be significantly higher than that of Q2 2020 and to be at a similar level to that of Q2 2019
Q2 Adjusted EBITDA margin will be at breakeven, to slightly positive
DASH (Door Dash) Q1 Earnings
Orders 329M vs CONS 306.19M, +219% y/y
Total Orders grew 219% Y/Y
GOV $9.91B vs CONS $8.97B, +222% y/y
Marketplace GOV grew 222% Y/Y to $9.9B
Revenue $1.08B vs Cons $994.3M
Gross margin 49.0% vs Cons 50.7%
EBITDA $43.0M vs Cons $27.8M
EBITDA margin 4.0% vs CONS 3.3%
AOV $30.13 vs CONS $29.81
Take Rate 10.9% vs CONS 11.2%
Q2 Guidance:
Adjusted EBITDA $0-100M vs Cons $22.3M
Marketplace GOV to be in a range of $9.4B to $9.9B
Currently expect Take Rate to increase sequentially in Q2.
FY Guidance (Dec 2021):
Adjusted EBITDA $0M to $300M vs prior Adj EBITDA $0-200M and Cons $120.4M
GOV to be in a range of $35.0B to $38.0B vs prior $30.0-33.0B
Shares of DASH +8.6% after hours to $125.39 on 365K volume.
This Morning
No notable earnings this morning
Today
Notable After-Hours Market Movements
Positive Movements
+11.5% DMTK (DermTech) - earnings
+7.4% DASH (DoorDash) - earnings
Negative Movements
-29.9% CRMD (CorMedix) -- earnings
-4.0% DIS (Walt Disney) -- earnings
Notable Analyst Upgrades/Downgrades
Initiations
PRCH Porch initiated with an Overweight at Cantor Fitzgerald
COIN (Coinbase) initiated with an Overweight at Piper Sandler »
Upgrades
NCNO (NCino) - Gabelli upgraded NCino to Buy from Hold
GRWG (GrowGeneration) - upgraded to Buy from Neutral at Alliance Global Partners
DASH (DoorDash) - upgraded to Overweight from Equal Weight at Wells Fargo
ABNB (Airbnb) - upgraded to Overweight from Equal Weight at Wells Fargo
Downgrades
LPEN (Loop Energy) - downgraded to Neutral from Outperformer at CIBC »
Economic News
US
Lipper reports equity fund inflows of $9.0B in w/e 12-May vs inflows of $4.8B in w/e 5-May
Equity ETFs attracted $11.3B for their 14th straight week of inflows.
Conventional equity funds saw outflows of $2.3B.
Taxable bond fund inflows were $5.1B.
IG corporate bond inflows were $1.8B.
HY bond fund outflows were $672M.
Money market funds saw inflows of $6.1B.
Europe
Spain April CPI y/y +2.2% vs consensus +2.2%
Asia
Japan
M2 money supply +9.2% y/y vs consensus +9.4% and revised +9.4% in prior month
Capital Markets
(Source: Factset)
(Source: Factset)
(Source: Koyfin)
Crypto:
(Source: CoinMarketCap)
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