Daily Markets: Biden's New Coronavirus Vaccine Target Lifts Equities

Today’s Big Picture

Equity indices in Asia finished today’s trading higher across the board, led by the 2.7% climb in Hong Kong’s Hang Seng and the 2.0% and 2.3% moves higher in China’s Shanghai Composite and India’s Sensex, respectively. By mid-day trading in Europe, equity indices were mostly higher and U.S. futures point to a positive open.

Despite February PMI reports this morning that showed a slower Services economy in China MoM and continued contraction in the Eurozone, comments from U.S. President Joe Biden yesterday that every adult in America will have COVID-19 vaccine available by the end of May, up from the prior guidance at the end of July, is lifting equities this morning. After U.S. markets open, both IHS Markit and ISM will publish their Service sector PMI data for the U.S., and we suspect investors and economists will be pouring over it for signs of inflationary pressures. Investors will also be breaking out their decoder rings for UK finance minister Rishi Sunak’s budget speech later today, which will unveil the government's tax and spending plans.

Data Download

Coronavirus

At a press conference yesterday, President Biden shared Merck (MRK) will be assisting Johnson & Johnson (JNJ) with vaccine production. With the Department of Defense helping provide logistics support for vaccinations, Biden now expects that every adult will have vaccine available by end of May, up from prior guidance of end of July.

The FDA issued an emergency use authorization for an at-home Covid-19 antigen test made by the San Diego-based firm Quidel. The test is authorized for suspected Covid-19 infection within the first six days of symptom onset.

The number of Americans hospitalized for Covid-19 continued to fall Tuesday, dropping to the lowest level since October 29 according to data from the Covid Tracking Project. The number of people hospitalized has dropped every day since January 13.

Texas governor Greg Abbott announced yesterday that as of March 10, Texas businesses will be able to operate at full capacity and the mask mandate will cease. Soon after, Mississippi governor Tate Reeves said he would end a statewide mask mandate effective Wednesday. Those announcements came just a day after the CDC issued strong cautions against rolling back public health measures too soon.

International Economy

Today is Service PMI for February day from around the world. Overall, most regions were in significant contraction in January. Expectations were for some to improve in February, but for most to remain below the expansion line (recall that anything over 50 is expansionary) and that’s what the data bore out:

• Australia’s Markit Services PMI slipped to 53.4 in February from January’s 55.6
• Japan’s Jibun Bank inched ahead to 46.3 in February from 46.1 the prior month;
• China’s Caixin moved to 51.5 from 52.0 in January;
• Although still well in contraction territory, Spain’s Markit Services PMI reading for February recovered to 43.1 vs. 41.7 in January;
• Italy’s Services PMI rebounded to 48.8 in February from 44.7 the prior month, besting expectations for a reading of 46;
• Germany’s Markit Services PMI came in weaker than expected at 45.7 vs. 46.7 in January and the 45.9 consensus.
• The aggregate February Markit Services PMI reading for the Eurozone registered 45.7 vs. 45.4 the prior month and the expected 44.7.
• In the UK, its Markit/CIPS Service PMI jumped to 49.5 in February from 39.5 in January but just missed the expected 49.7.

We also received Q4 GDP updates:

• Australia’s fell 1.1% YoY after falling 3.8% in Q3 compared to expectations for a decline of 1.8%.
• Italy came in as expected at -6.6% YoY after falling 5.2% in Q3.

Domestic Economy

Tuesday’s IBD/TOIPP Economic Optimism index for March rose 3.5 points to 55.4, the highest level since February 2020. The six-month outlook for the US economy rose to 53.2 from 49.5, back into positive territory for the first time since October 2020. People are feeling better about their financials as well, with the personal finance subindex rising to 58 from 56.5.

Later today we will get the ADP Employment report for February, the February Service PMIs from both IHS Markit and ISM, and the usual weekly EIA Energy stocks report.

Markets

The S&P 500 declined 0.8% yesterday, retracing most of the day’s rally, while the Dow Jones Industrial Average declined 0.5%, the Nasdaq Composite slumped 1.7%, and the Russell 2000 fell 1.9%. Most of the 11 S&P 500 sectors wavered between gains and losses today, but ten of them closed in negative territory amid a weak finish. The lone sector to rise yesterday was materials, up 0.6%, while the two biggest decliners on the day were information technology and consumer discretionary, which fell 1.6% and 1.3%, respectively. The yield on the 10-year Treasury dropped slightly yesterday to 1.41%.

As of yesterday’s close, the S&P 500 has fallen 3.5% over the prior five trading days. In comparison, travel stocks such as International Consolidated Airlines (BABWF), Norwegian Cruise Holdings (NCLH), and United Airlines (UAL) were up 13.1%, 8.7%, and 5.2% respectively. Year to date the difference in performance is even bigger, with the S&P 500 up 3.0% while those three travel shares are up 29.9%, 23.5%, and 23.2% respectively.

Solar companies, including SunPower (SPWR), First Solar (FSLR), Enphase Energy (ENPH), and Sunworks (SUNW) came under pressure yesterday after the Biden administration backed former President Trump's stance on solar tariffs in filing with the U.S. International Court of Trade.

Stocks to Watch

Lyft (LYFT) boosted its 1Q21 adjusted EBITDA forecast due to a loss of $135 million vs. the prior outlook calling for a loss between $145-$150 million. The improved outlook reflects reduced operating expenses, a Contribution Margin that is expected to be at the top end of the previously provided range and the February increase the 4% MoM increase in average daily rideshare rides in February. The company continues to expect average daily rideshare ride volume in the first quarter of 2021 will exceed average daily ride-share ride volume in the fourth quarter of 2020.

January quarter results at Nordstrom (JWN) missed consensus expectations even though the company’s total company net sales decreased 20% YoY, slightly exceeding its guidance for a low-twenties percentage decrease. Digital sales increased 24% YoY, accounting for 54% of the quarter’s revenue. Gross profit as a percentage of net sales fell YoY primarily due to deleverage from lower sales volume and higher markdowns, partially offset by planned expense savings. For 2021, the company sees its revenue growing by more than 25% with digital representing ~50%, and for the first half of the year, Nordstrom sees its EBIT at roughly breakeven.

Ross Stores (ROST) also reported disappointing January quarter results as both revenue and EPS missed consensus expectations for the quarter as comparable-store sales fell 6%. The company sees its comparable store sales for the 13 weeks ending May 1, down 1%-5% YoY. For fiscal 2021, Ross expects to add about 60 new locations, consisting of approximately 40 Ross Dress for Less and 20 dd's DISCOUNTS but sees current quarter EPS in the range of $0.74-0.86 vs. the $0.91 consensus.

January quarter results at Urban Outfitters (URBN) were mixed with revenue coming in a tad light relative to the consensus forecast while EPS for the quarter came in better than expected. For the quarter, comparable Retail segment net sales decreased 7% YoY. During the year ended January 31, Urban opened 20 new retail locations including 7 Urban Outfitters stores, 7 Anthropologie Group stores, and 6 Free People stores (including 2 FP Movement stores); and closed 10 retail locations. While the company did not issue formal guidance it shares that it is “encouraged by the positive sales results all three brands delivered in North America quarter-to-date."

Shares of Veeva Systems (VEEV) moved higher after-market trading last night following strong Q4 results and guidance that implied the strength will continue in the coming quarters. Total revenue was up 27% to $396.8 million, with subscription sales also up 27% to $322.8 million. For the current quarter, the company sees revenue of $408-410 million vs. the $400 million consensus with operating income of $157-159 million and EPS of $0.77-0.78 vs. the $0.74 consensus. For the full year, Veeva is calling for revenue in the range of $1.755-1.765B and EPS of approximately $3.20.

fuboTV (FUBO) reported a loss of $2.47 per share for its December quarter while revenue for the quarter jumped 97.7% YoY to $105.08 million, topping the $93.94 million consensus. Exiting the quarter, the company reached 547,880 subscribers, up 73% YoY, Average Revenue Per User (ARPU) per month increased 17% YoY to $62.84, and content hours streamed rose 66% to 206 million. For the current quarter, the company sees revenue of $101-103 million vs. the $100.87 million consensus with subscribers of 520-530K. fubo noted it has secured the first market access deal for fubo Sportsbook in Iowa, through Casino Queen, and has agreements to become Authorized Gaming Operators of Major League Baseball and the National Basketball Association.

January quarter results reported by Ambarella (AMBA) topped consensus expectations and the company guided its current quarter above consensus expectations. Per the company, its “AI vision silicon products accelerated in FY21 with more than 175 unique customers purchasing engineering parts and/or development systems, including more than 40 who reached production volumes.” The company expects to have shipped more than 2 million computer vision SoCs by the end of Q1 on a cumulative basis.

FedEx (FDX) announced that by 2025, 50% of FedEx Express global pick-up and delivery (PUD) vehicle purchases will be electric, rising to 100% of all purchases by 2030, and by 2040 its entire PUD fleet will be electric vehicles. To help reach this goal, FedEx plans more than $2 billion of investment in vehicle electrification, sustainable energy, and carbon sequestration.

Google (GOOGL) backed health insurance startup, Oscar Health (OSCR), which sells health insurance coverage to individuals, families, small businesses and Medicare users, priced its IPO at $39 per share, well above the original target range of $32-$34.

Las Vegas Sands (LVS) will sell its Las Vegas real property and operations, including The Venetian Resort Las Vegas and the Sands Expo and Convention Center for about $6.25 billion. Affiliates of Apollo Global Management (APO) will acquire subsidiaries that hold the operating assets and liabilities of the Las Vegas business while VICI Properties (VICI) will acquire subsidiaries that hold the real estate and real estate-related assets of The Venetian.

Samsung Electronics (SSNLF) is considering two sites in Arizona and another one in New York in addition to Austin, Texas, for a new $17 billion chip plant, according to documents filed with Texas state officials.

Bloomberg reports JPMorgan Chase & Co. (JPM) is marketing big blocks of office space in Manhattan as companies re-evaluate their need for real estate amid the Covid-19 pandemic. This follows comments earlier in the week from CEO Jamie Dimon that the shift to remote work brought on by the pandemic may lead to permanent changes in how businesses operate and will reduce companies’ need for real estate.

After today’s market close, American Eagle (AEO), Marvell (MRVL), Okta (OKTA), Red Robin Gourmet (RRGB), Snowflake (SNOW), Splunk (SPLK) , and others are expected to report their quarterly results. Investors looking to get a jump on those reports should visit Nasdaq’s earnings calendar page.

On the Horizon

• March 4: Jobless Claims, Nonfarm Productivity, Factory Orders
• March 5: Nonfarm Payrolls, Balance of Trade
• March 8: Wholesale Inventories
• March 9: API Crude Oil Stocks
• March 10: Inflation, EIA Energy Stocks, Monthly Budget Statement
• March 11: JOLTs report for January, weekly jobless claims
• March 12: Producer Price Index, Michigan Consumer Sentiment
• March 15: NY Empire State Manufacturing, Net Capital Flows
• March 16: Retail Sales, Export/Import Prices, Industrial Production, NAHB Housing Market, Business Inventories, API Crude Oil Stocks
• March 17: Building Permits, Housing Starts, EIA Energy Stocks
• March 18: Philadelphia Fed Manufacturing, Weekly Jobless Claims
• March 22: Chicago Fed National Activity Index

Thought for the Day

“Spring is nature’s way of saying, ‘Let’s party!’” - Robin Williams

Disclosures

• Okta (OKTA), Splunk (SPLK) are constituents in the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• SunPower (SPWR), First Solar (FSLR), Enphase Energy (ENPH) are constituents of Tematica Research’s Cleaner Living Index.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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