Daily Markets: Equities Pause After Hitting Fresh Highs

Today’s Big Picture

Equity indices in Asia finished the day’s trading on a mostly higher note and by mid-day trading, European equities were mostly lower. After rising over the last six days and once again hitting new record highs with yesterdays’ market close, U.S. futures suggest those equities will give back a fraction of their recent gains when those markets open later this morning. With a sea of corporate earnings before the market opens, and little in the way of U.S.-facing economic data to be had, investors will want to monitor U.S. futures as earnings reports are digested.

Investors will also want to keep an eye on President Biden’s stimulus plan following House Democrats moving forward with $1,400 stimulus checks with a $75,000/year eligibility and a $3,600 per child credit in the stimulus bill. Of course, the bill now heads to the Senate, and the details of the Biden plan could morph before ultimately being passed. Afternoon trading could get a little wonky this afternoon as President Trump’s impeachment trial is set to kick off today at 1 PM ET. One way or another, that is bound to get some chins wagging.

Data Download

International Economy

Average cash earnings in Japan fell 3.2% YoY in December after falling 1.8% in November. Machine tool orders rose 9.7% YoY in January after rising 9.9% in December.

Australia’s NAB Business Confidence rose to 10 in January from 5.

Germany’s Imports slipped 0.1% MoM (seasonally adjusted) in December after rising 5.4% in November and compared to expectations for a 1.1% decline. Exports inched ahead by 0.1% MoM (SA) in December after rising 2.2% in November and compared to a 1.0% decline.

Italy’s Industrial Production dropped 2% YoY in December after falling 4.2% in November and missed the expected 1.4% decline.

The former head of the European Central Bank, Mario Draghi, is moving closer towards becoming the next Italian prime minister with two formerly anti-euro parties, the League and Five Star Movement, signaling that they would be willing to support him.

Carmakers ranging from Ford (F) and General Motors (GM) to Volkswagen (VLKAF), Nissan (NSANY), and Honda (HMC) have been forced to either idle their manufacturing plants or slow production due to crippling shortages in semiconductor chips. German carmakers are now considering building stockpiles of semiconductor chips to prevent a repeat of the shortages, which would be a major overhaul of the just-in-time supply chains that have been used for decades.

Domestic Economy

The debate is heating up on Capitol Hill over concerns that President Biden’s $1.9 trillion fiscal stimulus plan is so large that it could lead to an overheating economy. Richmond Fed president, Tom Barkin, told the Financial Times that he expects to see short-term price volatility, but that he sees both deflationary and inflationary risks on the horizon. Janet Yellen, U.S. Treasury secretary and former chair of the Federal Reserve dismissed inflation concerns as well.

Later today we will get the NFIB Business Optimism Index for January, the JOLTs Report, and the usual weekly Redbook report.

Markets

All four of the major stock indices closed yesterday at record highs, their sixth consecutive day of gains. The Nasdaq rose 1.0%, the Dow added 0.8%, the S&P 500 rose 0.7%, and the Russell 2000 closed up 2.5%. The Russell 2000’s close was 39.3% above its 200-day moving average, a record spread.

Stocks to Watch

Canopy Growth (CGC) reported better-than-expected December quarter revenue that rose 23.4% YoY to of CC$153 million vs the CC$149.94 million consensus. Alongside results for the quarter, the company established medium-term financial targets that include net revenue CAGR of 40%-50% from FY 2022 to FY 2024; positive adjusted EBITDA during the second half of FY 2022 and 20% Adjusted EBITDA margin for the full year FY 2024; and positive operating cash flow for the full year FY 2023 and positive free cash flow for the full year FY 2024.

December quarter top and bottom-line results at DuPont (DD) topped consensus expectations. During the quarter, the company experienced strong demand in Electronics & Imaging, Nutrition & Biosciences, and Transportation & Industrial. DuPont issued upside guidance for the current quarter and 2021. For the current quarter, the company sees EPS of $0.75-0.77 vs. the $0.63 consensus with revenue of $3.75-3.85 billion the $3.68 billion consensus. For the full year, DuPont is forecasting EPS of $3.30-3.45 vs. the $3.11 consensus.

Chegg (CHGG) handily beat consensus expectations for its December quarter and issued upside guidance for the current one. For the December quarter, the connected learning platform company reported EPS of $0.55 vs. the $0.41 consensus as revenue rose 63.3% YoY to $205.7 million, well ahead of the $153.9 million consensus. For 2021, the company sees revenue in the range of $780-$790 million vs. the $780 million consensus with a gross margin between 68%-69%. The company shared it is seeing increased shipping and logistics surcharges for Required Materials from its third-party logistics provider and currently forecasts this to continue into the fall 2021 semester, costing it approximately 200 basis points of gross and adjusted EBITDA margin for 2021.

Nuance Communications (NUAN) topped top and bottom-line expectations for its December quarter and reaffirmed its 2021 EPS guidance of $0.71-$0.77 vs, the $0.75 consensus. Nuance sees its 2021 revenue in the range of $1.342-$1.382 billion, which bookends the $1.36 billion consensus. The company also announced the acquisition of Saykara, a startup focused on developing a mobile AI assistant to automate clinical documentation for physicians.

Simon Properties (SPG) reported December quarter FFO of $2.17 per share, $0.06 below the $2.23 consensus. Revenue for the quarter fell 24% YoY to $1.13, modestly missing the $1.15 billion consensus. At the end of 2020, the company shared its occupancy was 91.3%. For 2021, the company sees its FFO in the range of $9.50-9.75 vs. the $9.57 consensus.

Top and bottom-line results for Take-Two’s (TTWO) December quarter topped consensus expectations, and the company guided its current quarter well above consensus revenue and EPS forecasts. Net bookings during the quarter were led by strong demand for Grand Theft Auto Online, Grand Theft Auto V, NBA 2K, the Mafia: Definitive Editions, and Mafia: Trilogy. For the current quarter, Take-Two sees EPS of $0.88-0.98 vs. the $0.66 consensus with revenue of $602-652 million vs. the $580 million consensus. For 2021, the company is expecting net bookings of $3.37-$3.42 billion.

Glu Mobile (GLUU) agreed to be acquired by Electronic Arts (EA) for $12.50 per share in cash and the transaction has been approved by the Boards of each company. The acquisition is expected to be immediately accretive to Electronic Arts' total net bookings, and it is expected to grow underlying profitability beginning in its first year.

Beacon Roofing Supply (BECN) reported December quarter EPS of $1.14 per share, $0.53 better than the consensus forecast. Revenue for the quarter rose 9.0% YoY to $1.83 billion, topping the $1.7 billion consensus.

Honda Motor (HMC) reported quarterly results that topped revenue expectations and boosted its outlook despite the chip industry that is plaguing the auto industry.

Taiwan Semiconductor (TSM) reported its January revenue jumped 22.2% YoY (+8% MoM) to NT$126.75 billion.

ChipMOS Technologies (IMOS) reported January revenue +24.9% YoY to $77.2 million.

ASE Technology (ASX) reported its January revenue increased 30.3% YoY to NT$40.85 billion.

Singapore Airlines (SINGF) announced it would defer over $3 billion in spending on Airbus SE (EADSY) and Boeing (BA) planes after reaching agreements with the aircraft manufacturers to delay deliveries.

Philips (PHG) completed its tender offer for BioTelemetry (BEAT) for $72 per share in cash.

Pinterest (PINS) will host its first-ever advertiser summit, Pinterest Presents, on March 3rd, 2021.

The Financial Times reports EU lawmakers are looking to make Big Tech companies pay for news, strengthening the hand of publishers against Google (GOOGL) and Facebook (FB).

According to Transportation Secretary Pete Buttigieg, federal officials are considering whether to require airline passengers to have a negative coronavirus test before boarding domestic flights.

S&P MidCap 400 constituent Monolithic Power Systems (MPWR) will replace TechnipFMC (FTI) in the S&P 500 in anticipation of TechnipFMC’s announced spin-off of Technip Energies in a transaction expected to be completed on or about February 16. S&P SmallCap 600 constituent Iridium Communications (IRDM) will replace Monolithic Power Systems in the S&P MidCap 400, and Collegium Pharmaceutical (COLL) will replace Iridium Communications in the S&P SmallCap 600, effective before the opening of trading on Friday, February 12.

After today’s market close, Akami (AKAM), Cisco (CSCO), Lyft (LYFT), Twitter (TWTR), Yelp (YELP), and a few dozen others are expected to report their quarterly results. Investors looking to get a jump on those and other reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• February 10: MBA Mortgage Applications, Inflation rate, Wholesale Inventories, weekly EIA Energy stocks, monthly budget statement
• February 11: Weekly jobless claims
• February 12: Lunar New Year in China: Year of the Ox, Michigan Consumer Sentiment, weekly Baker Hughes Oil Rig count
• February 16: NY Empire State Manufacturing, weekly Redbook, Net Capital Flows
• February 17: Retail Sales, PPI, Industrial Production, Capacity Utilization, Manufacturing Production, Business Inventories, NAHB Housing Market Index, FOMC Minutes, weekly API Crude Stock
• February 18: Housing Starts, Building Permits, Philadelphia Fed Manufacturing, weekly Jobless Claims, Import and Export Prices, EIA energy stocks
• February 19: Markit Manufacturing and Service PMI (flash), Existing Home Sales, weekly Baker Hughes Oil Rig report
• February 22: Chicago Fed National Activity, Dallas Fed Manufacturing
• February 23: S&P/Case-Shiller Home Prices, CB Consumer Confidence, weekly API Crude Oil Stocks
• February 24: New Home Sales, weekly EIA Energy Stocks
• February 25: Durable Goods, Weekly Jobless Claims, Pending Home Sales
• February 26: Personal Income & Spending, Goods Trade Balance, Chicago PMI, Michigan Consumer Sentiment

Thought for the Day

“Life is not a problem to be solved but a reality to be experienced.” ~ Soren Kierkegaard

Disclosures

• Akami (AKAM), Cisco Systems (CSCO) are constituents in the Tematica BITA Digital Infrastructure and Connectivity Index.
• Cisco Systems (CSCO) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• Cisco Systems (CSCO) is a constituent in Tematica Research's Thematic Dividend All-Stars 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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