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End of Day Brief - Tuesday Mar. 16 - Stocks mixed

Stocks close mixed, with Nasdaq as the lone gainer

The major averages were mixed at midday, with the Nasdaq outperforming and the Russell 2000 lagging, and the Nasdaq was the only index to end the day with gains. On the economic front, import price, retail sales, industrial production, business inventories and NAHB housing market data were all released this morning, while the Fed's March FOMC meeting also got underway.

ECONOMIC EVENTS: In the U.S., import prices increased 1.3% and export prices were up 1.6% in February. Retail sales fell 3.0% in February, and declined 2.7%% excluding autos, which were bigger drops than projected. Industrial production fell 2.2% in February and the drop in production knocked capacity utilization to 73.8% from 75.5%. Business inventories slightly undershot estimates with a 0.3% rise in January, while business sales rose 4.7%. The NAHB housing market index fell 2 points to 83 in March, more than giving back the 1 point bounce to 84 in February.

The Federal Reserve began its two-day FOMC meeting and will release it associated rate decision and policy announcement tomorrow.

TOP NEWS: Shares of Ford ($F) were 5.4% lower after the company said it continues to expect to meet its previously issued full year 2021 financial guidance, but noted that it believes that if the current semiconductor shortage is extended through the first half of 2021, the shortage "could adversely impact Ford's adjusted EBIT by between $1.0 billion and $2.5 billion, net of reasonable cost recoveries and some production make-up in the second half of the year." In addition, Ford announced its intention to offer, subject to market conditions and other factors, $2B aggregate principal amount of convertible senior notes due 2026 in a private placement to qualified institutional buyers. Ford said it intends to use the net proceeds from this offering for general corporate purposes, including the potential repayment of debt.

In COVID-19 news, Moderna ($MRNA) announced that the first participants have been dosed in the Phase 2/3 study, called the KidCOVE study, of mRNA-1273, the company's vaccine candidate against COVID-19, in children ages 6 months to less than 12 years.

Further, the EMA said it believes that the benefits of AstraZeneca's ($AZN) COVID-19 vaccine outweigh the risks after several countries halted the use of the vaccine amid reports of dangerous blood clots in connection with the shot, The Wall Street Journal reports. In a briefing, EMA Executive Director Emer Cooke said the regulator sees no indication that the vaccine caused a number of blood-clotting incidents reported across the region, but is currently reviewing those incidents to determine whether they represent a broader risk. The results of the review will be presented on Thursday, Cooke added.

Meanwhile, the Centers for Medicare & Medicaid Services has significantly increased Medicare reimbursements rates for COVID-19 vaccines as it tries to accelerate their rollout. According to the announcement, the national average payment rate for hospitals, pharmacies and other immunizers has risen to $40 for single-dose vaccines and $80 for COVID vaccines requiring two doses. Commenting on the news, Morgan Stanley analyst Ricky Goldwasser said the higher reimbursement could be a "windfall" and represent "meaningful upside" to guidance from CVS Health ($CVS) and Walgreens ($WBA).

Shares of GameStop ($GME) closed 5.4% lower following sharp gains this month, as Pimco co-founder Bill Gross told Bloomberg TV that he is still short on the stock, saying he's made about $10M betting against the gaming retailer's shares.

Additionally, FirstEnergy ($FE) shares rose 1% after The Wall Street Journal reported that the company is close to a deal with to give Carl Icahn two seats on its board and avert a proxy fight. Jesse Lynn and Andrew Teno, two employees if Icahn's firm, are expected to join FirstEnergy's board and serve on committees focused on helping the company improve its compliance and settle litigation, according to the Journal.

MAJOR MOVERS: Among the noteworthy gainers was Bioceres ($BIOX), which rose 11.3% after announcing it acquired a 6% ownership interest in Moolec Science. Also higher was New Fortress Energy ($NFE), which gained 27.4% after reporting quarterly results.

Among the notable losers was Solid Biosciences ($SLDB), which declined 32.4% after reporting interim functioning biomarker data from its IGNITE DMD trial. Also lower was Coupang ($CPNG), which fell 6.6% after the company confirmed that conditions were satisfied for a partial early lock-up release that will occur at the open of trading on March 18 with respect to its shares of Class A common stock. Coupang estimates that approximately 34.0M shares held by the "Early Release Employee Group" will become eligible for sale in the public market at the open of trading on March 18.

Reviewing Tuesday's economic data:

  • Total retail sales declined 3.0% m/m in February ( consensus -0.6%) and retail sales, excluding autos, declined 2.7% ( consensus +0.2%). However, there were large upward revisions to January sales, with total sales increasing 7.6% (from 5.3%) and sales, excluding autos, surging 8.3% (from 5.9%).
    • The key takeaway from the report is that the "weakness" in February was a byproduct of the tremendous strength in January, which made the sequential comparison exceedingly difficult. The market shouldn't be thrown for much of a loop by the February sales data -- if it's thrown for one at all -- because it recognizes that a new round of stimulus checks is just now starting to hit deposit accounts and will assuredly help prop up retail sales in March and April along with the early unleashing of some pent-up demand.
  • Total industrial production decreased 2.2% m/m in February ( consensus +0.5%) following an upwardly revised 1.1% increase (from 0.9%) in January. The capacity utilization rate dropped to 73.8% ( consensus 75.6%) from a downwardly revised 75.5% (from 75.6%) in January.
    • The key takeaway from the report is that the decline was unduly influenced by the severe winter weather in the south central region of the country in mid-February. That should drive expectations for a quick, and sizable, rebound in March.
  • The NAHB Housing Market Index decreased to 82 in March ( consensus 84.0) from 84.0 in February.
  • Business inventories increased 0.3% in January ( consensus 0.3%) following a revised 0.8% increase (from 0.6%) in December.
  • Import prices increased 1.3% in February while import prices excluding oil increased 0.4%. Export prices increased 1.6% in February while export prices excluding agriculture increased 1.5%.

  • Russell 2000 +17.5% YTD
  • Dow Jones Industrial Average +7.3% YTD
  • S&P 500 +5.5% YTD
  • Nasdaq Composite +4.5% YTD

Market Snapshot
SP 5003962.71-6.23(-0.16%)
10-yr Note +1/321.596
NYSEAdv 1118 Dec 2106 Vol 986.4 mln
NasdaqAdv 1210 Dec 2801 Vol 5.4 bln

Industry Watch
Strong: Information Technology, Communication Services
Weak: Energy, Financials, Industrials, Materials, Consumer Discretionary

Moving the Market

-- Cyclical stocks lagged while growth stocks showed relative outperformance

-- February retail sales weaker than expected, industrial production unexpectedly declines in February

-- Wait-and-see for Fed statement tomorrow

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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