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End of Day Brief - Thursday April 1 - S&P makes new high again!

SP 5004019.87+46.98(1.18%)
10-yr Note +5/321.685
NYSEAdv 2623 Dec 658 Vol 861.6 mln
NasdaqAdv 3038 Dec 993 Vol 4.5 bln

Industry Watch

Strong: Information Technology, Communication Services, Energy, Financials
Weak: Utilities, Health Care, Consumer Staples

Moving the Market

-- S&P 500 tops the 4000 level in broad-based advance

-- ISM Manufacturing Index for March comes in better than expected

-- First-of-the-month inflows, long-term rates decreased

Stocks make a strong start for April as S&P tops 4,000 for first time

Stocks had a strong start to April as risk appetites have been whetted by the announcement yesterday of Joe Biden's proposal for $2.25T in an infrastructure spending program. A decline in yields as inflation fears ease a bit was also supportive of equities. The S&P 500 rose above 4,000 to close at an all-time high while the Dow and Nasdaq indexes also posted gains ahead of the long Easter weekend.

ECONOMIC EVENTS: In the U.S., initial jobless claims rose 61,000 to 719,000 in the week ended March 27. Markit's manufacturing PMI rose to 59.1 in the final print for March, up 0.5 points from February's 58.6 and up a tick from the 59.0 preliminary reading. The ISM manufacturing index rose to a 37-year high of 64.7 in March, marking another big beat. Construction spending beat estimates with a 0.8% weather-led February drop.

TOP NEWS: Shares of Micron ($MU) gained 4.8% after the company's Q2 results topped the pre-announced range and guided well above consensus due to strong demand across all end markets. In addition, The Wall Street Journal reported last night, citing people familiar with the matter, that Micron and Western Digital ($WDC) are each weighing a potential deal for Kioxia Holdings that could value the Japanese semiconductor company at approximately $30B.

Meanwhile, CarMax ($KMX) shares fell 7.1% after the company reported Q4 results and announced it has signed a definitive agreement to acquire the remaining shares of Edmunds it does not already own for a purchase price that implies an enterprise value of $404M.

In COVID-19 news, Pfizer ($PFE) and BioNTech SE ($BNTX) announced updated topline results from analysis of 927 confirmed symptomatic cases of COVID-19 observed in their pivotal Phase 3 study through March 13, 2021, showing the Pfizer-BioNTech COVID-19 vaccine, BNT162b2, was 91.3% effective against COVID-19, measured seven days through up to six months after the second dose.

In the auto industry, General Motors ($GM) announced it sold 642,250 vehicles in the U.S. in the first quarter of 2021, up 4% compared to a year ago, while Ford ($F) reported Q1 U.S. sales were up 1% from last year to 521,334 vehicles. FCA US ($STLA) reported a 5% increase in Q1 U.S. total sales to 469,651 vehicles.

MAJOR MOVERS: Among the noteworthy gainers was Velodyne Lidar ($VLDR), which rose 12.1% after the company announced a multi-year agreement with AGM Systems, which provides hardware and software technology for the collection, processing and analysis of air and mobile mapping data. Also higher was QuantumScape ($QS), which gained 10.1% after announcing it has successfully met the technical milestone that was a condition to close for the investment of an additional $100M by Volkswagen Group of America Investments ($VWAGY).

Among the notable losers was Emergent BioSolutions ($EBS), which dropped 13.4% after The New York Times reported that employees at a Baltimore plant manufacturing two coronavirus vaccines accidentally conflated the vaccines' ingredients several weeks ago, ruining approximately 15M doses of Johnson & Johnson's ($JNJ) vaccine and forcing regulators to delay authorization of the plant's production lines. The plant is run by Emergent, a manufacturing partner to both J&J and AstraZeneca ($AZN), according to the report. Also lower was AbCellera ($ABCL), which fell 9.6% after the company announced agreements to expand its collaboration with Gilead Sciences ($GILD), including a multi-year, multi-target antibody discovery collaboration and access to AbCellera's humanized mouse technology.

Reviewing Thursday's economic data:

  • Initial jobless claims for the week ending March 27 increased by 61,000 to 719,000 ( consensus 679,000) from last week's revised count of 658,000 (from 684,000). Continuing claims for the week ending March 20 decreased by 46,000 to 3.794 mln from last week's revised level of 3.840 mln (from 3.870 mln).
    • The key takeaway from the report is that while claims have been trending in the right direction for months, the overall downtrend continues hitting speed bumps like the unexpected increase that was captured in today's report.
  • The ISM Manufacturing Index for March jumped to 64.7% ( consensus 61.2%) from 60.8% in February, reaching a level not seen since late 1983. The dividing line between expansion and contraction is 50.0%. March marked the tenth consecutive month the ISM Manufacturing Index has been above 50.0%.
    • The key takeaway from the report is that the Index reached its highest level in more than 37 years in the March reading, thanks to a growing backlog, rising prices, and low customer inventories.
  • Total construction spending decreased by 0.8% m/m in February ( consensus -0.9%) after increasing a downwardly revised 1.2% (from 1.7%) in January. Total private construction spending fell 0.5% m/m and total public construction spending decreased 1.7%.
    • The key takeaway from the report is that construction spending showed a smaller than expected decrease in February despite severe winter weather in many regions of the country.
  • The IHS Markit Manufacturing PMI increased to 59.1 in March from 59.0 in February.

  • Russell 2000 +14.1% YTD
  • Dow Jones Industrial Average +8.3% YTD
  • S&P 500 +7.0% YTD
  • Nasdaq Composite +4.6% YTD

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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