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End of Day Brief - Tuesday May 11 - Stocks drop, Nasdaq gets some dip buying

SP 5004152.10-36.33(-0.87%)
10-yr Note -1/321.615
NYSEAdv 875 Dec 2389 Vol 994.5 mln
NasdaqAdv 1565 Dec 2405 Vol 4.7 bln

Industry Watch

Strong: Materials
Weak: Energy, Financials, Industrials

Moving the Market

-- Cyclical/non-technology stocks succumbed to profit-taking interest

-- Growth stocks pared early losses as investors finally started to buy the dip

-- Pestering inflation expectations manifested in Treasury market and commodities

Dow underperforms and Nasdaq gets some dip buying

The major averages had a down day overall, but finished well of their early session lows, as stocks were sharply lower globally amid escalating fears over inflation. Those fears were fed overnight as China's PPI posted a larger than anticipated jump and the CPI notched a strong gain. In a reversal of the trend of the last few trading days, the Nasdaq was Tuesday's relative outperformer while the Dow suffered the worst pullback.

ECONOMIC EVENTS: In the U.S., the NFIB small business optimism index rose 1.6% to 99.8 in April. The JOLTS report showed job openings climbed 597,000 to 8.12M in March to hit a new record high.

TOP NEWS: In COVID-19 news, Pfizer (PFE) and BioNTech (BNTX) announced that the FDA has expanded the Emergency Use Authorization, or EUA, for their COVID-19 vaccine to include individuals 12 to 15 years of age. "This is the first COVID-19 vaccine authorized in the U.S. for use in this age group," the companies noted.

In other vaccine news, Politico reported that White House officials told governors on a private call today that new supply of Johnson & Johnson's (JNJ) COVID-19 vaccine wasn't immediately available for next week. It is not immediately clear whether the federal government would ship out J&J doses through federal distribution channels, such as those for pharmacy chains and community health centers, according to Politico.

In M&A news, Paper Excellence announced an agreement to acquire all of the issued and outstanding shares of Domtar (UFS) common stock for $55.50 per share in cash. The purchase price represents a premium of approximately 37% to Domtar's closing share price on May 3, the last trading day prior to the Domtar's statement responding to media reports regarding such a potential business combination.

L Brands (LB) announced its board of directors has unanimously approved a plan to separate the company into two independent, public companies: Bath & Body Works and Victoria's Secret, which includes Victoria's Secret Lingerie, PINK and Victoria's Secret Beauty.

Ginkgo Bioworks and Soaring Eagle Acquisition (SRNG), a publicly traded special purpose acquisition company, announced a business combination agreement that will result in Ginkgo becoming a publicly-listed company. The transaction implies a pre-money equity valuation for Ginkgo, which designs custom organisms, of $15B, and is expected to provide up to $2.5B of gross cash proceeds.

In other SPAC news, Wynn Resorts (WYNN) announced that it is merging its online betting platform Wynn Interactive with Austerlitz Acquisition Corporation I (AUS) to create an independent public company. Upon closing of the proposed transaction, the combined company is expected to have an enterprise value of approximately $3.2B, will retain the Wynn Interactive name and relist its shares on the Nasdaq Stock Exchange under the new ticker symbol "WBET."

Palantir (PLTR) shares closed 9.4% higher after the company reported better than expected Q1 results and provided upbeat revenue guidance for Q2.

In other earnings news, shares of Roblox (RBLX) jumped 21.3% after the video game company reported upbeat bookings and daily active users in its first ever quarterly report as a publicly traded entity. Following the results, Morgan Stanley analyst Brian Nowak raised his price target on the shares to $87 from $80, noting that engagement trends were "strong" in the quarter.

Meanwhile, Virgin Galactic (SPCE) shares rose 1% after the company reported downbeat quarterly results and said its next spaceflight test could be delayed further due to an unexpected possible maintenance issue with carrier aircraft VMS Eve.

MAJOR MOVERS: Among the noteworthy gainers was Ferro (FOE), which rose 23.5% after announcing into a definitive agreement to be acquired by Prince International. Also higher were 3D Systems (DDD) and NortonLifeLock (NLOK), which gained a respective 35% and 10.8% after reporting quarterly results.

Among the notable losers was Nano-X Imaging (NNOX), which declined 18.6% after reporting quarterly results and after Muddy Waters Research reiterated its contention via Twitter that Nano-X "is a scam.” Also lower were The RealReal (REAL), Rackspace Technology (RXT) and Rekor Systems (REKR), which fell a respective 19.1%, 20.9%, and 17.9% after reporting quarterly results.

Reviewing Tuesday's economic data:

  • Job openings increased to 8.123 million in March from a revised 7.526 million in February (from 7.367 million).
  • The NFIB Small Business Optimism Index for April increased to 99.8 from 98.2 in March.

Looking ahead, investors will receive the Consumer Price Index for April, the Treasury Budget for April, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Dow Jones Industrial Average +12.0% YTD
  • Russell 2000 +11.8% YTD
  • S&P 500 +10.5% YTD
  • Nasdaq Composite +3.9% 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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