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End of Day Briefing - Recap of Friday Jan. 15, 2021

Stocks close broadly lower after big banks' reports and the unveiling of Biden's stimulus plan

Stocks ended a bit of a seesaw week with a down day amid what appeared to be a "sell the news" reaction following President-elect Joe Biden revealing last night the details of his $1.9T "American Rescue Plan." In earnings news, JPMorgan ($JPM), Citigroup ($C) and Wells Fargo ($WFC) all declined after the trio of big banks kicked off reporting season for their sector.

ECONOMIC EVENTS: In the U.S., retail sales fell 0.7% in December and declined 1.4% excluding autos, which was much weaker than projected. The producer price index rose 0.3% in December and was up 0.1% excluding food and energy. The Empire State manufacturing index fell another 1.4 ticks to 3.5 in January, which was weaker than expected. Industrial production surged 1.6% in December, with capacity utilization rising to 74.5%, both of which were stronger than expected. Business inventories were up 0.5% in November and sales ticked down 0.1%, as forecast. In energy news, Baker Hughes reported that the U.S. rig count is up 13 from last week to 373 with oil rigs up 12 to 287.

Data from the Johns Hopkins Whiting School of Engineering shows there are now 93.3M confirmed cases of COVID-19 worldwide, including 23.3M in the U.S., and about 2M deaths due to the disease, including 389,000 in the U.S.

TOP NEWS: Bank stocks were in focus as major players JPMorgan (JPM), Citi (C), and Wells Fargo (WFC) kicked off this quarter's earnings season. JPMorgan shares were 1.8% lower even as the lender reported better than expected earnings and revenue for the fourth quarter, with the company saying it plans to start share repurchases in the first quarter. Citi shares also fell almost 7% despite upbeat Q4 results, while shares of Wells Fargo were down 7.8% after the bank reported better than expected earnings but lower than expected revenue for the quarter. Commenting on the quarter, Wells Fargo CEO Charlie Scharf said the company's results continued to be impacted by "the unprecedented operating environment and the required work to put our substantial legacy issues behind us." Additionally, PNC Financial ($PNC) shares fell 3.5% despite the company having reported upbeat Q4 results.

Shares of Exxon Mobil ($XOM) fell 4.8% after The Wall Street Journal reported that the SEC has launched an investigation into the company after an employee filed a whistleblower complaint last fall alleging that the company overvalued a key asset in the Permian Basin. In response, the company told Bloomberg that the whistleblower claims are "demonstrably false."

On the M&A front, Accolade ($ACCD) shares rose 9.6% after the company announced an agreement to acquire Innovation Specialists, also known as 2nd.MD, for $230M in cash, $130M in Accolade common stock, and up to $100M of Accolade common stock payable upon the achievement of defined revenue milestones following the closing. Following the news, Credit Suisse analyst Jailendra Singh upgraded Accolade to Outperform from Neutral, saying there will be significant cross-sell synergy opportunities from the deal.

Meanwhile, Spotify ($SPOT) shares fell 6.6% after Citi analyst Jason Bazinet downgraded the stock to Sell from Neutral, saying there's no benefit seen from the company's podcast investments. Additionally, The Information reported that Apple ($AAPL) is considering a new subscription service to charge people to listen to podcasts. Such a service from Apple could pose a threat notably to Spotify, but also to SiriusXM ($SIRI) and Amazon ($AMZN).

MAJOR MOVERS: Among the noteworthy gainers was DBV Technologies ($DBVT), which rose over 51% after announcing the receipt of written responses from the FDA to questions provided in the Type A meeting following the company's receipt of a complete response letter in connection with its biologics license application for Viaskin Peanut. Also higher was Tufin ($TUFN), which gained 12.9% after increasing its Q4 revenue outlook.

Among the notable losers was Cardiff Oncology ($CRDF), which declined more than 31% after presenting data from its Phase 1b/2 study in KRAS-mCRC. Also lower was Progress Software ($PRGS), which fell 9.6% after reporting quarterly results.

Reviewing today's economic data:

  • December retail sales declined 0.7% mln ( consensus -0.2%) and November retail sales were revised down to -1.4% from -1.1%. Excluding autos, December retail sales declined 1.4% m/m ( consensus -0.2%) and were revised down to -1.3% from -0.9% for November.
    • The key takeaway from the report is that it is clear consumer spending decelerated at the end of the fourth quarter, partly because of expiring benefits, weakening confidence in the short-term outlook, and restrictions on certain activities due to worsening coronavirus trends.
  • The Producer Price Index for final demand was up 0.3% m/m in December ( consensus 0.4%) while the index for final demand, excluding food and energy, was up 0.1%, as expected. That left the yr/yr readings at just 0.8% and 1.2%, respectively.
    • The key takeaway from the report is that inflation at the producer level remains in check.
  • Industrial production increased 1.6% m/m in December ( consensus 0.4%) following an upwardly revised 0.5% increase (from 0.4%) in November. The capacity utilization rate jumped to 74.5% ( consensus 73.5%) from an upwardly revised 73.4% (from 73.3%) in November.
    • The key takeaway from the report is the continued strength in manufacturing output, which occurred despite a 1.6% decline in the index for motor vehicles and parts.
  • The preliminary January reading for the University of Michigan Index of Consumer Sentiment checked in at 79.2 ( consensus 80.0) versus the final reading of 80.7 for December.
    • While there was a slight drop in consumer sentiment, the key takeaway is that it was only slight given the contentious issues related to rising coronavirus cases/deaths, the insurrection, and the impeachment of President Trump.
  • The Empire State Manufacturing Survey decreased to 3.5 in January ( consensus 6.0) from 4.9 in December.
  • Business Inventories increased 0.5% in November ( consensus 0.5%) after increasing a revised 0.8% (from 0.7%) in October.

NOTE:  The stock market will be closed on Monday in observance of Martin Luther King Jr. Day.

  • Russell 2000 +7.5% YTD
  • Nasdaq Composite +0.9% YTD
  • Dow Jones Industrial Average +0.7% YTD
  • S&P 500 +0.3% YTD

Market Snapshot
SP 5003768.25-27.29(-0.72%)
10-yr Note +11/321.097
NYSEAdv 1016 Dec 2137 Vol 1.23 bln
NasdaqAdv 1185 Dec 2594 Vol 6.28 bln

Industry Watch
Strong: Communication Services, Real Estate, Health Care, Utilities
Weak: Energy, Industrials, Financials, Materials, Consumer Discretionary, Technology

Moving the Market

President-elect Biden announces $1.9 trln spending plan

December Retail Sales miss expectations

JPMorgan Chase (JPM) reports better than expected results to start Q4 reporting season

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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