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End of Day Brief - Wednesday April 7 - Stocks mixed / little changed

SP 5004079.95+6.01(0.15%)
10-yr Note -1/321.665
NYSEAdv 1427 Dec 1827 Vol 803.1 mln
NasdaqAdv 1282 Dec 2754 Vol 4.0 bln

Industry Watch

Strong: Information Technology, Communication Services, Financials, Energy
Weak: Materials, Industrials, Health Care

Moving the Market

-- S&P 500 ekes out another closing record high

-- Consolidation activity despite JPMorgan Chase CEO Jamie Dimon saying that an economic boom could easily run into 2023

-- Mega-caps provided influential support

Stocks end mixed after FOMC minutes

Equities had a day of consolidative trade as the Dow, S&P 500 and Nasdaq all finished not far from where they'd closed yesterday. The release of the FOMC meeting minutes held few surprises and reinforced the central bank contention that inflation can run hot for some time and that its focus remains firmly on a full recovery in the labor market.

ECONOMIC EVENTS: In the U.S., the trade deficit widened 4.8% to $71.1B in February, which was more than expected. Consumer credit grew by $27.6B versus the prior month in February.

In White House news, the U.S. Department of the Treasury released the Made in America Tax Plan Report to provide additional depth on the plan first announced last week as part of President Biden's American Jobs Plan. The plan proposes raising the corporate income tax rate to 28% and enacting a minimum tax of 15% on book income for companies reporting yearly net income of at least $2B. Commenting on the proposals, Biden said that he is willing to negotiate over the newly proposed corporate tax rate, though that inaction on an infrastructure bill is "simply not an option."

In Federal Reserve news, minutes from the latest FOMC meeting said that the committee members see "some time until substantial further progress" on the Fed's goals, with participants in the meeting agreeing that overall financial conditions were "accommodative." In addition, FOMC members saw risks to their inflation projection as "balanced," according to the minutes.

TOP NEWS: Amazon ($AMZN) shares were 1.7% higher after CEO Jeff Bezos said yesterday that he supports a raise in the the U.S. corporate tax rate amid the country's infrastructure overhaul. "We support the Biden Administration's focus on making bold investments in American infrastructure," Bezos said. "Both Democrats and Republicans have supported infrastructure in the past, and it's the right time to work together to make this happen. We recognize this investment will require concessions from all sides-both on the specifics of what's included as well as how it gets paid for (we're supportive of a rise in the corporate tax rate). We look forward to Congress and the Administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness."

Shares of Carnival ($CCL) rose 1.4% after the company provided a corporate update, guiding for a first quarter U.S. adjusted net loss of $2B. CEO Arnold Donald said that the company is "focused on resuming operations as quickly as practical," noting that the cruiseliner is working with the CDC and the Biden administration to resume cruising.

In COVID-19 news, the European Medicines Agency's safety committee has concluded that "unusual" blood clots with low blood platelets should be listed as "very rare" side effects of AstraZeneca's ($AZN) COVID-19 vaccine Vaxzevria. The EMA committee added: "COVID-19 is associated with a risk of hospitalisation and death. The reported combination of blood clots and low blood platelets is very rare, and the overall benefits of the vaccine in preventing COVID-19 outweigh the risks of side effects."

In SPAC news, CA Healthcare Acquisition ($CAHC) announced a definitive merger agreement with LumiraDx, a point of care diagnostics testing company. The combination reflects a value of $5B for Lumira's existing equity, before giving effect to the transaction. The announcement comes a little over two months after the special purpose acquisition company had its initial public offering.

Meanwhile, Reuters reported that Exxon Mobil ($XOM) is exploring a potential sale of its Advanced Elastomer Systems unit, which could be valued at around $800M including debt.

MAJOR MOVERS: Among the noteworthy gainers was Ouster ($OUST), which rose 25.7% after Citi analyst Itay Michaeli initiated coverage of the stock with a Buy rating. Also higher was Biohaven ($BHVN), which gained 8.5% after providing Q1 Nurtec ODT net product revenue guidance.

Among the notable losers was FibroGen ($FGEN), which declined 43% after the company provided "clarification of certain prior disclosures of U.S. primary cardiovascular safety analyses" from the Phase 3 program for roxadustat for the treatment of anemia of chronic kidney disease, or CKD. Also lower was Geo Group ($GEO), which fell 20.4% after the company suspended its quarterly dividend payments and said it is evaluating its corporate structure.

Reviewing Wednesday's economic data:

  • The February Trade Balance report showed a widening in the deficit to $71.1 billion ( consensus -$70.5 billion) from an upwardly revised -$67.8 billion (from -$68.2 billion) in January. The widening was the result of exports being $5.0 billion less than January exports, and imports being $1.7 billion less than January imports.
    • The key takeaway from the report is that the impact of the semiconductor shortage was apparent in the $3.4 billion decrease in imports of automotive vehicles, parts, and engines.
  • Consumer credit increased by $27.6 bln in February after increasing by an upwardly revised $0.1 bln (from -$1.3 bln) in January. This was the largest monthly increase in consumer credit since November 2017.
    • The key takeaway from the report is that revolving credit expanded for only the second time in the last 12 months and was the largest increase in revolving credit since July 2019.
  • The weekly MBA Mortgage Applications Index fell 5.1% following a 2.2% decline in the prior week.

  • Russell 2000 +12.6% YTD
  • Dow Jones Industrial Average +9.3% YTD
  • S&P 500 +8.6% YTD
  • Nasdaq Composite +6.2% 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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