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End of Day Brief - Wednesday Mar. 17 - Stocks make new highs

Stocks higher as Fed maintains interest rates talks up the economy

The major averages were mixed at midday with attention fixated on the Fed, which concluded its two-day meeting and announced its rate decision this afternoon. As expected, the Fed kept its interest rate benchmark unchanged and while some members of the rate setting committee expressed a view that rates could start to be raised in 2022 or 2023, the group as a whole still appears to think rates may remain at current near-zero levels for the next few years.

ECONOMIC EVENTS: In the U.S., housing starts slumped 10.3% to a 1.42M rate in February, while building permits were down 10.8 % to a 1.68M rate.

In Federal Reserve news, the Fed kept its interest rate benchmark unchanged at 0%-0.25%, saying that economic activity and employment have turned up recently. "Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak," the central bank said. "Inflation continues to run below 2%. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses." Speaking in a press conference following the conclusion of the bank's FOMC meeting, Fed Chair Jerome Powell said that some of the "very worst economic outcomes" have been averted and that economic recovery has progressed more quickly than anticipated.

Meanwhile, CNBC's Ylan Mui confirmed that the Internal Revenue Service intends to push back the deadline for the U.S. tax filing season to May from April.

TOP NEWS: Shares of Teladoc ($TDOC) fell 4.4% following Amazon's ($AMZN) announcement this morning that it is launching Amazon Care across the U.S. this summer. Until now, Amazon Care has been exclusively available to Amazon employees and their families in Washington state. Today, Amazon said that Amazon Care will expand its virtual care to companies and Amazon employees in all 50 states across the U.S.

In M&A news, Lumentum ($LITE) confirmed that it delivered a revised proposal to acquire Coherent ($COHR) in a cash and stock transaction valued at $6.9B. Using Lumentum's closing stock price as of March 16, the revised proposal equates to a consideration of $275.00 per Coherent share. On March 12, II-VI Incorporated ($IIVI) had announced a revised proposal to acquire all of the outstanding shares of Coherent common stock in a cash and stock transaction that it said implied a total enterprise value of $6.8 billion and total per share consideration of $272.68.

In COVID-19 news, the World Health Organization noted that some countries in the European Union have temporarily suspended use of the AstraZeneca's ($AZN) COVID-19 vaccine as a precautionary measure based on reports of rare blood coagulation disorders in persons who had received the vaccine. However, WHO said it thinks that the benefits of the AstraZeneca vaccine outweigh its risks and recommends that vaccinations continue" at this time.

Shares of Plug Power ($PLUG) were under pressure after the company said it will restate its previously issued financial statements for fiscal years 2018 and 2019 and its quarterly filings for 2019 and 2020. Following the news, Truist analyst Tristan Richardson downgraded the stock to Hold as he expects limited opportunity for near-term outperformance after the disclosures. Still bullish on the name, both Cowen and Roth Capital kept Buy-equivalent ratings on Plug while arguing that the weakness in the shares provides a buying opportunity.

MAJOR MOVERS: Among the noteworthy gainers was Immatics ($IMTX), which rose 25.5% after providing a clinical data update from the dose escalation cohorts of the company's ongoing Phase 1 trials for its engineered Adoptive Cell Therapy approach. Also higher was Crowdstrike ($CRWD), which gained 6% after reporting quarterly results.

Among the notable losers was Rubius Therapeutics ($RUBY), which declined 24.4% after a 6.9M share secondary offering priced at $29 per share. Also lower was NRG Energy ($NRG), which fell 16.7% after it withdrew its fiscal 2021 guidance and issued a financial update on the impacts of winter storm Uri.

Reviewing Wednesday's economic data:

  • Housing starts declined 10.3% month-over-month in February to a seasonally adjusted annual rate of 1.421 million units ( consensus 1.550 million) and building permits declined 10.8% month-over-month to a seasonally adjusted annual rate of 1.682 million ( consensus 1.750 million).
    • The key takeaway from the report is that the declines in single-unit starts were the worst in the Midwest (-30.5%) and South (-16.0%) regions, which were unduly impacted by the severe winter weather that hit in mid-February. That should take some of the sting out of the weak starts number for February, yet the fact that building permits (a leading indicator) for single-unit dwellings were flat to down in all regions is apt to create some concern that rising lumber costs and rising mortgage rates will lead to some slowing in the homebuilding industry.
  • The MBA Mortgage Applications Index decreased 2.2% following a 1.3% decline in the prior week.

  • Russell 2000 +18.3% YTD
  • Dow Jones Industrial Average +7.9% YTD
  • S&P 500 +5.8% YTD
  • Nasdaq Composite +4.9% YTD

Market Snapshot
SP 5003974.12+11.41(0.29%)
10-yr Note -2/321.639
NYSEAdv 1772 Dec 1390 Vol 1.1 bln
NasdaqAdv 2385 Dec 1593 Vol 5.4 bln

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

Moving the Market

-- S&P 500 and Dow Jones Industrial Average close at record highs following dovish FOMC policy statement

-- Fed kept rates and pace of asset purchases unchanged

-- No change in the median estimate that the fed funds rate would remain unchanged through 2023

-- Long-term interest rates backed down from session highs

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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