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End of Day Brief - Monday April 5 - Stocks make new highs again

SP 5004077.91+58.04(1.44%)
10-yr Note +1/321.706
NYSEAdv 2040 Dec 1216 Vol 869.2 mln
NasdaqAdv 2411 Dec 1643 Vol 4.4 bln

Industry Watch

Strong: Consumer Discretionary, Information Technology, Communication Services
Weak: Energy

Moving the Market

-- S&P 500 and Dow rally to fresh intraday and closing record highs

-- Strong employment and non-manufacturing data for March

-- Positive momentum, mega-cap leadership

Stocks higher after strong jobs report

The major averages had a strong start to the week, catching a solid, but delayed, risk-on tailwind from Friday's blowout employment report.

ECONOMIC EVENTS: On Friday while the market was closed for trading, it was reported that U.S. nonfarm payrolls climbed 916,000 in March and that the unemployment rate fell to 6.0% from 6.2%. This morning, the final Markit services PMI for March was bumped up to 60.4 after edging up 0.2 ticks to 60.0 in the preliminary reading. The ISM services index surged 8.4 points to 63.7 in March to hit a new record high. Factory orders declined 0.8% in February, breaking a string of nine straight monthly gains.

TOP NEWS: Shares of Tesla ($TSLA) gained 4.4% after the company announced while the market was closed on Friday that its first quarter production and deliveries topped consensus expectations.

GameStop ($GME) shares initially responded with a selloff after the company announced that it has filed a prospectus supplement with the U.S. SEC under which it may offer and sell up to a maximum of 3.5M shares of its common stock from time to time through an "at-the-market" equity offering program. However, the stock recovered to close just 2.4% lower. The game retailer also reported that its total global sales increased approximately 11% for the first nine-weeks of fiscal 2021 compared to the same period of last year.

In COVID-19 news, Johnson & Johnson ($JNJ) announced on Saturday that it is assuming full responsibility regarding the manufacturing of drug substance for its COVID-19 vaccine at the Emergent BioSolutions ($EBS) Bayview facility. Separately, on Friday Emergent BioSolutions announced that topline data from a trial of its investigational SARS-CoV-2 immune globulin intravenous, or COVID-HIG, for the treatment of hospitalized patients with COVID-19 showed that the addition of anti-SARS-CoV-2 hyperimmunoglobulin to standard of care, inclusive of remdesivir, for hospitalized adult COVID-19 patients with symptoms for less than 12 days did not provide clinical benefit when compared to standard of care plus placebo.

The U.S. Supreme Court reversed and remanded a prior court's ruling, stating that Alphabet's ($GOOGL) Google did not commit copyright infringement when it used Oracle's ($ORCL) code in a previous version of its Android operating system. Dorian Daley, General Counsel of Oracle, stated following today's Supreme Court decision: "The Google platform just got bigger and market power greater. The barriers to entry higher and the ability to compete lower. They stole Java and spent a decade litigating as only a monopolist can. This behavior is exactly why regulatory authorities around the world and in the United States are examining Google's business practices."

Meanwhile, General Motors ($GM) shares were 5.6% higher after the company said it would make "important product-related announcements" for Factory ZERO on Tuesday, April 6. The stock was also initiated with an Overweight rating at Wells Fargo.

Reuters reported that Pfizer ($PFE) is working on a new deal to supply COVID-19 vaccines to Israel after an initial supply agreement signed in late 2020 has ended. In November, Pfizer and its partner BioNTech ($BNTX) agreed to supply Israel with an undisclosed number of COVID-19 vaccines and Israel's Finance Ministry has said it paid approximately $785M.

MAJOR MOVERS: Among the noteworthy gainers was dMY Technology II ($DMYD), which jumped 40.8% after Genius Sports announced a multi-year strategic partnership with the NFL to be the exclusive distributor of official league data. dMY is in the process of merging with Genius Sports Group ($GENI) to bring the company public. Also higher was AMC Entertainment ($AMC), which gained 13.5% after B. Riley analyst Eric Wold upgraded the stock to Buy from Neutral after an "impressive" weekend at the box office.

Among the notable losers was Molecular Templates ($MTEM), which declined 23.6% after it decided to discontinue development of MT-3724. Also lower was Acadia ($ACAD), which fell 17.2% after receiving a complete response letter from the FDA regarding its supplemental new drug application for Nuplazid indicating the application cannot be approved in its present form.

Reviewing Monday's (and Friday's) economic data:

  • March nonfarm payrolls increased by 916,000 ( consensus 627,000). March private sector payrolls increased by 780,000 ( consensus 470,000). March unemployment rate was 6.0% ( consensus 6.0%), versus 6.2% in February.
    • The key takeaway from the employment report is that it was indicative of an economy that is gaining momentum from reopening activity.
  • The ISM Non-Manufacturing Index increased to 63.7% in March ( consensus 58.5%) from 55.3% in February. The dividing line between expansion and contraction is 50.0%. The March reading marks the tenth straight month of growth for the services sector, and is the highest reading on record.
    • The key takeaway from the report is that it reflects some natural slowing after a long streak of monthly increases for factory orders. In turn, more current economic releases, like the ISM Manufacturing Index for March, will feed a belief that factory orders are destined to rebound in coming months.
  • Factory orders for manufactured goods decreased 0.8% m/m in February ( consensus -0.5%) after increasing an upwardly revised 2.7% (from 2.6%) in January. This is the first time in ten months that factory orders have not increased.
  • The IHS Markit Services PMI for March was revised higher to 60.4 from 59.8 in the preliminary reading.

  • Russell 2000 +14.7% YTD
  • Dow Jones Industrial Average +9.5% YTD
  • S&P 500 +8.6% YTD
  • Nasdaq Composite +6.3% 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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