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End of Day Brief - Wednesday May 5 - Stocks mixed as Dow hits a new high

SP 5004167.59+2.93(0.07%)
10-yr Note +2/321.577
NYSEAdv 1726 Dec 1537 Vol 928.8 mln
NasdaqAdv 1863 Dec 2278 Vol 4.5 bln

Industry Watch

Strong: Energy, Materials, Financials
Weak: Utilities, Real Estate, Consumer Discretionary, Communication Services, Information Technology

Moving the Market

-- Dow closes at record high in mixed session that favored value and cyclical stocks

-- Technology/growth stocks were unable to sustain early efforts to buy the dip

-- Decent economic data on services sector activity and private-sector hiring activity

-- Treasury Secretary Yellen and other Fed speakers downplayed sustained inflation pressures, with Ms. Yellen walking back on prior interest rate comments

Stocks mixed after Yellen clarifies rates comment

The major averages were higher at midday after Treasury Secretary Janet Yellen attempted to blunt the impact of her comments yesterday where she said rates may need to rise to keep the economy from overheating. She has clarified that she was not making a forecast or advocating for a rate hike from the Fed, but the Nasdaq was unable to sustain its early strength and was the laggard among the indexes once again.

ECONOMIC EVENTS: In the U.S., ADP reported private payrolls increased 742,000 in April, missing the consensus forecast for 785,000 payroll additions. The final April Markit services and composite indexes were revised higher versus the preliminary reading. The services PMI was bumped up 1.6 ticks to 64.7 following the 2.5 point rise in the preliminary to 63.1, while the final composite index for April was revised 1.3 points higher to 63.5 from the 62.2 flash reading. The ISM-NMI services index slipped 1 point to a 62.7 figure from a record-high of 63.7 in March

TOP NEWS: Shares of General Motors (GM) were 4% higher after the car maker reported better than expected first quarter adjusted earnings and provided guidance for fiscal 2021. The company said that it is "highly confident" in its FY21 guidance, adding that the current semiconductor chip shortage won't impact its growth or electric vehicle initiatives.

Lyft (LYFT) shares, on the other hand, fell 6.3% after the ride-sharing service reported worse than expected first quarter losses, with active riders in the quarter falling 36.4% year-over-year, and Q2 revenue guidance that was lighter than expected. Following the report, no fewer than five analysts raised their price targets on Lyft shares, with Barclays analyst Ross Sandler saying that demand continues to outpace supply, which is helping offset the higher driver incentives and increase unit economics.

In other earnings news, T-Mobile (TMUS) shares rose 4.4% after the carrier reported upbeat Q1 results, including 1.4M total net additions and 1.2M postpaid net additions in the quarter. In addition, the company raised its fiscal 2021 postpaid net additions view.

In non-earnings news, Facebook (FB) was in focus after its Oversight Board upheld the social media giant's decision on January 7 to restrict then-President Donald Trump's access to posting content on his Facebook page and Instagram account. The company said it was "pleased" with the board's decision and will seek to determine an action that is "clear and proportionate." In the meantime, Trump's accounts will remain suspended, the company added.

Shares of Peloton (PTON) slid 14.6% following the announcement of two separate voluntary recalls of the company’s Tread+ and Tread treadmills. KeyBanc analyst Edward Yruma called the voluntary recall "a clear negative," but several of his research firm peers called the pullback in the stock on the headlines a buying opportunity.

Jessica Alba's Honest Company (HNST), which identifies itself as "a mission-driven, digitally-native brand focused on leading the clean lifestyle movement," priced 25.81M shares at $16 in its initial public offering and began trading at $21.22 per share.

Pfizer Canada (PFE) and BioNTech (BNTX) announced that Health Canada has expanded the Interim Order authorization for their COVID-19 vaccine to include individuals 12 to 15 years of age. Meanwhile, a CDC spokeswoman told Bloomberg in an email that the CDC has scheduled an advisory committee meeting for May 12 to consider the use of the COVID-19 vaccine developed by Pfizer and BioNTech in teenagers.

Also on the COVID-19 front, Bloomberg reported that the U.S. plans to support a waiver of vaccine-patent protections at the World Trade Organization. “We are for the waiver at the WTO, we are for what the proponents of the waiver are trying to accomplish, which is better access, more manufacturing capability, more shots in arms,” U.S. Trade Representative Katherine Tai said in an interview. Several COVID-19 vaccine makers, including Pfizer, Moderna (MRNA), and Johnson & Johnson (JNJ), were trading lower after the news.

GameStop (GME) was in focus after S&P Global Ratings upgraded its issuer credit rating on the video game retailer to "B" from "B-" and removed the ratings from CreditWatch, where it placed them with positive implications on April 5.

MAJOR MOVERS: Among the noteworthy gainers was Athenex (ATNX), which rose 22.6% after it acquired Kuur Therapeutics for $185M. Also higher was Hayward (HAYW), which gained 24.3% after reporting quarterly results.

Among the notable losers was HollyFrontier (HFC), which fell 4.4% after entering into a definitive agreement to acquire Puget Sound Refinery from Shell (RDS.A). Also lower was Esperion (ESPR), which dropped 21.8% after reporting quarterly results.

Reviewing Wednesday's economic data:

  • The ISM Non-Manufacturing Index decreased to 62.7% in April ( consensus 65.0%) from 63.7% in March. The dividing line between expansion and contraction is 50.0%. The April reading marks the eleventh straight month of growth for the services sector and follows a record high reading for March.
    • The key takeaway from the report is the understanding that services sector activity is still running at a fast pace, as business activity slowed only modestly from the record pace logged in March.
  • The ADP Employment Change report estimated that 742,000 jobs were added to private-sector payrolls in April ( consensus 810,000) following an upwardly revised 565,000 increase (from 517,000) in March. This was the largest increase since September 2020.
  • The IHS Markit Services PMI for April was revised higher to 64.7% from 63.7% in the preliminary reading.
  • The weekly MBA Mortgage Applications Index decreased 0.9% following a 2.5% decline in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report and preliminary Productivity and Unit Labor Costs for the first quarter on Thursday.

  • Russell 2000 +13.5% YTD
  • Dow Jones Industrial Average +11.8% YTD
  • S&P 500 +11.0% YTD
  • Nasdaq Composite +5.4% 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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