Thursday February 25, 2021 Trading Desk: (312) 236-8907
TODAY’S GAME PLAN: from the trading desk, this is not research
DATA/HEADLINES 8:30ET Weekly Jobless Claims, GDP revision, Durable Goods; 10:00ET Pending Home Sales; 11:10ET Fed’s Quarles speaks; 12:00ET Fed’s Bostic speaks; 1:00ET $62 billion 7-year note auction; 3:00ET Fed’s Williams speaks
Finance ministers and central bankers from the Group of 20 will meet virtually Friday
TODAY’S HIGHLIGHTS:
- More than 218 million vaccine doses have been administered globally
- A new variant is spreading rapidly in NYC, the NYT reported
- Merck to Buy Autoimmune Drug Developer Pandion for $1.85 Billion
- Coinbase has filed to go public via a direct listing
Global stocks jumped after US Federal Reserve Chair Jerome Powell reaffirmed interest rates would stay low for a long time, calming market fears that higher inflation might prompt the central bank to tighten monetary policy. Easy financial conditions, the promise of fiscal stimulus and accelerating COVID-19 vaccine rollouts have driven money into the reflation trade. Economically sensitive and cheap stocks are gaining traction, while pandemic winners have come under pressure. The selloff in global bonds deepened as the benchmark US Treasury yield hit a one-year high and debt from the UK to Australia came under pressure. Adding to the optimism, Pfizer and BioNTech’s Covid-19 vaccine was overwhelmingly effective against the virus in a study that followed nearly 1.2 million people in Israel. Public-health experts said the results show that immunizations could end the pandemic.
EQUITIES:
US equity futures are mixed, with contracts on the tech-heavy Nasdaq 100 underperforming, down 1%, while the Russell 2000 Index of small-caps is trying to hold in the green. Companies popular with the day-trader crowd are surging once again with GameStop jumping 55% and AMC Entertainment up 17% in pre-market trading. Best Buy fell 5% after comp sales missed and the company said it won’t provide traditional guidance. Nvidia slipped 3% on concerns growth will slow at its data center chip business although its revenue forecast beat.
E-mini S&P futures -0.4%, Nasdaq -1.0%, Russell 2000 futures -0.05%, Dow futures -0.05%.
The Nasdaq continues to underperform and we are watching to see if the 200 day moving average in Nasdaq relative to S&P 500 breaks.
Wayfair shares dropped 7% in premarket trading after fourth-quarter adjusted revenue and orders delivered missed estimates, although adjusted earnings per share beat expectations. Wayfair has not settled below its 200 day moving average since climbing above it in April
Energy sector the leader again yesterday with XLE up 3.5%
European stocks edged higher, as hopes of an economic recovery fueled a further rotation into value and cyclical sectors. Energy (+2.2%) and bank shares (+1.8%) are leading gains, while chemical and healthcare stocks slip. Euro zone economic sentiment rose more than expected, boosting inflation expectations among producers and consumers. Anglo American gained over 4%, to a near-decade high after reporting earnings that beat expectations and Tenaris surged 14% as results also beat. Nokia Oyj was the best performer on the Stoxx 600 amid fresh interest in the company from a Reddit forum. Anheuser-Busch InBev dropped 55 as it missed quarterly profit estimates. Stoxx 600 is flat, FTSE 100 +0.4%, CAC +0.15%, DAX -0.2%.
Asian stocks rebounded from their biggest drop in almost three months, bolstered by a rally in technology names. Samsung Electronics, SK Hynix and Taiwan Semiconductor boosted the MSCI Asia Pacific Index after President Biden said he plans to address shortfalls in chip output that have idled production at auto plants. Global production at Japanese automakers slipped 4.5% in January from last year as a widespread chip shortage forced the industry to cut production. South Korea’s equity benchmark surged 3.5% to lead gains in Asia, while indices in Singapore, Malaysia, Japan, and Taiwan rallied at least 1.5% each. Stocks in New Zealand bucked the trend, sliding 1.2%, after the government said it will require the central bank to take account of rampant house prices when making monetary policy decisions. The Shanghai Composite Index rose 0.6% led by conglomerate stocks.
FIXED INCOME:
Treasuries slid throughout the Asian session as a regional sell off was led by a sharp decline in Australia after the composition of RBA buying disappointed traders. The RBA was walloped by the reflation trade as its biggest bond purchases in 11 months struggled to hold down yields. The US 10-year Treasury yield climbed to the highest in a year, while Japan’s longer-dated benchmarks rose to multiyear records. Fed Chair Jerome Powell said yesterday that he sees the selloff as a “statement of confidence” in the economic outlook. The front-end of the US yield curve remains anchored with Fed funds stuck at a historical low of 0.25% and the closely watched 2/10 curve continues to climb, indicating growth and inflation ahead. 1.48% is key Fibonacci resistance in US 10 year yield. Auction cycle concludes with $62b 7-year note sale at 1pm ET, follows soft 5-year Wednesday which tailed the WI by 0.6bp.
METALS:
Spot Gold fell over 1% as treasury yields remained elevated, with bullion’s safe haven appeal also hit by improving sentiment for a faster global economic recovery. Gold’s drop comes despite a weaker dollar and Federal Reserve Chairman Jerome Powell’s reiteration on Wednesday that monetary policy would be unchanged until the economy gets back to full employment.
Base metals advanced on the recovery optimism, with copper and aluminum both spiking to the highest since 2011. The recent surge in metal prices has stoked fresh speculation about a new commodities super-cycle, driven by tight supplies and strong demand as the world moves to decarbonize.
ENERGY:
Oil held gains after closing at the highest level in more than a year as a slump in US crude production following the cold blast and shrinking European stockpiles tightened the market further. Inventories of US oil have fallen by 40 million barrels over the last three weeks. The futures curve is in a backwardation of almost $6 a barrel for the next 12 months, a structure that indicates scarce supplies.
CURRENCIES:
The dollar index fell to its lowest since early January and dropped to three-year lows against the Australian and Canadian dollars, after dovish signals from the Federal Reserve boosted the reflation trade in currency markets. The Australian dollar, which is considered a liquid proxy for risk appetite, was up 0.4%. SEK and NOK are the best performers in G-10, CHF and JPY lag. Euro-Swiss franc has surged this week, as investors quit the safe-haven franc.
1.1145 is the 200 week moving avg in EURCHF and will likely be key longer term resistance.
TECHNICAL LEVELS: (futures)
| ESH | TYH | April Gold | CLJ | DXH | |
| Resistance | 4000.00 | 138’05 | 1900.0 | 69.59 | 93.250 |
| 3982.00 | 137’15 | 1875/78 | 67.23 | 92.650 | |
| 3960/61 | 137’02 | 1856/58* | 66.60 | 91.415 | |
| 3936.00 | 136’25 | 1835.7 | 65.65 | 90.875 | |
| 3926.00 | 136’01 | 1819/20 | 64.56 | 90.420 | |
| Settlement | 3922.50 | 135’05 | 1797.9 | 63.22 | 90.170 |
| 3885.00 | 134’27 | 1794.0 | 61.80 | 89.685* | |
| 3852/54* | 134’10+ | 1780.5 | 60.58 | 89.165 | |
| 3827.00 | 133’21 | 1754/59 | 59.11 | 88.150* | |
| 3804/05 | 132’26 | 1717.0 | 57.66* | 86.910 | |
| Support | 3760.00 tl* | 132’00 | 1704/05 | 556.21 | 86.100 |
Colors within the report: Green is always the 200 period (day, week). Red is always 21, Blue = 50, Brown = 100 *Stars have added importance
Equity movers in early trading, as of 7:35am ET:
Advancers
- PAND +131.4% (+$33.7); Merck to Buy Pandion Therapeutics
- KOSS +79.9% (+$14.7); Reddit Favorites Soar With Millions of Shares Trading Premarket
- GME +54.9% (+$50.3); GameStop Rises 82% on Germany’s Tradegate
- CCRN +19.4% (+$1.95); Cross Country Health 1Q Revenue Forecast Beats Estimates
- LOTZ +16.8% (+$1.64); Reddit Favorites Soar With Millions of Shares Trading Premarket
- TRUE +16.6% (+$0.84); TrueCar Soars as 4Q Adjusted Ebitda, Outlook Beat Estimates
- ASLN +15.3% (+$0.54)
- NVOS +13.5% (+$0.86)
- TNDM +12.6% (+$11.5); Tandem Diabetes 4Q EPS Beats Estimates
- AMC +11.4% (+$1.04); GameStop Revival Extends as Meme Stock Mania Kicks Up Anew
- MNSO +11.4% (+$3.19); Miniso Announces Results for the Second Quarter
- RVLV +10.8% (+$3.95); Revolve Climbs as Overseas Leads the Recovery Path: Street Wrap
- SELB +9.7% (+$0.40)
- ACH +9.2% (+$1.10)
- NGA +8.6% (+$1.61)
- HGEN +7.7% (+$1.49)
- EXPR +7.7% (+$0.25); Meme Stock Mania / favorite among Reddit r/WallStreetBets users
- REV +7.5% (+$0.87)
- LIZI +7.3% (+$0.73)
Decliners
- PING -12.7% (-$4.11); Ping Slips as Credit Suisse Cuts Citing ‘Too Many Caution Flags’
- W -7.8% (-$20.1); Wayfair 4Q Revenue, Orders Lag Estimates, Shares Fall
- PZZA -7.4% (-$7.64); Papa John’s 4Q U.S. Company-owned Comp Sales Miss Estimates
- TDOC -6.5% (-$16.5); Teladoc Falls Despite 1Q Adjusted Ebitda Forecast Beat
- IFRX -6.3% (-$0.33); InflaRx Falls Postmarket After Offering Shares
- BBY -5.7% (-$6.46); Best Buy Falls After Holiday Sales and 2021 Forecast Disapppoint
- OCGN -5.6% (-$0.50)
- XONE -5.2% (-$2.07)
- PLUG -5.2% (-$2.61); Plug Power 4Q Net Revenue Misses Estimates
- ABUS -5% (-$0.22); Arbutus Biopharma Rated New Hold at Jefferies; PT $5
- HIMS -4.9% (-$0.83)
- BUD -4.9% (-$3.20)
- GBT -4.9% (-$2.39)
- BNGO -4.6% (-$0.51)
- TMST -4.4% (-$0.37)
- DMYI -4.4% (-$0.63)
- TROX -4.2% (-$0.81); Tronox Offering of 19.2m Shares by Holder Prices at $18.25/Share
David Wienke
Cabrera Capital Markets, LLC
