The stock market rally strengthened late in the week, with the S&P 500 topping 4,000 for the first time, the Russell 2000 reclaiming its 50-day line and the Nasdaq trying to do the same. Some tech titans flashed early entries as several more chip stocks broke out. The Biden infrastructure bill provided some support, while the 10-year Treasury yield retreated Thursday from a 14-month high. Steelmaker Cleveland-Cliffs (CLF) surged on bullish guidance, while Micron (MU) rallied on strong earnings and targets. Boeing (BA) won some big 737 Max orders.
Stock Market Rally Broadens
The split stock market rally is looking a little less split. The S&P 500 hit a record high, topping 4000 for the first time. Meanwhile, the Russell 2000 moved back above its 50-day line while the Nasdaq fought to get to that level. The Biden infrastructure plan buoyed the broad market, giving the market-leading chip gear group another boost. More steel stocks broke out, including Cleveland-Cliffs.
Manufacturing Activity Surges
The ISM manufacturing index jumped 3.9 points to 64.7, the best reading since late 1983, as Covid vaccines and the latest $1.9-trillion stimulus propel the U.S. economy on a fast track to recovery. Yet the details of the report also indicate supply constraints and potential price shocks ahead. Manufacturers reported that customer inventories are too low in 15 of 18 industries. The order backlog reading was the highest in records back to 1993. Meanwhile, all 18 industries reported paying higher prices for raw materials.
Meanwhile, initial jobless claims unexpectedly rise to 719,000 in the week of March 27 from 658,000 in the prior week. Still, the four-week average eased to a pandemic-low 719,000. ADP’s early read on March hiring showed the private sector adding 517,000 jobs last month, up from 117,000 in February.
The Labor Department was due to report its March employment report on Friday.
Global Banks Brace For Big Losses
Investment banks Nomura (NMR), Credit Suisse (CS) and possibly others stand to lose billions of dollars as Archegos Capital Management hedge fund was forced to dump shares in recent days to meet margin calls. Nomura and Credit Suisse stocks plunged. Morgan Stanley (MS) and Goldman Sachs (GS) reportedly stemmed losses by quickly offloading Archegos shares. Among the companies affected by the fire sale are ViacomCBS (VIAC) and Discovery Communications (DISCA). Their shares rebounded after crashing last week.
Southwest Buys Boeing 737 Max Jets
Southwest (LUV) confirmed that it would add 100 Boeing (BA) 737 Max 7s to its order. The carrier also converted 70 Max 8 firm orders to Max 7 orders. And it added 155 options for the Max 7 or Max 8 for 2022 through 2029. The changes will give Southwest 349 Max orders and 270 options for Max 7 or Max 8 aircraft for 2021 through 2031. Alaska Air (ALK) confirmed Tuesday it would buy an additional 23 Boeing 737 MAX 9 jets. The orders come as airlines see an uptick in bookings as the Covid-19 vaccine roll out picks up speed. American Airlines (AAL) said it expects to reactivate most of its jets in Q2 to meet demand.
Cleveland-Cliffs Soars On Guidance
Cleveland-Cliffs (CLF) popped after the steelmaker said it sees Q1 adjusted EBITDA of approximately $500 million and Q2 EBITDA of approximately $1.2 billion. That’s above analyst estimates or $388 million in Q1 and $1.03 billion in Q2. The company also sees full-year EBITDA of $3.5 billion, assuming hot rolled steel prices averages $975 per net ton for the remainder of the year. Analysts expect EBITDA of $2.87 billion. President Biden’s $2 trillion infrastructure plan is likely to be bullish for steelmakers. Cleveland-Cliffs surged to a record high Wednesday, while other steel stocks rose sharply, though the sector pulled back Thursday.
Micron Beats Q2 Targets
Memory-chip maker Micron Technology (MU) delivered a beat-and-raise fiscal second-quarter report amid an improving market, especially for DRAM chips. Micron earnings jumped 118% while sales rose 30% to $6.24 billion. For the current Q3, Micron expects EPS to leapt 98% with sales up 34% to $7.1 billion. Meanwhile, Micron and Western Digital (WDC) reportedly are exploring separate bids for Kioxia, which would value the Japanese flash memory-chip maker at about $30 billion.
Micron stock jumped Thursday.
The Micron earnings also is good news for chip-gear makers, which rallied during the week on the Biden infrastructure plan and Taiwan Semiconductor (TSM) announcing big capital spending plans.
Nio, Xpeng Report Strong Sales
China’s Nio (NIO) delivered 7,257 electric vehicles in March, up 373% vs. a year earlier, amid a chip shortage affecting late March production. Sales hit 20,060 in Q1, topping last week’s downwardly revised target of 19,500. XPeng sold 5,102 EVs in March, up 384%, and 13,340 in Q1, up 487%. XPeng will reveal its third EV model in Q2, and already sells an electric sedan and an electric SUV. Warren Buffet-backed BYD (BYDDF) saw net profit leap 162% to $643.75 million in 2020. The China EV and battery maker sold 426,972 vehicles last year, down 7.5%, but rebounding in late 2020.
Tesla was likely to report Q1 deliveries over the long weekend. Analysts expected Tesla (TSLA) to deliver 168,000 EVs.
Shares of Nio, Xpeng, BYD and Tesla rebounded but remain well off prior highs.
Chewy Jumps On First Profit
The online provider of pet food and products reported a first-ever adjusted profit of 5 cents a share vs. views for a 10-cent loss. Revenue soared 51% to $1.96 billion. Chewy.com (CHWY) ended the quarter with 19.2 million users, up 43% from a year earlier.
Lululemon Beats, Cautious About 2021
Workout apparel maker Lululemon (LULU) reported Q4 EPS rose 13% as revenue grew 24% to $1.73 billion, both beating. Direct-to-consumer net revenue soared 94%. Same-store sales grew 21%. But adjusted operating margin decreased 290 basis points to 26.9%. It guided Q1 EPS of 86-90 cents, above consensus for 84 cents, on revenue of $1.1 billion-$1.13 billion, above views for $1.01 billion. But it sees full-year EPS of $6.30-$6.45, below estimates for $6.65, on revenue of $5.55 billion-$5.65 billion, above views for $5.41 billion.
News In Brief
BioNTech (BNTX) reported Q4 revenue of 345.4 million euros, or 0$404.6 million. The German biotech also guided to 9.8 billion euros, or about $11.5 billion, in Covid-19 vaccine-related revenue based on existing contracts for 1.4 billion doses. BioNTech and partner Pfizer (PFE) raised their expected 2021 vaccine production forecast.
Romeo Power (RMO) reported rising Q4 revenue in its first report since coming public, but the battery play guided sharply lower on 2021 revenue, citing a battery cell shortage. Shares tumbled.
PayPal (PYPL) launched its online checkout service for consumers that own cryptocurrencies. PayPal said the service is now available at “millions of global online businesses.” If customers hold Bitcoin or other cryptocurrencies in their PayPal digital wallets, they’ll be able to convert them into “fiat currencies” at checkout. Visa (V) will allow the use of the cryptocurrency USD Coin, tied to the U.S. dollar, to settle transactions on its payment network.
Academy Sports & Outdoor (ASO) reported EPS surged 335% with sales up 17% to $1.6 billion. It’s the third straight quarter of triple-digit earnings growth for the sporting goods retailer since it went public in October.
Walgreens Boots Alliance (WBA) reported better-than-expected fiscal Q2 earnings, though revenue missed. The drugstore chain raised its full-year profit forecast. Shares jumped.
Conn’s (CONN), a retailer that sells furniture, electronics and appliances and offers consumer credit, reported Q4 earnings that soundly beat estimates, helped by a lower provision for bad debts and a stimulus-related tax benefit. Revenue missed. Conn’s said its current fiscal year started strongly, with positive same-store sales.
Dave & Buster’s (PLAY) reported fourth-quarter results that weren’t as bad as expected, though still a loss and sharp revenue drop vs. a year earlier. During the first eight weeks of Q1, sales at fully running comparable stores marked the “strongest performance” since the coronavirus pandemic started, the gaming and restaurant chain said.
CarMax (KMX) earned $1.27 a share, down 2% but beating by three cents. Revenue also beat, rising 4% to $5.16 billion. Higher pricing offset a 2% drop in same-store sales. The nation’s No. 1 used-car retailer will buy the rest of car info site Edmunds for $404 million. CarMax stock fell sharply, below a recent buy point.
Canoo (GOEV) indicated it ended a deal to give Hyundai and affiliate Kia access to the startup’s modular EV platform after reporting steep Q4 operating losses though they could narrow in Q1. Earlier, Canoo also announced management changes, including a new CFO. Shares plunged.
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