TheChek News Flow

Closing Stock Market Summary

The S&P 500 (+1.0%), Dow Jones Industrial Average (+1.0%), and Nasdaq Composite (+1.0%) each closed higher by 1.0% on Wednesday, as investors digested some less-dovish Fed news reasonably well. The Russell 2000 outperformed with a 1.5% gain.  

Six of the 11 S&P 500 sectors rose at least 1.0%, including the energy sector (+3.2%) with a 3% gain and the information technology sector (+1.4%) with an influential 1.4% gain. The utilities (-0.1%) and communication services (-0.01%) sectors were the only sectors that closed lower.  

Most of these gains were registered before the FOMC statement was released at 2:00 p.m. ET amid easing Evergrande concerns and dovish-oriented expectations for the Fed. 

The FOMC left the target range for the fed funds rate unchanged at 0.00-0.25% and said tapering the rate of asset purchases may soon be warranted if progress on the economy continues broadly as expected. Interestingly, the Fed's median estimate for a rate hike moved up to 2022, versus a prior median estimate of no change through 2022.

Fed Chair Powell suggested that a decent September employment report would be enough for him to think tapering could start in November, which would then conclude around the middle of next year. Separately, Mr. Powell relegated Evergrande to a China-specific issue and urged Congress to raise the debt ceiling to avoid risking severe damage to the economy and financial markets. 

Aside from the interest-rate projection, and acknowledging that inflation pressures could remain elevated longer than anticipated, there weren't that many big surprises today. There was the typical post-FOMC volatility, but the market seemed to appreciate the guidance from the Fed chair regarding a taper timeline.

Shorter-dated Treasuries saw increased selling pressure following the policy directive. The 2-yr yield increased three basis points to 0.24% while the 10-yr yield increased one basis point to 1.34%. The U.S. Dollar Index increased 0.3% to 93.43. WTI crude futures increased 2.5%, or $1.75, to $72.26/bbl.

In the corporate space, Facebook (FB 343.21, -14.27, -4.0%), Adobe (ADBE 626.08, -19.81, -3.1%), and FedEx (FDX 229.08, -22.99, -9.1%) were notable laggards today.

Facebook commented on IOS-related headwinds and said it's been underreporting ad performance by about 15% for web conversions on IOS due to privacy changes. Adobe fell despite beating EPS estimates and issuing upside Q4 guidance. FedEx missed EPS estimates and lowered its FY22 EPS guidance.

Reviewing Wednesday's economic data:

• Existing home sales decreased 2.0% m/m in August to a seasonally adjusted annual rate of 5.88 million (consensus 5.86 million) from an upwardly revised 6.00 million (from 5.99 million) in July. Total sales in August were down 1.5% from a year ago.
  • In economic data:
    • The key takeaway from the report is that the supply of existing homes for sale is tight, particularly at more affordable price points. That is driving up the pace of price increases well beyond the pace of income growth, which is creating affordability pressures for prospective buyers and crimping overall sales activity.
• The weekly MBA Mortgage Applications Index rose 4.9% following a 0.3% increase in the prior week.

Looking ahead, investors will receive weekly Initial and Continuing Claims, the Conference Board's Leading Economic Index for August, and the preliminary Markit Manufacturing/Services PMIs for September on Thursday.

• S&P 500 +17.0% YTD
• Nasdaq Composite +15.6% YTD
• Dow Jones Industrial Average +11.9% YTD
• Russell 2000 +12.3% YTD

After Hours Summary: BB +7%, KBH +0.5% higher on earnings; SCS -3.7% falls on earnings; EAR falls -51.1% as it discloses criminal investigation by DOJ

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: BB +7% (also COO to step down), FUL +2.6%, KBH +0.5%

Companies trading higher in after hours in reaction to news: ARD +2.1% (declares special cash dividend of $1.25/sh), WLTW +0.7% (increases share buyback authorization by $4 bln), CHPT +0.7% (WEX and CHPT announce plans to expand relationship to ease integration of EVs into corporate fleets), FB +0.6% (CTO Mike Schroepfer to step down), YUMC +0.3% (outlines strategy; accelerating store network expansion to reach 20,000 stores; plans to accelerate the expansion of Lavazza cafés in China), VTNR +0.2% (deal to acquire Mobile refinery is currently expected to close during 1Q22), HEP +0.1% (HEP and HFC disclose receipt of request for additional information from the FTC in connection with Sinclair transaction)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SCS -3.7%

Companies trading lower in after hours in reaction to news: EAR -51.1% (discloses criminal investigation by DOJ related to insurance reimbursement claims; withdraws guidance), SYBX -8.9% (stock offering), GRIN -2.7% (stock offering), REXR -2.6% (stock offering), AXNX -2.6% (provides additional update on inter partes review proceedings), FEYE -2.2% (to change name and ticker to Mandiant (MNDT)), GENI -2.1% (stock offering), MGM -0.4% (weighing options to control BetMGM in light of recent Entain buyout offer, according to Bloomberg), CTOS -0.3% (stock offering), ARCT -0.1% (CEO met with President of Vietnam and CEO of Vingroup to discuss ongoing collaboration for supply of COVID-19 vaccines), HFC -0.1% (HEP and HFC disclose receipt of request for additional information from the FTC in connection with Sinclair transaction)

Early premarket gappers

• Gapping up:
  • SFIX +15.6%, BLUE +5.6%, ENLV +5%, RKLB +4.9%, AMWL +4.5%, XAIR +2.7%, VALE +2.6%, CRVS +2.1%, SWN +1.9%, EQR +1.6%, JBLU +1.6%, TUYA +1.6%, JPM +0.9%, RDN +0.6%, ETR +0.6%, MA +0.5%
• Gapping down:
  • SMMT -19.8%, LPTX -12%, ABEO -5.8%, FDX -5.7%, NOTV -5.1%, BDSI -3.8%, TIXT -3.7%, ADBE -3.3%, H -3%, INNV -3%, JCOM -2.9%, SAFE -2.7%, INCY -2.5%, APTS -2.3%, PLAY -1.4%, CF -1.4%, WMG -1.2%, VTNR -1.2%

Gapping up
In reaction to earnings/guidance:

• SFIX +12.2% (also launches Stitch Fix Freestyle) GIS +2.6% GDEV +1.8% TUYA +1.6% BDSI +1.3% (guides Q3 revs below consensus)

Other news:

• ELMS +6.4% (has received a binding purchase order for 1000 units of its Urban Delivery vehicle from its strategic distribution partner Randy Marion Automotive Group)
• RKLB +4.6% (signs dedicated launch contract with Astroscale Japan)
• BLUE +3.9% (submits BLA to the FDA for beti-cel gene therapy)
• ENLV +3.8% (doses first patient in placebo-controlled Phase IIb Clinical Trial of Allocetra in severe and critical COVID-19 patients with ARDS)
• RYTM +3.7% (receives Marketing Authorization for IMCIVREE in Great Britain)
• ARCT +3.3% (receives approval from Vietnam Ministry of Health to proceed into Phase 2 and Phase 3a for ARCT-154)
• AMAL +2.9% (acquires Amalgamated Bank of Chicago)
• VALE +2.3% (appoints Gustavo Pimenta as Executive Vice President of Finance and Investor Relations)
• SAH +2% (adds $3.2 billion in annualized revenues with acquisition of RFJ Auto Partners)
• EQR +1.6% (provides operating update)
• SWN +1.3% (KMI and SWN announce responsibly sourced natural gas agreement)
• BSN +1.3% (merger partner Vertical Aerospace announces Marubeni Corporation's pre-order option for up to 200 aircraft and signs Mou to explore the introduction of eVTOL aircraft in Japan)
• AMWL +1.2% (names new CFO)
• KMI +1.1% (KMI and SWN announce responsibly sourced natural gas agreement)
• JPM +1% (increases dividend)

Analyst comments:

• CDTX +6.1% (upgraded to Strong Buy from Buy at WBB Securities)
• PMVP +5.5% (upgraded to Buy from Neutral at Goldman)
• TECK +3.9% (upgraded to Outperform from Market Perform at BMO Capital Markets)
• AMBA +3.3% (upgraded to Overweight from Sector Weight at KeyBanc Capital Markets)
• PEBO +1.7% (upgraded to Overweight from Neutral at Piper Sandler)
• SPG +1.4% (upgraded to Buy from Hold at Argus)
• ACN +1.1% (upgraded to Buy from Neutral at MoffettNathanson)