Friday Market Roundup, Lumber is up 193% y/y, Morgan Stanley Reports Strong Trading Profits, U.S. Consumer Sentiment Report for March and NFL Chooses Caesars, FanDuel and DraftKings for First Sports Betting Partnerships.
1. Friday Market Roundup
Markets are trading mixed Friday with the DJIA up 0.37% just above $34,000, S&P 500 was Flat at $4170, the Nasdaq 100 traded down -0.2% and the Russell 2000 was down -0.3%. Stocks have performed strongly in April, with the S&P 500 gaining over 5% and Nasdaq 100 up near 7%. Another batch of earnings from the financial sector is in focus this morning from Morgan Stanley, PNC Financial, Citizens Financial, and Ally Financial – all came in above expectations in a week that we’ve seen most companies that have reported earnings to bet top and bottom-line expectations. The 10-yr bond yield fell on Thursday to 1.53% and is rebounding slightly on Friday to 1.57% – down from its March high of 1.75%. In other markets, Crude was flat at $63/bbl, Gold continued higher up +0.7% at $1780/oz, The US Dollar was down -0.1% testing support, and Bitcoin fell -3% back to $61000/coin. In economic data, Housing Starts for March were up +19.4% for the month, after weather impacted the space in February, Building permits rose +2.7%, and Consumer Sentiment showed a reading of 86.5, a modest rise from the previous month’s reading of 84.9, but below expectations.
2. Lumber is up 193% Y/Y
Lumber has surged to a record high price of $1,048 per thousand board feet, compared to just $348 for the same amount just a year ago. Analysts have said that the average price for that same unit hovered around $380 at almost any point over the last five years. Lumber is the latest product to be impacted by the pandemics supply chain problems, which have contributed to price surges up three times as much, causing builders and contractors to be left waiting. President of Sharbell Development, Tom Troy, cited that he’s lived through a few other cycles of up and down supply issues and he hasn’t seen anything like this in over 40 years. The lumber labor market continues to be in complete chaos as many sawmills have been forced to halt or completely stop production over the last year due to Covid-19 and beyond just the supply issues, producers never saw the rise in demand that would shortly follow. Even while lumber prices have surged, home building has remained strong, as seen in today’s housing data.
3. Morgan Stanley Strong Trading Profits
Morgan Stanly’s stock was slightly down in early trading hours on Friday after reporting earnings of $2.22 EPS and revenue of $16.1B, beating the consensus earnings estimates of $1.72 EPS and revenue of $13.4B. The company also saw revenue growth of 38.6% on a year-over-year basis. The banking firm also said that the wealth management revenue in the quarter jumped around 47% to $5.96B, which matched analysts’ expectations. CEO James Gorman announced $20B in deals last year, marking the industry’s most aggressive takeovers since the 2008 financial crisis. Gorman cited that the firm delivered record results, saying they closed the acquisition of Eaton Vance which takes Investment Management to over $1.4T of assets as Wealth Management has brought in record flows of $105B. Revenue from merger’s and acquisitions in their investment banking arm, along with increased trading profit particularly on their fixed income trading desks, helped Morgan Stanley this quarter, but it wasn’t enough for traders to buy up the report after the stock has gained +18% YTD.
4. U.S. Consumer Sentiment Report for March
The U.S. Consumer Sentiment report was released on Friday and showed that U.S. consumer sentiment improved in April following another round of stimulus help and as job growth continues to accelerate. Inflation is also expected to continue to surge, as projections have it reaching its highest point in 9 years. The University of Michigan preliminary sentiment index went up from 84.9 to 86.5 in March, data showed in Friday’s release, below the consensus expectations, but it remains at a pandemic high. Consumers are more optimistic now as the economic recovery continues on while Consumers expect inflation to stay on the rise, expecting it to rise 3.7% over the next calendar year, the highest rise for inflation since 2012. The Director of the survey, Richard Curtin cited that fewer consumers mentioned the appeal of low prices and much more justified buying based on improved job and income prospects.
5. NFL Chooses Caesars, FanDuel and DraftKings for First Sports Betting Partnerships
The NFL is officially dipping jumping in the sports gambling world, as the league announced partnerships with top sports betting companies such as Caesars, FanDuel, and DraftKings. The deal allows sports betting firms to use NFL products and property and use its brand for betting promotions. The betting companies will also be allowed to use material from the NFL as the two will use a content-sharing model that will include material such as NFL highlights and Next Gen Stats data, which will help them set and adjust betting lines. The terms of the deal were not announced, but people close with the situation have said the terms include a five-year pact that could be worth just under $1B combined. This won’t be the only deal the NFL strikes with gambling-type companies, as the league begins to finally start accepting sports betting and another wave of sports betting partnerships could be right around the corner. Fantasy football and gambling revenues are expected to rise over the next several years as many states have started to allow online gambling. The deal with the NFL is a big one for companies who are trying to corner that marketplace.