* Major U.S. indexes fall, Nasdaq off >1%; Russell 2000 off
>2%
* Energy weakest major S&P 500 sector; utilities lead
gainers
* Dollar edges up; crude slumps, gold rises
* U.S. 10-Year Treasury Yield ~1.57%
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FUN WITH CHARTS: EATING IN VS DINING OUT (1300 EDT/1700 GMT)
More than a year after the rapid spread of COVID-19
shuttered restaurants and forced many Americans to learn to
appreciate the joys of cooking, vaccine deployment and lifted
restrictions are making a meal at a cozy restaurant seem like
less of a death wish.
As local economies re-open, pent-up demand for a table for
two will likely be a boon to the hard-hit restaurant sector, as
well as other customer-facing services industries that suffered
the brunt of the shutdowns.
For Reuters' interactive graphic on world vaccine rollout
and access, click here https://graphics.reuters.com/world-coronavirus-tracker-and-maps/vaccination-rollout-and-access.
But while grocery stores, which had trouble keeping up with
demand even amid social distancing protocols, could see sales
cool off, it remains to be seen whether the
work-from-home/cook-at-home paradigm is here to stay.
The current earnings season is likely to provide the first
glimpse at how these two related - yet rival - sectors will
weather the shift as consumers click their Open Table app
instead of Fresh Direct.
"With regard to the top line, we'll be watching average
restaurant sales dollar volumes relative to 2019 levels to gauge
the pace of recovery—rather than the significant upswing in late
March/April comps—while also keeping a close eye on the cost
environment," writes Christopher Carril, analyst at RBC Capital
Markets.
The chart below shows price growth, demand growth and stock
performance of eating in vs. dining out:
The consumer price index (CPI) shows "food at home" prices
were initially far more volatile than "food away from home,"
although both have calmed down since November, when the FDA gave
emergency approval to COVID-19 vaccines.
Retail receipts, unsurprisingly, show demand for groceries
remains above pre-pandemic levels. But retail sales for food and
beverage services is steadily recovering from 2020's
February-April plunge, and in March of this year was just 5.1%
below where they were at the beginning of last year.
As for the more forward-looking stock market, while
investors appear to be betting on a restaurant recovery, they
haven't turned against groceries. The S&P 1500 Restaurants index
is neck-and-neck with the S&P 1500 Food Retail
index, with both up just over 30% since January 1,
2020.
(Stephen Culp)
*****
APPLE VS THE NASDAQ 100: STATUS STILL BRUISED (1215 EDT/1615
GMT)
Apple has seen a strong rally off its early-March
low. The stock jumped nearly 16% into Monday's close, putting it
around 7% from of its $145.09 January record intraday high.
That said, the stock is down around 1% so far on Tuesday
ahead of a virtual event at 1 PM (1300 EDT) today. The company
is expected to unveil a new podcast subscription service and
finally may show off tiny tags meant to locate lost items. The
event will also likely feature new iPads and Mac computers.
Of note, Apple peaked in relative strength vs the Nasdaq 100
in early-September last year. At that time, the AAPL/NDX
ratio flirted with a more than 30-year resistance line, before
ultimately failing:
The ratio managed to return to this line again in
late-January of this year. However, it once again failed
, and subsequently, in mid-February, broke below its
200-day moving average (DMA) for the first time since July 2019,
further bruising Apple's status vs the index.
Despite the stock's recent rally, the ratio has yet to
reclaim the long-term moving average. And with Tuesday's AAPL
weakness, the ratio is ticking down slightly.
In any event, if Apple is to continue its relative recovery,
the 200-DMA may present a significant hurdle.
(Terence Gabriel)
*****
CLOSING SNAPSHOT: EUROPE'S WORST DAY OF THE YEAR (1200
EDT/1600 GMT)
European shares slipped 2% from record highs and had their
worst day since December 21 as COVID cases rose across Asia.
Worries that a possible reintroduction of COVID-19 emergency
measures in Japan and record daily number of COVID deaths in
India weighted on sentiment, pushing the pan-European index
down 2%.
Banks, travel and leisure shares fell more
and 3.6%. While basic material and oil and gas
indexes also fell more than 3%.
Tobacco companies also weighed on Europe following a report
the Biden administration was considering requiring tobacco
companies to lower the nicotine levels in all cigarettes sold in
the United States.
(Joice Alves)
*****
IPOS WADE INTO CHOPPY WATERS (1100 EDT/1500 GMT)
Another wave of IPOs are on tap as 15 hopefuls look to go
public over the next two weeks even as investors have become
more cautious.
The average return of 2021's crop of more than 100
debutantes now stands at about 5%, far below the roughly 50%
average gain for last year's vintage, per Reuters calculation.
This as the S&P 500 and Nasdaq have advanced
about 10% and 7%, respectively, so far this year.
Amid last week's mixed bag of outcomes, KKR-backed
mobile app and gaming firm AppLovin Corp was a notable
flop as its shares tumbled out of the gate. APP shares are up
more than 2% on Monday, but remain 25% below their IPO price
.
Conversely, SPAC (special-purpose acquisition company) new
issuance has slowed to a trickle recently as the U.S. SEC has
issued accounting guidance and stepped up scrutiny on
disclosures, fees, conflicts and sponsor compensation.
. Still, 308 SPACs have already raised $100 billion
year-to-date vs 248 that raised $83 billion all of last year,
according to SPAC Research.
Below is the near-term IPO calendar, by expected debut date
and approximate deal size (assuming mid-point pricing):
Apr 21:
DoubleVerify (digital ad software) (~$340M)
NeuroPace (medical devices)(~$85M)
Skywater Technology (semiconductors) (~$75M)
UiPath (automation software) (~$1.3B)
Apr 22:
KnowBe4 (cybersecurity) (~$200M)
Zymergen (biochemistry) (~$400M)
Apr 23:
Agiliti Inc (medical equip svcs) (~$500M)
Impel NeuroPharma (biotech) (~$80M)
Latham Group (swimming pools) (~$400M)
Treace Medical Concepts (medical devices) (~$150M)
Rain Therapeutics (biotech) (~$125M)
Apr 28:
FTC Solar (solar equipment) (~$350M)
Aveanna Healthcare (healthcare svcs) (~$650M)
Apr 29:
Endeavor Group (UFC owner) (~$500M)
Fortegra Group (insurance) (~$130M)
(Lance Tupper)
*****
AS DEMAND AND ACTIVITY CLIMB, WILL OIL KEEP PACE? (1002
EDT/1402 GMT)
Both WTI <CLcv1) and Brent have climbed roughly 30%
this year, as investors anticipated vaccine rollouts and
economic reopenings will help lift crude demand, but Wells Fargo
Investment Institute (WFII) investment strategy analyst Austin
Pickle looks at how much more room oil has to run.
Pickle sees a similar result for the major components of oil
demand - gasoline, distillate and jet fuel. Looking at the
four-week average of components and comparing it to the
2015-2019 period shows gasoline and distillate demand around 90%
of normal levels, with jet fuel at around 70%.
Pickle also looked at U.S. activity levels at airport
security checkpoints, restaurant diners and overall population
mobility. To him, these indicate the U.S. has made up much of
the ground lost, but is "not quite back to normal."
But as oil prices recently reached levels seen just before
the pandemic, Pickle does not think they will continue to climb
even with activity ramping up as the pandemic fades.
Pickle notes that OPEC's spare capacity reached
"unprecedented extremes in 2020 and they are still a long ways
off from bringing that level down," and as such he expects the
crude price to have a hard time sustaining much higher levels.
And while OPEC and other producers have been reluctant to
release more crude, Pickle expects that hesitation will fade as
the year moves on and economic growth along with oil demand
prove to be more resilient, bringing about a fade in prices by
year-end.
(Chuck Mikolajczak)
*****
S&P 500 DEFENSIVE SECTORS: REARING THEIR UGLY HEAD? (0900
EDT/1300 GMT)
The S&P 500 index hit new record highs last week.
However, a sudden relative strength shift which has the
benchmark index underperforming a composite of its defensive
sectors suggests the market may be in the early stages of a
surprise "risk-off" phase:
Indeed, the ratio of the SPX to a composite of its defensive
sectors: real estate, staples, and utilities
, on a weekly basis, spiked to an all-time high of 3.24
in late February.
However, since then, and despite the SPX having continued to
advance, the ratio put in a lower high earlier this month.
Of note, looking back to late 2018, after hitting fresh
record highs, the S&P 500 has suffered four sharp declines: two
modest, averaging just over 7%, and two major averaging just
about 28%, that were preceded by SPX/defensive composite ratio
divergence.
Therefore, unless the SPX makes new highs and the ratio
surpasses its late-February peak, the market may be vulnerable,
given that it may actually be sapped of its animal spirits.
(Terence Gabriel)
*****
FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT
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(Terence Gabriel and Lance Tupper are Reuters market analysts.
The views expressed are their own)