Wall Street Gains as Crude Price Surge, Strong Economic Data Prompt Broad Rally

All three major U.S. stock indexes gathered strength as the session progressed, with economically sensitive cyclicals, smallcaps and transportation stocks leading the charge.

While value stocks initially held the advantage, the risk-on sentiment gained momentum through the afternoon, broadening to include growth stocks.

“Today is the first time in a while when both growth and value stocks are doing pretty well. It’s been either or for much of the last few weeks and today it’s both,” said Chuck Carlson, chief executive of Horizon Investment Services in Hammond, Indiana. “Breadth matters, and that’s something investors like to see.”

A host of economic data showed hints of waning inflation and an ongoing return to economic normalcy, even as supply constraints, complicated by hurricane Ida, hindered factory output.

Import prices posted their first monthly decline since October 2020, in the latest sign that the wave of price spikes has crested, further supporting the Federal Reserve’s position that current inflationary pressures are transitory.

Next week, the Federal Open Markets Committee’s two-day monetary policy meeting will be closely parsed for signals as to when the central bank will begin to taper its asset purchases.

The graphic below shows major indicators against the Fed’s average annual 2% inflation target.

The Dow Jones Industrial Average rose 236.82 points, or 0.68%, to 34,814.39; the S&P 500 gained 37.65 points, or 0.85%, at 4,480.7; and the Nasdaq Composite added 123.77 points, or 0.82%, at 15,161.53.

Among the 11 major sectors in the S&P 500, all but utilities gained ground. Energy was by far the biggest gainer, benefiting from a jump in crude prices driven by a drawdown in U.S. stocks.

U.S.-listed Chinese stocks extended recent losses, as weak retail sales data pointed to a possible economic slowdown in the mainland, while Beijing’s regulatory overhaul of Macau’s casino industry further dampened appetite for Chinese stocks.

This follows a series of regulatory moves by China against major technology firms, which has wiped out billions in market value this year.

“It would be tough to buy any Chinese stocks,” Carlson said. “From an investor standpoint you don’t know what sector is next.”

“I don’t think the situation is going to get better any time soon and it’s probably going to spread,” he added.

U.S.-based casino operators Las Vegas Sands Corp, Wynn Resorts Ltd and MGM Resorts International slid between 1.7% and 6.3%.

Apple Inc snapped a decline over recent sessions following an adverse court ruling on its business practices, and a lukewarm response to its event on Tuesday where it unveiled updates to its iPhone and other gadgets. Its shares gained 0.6%.

Lending platform GreenSky Inc shot up 53.2% after Goldman Sachs Group Inc said it would buy the company in an all-stock deal valued at $2.24 billion.

Advancing issues outnumbered declining ones on the NYSE by a 2.15-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and three new lows; the Nasdaq Composite recorded 55 new highs and 106 new lows.

(Reporting by Stephen Culp; additional reporting by Ambar Warrick and Sruthi Shankar in Bengaluru; Editing by Richard Chang)

Las Vegas Sands Could Break 11-Year Support

Las Vegas Sands Corp. (LVS) is trading lower by nearly 5% on Wednesday, within spitting distance of 2020’s pandemic low, after China proposed tighter regulation of Macao casinos. Rival Wynn Resorts Ltd. (WYNN) is dropping like a rock as well, hitting the lowest low since November 2020. Both stocks have underperformed major indices by a country mile so far in 2021, trading deeply in negative returns, fueled by ongoing weakness in U.S. and Macao gaming operations.

Heavy-Handed Regulation Ahead

China proposes to remove the current sub-concession system, appoint Communist party delegates to oversee gaming operators, and compose a new illegal deposit crime to address money laundering. That nation’s attacks against the excesses of capitalism have taken a darker tone this year, punctuated by severe gaming restrictions for minors and, as colorfully scribed by Forbes, the “protracted dismemberment of billionaire Jack Ma”.

Macao is still getting hit hard by the pandemic, with border restrictions limiting traffic. As Las Vegas Sands noted in last week’s press release, “travel restrictions and the evolving COVID-19 situation in Macao and mainland China continue to limit visitation and hinder (majority-owned) Sands China Ltd. current financial performance. The COVID-19 pandemic has materially adversely affected the number of visitors to SCL’s facilities and disrupted SCL’s operations, and SCL expects this adverse impact to continue until the COVID-19 pandemic is contained.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly upbeat, given the exceptionally poor performance, with an ‘Overweight’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’ and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions, even though Sands has dropped nearly 53% in the last six months. Price targets currently range from a low of $50 to a Street-high $80 while the stock will open Wednesday’s session a jaw-dropping $13 below the low target.

Las Vegas Sands topped out 60 points under 2007’s all-time high in 2014 and entered a sideways pattern that briefly undercut long-term support below 35 during 2020’s pandemic decline. The subsequent uptick carved the fourth lower high in seven years in March 2021, giving way to a steep decline that’s now stretched within four points of last year’s low.  This is a dangerous set-up due to repeated action near this level since 2011, raising odds for a secular breakdown.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Las Vegas Sands at Cusp of Industry Revival

Las Vegas Sands Corp. (LVS) reports Q1 2021 earnings after Wednesday’s closing bell, offering a glimpse into the gaming industry’s ongoing recovery from the COVID-19 pandemic. Analysts are looking for the old school operator to lose $0.22 per-share on $1.37 billion in revenue, worse than the $0.02 loss reported in the same quarter last year. The stock ran in place after missing Q4 2020 top and bottom line estimates in January and is now trading close to a 14-month high.

Leaving Las Vegas

The Nevada Gaming Board reported that statewide ‘gaming win’ fell 25.9% year-over-year in February, with a 41.5% loss on the Las Vegas Strip. The March report at the end of this month should offer greater transparency into current conditions because it should compare favorably to March 2020, when the industry came to a grinding halt. Even so, challenges remain, with Nevada casinos allowing just 50% of capacity until final restrictions are lifted in June.

This should be Las Vegas Sands’ last full quarter with Nevada exposure, despite the company’s name, because it sold The Venetian and Sands Expo and Convention Center in March to focus on Asian operations. Macao is now waking up from the dead at a rapid pace, with the local Gaming Inspection and Coordination Bureau reporting that March generated the highest monthly revenue since January 2020. Even so, first quarter receipts were still down 22.5% year-over-year.

Wall Street and Technical Outlook

The property sale has provoked a mixed reaction on Wall Street, with consensus dropping to an ‘Overweight’ rating based upon 8 ‘Buy’, 1 ‘Overweight’, and 7 ‘Hold’ recommendations. Price targets currently range from a low of $53.50 to a Street-high $86.50 while the stock opened Wednesday’s session $10 below the median $69.50 target. This weak placement suggests that Main Street has reservations about the transaction as well.

Las Vegas Sands topped out in the 80s in 2014 and entered a decline that hit a 10-year low in the 30s in March 2020. The stock recouped about 80% of the pandemic decline into March 2021 but hasn’t ended the string of lower highs in place for the last three years, indicating the downtrend is fully intact. However, accumulation readings are telling a more bullish tale, lifting to the highest highs since 2011.  Given the conflict, mixed action into the third quarter looks the path of least resistance.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Wynn Resorts Could Test 1st Quarter Low

Casino and resort operator Wynn Resorts Inc. (WYNN) fell to a 7-week low on Monday morning, with sector sentiment deteriorating at a rapid pace following months of weak visitation numbers in Macao and Las Vegas. A potential money laundering scandal at rival Las Vegas Sands Inc. (LVS) is adding to selling pressure, warning WYNN shareholders the stock could eventually test the first quarter’s multiyear low in the mid-30s.

Industry Slump Undermining Wynn Resorts Revenue

The Macao Gaming Commission and Coordination Bureau recently reported that August gross revenue fell an astounding 94.5% year-over-year while the Nevada Gaming Board’s latest release noted the July Las Vegas Strip gaming win rate dropped 39.9 % year-over-year. Domestic and international travel restrictions and COVID fears are driving the bearish metrics, ahead of a winter that could ignite a second pandemic wave.

Goldman Sachs analyst Stephen Grambling downgraded Wynn Resorts from ‘Buy’ to ‘Neutral’ earlier this month, removing the stock from their ‘Conviction List’ and dropping the price target to $95. Grambling justified the bearish call with troubling statistics about Macao operations, stating “Wynn holds outsized exposure to Wynn Macao and, after revising our forecasts to embed softer VIP in 2021, we find limited upside, given the stock’s recent run.”

Wall Street And Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’ rating based upon 9 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions and move to the sidelines at this time. Price targets currently range from a low of $72 to a street-high $120 while the stock is now trading on top of the low target. These predictions look way too high but the humble placement may limit downside, at least in the short-term.

Technically speaking, Wynn Resorts has been stuck in a downtrend since posting an all-time high near 250 in 2014.  The stock has lost substantial value since a recovery rally topped out near 200 in 2018, with the downside accelerating to an 8-year low in the first quarter of 2020. The bounce since that time has failed to remount the broken 200-month moving average, raising odds the decline will eventually test and possibly break the March low in the mid-30s.

For a look at all of today’s economic events, check out our economic calendar.

Las Vegas Sands Looks Overpriced Ahead Of Earnings

Macao and Las Vegas resort operator Las Vegas Sands Inc. (LVS) reports Q2 2020 earnings after the U.S. closing bell on Wednesday, with analysts expecting a $0.73 loss on $549.0 million in revenue. That would mark a stomach-churning 80% year-over-year decline as a result of historic headwinds, driven by the worldwide pandemic. Companies with Macao exposure have been hit harder than domestic-only operations so far in 2020 because the Wuhan outbreak impacted the sector well before COVID-19 struck the United States and Europe.

Las Vegas Sands Vulnerable To Downside Surprise

65% of company revenue is booked through Macao while Las Vegas operations comprise just 12% of revenues. Both venues have reopened but Las Vegas traffic has been hurt badly by the resurgence in Nevada COVID-19 infections, with daily positives hitting an all-time high just last week. Given the adverse environment, current consensus may be understating the negative impact to second quarter earnings, raising the potential for a downside surprise.

Las Vegas Sands CEO Sheldon G. Adelson commented about reopening efforts following shutdowns in Macao, Las Vegas, and other key properties, noting “I remain extremely bullish about the future of our company and its growth prospects. We operate best-in-class properties in the leading markets in our industry and we are currently executing significant investment programs in both Macao and Singapore to create meaningful new growth from our existing portfolio”.

Wall Street And Technical Outlook

Wall Street currently rates Las Vegas Sands as a ‘Strong Buy’, based upon 9 ‘Buy’ and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close out positions at this time. Price targets range from a low of $48 to a street high $67 while the stock is now trading within a few cents of the low target. All in all, these ratings look over-optimistic, failing to account for growing infections and the likelihood of a second wave in China this winter.

The stock topped out in 2018 at a 4-year high in the 80s and sold off into the upper 40s in 2019. It broke that trading floor in the first quarter of 2020 and dropped to the lowest low since 2010, highlighting extensive technical damage. A bounce into June stalled at the broken 2019 support, yielding nearly 7 weeks of sideways action that’s failed to mount the formidable barrier. As a result, it’s the price level to watch if tonight’s earnings generate a ‘buy-the-news’ reaction.