* Dow, S&P 500, Nasdaq up >2%; smallcaps, transports ahead
* Every S&P sector green; financials up most
* Euro STOXX 600 index up ~1.8%
* Dlr up, crude, gold fall; U.S. 10-Yr Treasury yield ~1.45%
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CRUISE LINER CAPITAL RAISES FLOOD THE ZONE (1320 EST/1820 GMT)
Cruise ship operators are quickly revisiting the capital markets to boost liquidity as investors bet on a rebound from the COVID-19 pandemic.
Early Monday, Royal Caribbean Cruises Ltd raised about $1.54 billion for general corporate purposes after pricing its equity offering at $91 per share. The capital raise came a week after RCL recorded a 30% increase in new bookings since the beginning of the year when compared to November and December.
Cruise operator stocks were punished in 2020 as most trips were canceled due to travel restrictions and the companies were forced to raise cash to bolster their balance sheets to help weather the pandemic.
On the heels of RCL's encouraging report last week, larger rival Carnival Corp priced a $1 billion stock deal.
And joining the ride, Norwegian Cruise Line Holdings early Monday launched $1.1 billion offerings of senior notes to fully repay two of its credit facilities, with the remainder of net proceeds targeted for general corporate purposes.
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In Monday afternoon trading, RCL shares were down 3.5% and CCL shares were off 1.4%, while NCLH shares were up 0.1%. The trio of stocks was up between 16%-22% to start 2021.
(Lance Tupper)
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GAMESTOP AND OTHER REDDIT FAVORITES MAKE FRESH RALLY (1250 EST/1750 GMT)
Shares of GameStop are making a fresh push on Monday, up 7% at $109 as commmenters on Reddit's Wallstreetbets hype the videogame retailer following a volatile surge and selloff last week.
With the broader market rallying on upbeat developments in vaccines and fiscal stimulus, several stocks popular on Wallstreetbets also surged. AMC Entertainment jumped 11%, Koss rallied 7% and U.S. shares of Blackberry
rose 8%. All of those stocks were off earlier highs, with GameStop at one point up almost 18%.
A daily GameStop discussion thread
on Wallstreetbets had about 26,000 comments, and all those reviewed by Reuters were bullish.
GameStop is up about 150% from last Tuesday, when the co said Chief Financial Officer Jim Bell would step down. It is up almost 500% since Jan 11, when the co agreed with Chewy.com founder Ryan Cohen's RC Ventures LLC to add Cohen and two other e-commerce veterans to its board.
(Noel Randewich)
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WITH RATES RISING, EARNINGS GROWTH KEY FOR S&P (1135 EST/1635 GMT)
Expect earnings growth to play a larger role than valuation expansion for S&P 500 returns as interest rates rise, Goldman Sachs strategists wrote in a note Monday.
"We believe higher interest rates will be offset by a lower equity risk premium, leaving earnings growth, rather than valuation expansion, as a key driver of returns," they wrote.
Faster economic growth and elevated operating leverage will drive positive revisions to consensus and margins estimates in earnings, according to the strategists, who said they recently raised their 2021 S&P 500 EPS estimates following stronger-than-expected fourth-quarter earnings.
They now expect S&P 500 earnings to have dropped 13% in 2020 and to grow 27% in 2021 to $181.
"If realized, 2021 EPS would be 10% higher than the pre-pandemic 2019 level of $165."
The earnings recovery will be uneven across sectors, they noted, with cyclical sectors most affected by the pandemic "likely to deliver the fastest growth in 2021," they wrote.
Also, they noted that after 2021, "the primary risk to 2022 EPS is corporate tax reform," given that U.S. President Joe Biden has already called for "an increase in the statutory federal corporate tax rate."
(Caroline Valetkevitch)
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MARCH COMES IN LIKE A LION: PMI, CONSTRUCTION SPENDING (1103 EST/1603 GMT)
Data released on Monday signaled the recovery is gaining momentum as an uneven rebound from the global health crisis continues to shovel coal into the U.S. economic engine despite lingering headwinds.
U.S. factories accelerated their recovery in February, expanding at the fastest pace seen in three years.
Institute for Supply Management $(ISM)$ purchasing managers' index $(PMI.UK)$ delivered a reading of 60.8, a 2.1 point increase from January and healthier than the more languid projected gain of 0.1 point.
A PMI reading above 50 signifies increased activity over the previous month.
"Production expanded vigorously, and new orders signal strong activity in the pipeline," writes Oren Klachkin, lead U.S. economist at Oxford Economics. "Factory activity would have been stronger were it not for enduring supply chain and logistical challenges that slowed supplier deliveries, dragged on inventories, and raised input costs."
Indeed, tight supply caused by hobbled supply chains continues to drive up production costs.
The 'prices paid' component vaulted 5.9 points to 86.0, its highest level since July 2008.
The survey's respondents are feeling the supply pinch:
"A sense of urgency is being felt regarding new orders. Customers are giving an impression that a presence of stability is forthcoming and order flow is increasing," (textiles).
"Supply chains are depleted; inventories up and down the supply chain (is) empty," (chemicals).
Things are now out of control. Everything is a mess, and we are seeing wide-scale shortages," (electrical equipment/appliances).
Global financial information firm IHS Markit also released its take on February PMI , which came in at a less robust 58.6.
"Another month of strong production growth suggests that the US manufacturing sector is close to fully recovering the output lost to the pandemic last year," writes Chris Williamson, Chief Business Economist at IHS Markit.
But Markit also notes the looming specter of higher prices.
"A concern is that shortages of raw materials have become a growing problem, with record supply chain delays reported in February, contributing to the steepest rise in material costs seen over the past decade," Williamson adds. "Prices charged for a wide variety of goods coming out of factories are consequently rising, which will likely feed through to higher consumer inflation."
ISM and Markit PMI differ in the weight given to the various subcomponents, such as new orders, etc.
The graphic below shows the degree to which the two indexes agree/disagree.
Finally, a report from the Commerce Department showed expenditures on U.S. construction projects jumped by 1.7% to a record high in January, blowing past the 0.8% consensus and building on December's 1.1% increase.
Residential construction once again provided the biggest boost, jumping 2.5% from the previous month and soaring by 21% year-on-year, as spiking demand and record low supply continues to throw homebuilding into overdrive.
"Overall, construction spending is being supported by residential activity, in particular single-family construction, reflecting tight inventories," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "The January level of residential is 26.5% SAAR above the fourth quarter average."
The momentum appeared to be contagious.
All three U.S. stock indexes were sharply higher as risk appetite returned with a vengeance. Economically-sensitive small-caps and transports were ahead of the pack.
(Stephen Culp)
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WALL ST UP MORE THAN 1% EARLY; VACCINE NEWS A POSITIVE (1001 EST/1501 GMT)
U.S. stocks were up more than 1% in early New York trading Monday, helped by optimism over news that Johnson & Johnson
became the third authorized COVID-19 vaccine in the United States and has begun to ship its single-dose shot vaccine.
Also boosting stocks, bond prices edged up after a month-long selloff and yields eased.
All 11 S&P 500 sectors were higher, led by energy .
JNJ shares are up about 1.7%, and travel-related firms are on the rise.
Investors also cheered the House of Representatives' passage of U.S. President Joe Biden of his $1.9 trillion coronavirus relief package early Saturday. The bill now moves to the Senate.
Here is the early market snapshot.
(Caroline Valetkevitch)
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SMALL CAPS BATTLING SOME BIG BARRIERS (0900 EST/1400 GMT)
The small-cap Russell 2000 is up 5-straight months, and 10 of the past 11 months. In fact, the index is up 91% off its March 2020 close, which is its biggest rolling 11-month advance in its history.
That said, the RUT nearly hit a long-scale monthly channel resistance line in February, and then backed away:
On February 10, the RUT reached as high as 2,318, putting it just 1% shy of the channel barrier around 2,345. Since then, the index is down 5%, to a 2,201 close on Friday. The channel line ascends to around 2,365 in March.
Meanwhile, since its March 2020 trough, the RUT has seen a massive snapback in its relative performance vs the large-cap Dow Jones Industrial Average . After falling to a 17-year low last March, the RUT/DJI ratio has now risen to 6-year high at 7.12%.
However, since 1988, this ratio has struggled much beyond 7.0%, with its highs between 7.12% and 7.25%. Additionally, a broken support line from 1999, which is now resistance, is another hurdle coinciding with levels just over 7%.
Therefore, the RUT appears to be at an important juncture as it attempts to continue its advance, while sustaining its recent outperformance vs the large-cap Dow.
In any event, given its recent leadership role, a greater RUT downturn may coincide with increasing overall market weakness.
(Terence Gabriel)
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FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE:
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(Terence Gabriel and Lance Tupper are Reuters market analysts. The views expressed are their own)