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The Zacks Analyst Blog Highlights: L Brands, Tempur Sealy and Crocs

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For Immediate Release

Chicago, IL – March 9, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: L Brands, Inc. (LB - Free Report) , Tempur Sealy International, Inc. (TPX - Free Report) and Crocs, Inc. (CROX - Free Report) .

Here are highlights from Monday’s Analyst Blog:

Traders Eye T-Bond Auctions: Global Week Ahead

In the Global Week Ahead, all eyes will be on the scheduled U.S. Treasury 10-year and 30-year bond sales. Those happen on Wednesday and Thursday.

Any sign of dysfunction, and Fed Chair Powell and the rest of the FOMC will take notice.

One whiff of a problem, and those U.S. central bankers will likely act, in some fashion, and sooner rather than later.

Then, there are the eyes of the Rest of the World's central bankers and equity traders the world over: They will be watching.

We are where we are, in a drawn-out exit from the COVID pandemic.

So, get a ticket and take your seat in the Bond Market Stadium. Like everybody else!

Next are Reuters' five world market themes, reordered for equity traders—

(1) Watching U.S. Treasury Bond Sales, for the Direction of Rates

On February 25th, as a mini-tantrum raged on bond markets, the U.S. Treasury auctioned $62 billion in 7-year notes — but investors, it would seem, forgot to show up. The lowest bid-cover ratio of 2.04 on record sent 10-year Treasury yields rocketing to a one-year high above 1.61%.

The Fed signaling it is not perturbed by rising yields has markets fretting again.

Scheduled 10-year and 30-year Treasury bond sales on Wednesday and Thursday will be what TD Securities dubs a "litmus test for potential market dysfunction."

The first aims to raise $38 billion, the second $24 billion. Another $58 billion of three-year notes are auctioned Tuesday.

The Fed clearly believes any inflation rise is transitory and tighter financial conditions so far don't warrant action. The outcome of the auctions might well test its resolve.

(2) The ARK Innovation Fund Has Run Aground

After the slide in tech stocks, one fund that bears watching is Cathie Wood's $23 billion ARK Innovation fund, which has fallen more than the market in recent days. Wood shot to prominence with outsized bets on companies such as Tesla and Square that surged during the pandemic. Lipper data shows she attracted $14.84 billion in inflows over the past 12 months.

But tech companies are acutely sensitive to higher bond yields, leaving the ARK fund — and others like it — vulnerable to a performance hit and outflows. Wood's heavy exposure to illiquid stocks could turn out to an issue.

(3) European Earnings Are Forecast to Beat the USA Across 2021

European and U.S. equity returns are running neck-and-neck in 2021, but after five years of underperformance, European stocks may have just enough tailwind to win the 2021 race.

The old continent being light on tech, isn't on the front line of the bond selloff, which has hit the rate-sensitive Nasdaq. In fact, for investors seeking to ride the reflation trade, Europe ticks a lot of boxes, being heavy with commodities, financials and other value stocks.

U.S. 10-year Treasury yields around 1.5% match the S&P 500's dividend yield. Europe's risk-free equivalent, the German Bund, meanwhile pays -0.3%, nowhere near the 1.8% dividend yield on EURO STOXX.

Analysts forecast European earnings growth to beat the U.S. every quarter in 2021. So, 43.8% versus 21.6% in Q1 and 79.1% versus 50.9% in Q2.

(4) Will Higher Government Borrowing Costs Hit Europe Hard?

From Frankfurt to Rome and Madrid, government borrowing costs are up as much 33 basis points this year, so Thursday's European Central Bank meeting will be a test of its ability to suppress bond yields.

As higher yields risk derailing a fragile Eurozone economy, markets want action — or at least a commitment to step up bond buying via the 1.85 trillion-euro Pandemic Emergency Purchase Scheme. Not doing so risks accelerating the selloff.

Almost a year ago markets, already alarmed by COVID-19, took fright at ECB President Christine Lagarde's off-the-cuff remark that the bank wasn't there to "close spreads." Soaring yields forced the ECB to respond with the PEPP.

The anniversary is a reminder to the ECB: it never hurts to show markets now and then not to push it too far.

(5) China Withdrawing Pandemic Stimulus Now

Premier Li Keqiang kicked off the annual week-long National People's Congress (NPC) with his 2021 report, restoring China's annual economic growth target set for above 6% this year.

But the bigger question is: how does Beijing withdraw pandemic stimulus and avoid asset bubbles without upsetting the economy and twitchy financial markets?

Chinese stocks and government bonds sank this week after its top banking regulator warned of bubbles overseas and rising lending rates.

Trade and money supply data due out will show just how uneven the economy still is and froth levels in the banking system. Markets will watch the NPC closely for clues ahead.

Top Zacks #1 Rank (STRONG BUY) Stocks

Let's look into three top retail stocks this week.

(1) L Brands: This is a $54 a share Apparel and Shoe Industry player. That makes for a $15B market cap. Victoria's Secret is their big brand. I see a Zacks Value score of C, a Zacks Growth score of C and a Zacks Momentum score of C.

(2) Tempur Sealy: This is a $34 stock in the Retail-Home Furnishings space, selling a line of beds. That makes for a $7B market cap. I see a Zacks Value score of B, a Zacks Growth score of A and a Zacks Momentum score of C.

(3) Crocs: This is a $75 stock in the Textile-Apparel industry. This makes for a $43.9B market cap. The company was founded in 1999 and is based in Niwot, Colorado. The iconic clog is their main product. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of B.

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