Market Review: April 23, 2020

Auto PostDaily Market Report

Closing Recap

Thursday, April 23, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished mixed, well off their best levels following a report that GILD’s coronavirus treatment drug in development, Remdesivir, flopped in a trial in China. Prior to that, stocks had risen as oil extended its rebound (WTI crude rises 20%), earnings results proved better than feared (ahead of INTC tonight) and the House prepared to vote on a $484 billion coronavirus relief package. Jobless claims for the week were 4.4M, down from the 5.2M filing for first time unemployment last week, but brings the total to 26.5M over the last 5-weeks (16% of the US labor force). While the numbers are coming down, they are all still startling and worrisome reminiscent of the Great Depression. Markets have largely been looking past record low economic data, on the assumption that the jobs data and manufacturing declines being witnessed will be “bottoms. European stocks staged another good rally driven by banks and oil & gas stocks as crude prices continued its rebound from 20-plus year lows as the European STOXX 600 rose 1% and is now just shy of hitting 1-1/2 month highs as investors continue to ignore backward-looking awful economic data in Europe and the U.S.

·     Stocks took a turn lower early afternoon (taking the S&P and Nasdaq negative) after GILD’s highly touted experimental coronavirus drug, remdesivir, has failed its first randomized clinical trial, the Financial Times reported, citing draft documents published accidentally by the World Health Organization (which was later confirmed). That took the steam out of markets that had been rallying on hopes the last few sessions. Also not helping were headlines that EU leaders end talks without agreement on a recovery package, as Germany’s Merkel said likely EU500B support package can start June 1st. The news offset positive developments today including sharp declines in overall coronavirus cases in Italy (as recoveries surpassed cases for the first time) and a slowing death rate and hospitalizations in New York.

·     Note it was a month ago to the day that the S&P had bottomed, now up 25% from that low (2,191.86 on 3/23) as stocks have been buoyed by Fed and government actions to stimulate the economy, taking rates back to zero essentially while buying all types of assets, flooding markets with liquidity and providing relief checks to individuals out of work and small business with loans to get by during this worldwide economic shutdown due to the COVID-19 pandemic.

Economic Data

·     Weekly jobless claims mostly in-line at 4.427MM first time claims vs. est. 4.5M and continuing claims 15.976MM vs. est. 16.73MM; the 4-week average rose to 5,786,500 for week from 5,506,500 prior week (previous 5,508,500)

·     The IHS Markit composite index of purchasing managers plummeted 13.5 points to 27.4, the lowest in data back to 2009. IHS Markit measures of U.S. orders, employment and exports all tanked in April. The group’s measure of future activity, a gauge of sentiment, contracted for the first time in data back to July 2012.

·     The IHS Markit gauge of services slid 12.8 points to 27 in April, the lowest in records back to October 2009. The index of manufacturing dropped to an 11-year low of 36.9.

·     March new home sales fell (-15.4%) to 627,000 annual rate, slightly below the 644K estimate; while prior month was revised down to 741K from 765K; the median new home price rose 3.5% y/y to $321,400; average selling price at $375,300


Commodities & Currencies

·     The dollar reversed higher mid-afternoon vs. major currencies, rising against the euro after EU leaders end talks without agreement on a recovery package, raising concern for the European Bloc. The U.S. dollar had risen to a near 1-week high vs Japanese yen on Nikkei report that Bank of Japan considering increasing amount of commercial paper and corporate bond purchases. June gold climbs by $7.10 or 0.4% to settle at $1,745.40 an ounce (pulled back off earlier highs of $1,764.20 an ounce), adding to yesterday gains. Oil prices rise for a second day, with WTI crude up $2.72 or 20% to settle at $16.50 per barrel (off earlier highs) in a week of unprecedented volatility. Treasury market’s rally despite the bounce in stocks, as the 10-yr yield falls to 0.6%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; TGT shares fell despite saying comp-store sales rose more than 7% so far in Q1 and digital comparable sales has surged over 275% so far in April, but warns margins to drop by 5-percentage points in Q1 due to temporary wage increases of $2 an hour for store and distribution center workers as well as higher sales of low-margin products; GPS slides after company provides further impact from coronavirus, says existing cash may not be enough to fund operations/drew down their entire $500M revolver; WWW cut to neutral at Susquehanna saying post crisis, WWW’s wholesale business recovery will lag peers, in their view; mattress retailers rise with SNBR which posted Q1 EPS, revenue and comp store beats; CROX slides as expects a larger decline in Q2 revenue as majority of the stores may stay closed

·     Consumer Staples; SAM shares fall as reported 1Q EPS of $1.49 (-26% YoY), below consensus of $1.77 as delivered better-than-expected top-line growth, which was more than offset by weaker-than-expected profit margins; HSY posted a top/bottom line miss for Q1 and withdraws full-year outlook, says retail foot traffic has been volatile and consumer shopping, consumption behaviors are evolving/sales fall a whopping 46.7% in the reported quarter in China and gross margins fell 180 bps; GO 15M share secondary priced at $34.00; in research, food service distributors SYY, USFD, PFGC, CHEF were all downgraded at BMO Capital as have little conviction in the duration for the need for continued social distancing measures and we see risk that a return to "normal" takes much longer, which could pressure a return to restaurant spend/eating out

·     Restaurants; DPZ reported Q1 profit and revenue that rose above expectations, but missed on U.S. same-store sales, rising 1.6% in the U.S., missing the consensus of a 2.2% rise, while international sales growth of 1.5% matched expectations; CHUY, DRI, EAT, and TXRH all upgraded to Market Perform at BMO Capital on more balanced risk/ reward; however, perception of meaningful incremental casual dining upside given outsized pullbacks appears overstated – firm also upgrade CMG to Market Perform on more balanced risk/reward, but WING remains their preferred fast casual option

·     Casino & Leisure movers; in casinos, LVS reported better-than-expected 1Q20 Macau adj. EBITDA and also beat on margins on the back of solid cost controls while mgmt expects Macau to re-open to China citizens as early as May (lifts the group) – upgraded at JPMorgan; MGM said -there have not been meaningful cancellations for 2021 and some tentative re-bookings in Q4

·     Auto sector; JPMorgan upgraded KAR on stable end-market while downgraded car rental stocks HTZ on travel woes and they preview 1Q20 earnings for auto parts suppliers positioned -50% below consensus EPS and -13% below on EBITDA, a function of the COVID-19 pandemic, which has materially worsened expectations for 1Q global light vehicle production; ORLY posted in-line Q1 earnings while gross margins missed by 70 bps/noted that comp sales decreased 13% YoY for the four-week period including the first two weeks of April



·     Energy stock news was limited, but the price action was not with many energy names soaring for a second consecutive session, getting a boost from another spike in oil futures after the most volatile week in history just keeps getting odder. Utilities were the worst performing sectors given their defensive nature as broader markets went higher.



·     Investment managers/brokers; IVZ falls after earnings and dividend cut to 15.5c from 31c with EPS of 34c missing the 51c estimate and AUM falling 14% QoQ; AMTD Q1 profit falls short of est. for the second straight qtr, while revenue exceeds expectations, hurt by drop in net interest revenue, dip in transaction fees and commissions and a ~14% rise in operating expenses; BX rises early behind strong FRE, or fee-related earnings, in the firm’s first-quarter results.

·     REITs; CLI said it collects ~90% of office tenant rent an 96% of residential tenant rent for April as of April 20/tenants that represent ~6% of billings, including some that have paid April rent, have asked for some form of rent relief



·     Pharma movers; LLY reports 15.1% rise in Q1 sales, boosted by its top-selling diabetes drug, Trulicity, and as customers stockpiled medicines following stay-at-home orders while slightly raises the top end of its year profit outlook; MRK resubmits its supplemental Biologics License Applications to the U.S. FDA to update the dosing frequency for anti-cancer drug Keytruda

·     Biotech movers; GILD shares dropped midday after the Financial Times reported its potential antiviral drug for the coronavirus (remdesivir) has flopped in its first randomized clinical trial citing draft documents published accidentally by the WHO and seen by the Financial Times; IMMU rises after the company’s Trodelvy breast-cancer drug received an early approval from the FDA/Piper raised tgt to $40 to reflect our lowered discount rate and new pricing assumptions; INO says the Coalition for Epidemic Preparedness Innovations had awarded co and the International Vaccine Institute $6.9M in funding for an early-stage trial of its potential coronavirus vaccine in South Korea; BIIB downgraded to sell at Citigroup, cut at Raymond James as well and tgt lowered as sees incremental downside, noting that management did not provide a satisfactory explanation for the aducanumab filing delay

·     Healthcare services and providers; ENZ rises as launches COVID-19 test kits under FDA’s Emergency Use Authorization/tests use company’s proprietary GENFLEX open diagnostic platform


Industrials & Materials

·     Transports; KNX reported a 1Q20 beat on earnings driven by solid Truckload performance (including solid expense control) while expects double digit decline to loaded miles for 2Q, but are constructive on the medium-to-long-term; LSTR EPS of $1.04 (-34% year/year) was below the consensus estimate/guidance of $1.10/$1.10-1.20, respectively with Q1 revenue of $928M (-10%) was shy of consensus’ $931M and toward the low end of $915M-$965M guidance; in rails, CSX beat on 1Q20 earnings driven by strong cost control measures but expect carload volume weakness in 2Q and 3Q; UNP withdraws views for shipping volume, headcount and operating ratio and is racing to cut costs as it foresees a 25% shipping volume decline in 2Q, but it won’t be enough to improve its operating ratio; RUSHA, ODFL, XPO other movers on results/guidance

·     Metals & Materials; AA cuts supply and pulls outlook for reeling aluminum market saying the extent and duration of pandemic is unknown/to curtail output at U.S. smelter, cut $100 million in capex/suspends projections for supply and demand balances/cuts its FY20 Aluminum segment shipment view to 2.9M-3.0M from 3.0M-3.1M metric tons; RS shares advance in steel sector after quarterly earnings top estimates


Technology, Media & Telecom

·     Internet; EXPE said it is raising approximately $3.2B of new capital, consisting of a $1.2B private placement of perpetual preferred stock and approximately $2B in new debt financing as investment funds managed by affiliates of Apollo Global Management and Silver Lake are providing the equity investment; AMZN tgt raised to $2,900 from $2,600 at Goldman Sachs as expect Amazon to report results well above consensus expectations on revenue and profitability, while guiding 2Q above consensus on both metrics; SNAP offering privately $750 mln 5-yr convertible senior notes (follows surge in shares yesterday post earnings)

·     Semiconductors; XLNX forecasts Q1 revenue below estimates (sees Q1 revenue $660M-$720M vs. est. $738.84M), refrains from providing an annual outlook; STX reported better Q1 results in the hard-disk drive space but sees Q4 EPS $1.28, +/- 10% vs. est. $1.29 and guides Q4 revenue $2.6B, +/- 7%, vs. consensus $2.57B; in equipment space, LRCX reported Q1 revenue in-line with estimates but did not issue guidance, citing COVID-19 uncertainties but Q2 revs expected to rise; INTC to report earnings after the close tonight

·     Software movers; CTXS warned a surge in Q1 demand driven by the pandemic could be offset in the 2H after reporting better earnings’ in research, JPMorgan reduces exposure to high multiple software stocks following an historically epic 25% oversold rally in the S&P 500 since March 23rd , which has lifted our basket of SMID-Cap growth software stocks to flat YTD – firm downgraded COUP, PAYC, CDAY to underweight and cut SMAR, TWLO to neutral; Credit Suisse upgraded PANW in the security sector while downgraded ZS on balanced risk/reward, while in general software, downgraded PAYC, SWI and CDAY

·     Media & Telecom movers; Evercore downgraded several names in the media sector, cutting DISCA, FOXA, NYT, TV and VIAC to in-line from outperform amid concern of weak ad trends; Liberty Media has changed the attribution of its interest in LYV along with other balance-sheet items, among its tracking stocks on the FWONA and LSXMA which will create more focused tracking stock groups, the company says. Some $1.5B in net asset value was reattributed from Formula one to Liberty SiriusXM. That includes the entire Live Nation stake (69.6M shares, or $2.6B) along with some smaller intergroup interests.


Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

Live Trading

Open an Account

Paper Trading