Market Review: August 10, 2020

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Closing Recap

Monday, August 10, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished mixed as the Dow and Russell 2000 index (SmallCaps) outperformed much like Friday’s trading action, while the Nasdaq Composite declined, falling for a second day after a record run to historical highs mid-last week in another bout of profit taking. Recent financial results from airline and hotel operators (MAR today said saw steady signs of demand returning), and weekend travel numbers showed improvement in travel demand, helped boost the sectors that have been among the worst-hit by the pandemic (casinos, cruise, travel, retail and restaurants), along with the number of coronavirus cases in the U.S. improving. Also, the White House seems ready to restart negotiations in an effort reach a deal with Democrats on further pandemic aid after President Trump this weekend signed several executive orders this weekend aimed at extending coronavirus relief, including providing additional payments to the unemployed (though it is unclear whether the executive orders are enforceable). U.S. Treasury yields edge higher with the 10-yr touching 0.57% while the dollar rebounded. Oil and gold prices finish higher but off their best levels as the dollar recovered. Stock markets have rallied in five of the last six weeks having lifted the S&P 500 to within 1% of its all-time high reached in February. Stimulus talks, China trade talks, and coronavirus cases remain center stage for markets which are starting the week mostly higher outside of the slide in tech). Transports outperform a second day behind airlines strength and continued momentum in package delivery names (UPS, FDX).



·     Oil prices rose as WTI crude was up 72c or 1.75% to settle at $41.94 per barrel while gold prices rise $11.70 or 0.6% to settle at $2,039.70, pulling back from earlier highs of $2,060.80 an ounce. Commodity prices benefitted again from the decline in the U.S. dollar, while investors also looked to improving demand for energy as coronavirus cases are beginning to show signs of slowing, with declining cases in some of the biggest hot spots last month. Brent crude up 59c or 1.33% to $44.99 per barrel as commodity prices stay strong.


Currencies & Treasuries

·     Currency markets active as the dollar initially erased overnight gains, once again succumbing to selling pressure given the low rate environment in the U.S., monetary policy programs in place though bounced off morning lows against major currencies on a day that had no impactful economic data. Jobs results came in strong last week which gave the “buck” a bounce off 2-year lows reached earlier in the week, but remains under pressure. Treasury prices in a narrow trading range, but slipped late day as the 10-year yield ended around 0.57%, best levels in a little over a week as investors moved money back into stocks late day. The U.S. Treasury will sell record amounts of three, 10 and 30-year debt this week – will sell $48 billion in three-year notes, $38 billion in 10-year notes and $26 billion in 30-year bonds as part of its quarterly refunding.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers and Staples; FL shares jumped after saying Q2 same-store sales increased about 18% driven by pent-up demand at its reopened stores and the effect of fiscal stimulus, while guided Q2 EPS 66c-70c after posting a 67c loss in Q1, as an increase in sales helped counter higher promotions; EL shares rise after Barron’s + this weekend saying shares dropped as consumers shifted spending to necessities, creating an opportunity to buy on the dip; NKE traded to 52-week highs today in what was a broad rally in retail (KSS, JWN, KSS)

·     Casino & Leisure movers; Macau casino operators rose early (WYNN, MLCO) after China said it will resume issuing tourist visas for visitors to Macau; MGM rises as IAC says it has accumulated a 12% interest for an aggregate of about $1 billion over the last few months; in theme parks, SEAS posted a worse-than-expected Q2 EPS loss as adjusted EBITDA was -$53.8M in Q2 vs. profit $149.7M a year ago and said attendance was 300K vs. 6.5M a year ago; cruise lines rally despite RCL posting net loss attributable of $1.64B, also writing down value of certain assets by $156.5M while expects to burn about $250M-$290M of cash on average per month while its operations are suspended; DKNG and PENN shares pressured after reports this weekend that the college football season could be in jeopardy after one conference cancelled; in electric vehicle news, NKLA shares jumped after saying it secured an order to make at least 2,500 electric garbage trucks for refuse giant Republic Services Inc., fulfilling one of the electric-vehicle startup’s three major business goals for the year



·     Energy stocks edged higher given the rebound in oil prices today amid a sliding US dollar; not much in stock news as HAL and HON announced collaboration to maximize asset potential, reduce execution risk & lower total cost of ownership for oil & gas operators; not much else in stock news as the bulk of energy earnings for Q2 is behind us

·     Utilities & Solar; EXC shares dropped following an explosion in Baltimore (EXC serves 10 mln customers, including Baltimore area through its subsidiary Baltimore Gas and Electric Co); PPL shares rose after initiating sale process for UK business, and as the company reports results, but withdrew guidance; DUK Q2 revs of $5.42B fell over 7% YoY and missed estimates of $5.7B while EPS beat and reaffirmed its year and said its 5-year, $56-billion capital plan remains intact; AES unit to get $720M from early end to Chile contracts



·     Pharma movers; KODK share plunge after the federal agency that announced a $765M loan to Kodak less than two weeks to make generic drugs ago said the offer is on hold pending probes into allegations of wrongdoing; ITCI shares fall as Q2 EPS loss and revenue missed estimates while said plans to initiate clinical program of lumateperone in MDD in 2020; PIRS and LLY entered into a clinical trial collaboration and supply agreement to evaluate the safety and efficacy of combining Pieris’ PRS-343 with Lilly’s ramucirumab, and paclitaxel for the second-line treatment of patients with HER2-positive gastric cancer in a phase 2 study; EGRX cut its R&D expenses forecast for the full $40-$44M from $46M-$50M on Q2 rev miss; CGC reported a narrowed loss in Q2 profit, as revenue rose in the period (revenue rose to C$110.4 million from C$90.5 million); MNK said the FDA granted priority review for co’s experimental regenerative skin tissue therapy called StrataGraft/regulator sets an action date of Feb. 2, 2021; MCRB surges after saying its lead drug, SER-109, met the main goal of a late stage trial

·     Biotech movers; ICPT a narrower Q2 EPS loss of ($1.92) vs. est. ($2.28) as revs rose 17% YoY to $77.2M, topping the $72.4M estimate as Ocaliva sales rose 16.4%; OMER shares jump as reports recovery and survival of all six-patients in a study of Narsoplimab, its investigational treatment for the acute respiratory distress syndrome caused by COVID-19 disease; ANAB shares fall as patients dosed with etokimab every four or eight weeks failed to achieve statistically significant improvement in their bilateral nasal polyps score and in their sino-nasal outcome test versus placebo at week 8 time point; HOTH says it had licensed intellectual property rights to develop a medical device that could potentially diagnose COVID-19 infections via breath samples; TRVN rises after saying the FDA approved the drugmaker’s Olinvyk, an opioid agonist for the management of moderate to severe acute pain in adults, where the pain is severe enough to require an intravenous opioid and for whom alternative treatments are inadequate

·     Healthcare services and providers; Credit Suisse raised targets on ABC to $100 (from $90) and MCK to $150 (from $137) based on a faster-than-expected recovery in core drug distribution and expected operating profit growth for the remainder of calendar 2020 while maintain $56 price on CAH given its medical business still faces headwinds. Given the uncertainties regarding the outstanding Opioid lawsuits, we remain Neutral on the sector


Industrials & Materials

·     Transports; Dow Transports outperform, rising for a 9th straight day, behind airlines strength (AAL, UAL, ALK) after talk last week the U.S. was looking to include them in the next relief package and continued momentum in package delivery names (UPS, FDX) after they each announced price increases for the upcoming holiday season; FDX upgraded to Outperform from Market Perform at Bernstein with $225 tgt as we expect the company to deliver better than consensus expectations on 1) better residential pricing, 2) continued strength in Express and air cargo rates, 3) an inflection in ground margins. E-commerce parcel pricing is expected to remain strong as the pull forward of e-commerce penetration has strained delivery capacity

·     Metals & Materials; gold miners jumped initially with the price of gold surging and as GOLD Q2 revenues ramp nearly 50% higher amid record gold prices up to $3.06B from $2.06B a year earlier, capitalizing on the record run-up in gold prices – Barrick says it realized an average gold price of $1,725/oz. in the quarter, up 31% Y/Y, but Q2 gold production fell 15% Y/Y to 1.15M oz.; industrial metals saw strength today, with bounces in steel and copper stocks; OLN downgraded to neutral from buy at Bank America noting the company’s Q2 results marked its 3rd consecutive quarter of missed EBITDA and warns that Q3 guidance may be risk as caustic soda prices trend lower due to a resurgence in chlorine demand


Technology, Media & Telecom

·     Internet; TWTR shares active after the WSJ reported this weekend the social media company has held early talks about a potential combination with TikTok, citing people familiar with the matter ; WIX announces private offering of $500M of convertible senior notes due 2025; PINS was upgraded to Overweight at Morgan Stanley with $44 tgt saying it is driving/benefiting from accelerating e-commerce and social shopping

·     Semiconductors; QCOM active after weekend reports it is telling U.S. policymakers their export ban won’t stop Huawei from obtaining necessary components and just risks handing sales to the U.S. firm’s overseas competitors, according to a presentation reviewed by WSJ; ON Q2 EPS 12c on revs $1.21B vs. est. 2c/$1.18B while sees Q3 revenue $1.2B-$1.33B above consensus $1.27B based on product booking trends, backlog levels, and estimated turns levels; NVDA receives street wide tgt high of $520 at Bank America as expects Q2 results to meet consensus "as data center demand remains resilient, offset somewhat by softness in more cyclical businesses; CEVA shares jumped following a Q2 earnings beat this morning

·     Software movers; HUYA and DOYU shares active as Tencent (TCEHY) proposed a stock-for-stock merger of the two companies, via an acquisition by Huya; AYX falls further after sliding -28% on Friday after a disappointing outlook in the software space; in Media & Telecom movers; AVYA rises after Q3 EPS beat, swinging to profit from same period last year and guides year revs $2.84B-$2.86B vs., est. $2.78B; FWONA 2Q revenue $24M fell -96% YoY and was in-line with estimates while 2Q adjusted Oibda loss was $26M vs. profit $136M YoY; LSXMA Q2 Oibda slips -1.1% YoY to $615M and expands buyback program


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.

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