Market Review: August 17, 2020

Auto PostDaily Market Report

Closing Recap

Monday, August 17, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished mixed as the Dow ends lower and the S&P 500 fell short of its February record intraday record high of 3,393 yet again (high 3,387.59), but technology gains once again just astounding with another day of record gains. Apple (AAPL) and Tesla (TSLA) both touch all-time record highs in what was another record setting session overall for the Nasdaq Composite, helped by another spike in semiconductors (all-time high for the Philly semi index – SOX) as NVDA trades to a new record ahead of its earnings on Wednesday afternoon. Retail will be in focus the next few days with earnings from WMT, KSS, HD and AAP tomorrow followed by TGT, LOW and TJX on Wednesday morning, with many of them expected to have benefitted from the pandemic. Oil prices rose (though stocks failed to rally) as WTI crude settle at their highest closing price since March 5, ending 2.1% higher at $42.89 a barrel as investors turn bullish on reports that major oil producers from the OPEC-plus group were 97% compliant last month with emergency production cuts. Gold prices rise topping the $2,000 an ounce level again as the dollar slide back near 2-year lows and miners get a boost after Warren Buffet’s Berkshire revealed a stake in shares of “GOLD” last Friday in its 13F filing.

·     Still this week, minutes of the Federal Reserve’s latest meeting, due on Wednesday, are expected to provide more insight into the central bank’s view of an economic recovery, while housing starts data is also on tap. Markets also await word from Washington on any new developments on the extended stimulus relief bill, as well as any color on trade talks with China. China/U.S. 6-month trade review talks were postponed this weekend. Reports today showed the U.S. commerce department to tighten restrictions on Huawei access to U.S. technology, semiconductors which means Huawei cannot get third-party designed chips that use U.S. technology without a license. Manufacturing in NY expanded in August at a slower pace than projected as more factories reported declining orders, as coronavirus continues to limit momentum in the recovery. Overall, energy, financials and re-opening trade names (cruise, airlines, and casinos) biggest drags while technology once again market leaders.

Economic Data

·     NY Fed’s Empire State current business conditions index falls to a positive 3.7 reading in August from 17.2 in July and below the consensus for a 15.0 reading; new orders index falls -1.7 in August vs 13.9 in July while prices paid index 16.0 vs. 14.9 MoM and the employment index at 2.4 in August vs. 0.4 in July; six-month business conditions index 34.3



·     December gold prices jumped $48.90 or 2.5% to settle at $1,998.70 an ounce, helped by a sliding dollar (back to around 2-year lows) as well as reports that Warren Buffet’s Berkshire added position in gold miner Barrick Gold (GOLD) when its 13F filing was revealed last Friday. Last week, gold came under pressure as U.S. Treasuries climbed to an eight-week high, detracting from its appeal. Oil prices also advance on a weaker dollar and further rotation into “riskier” assets as WTI crude gains 88c or 2.09% to settle at $42.89 per barrel in what was a relatively quiet day of news in the commodity space and nat gas prices dipped about 1% on profit taking.



·     The U.S. dollar sunk back near 2-year lows against a basket of currencies as the USD-JPY touched one-week lows of 106.00, not far off last week’s 105.71 low, as the yen rose despite the horrendous Japan GDP report released overnight, and the generally risk-on conditions. Sterling edged up against the dollar, rising above the $1.31 level ahead of a new round of Brexit negotiations. Bitcoin prices rise about 5% to $12,473 highs (52-week highs), while Litecoin jumps over 5% above $65 as crypto currency outperforms. The dollar can’t gain traction despite signs of improvement in the economy, as the Fed keeping rates low for an extended period of time along with monetary easing measures keeps a lid on the advance.


Bond Market

·     U.S. Treasury yields retreat a bit from last week’s higher levels ahead of more auctions this week of 20-yr and 30-yr TIPS (follows $112 billion in record supply of 30-year bonds and three- and 10-year notes last week). U.S. Treasury yields fell as the 10-year dipped 3 bps to 0.67%) while stocks were mixed on very light volumes. Minutes of the Federal Reserve’s latest meeting, due on Wednesday, are expected to provide more insight into the central bank’s view






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; luxury retailers Burberry (BRBY) upgraded to hold and Louis Vuitton (MC) upgraded to buy at Jefferies; UBS said they believe that the dollar stores (DLTR, DG) are poised to report another quarter of strength as conditions created by the pandemic have played into the key tenets of these retailers; retailers AAP, HD, KSS, WMT report tomorrow morning and LOW, TJX and TGT report Wednesday morning; OSTK shares jump as Piper initiated with an overweight and $140 tgt (despite rally in shares) as believe there are seismic forces at work that have dramatically improved the sales and profitability outlook for OSTK well into the future

·     Consumer Staples; DEO agreed to acquire Aviation American Gin through the acquisition of Aviation Gin LLC and Davos Brands LLC for a total consideration of $610 million; for tobacco, Jefferies said while worsening cigarette pressures are well known and arguably nobody cares, heightened headwinds could still have an impact (for PM, MO); for KR, Berkshire discloses an increase to 21.9M shares (+16%) vs prior 18.9M in 13F filing Friday

·     Auto and electric vehicle sector; TSLA jumps behind another positive analyst comment as Wedbush upped bull case tgt to $2,500 saying earlier "continue to believe EV demand in China is starting to accelerate in July/August with Tesla competing with a number of domestic and international competitors for market share with Giga 3 remaining the linchpin of success which remains the prize that Musk and Tesla are laser focused on capturing; NKLA shares give back some of last week gains after filing Friday showed investor Jeffrey Ubben trims position Jeffrey Ubben’s Inclusive Capital Partners sold 1.4 million shares of Nikola on August 11; AAP reports earnings in the auto retailer space with high expectations given pandemic impact

·     Restaurants; EAT was upgraded to buy from hold at Deutsche Bank and raised to neutral from underperform at Bank America saying that while company’s same store sales have outperformed its peers partly as a result of their regional exposure, its Chili’s business is also operating well thanks to the more direct brand oversight; YUM tgt raised to $108 at Oppenheimer saying work highlights an enhanced risk/reward and positive event path for YUM shares; DPZ said it and its franchisees to hire more than 20,000 people, including delivery experts and pizza makers, in U.S

·     Housing & Building Products; Bank America the latest broker to raise estimates on HD and LOW ahead of earnings (Tuesday and Wednesday respectively this week) – Oppenheimer noted same-store sales growth is expected to be 10.9% at HD and 14.3% at LOW, besting FQ1’s 6.4% and 11.2%, respectively

·     Casino & Leisure movers; for PLNT Jefferies said updated traffic analysis illustrates that while PLNT’s gym reopenings have experienced NT volatility, trends appear to be stabilizing at ~60% of pre-COVID levels, on avg; PLNT and CLUB spike as Cuomo said N.Y. gyms can open Aug. 24 with 33% capacity, masks; in gaming, the WSJ discusses the opportunity in online gambling for the casino industry as the owner of the Golden Nugget said due to DKNG he realized that he has ‘an online gaming business that is worth a lot more than we thought it was worth; CCL, NCLH weak as cruise lines fall with airlines, theme parks and other reopening related trades (all among top decliners in the S&P)



·     Energy stocks a drag early along with financials – still failing to show any upward momentum after good gains last week; OXY slides after Warren Buffet’s Berkshire Hathaway dissolves stake as per 13F filing;; oil prices rebounded off earlier weakness at the start of a week that will see OPEC+ gather to assess its supply deal, as countries struggle to contain the virus that’s hurt economies and fuel demand globally

·     In stock new; COP’s plan for drilling in the National Petroleum Reserve in Alaska along the state’s North Slope oil fields was approved on Friday by the U.S. Bureau of Land Management; HES is laying off ~10% of its workforce and streamlining operations; Hess, which had 1,770 employees as of year-end 2019, dismissed 165 full-time workers this week; in research, Piper upgraded shares of BP, RDS to overweight, while downgraded CVX to neutral noting Q2 results served to highlight both the challenges facing the Major oils (weak E&P/refining margins, spending deficits, etc.), but also the material divergence in both portfolios and strategy across the group

·     Utilities & Solar; EXC was downgraded to underperform from neutral at Bank America citing mounting concerns about political risk; SRE was downgraded at Wells Fargo as think the risk/reward is more balanced following the recent pop in the stock



·     Bank movers; banks pressured after Berkshire Hathaway 13F filing last Friday showed Buffett reduced stakes in many banks (including JPM, WFC); Consumer finance and lending; INS positive mention at BTIG saying shares could receive significant boost if Goldman sacs is successful in bid for GM’s credit card portfolio, adding to upside from growth of Goldman’s apple card program

·     Monthly Master Trust credit card data out for some card issuers as COF July net-charge offs 3.82% vs. 4.15% in June and delinquency rate at 2.44% vs. 2.47% at the end of June; DFS July net-charge offs at 2.09% vs. 2.13% at the end of June and delinquency rate at 1.36% vs. 1/44% MoM; ADS July charge-offs 7.2% vs. 5.70% YoY and delinquencies for July of 4.7% vs. 5.50% YoY; BAC July net-charge offs 2.09% vs. 2.47% YoY and delinquencies 1.16% vs. 1.57% YoY; AXP card member loans 30 days past due loans as a % of total 1.4% at July end vs 1.5% at June end and card member loans net write-off rate-principal only 2.6% at July end vs 2.6% at June end



·     Pharma movers; SNY entered into a definitive agreement for the acquisition of PRNB for a total enterprise value of $3.36B, paying $100 per share in cash ; ARNA tgt raised to $115 from $95 at Guggenheim as view the stock as having ~30% upside / -10-15% downside on data readout; XBIT said it has identified True Human antibodies, derived without modification from humans, that could potentially be used to treat COVID-19; TCON says U.S. FDA clears its application to start human trials of its investigational soft tissue cancer treatment; LCI said it will be the exclusive U.S. distributor for the generic of Respirent Pharma’s Flovent Diskus.

·     Biotech movers; CVAC extends strong gains after IPO priced late last week – shares more than tripled to close Fri at $55.90 after IPO priced at $16 – specializes in the messenger RNA technology that is the basis of many of the leading Covid-19 vaccine programs; UBX shares tumble as the company’s mid-stage trial for osteoarthritis treatment (UBX0101) fails to meet main goal – said there was no statistically significant difference between any arm of UBX0101 and placebo at the 12-week endpoint – does not anticipate progressing UBX0101 into pivotal studies; NVAX said it’s beginning a Phase 2b clinical trial in South Africa to evaluate the efficacy of NVX-CoV2373, its COVID-19 vaccine candidate; ABEO enters into a license and inventory purchase agreements with privately-held Taysha Gene Therapies for rights to experimental gene therapy for treating rare disorder CLN1; CLVS rises after saying Rubraca shows significant clinical activity in men with a certain type of prostate cancer

·     Medical equipment and devices; DVA announces a $1B stock buyback offering; TRIB shares fell after saying its Primus Corp. subsidiary received a warning letter from the U.S. FDA following an inspection of its Kansas City, Mo., manufacturing facility that took place in January 2020; GNMK said it notified the FDA of intent to commercially distribute the eSensor SARS-CoV-2 test for clinical use – submits Emergency Use Authorization (EUA) to the FDA for the test

·     Healthcare services and providers; FLGT raises fy20 revenue view to $135M from $120M; announces expansion into Houston; Houston lab will be focused on covid-19 testing initially; Guggenheim with several tgt changes in services as raises PGNY price target to $34 (from $30) and reiterating our Buy rating while raising LVGO price target to $135 (from $62) and reit buy; APDN files a non-provisional patent application with the USPTO entitled “Methods and Systems of PCR-Based Recombinant Adeno-Associated Virus (AAV) Manufacture.”


Industrials & Materials

·     Transports; CHRW downgraded to neutral from outperform at RW Baird after its recent rally while upgraded UNP to outperform with a $220 tgt – said 2Q20 EPS reporting was remarkable, with median upside versus consensus of ~50% among our covered companies. However, a few themes and trends emerged during reporting and into the early part of 3Q20 that we believe present sustainable catalysts for the group beyond (raises FDX to top idea); for airlines, Bank America said Domestic industry capacity is tracking to -47.6% in September vs -46.3% in August and -50% in July." The U.S. airline industry currently shows a 46% reduction in domestic capacity for August and 56% decline in system-wide capacity; RYAAY cuts capacity in Sept and Oct

·     Metals & Materials; GOLD rises after Berkshire 13F filed Friday showed they acquired nearly 21 million shares of Barrick Gold (GOLD) worth $563 million; CMC tgt raised to $22 at Cowen saying they walk away from CMC’s investor day with a greater appreciation for EBITDA uplift from ongoing footprint optimization in the U.S. and view the company’s investment in a third micro mill as well placed


Technology, Media & Telecom

·     Semiconductors; NVDA rises again as more analysts raise price tgts ahead of its earnings results this week (reports Wednesday night) – Susq to $540, Wells to $510; overall semiconductor index (SOX) rises to new all-time highs as space continues to outperform and lead the Nasdaq higher; MU remains weaker after softer guidance last week sunk it and shares of WDC, STX; INFN was upgraded to buy at Stifel as believe the company is well positioned to win share with the launch of their 800G products later this year, and drive significant operating leverage in their model with the adoption of new 600G/800G products

·     Hardware, Software movers; RXT shares jumped after Reuters reported AMZN is in preliminary talks to invest in U.S. cloud services provider Rackspace Technology as the deal would involve Amazon acquiring a minority stake in Rackspace; ZM shares rise as KeyBanc said data for credit and debit cards in SMB focused card base outlines continued growth in Cloud Conferencing with Zoom billings up 32% q/q in its F2Q21 vs. consensus down 15% (leading us to raise ZM estimates); AAPL removed Fortnite from the App Store and informed Epic that on August 28 Apple will terminate all developer accounts and cut Epic off from iOS and Mac development tools


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