Market Review: August 25, 2020

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Closing Recap

Tuesday, August 25, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished mixed as weaker confidence data offset optimism on trade as U.S. and China officials pledged firm commitment to a Phase 1 trade deal. Consumer confidence fell in August to a new pandemic low after a fresh rash of coronavirus cases during the summer, as the index of consumer confidence sank to 84.8 this month from a revised 91.7 (and well below the 93.0 estimate). As usual, technology outperformed with the Nasdaq Composite rising a 4th day, surpassing yesterday’s intraday record highs. There also remains increased optimism around COVID-19 vaccine development after the FDA approved the emergency use of blood plasma in COVID-19 patients this past Sunday. Markets still await an annual conference of U.S. central bankers where Federal Reserve Chairman Jerome Powell is scheduled to speak the tail end of the week. In stocks news, the Dow Jones Industrial Average slides following three index changes as AMGN, CRM, HON were added to the Dow while PFE, RTX, XOM are removed ahead of the AAPL 4-1 stock split which changes the tech weighting in the Dow. The S&P index recorded over 25 new 52-week highs and no new lows in what was a generally low volume day. Oil prices and stocks extend yesterday’s gains as Tropical Storm Marco made landfall Monday, but attention is focused on Laura, which was upgraded to a hurricane Tuesday morning and is expected to make landfall on the U.S. Gulf Coast later this week.

Economic Data

·     U.S. June 20-metro area home prices +3.5% vs. est. 3.8% and revised +3.6% in May while June home prices in 20 metro areas flat seasonally adj vs. est. +0.1%; June 20-metro area home prices non-adjusted +0.2% vs. revised +0.3% in M as per S&P Case-Shiller

·     New Home Sales for July surges 13.9% to 901K, easily above the 790K estimate July home sales northeast -23.1%, Midwest +58.8%, South +13.0% and West +7.8%; July new home supply 4.0 months’ worth at current pace vs June 4.6 months; July median price $330,600, +7.2%

·     Richmond Fed for August reported at +18 vs. est. +10 as shipments fell to 22 after 23 the prior month and new order volume increased to 15 after 9 the prior month

·     Consumer Confidence for August reported at 84.8, well below the 93.0 estimate and downwardly revised 88.6 from 92.6 in July; consumer expectations index 85.2 vs. July revised 88.9 and present situation index 84.2 vs. revised 95.9



·     Gold prices slipped for a second day as December gold fell -$16.10 or 0.8% to settle at $1,923.10 an ounce despite the dollar index holding lower as China-U.S. trade tensions ease and markets position themselves ahead of Fed Chairman Powell’s Jackson Hole speech later this week. After touching record highs just two weeks ago, profit taking has ensued in the precious metal, finishing lower in four of the past five sessions, as equities take cues from optimism on vaccines and treatments for the COVID-19 pandemic.

·     Crude oil prices touch 5-month highs for most recent contract, with WTI crude rising 73c or 1.7% to settle at $43.35 per barrel, supported by declining supplies as U.S. producers shut most output in the Gulf of Mexico ahead of Hurricane Laura. Laura is expected to strengthen into a major hurricane with 115 mile per hour (185 kph) winds when it strikes the coast near the Texas-Louisiana border Wednesday night. On Tuesday, energy firms shut 1.6 million barrels per day of crude output, 83% of Gulf of Mexico’s offshore production.


Currencies & Treasuries

·     The benchmark 10-year Treasury yield was higher by 3 bps to 0.68% as concerns eased over the U.S.-China tensions, bolstering risk assets once again as U.S. and Chinese officials reaffirmed their commitment to the Phase One trade deal. Supply weighs again as the U.S. Treasury Department kicked off the first of its $148 billion of debt auctions this week, starting with a $50 billion sale of 2-year notes at a yield of 0.155%, matching July’s record low and slightly below the 0.158% when issued yield prior; the bid to cover (demand was at 2.78 and indirect bidders awarded 57.63%). The dollar quietly inched lower vs. most currencies following mixed economic data.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; BBY posted Q2 earnings and sales that topped consensus, while comp sales rose 5.8% beating the 3.7% estimate, but shares lagged after saying it expects sales growth may slow in the coming weeks due to challenges such as higher unemployment and potential supply issues; TIF slipped after LVMH said it notified Tiffany that it reserves the right to challenge the validity of the extension of the deal outside date; LB rises after MKM upgraded to buy with $40 tgt amid greater confidence in a Victoria’s Secret transaction and positive on Bath & Body Works; PLCE reported a wider-than-expected quarterly adj loss of (-$1.48) vs. est. loss (-$1.14) saying back-to-school sales have been significantly impacted and also anticipated a negative impact on its Q3 results; CROX was upgraded to buy at B Riley and raised its price tgt to $46 from $35; GPS was upgraded to buy at Citigroup and raised tgt to $24 from $12 saying the plan to spin off Old Navy was ditched, but the plan could imply the Board is willing to take on corporate actions to unlock shareholder value

·     Auto sector; NIO was upgraded to neutral from sell at UBS and raise tgt to $16.30 from $1 noting the stock’s fundamentals have improved with the revival of sales volumes and margins in the company’s reported Q2 and guided Q3; TSLA active again ahead of its stock split later this week as CEO Elon Musk has suggested the U.S. electric carmaker may be able to mass produce batteries with 50% more energy density in three to four years

·     Housing & Building Products; RBC Capital raises WSM Q2 comp estimate to 10% from ~2% given his view that the Retail Lift and home-centric spending accelerated meaningfully in Quarter; AMWD reported a top and bottom line Q1 beat while noted sales and net income were negatively impacted by COVID-19; TOL set to report earnings tonight in homebuilders

·     Consumer Staples; SJM reported a beat on the top and bottom line and raises year sales view to 0% to +1%, saw -1% to -2% and raises FY21 free cash flow view to $925M-$975M from $900M-$950M; HAIN Q4 EPS of 32c topped the 26c estimate on in-line sales of $511M, while Q4 adj Ebitda rose over 9% to $62.2M (shares fell after its CEO said the company is expecting growth to slow in H2 2021 due to adverse macro factors); HRL posted Q3 EPS and sales that came in just above consensus views while saying it sees Q4 mirroring many dynamics seen in Q3; THS files mixed shelf registration

·     Restaurants; SBUX was upgraded to buy from hold at Stifel and raise tgt to $90 from $78 as near-term believe SRS are recovering at least in line with Street estimates, which should be viewed favorably and sales trends should benefit in FY21 from aggressive steps the company is taking to improve convenience, such as curbside pickup and drive-thru handhelds; PZZA said August system-wide North America comps +24.2%, North America franchised restaurants comps +26.1%; JACK was initiated buy and $100 tgt at Deutsche Bank as like the setup because there is still upside in a base case

·     Leisure and Gaming; MGM’s BetMGM and VSiN, The Sports Betting Network announce a collaboration that will include the launch of a sports betting show; DKNG rises with strength attributed to Northland saying the timing of an Illinois executive order reinstating remote registration for sports betting accounts came at an opportune time; cruise lines give back some of yesterday vaccine related hope gains (CCL, RCL)



·     Energy stock movers; energy stocks bounced early with oil prices and gasoline futures rallied as storms forced the shutdown of more than 80% of offshore crude-oil production in the Gulf of Mexico and prompted refinery cuts. Tropical Storm Marco made landfall Monday, but attention is focused on Laura, which was upgraded to a hurricane Tuesday morning and is expected to make landfall on the U.S. Gulf Coast later this week

·     Utilities & Solar; POR disclosed trading losses that could reach $155M, prompting the company to lower its full-year EPS view to $1.30 to $1.60 from $2.20-$2.50 prior and sees no impact expected to dividend guidance or long-term eps growth rate; SOL announced the signing of an agreement to acquire certain assets, including solar projects and accounts receivable, from an undisclosed U.S.-based developer in an all-stock transaction that values the assets at approximately $8 million; XEL was downgraded to hold at Argus citing valuation



·     Bank movers; banks started the day higher, initially adding to Monday gains as investors rotated back into value names given the underperformance vs. growth in 2020; insurance stocks, especially reinsurance (RNR, ACGL, RE, CB) remain in focus ahead of expected impact of tropical storms in Louisiana and the Gulf region; Raymond James noted Tropical Storms Marco and Laura continue towards Louisiana and Texas with landfalls Monday evening and Wednesday, the storms will likely have a significant impact on self-storage properties – among the self-storage REITs, exposure to Louisiana is minimal while LSI has the greatest exposure to Houston (9% of revenues) followed by PSA, CUBE, and Underperform-rated EXR



·     Pharma movers; BMY said it enasidenib fails to extend survival in late-stage leukemia; OVID jumps as it and Japan’s Takeda Pharmaceutical said phase-2 ELEKTRA study of their Soticlestat treatment for certain types of epilepsy in children achieved its primary endpoint with high statistical significance and plan to initiate phase 3 registrational program in Dravet Syndrome; TEVA shares fell late session after Bloomberg reported the U.S. is preparing to charge the company with conspiring with competitors to raise prices for generic drugs

·     Biotech movers; AMGN will replace PFE in the Dow Jones Industrial Average; IMVT rises after saying it expects to start registration-enabling Phase 3 trial in the first half of 2021, with positive topline results from ASCEND MG, a phase 2a study of IMBT-1401 in patients with myasthenia gravis (MG); ALT announces additional positive results from preclinical studies of its single-dose intranasal COVID-19 vaccine candidate – AdCOVID; SRPT announces FDA acceptance of Casimersen (srp-4045) NDA for patients with DMD amenable to skipping Exon 45

·     MedTech and Equipment; MDT Q1 EPS of 62c tops the 18c estimate, but is down sharply from $1.26 last year due to disruptions caused by the coronavirus pandemic while revs of $6.5B tops the $5.44B estimate citing a recovery in procedure volumes, while revenue from its businesses in non-U.S. developed markets declined the least among its sectors; MD announced changes to its financial leadership with current CFO Farber to depart and former Quality Care Properties CFO C. Marc Richards joining the company and expected to assume the CFO role in October 2020.


Industrials & Materials

·     Transports, Industrial & Machinery; HON will replace RTX in the Dow Jones Industrial Average; the Dow Transports remain not far from record all-time highs reached in January (11,359) as package delivery (FDX, UPS), truckers and rails rally, while airlines have rebounded on hopes of the economy reopening; ODFL was downgraded to sell from hold at Stifel on valuation; AAL says about 19,000 of team members will be involuntarily furloughed or separated on Oct. 1, unless there is an extension of PSP (will have at least 40,000 fewer people working Oct. 1 than it had when it entered pandemic); BA says making progress toward launching second uncrewed Starliner flight test by year-end or early January, pending software and test hardware production developments, Reuters reported


Technology, Media & Telecom

·     Internet; FB agrees to pay France $125 million to settle dispute over 10 years of back taxes; BABA new all-time highs after Ant Group files for IPO in Hong Kong and Shanghai; FTCH shares slipped after Women’s Wear Daily (WWD) said AMZN will launch a luxury brands platform next month, just as fashion-show season kicks off; GOOGL and FB shares rally with tech and as UBS raises price targets on both ($1,970 and $330 respectively)

·     Software movers; CRM will replace XOM in the Dow Jones Industrial Average; PANW reported upside to revenue ($950M vs. street $923M) and billings ($1,390M vs. street $1,203M) driven by stability in product (flat Y/Y) and considerable strength in “next-gen” products while billings guide is just in line and FY 21 growth is implied to be mid-teens w product flat to down; FSLY extends gains after Raymond James upgraded yesterday lifted shares citing durability of growth profile

·     Hardware & Component news; AAPL shares slight pullback after hitting record highs above $515 on Monday on continued momentum; NPTN downgraded to underperform at Raymond James based on assessment that the risk of losing Huawei has grown too high; RNWK supports the acquisition of Rhapsody International, Inc., which does business as Napster, by MelodyVR Group PLC, in deal valued ~$70M, comprising $15M in cash


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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