Market Review: December 11, 2020

Auto PostDaily Market Report

Closing Recap

Friday, December 11, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Another day, another market rally, as investors brush off mixed vaccine news, no new developments on the stimulus/relief front in Washington, the UK preparing for a possible no Brexit and generally mixed to weaker data – but stocks still bounce the entire session. The rally in markets has been non-stop since the Presidential election, with major averages exhibiting absolutely no fear as the hopes of a vaccine and additional stimulus funds have pushed major averages to record highs – offsetting rising coronavirus cases and tighter restrictions, but the fear of missing out has kept investors chasing performance. The Dow Jones Industrials outperformed other averages behind a stellar day for Disney (DIS) which posted upbeat Disney+ subscriber numbers and an overly bullish outlook. Another bullish week for stocks with no end in sight.

·     News that Sanofi/GSK experienced a setback following poor results for elderly patients and its rollout delayed until end of Q1 2021 hit stock futures overnight, offsetting the highly anticipated (and widely expected) news that an FDA advisory panel approved PFE and BNTX’s Covid-19 candidate. Brexit fears remain as UK PM Johnson said that he is preparing the country for a no-deal Brexit in a press interview late on Thursday, warning there is a strong possibility talks would fail. Gold futures rose 0.3%, or $6.20, to settle at $1,843.60 an ounce and finish higher on the week after a surge in jobless claims may lead to further monetary easing. Oil prices edged lower by 21c but end the week with a small gain closing just off 9-month highs. Treasury yields dipped late week while the dollar languished again as investors look to riskier assets.

Economic Data

·     Producer Price Index for Nov rose +0.1%, in-line with consensus and down from +0.3% prior, while YOY, prices rose +0.8% vs. +0.7% consensus and +0.5% prior. Core PPI (ex: food & energy) rose +0.1%, below the +0.2% consensus and +0.1% prior and YoY core rose 1.4% vs. est. 1.5%

·     University of Michigan Surveys of consumers current conditions index prelim Dec 91.8 (consensus 87.0) vs final Nov 87.0; consumers expectations index prelim dec 74.7 (consensus 71.0) vs final Nov 70.5; consumers sentiment prelim dec 81.4 (consensus 76.5) vs final Nov 76.9






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; LULU reported Q3 adj EPS $1.16 on revs $1.1B that topped estimates ($0.88 on $1.0B), comp sales +19%, ecommerce sales +93% YoY with a record performance for the week of Black Friday, adj operating margin decreased 10bps to 19.1%, its gross profit margin increased to 56.1% from 55.1% YoY, and the company upped its share repurchase program to $500M; COST Q1 EPS $2.62 vs. est. $2.05 on sales $42.35B (+16.9% from $36.24B last year) vs. est. $42.66B, membership fees up over 7% YoY to $861M, comp sales +15.4%, total E-Commerce comp sales +86.4%; TJX was downgraded to Neutral from Buy at Citi who is less confident that TJX is on a visible path to reversing the downward margin trajectory they have seen for the past several years; Citi upgrades RL to Buy from Neutral based on their belief that RL is making the right moves to upscale the brand while positioning itself to cut a meaningful amount out of its expense base; OpCo reiterated FIVE at Outperform and raised their target to $195 from $140, calling the company a superior, merchandise-driven market share grabber and one of the most compelling new unit expansion stories across retail; Goldman downgraded SFIX to Neutral with a $58 pt from Buy after the stock traded through their price target, providing a more balanced risk-reward; FL was initiated at Sector-Weight by KeyBanc

·     Auto sector; China’s sales of SUVs, minivans and sedans rose by double digits in November but were below pre-pandemic levels for the year; sales rose 11.6%Y/Y to 2.3M, according to the China Association of Automobile Manufacturers (XPEV, LI, KNDI, NIO); NIO announced a secondary offering of 60Mm ADS (pricing Monday); Jefferies downgraded TSLA to Hold from Buy but raised its pt to $650 from $500 as they do not believe the company can dominate the auto sector given the industry structure, though they acknowledge the company’s durable competitive edge and say it is in a league of its own; Jefferies also raises their price targets for most of the legacy OEMs that they cover due to reducing the cost of risk to reflect cyclical improvements and a flattening of investment spending, and they prefer Ford (F) among these stocks based on an earnings recovery driven by: renewal of high value historic product franchises, equity leverage, cost issues coming under control, and new management; Goldman initiated RIDE at Buy with a $31 tgt and FSR at Neutral with a $15 tgt; EVBox Group, an EV charging company, agreed to merge with a blank-check company formed by TPGY in a transaction that values EVBox at an implied $969M enterprise value; BTIG initiated Buy ratings and $40 price target on EV Battery companies PLL and RMG, which is a SPAC waiting to close its acquisition of Romeo Power; In auto retail, Jefferies upgraded AZO to Buy from Hold as the company could potentially close the historical valuation gap versus ORLY as initiatives growing do-it-for-me market share bolsters long-term growth and significant DIY mix (78% of sales) provides near-term support

·     Restaurants; FAT said it has agreed to combine with Fog Cutter Capital Group Inc., in an effort to ramp up financial flexibility and simplify its corporate structure. ; PLAY said comparable-store sales have fallen 71% during the first five weeks of Q4 and November comp-store sales fell 69% and sales were about $32.6 million

·     Leisure and Gaming; MTN reported pass sales +20%/flat in units/dollars for the upcoming season, an acceleration from last quarter’s +18%/-4% and a beat to Bank America expectations of +10% to +15% for units and -10% for dollars (though missed results for quarter EPS and sales); in casinos and gaming, Jefferies raised tgts on LVS (top pick) to 66 from 55, CZR to 85 from 68, WYNN to 107 from 82, PENN to 74 from 64, MCRI to 65 from 57, MGM to 30 from 22, CHDN to 190 from 176 and BYD to 45 from 39 as believe the regional markets are best positioned fundamentally despite a weaker than expected 4Q20 driven by COVID-related restrictions; cruise line price tgts raised at Stifel after meeting with mgmt of all three, as CCL, NCLH and RCL move to $32, $35 and $100, respectively saying they were encouraged to hear that demand from consumers remains extremely strong for itineraries in late-2021 and 2022; AMC committed to issue an aggregate of 21.978M common shares in a private placement.



·     Energy stock movers: sector has been a monster recently, surging as oil prices touch best levels since the pandemic in March, as investors extend bets that an economic recovery in 2021 due to a vaccine will boost demand, with E&Ps, majors, services and refiners rising; oil prices erased earlier gains today as the dollar climbed and equities fell. Brent crude had topped $50 Thursday

·     E&P sector was upgraded by Morgan Stanley to Attractive from In-Line as they believe the foundation appears in place for a sustained rally, but they also see the sharp rally in the group in the past month having created valuation disconnects. FANG upgraded to Overweight from Equal Weight with a $65 tgt, citing an estimated 14% free cash flow yield in 2021 that he expects to be highest among its peers; raised MUR to Equal Weight from Underweight with a $14 tgt, citing its reduced spending profile and improved cost structure. RRC also upgraded to Equal Weight from Underweight with a $7 tgt, stating that he now sees a more balanced risk/reward

·     Refiners: Morgan Stanley optimistic that the macro environment is rebalancing towards a margin recovery in the refining space, but he expects the ride to continue to be "bumpy as they upgraded VLO to Overweight from Equal Weight and up tgt to $74 from $50 and raised HFC to Equal Weight with a $34 tgt from $24 while downgraded PBF to Underweight from Equal Weight with a $9 price target, up from $7

·     Utilities & Solar; in solar, Piper initiated SEDG ($350 tgt) and ENPH ($150 tgt) at overweight and FSLR ($92 tgt) with a neutral as believe investors will continue to relatively favor capital light businesses with strong sustainable margins and the capability to capture meaningful market share thereby driving robust growth rates



·     Bank and insurance; Financials modestly weaker given the pullback in Treasury yields as investors fled to the safety of bonds (JPM, BAC, etc lower on day); Bloomberg reports that STT is weighing options for its asset management unit, including a possible merger with a rival and has evaluated deals with IVZ and UBS upgraded to Outperform on better credit and capital view at RBC; Credit Suisse upgraded USB to Neutral from Underperform and downgraded FRC, NTRS to UP from Neutral; MET announced that it has signed a definitive agreement to sell Metropolitan Property and Casualty Insurance Company and certain wholly owned subsidiaries to Farmers Group, a subsidiary of Zurich Insurance Group (ZURVY), for $3.94B in cash

·     Consumer Finance; a 14-billion-pound ($18.5 billion) class action against MA for allegedly overcharging more than 46 million people in Britain over a 15-year period was on Friday given the green light by the UK Supreme Court; Stephens initiated COF at Equal-Weight; SQ adds Shift Scheduling to its labor management tools, which allows business owners to schedule, manage, and pay their staff; Mizuho reiterated their Buy rating on FISV and said the stock was highly attractive following Tuesday’s investor day due to favorable metrics vs peers (Venmo, Zelle, PYPL, SQ), a JV with Stripe, $30B available for capital allocation through 2025, and management’s bullish outlook and strong leadership;

·     REITs; PEI completed its financial restructuring to emerge from Chapter 11 bankruptcy and now has access to $130M of new capital and an extended debt maturity schedule; Barclays lifted their price targets on OW-rated SHO, HST, DRHand EW-rated PK, APLE, CLDT, RLJ in lodging following management meetings, earnings, and vaccine news as they have raised 2022 estimates given the potential for a stronger recovery after 2021’s vaccine distribution and a relaxation in restrictions; BTIG lowered their price target on EQR to $74 from $79 and on ESS to $292 from $314, though they keep their Buy ratings on both stocks given a favorable renting environment and an expectation of sharp improvements in rental revenues next year;



·     Vaccine related news: SNY and GSK delayed advanced trials of their potential coronavirus vaccine after it produced an "insufficient" response in older adults – they now say it won’t be ready until late next year, and will commence a new second-phase study with a more concentrated antigen in February; PFE and BNTX announced that the U.S. FDA’s Vaccines and Related Biological Products Advisory Committee voted 17 to 4 in support of the FDA granting Emergency Use Authorization for the companies’ COVID-19 mRNA vaccine;

·     Pharma movers: BMY says Celgene and Cipla have settled their litigation related to patents for Revlimid (lenalidomide); PFE and BMY both announced dividend increases; XERS receives positive opinion from European Medicines Agency’s Committee for Medicinal Products for Human Use regarding its diabetes treatment; SNOA rises after Crown Laboratories to sell its Microcyn technology-based over-the-counter products like dermal sprays and gels

·     Biotech movers: LXRX said it has received U.S. FDA fast-track tag for development of LX9211 for diabetic peripheral neuropathic pain, or nerve damage caused by chronically high blood sugar and diabetes; DVAX said the European CHMP has issued a positive opinion recommending the granting of marketing authorization for HEPLISAV-B; NK rises after its partner ImmunityBio announced results from the Challenge study evaluating, hAd5 T-Cell COVID-19 vaccine candidate.

·     Deal pricings/secondary/IPO news: ABCL 24.15M share IPO priced at $20.00; FDMT 8.4M share IPO priced at $23.00; CERT 29.055M share IPO priced at $23.00; NBTX 7.3M share IPO priced at $13.50; NBRV 6M share Spot Secondary priced at $2.50; OPCH 10M share Spot Secondary priced at $15.00; PTGX 4.76M share Secondary priced at $21.00


Industrials & Materials

·     Transports; Airline sector downgraded at Deutsche Bank, cutting AAL, ALGT, ALK, DAL, JBLU, LUV, SAVE, SKYWand UAL all downgraded to hold from buy as finds airline stocks fairly valued following the recent rally. Notes the sector has surged over the past several months as positive developments on the COVID front have boosted investor sentiment but are now trading at or near fair value based on 2022 valuations; meanwhile, UBS upgraded UAL and ALK to buy; UPS named a catalyst call buy at Deutsche Bank on confidence in the company’s involvement in the distribution of the COVID-19 vaccine.

·     Metals & Materials; space takes a breather after a massive move, as metals slip; Cowen raised its rice tgt on CLF (PT to $13 from $5.50), STLD ($36 from $28) and X (PT to $15 from $7) saying they think it makes sense to remain selective with a defensive tilt in ’21 and continue to favor NUE (PT $60 from $51) – remain cautious on the US carbon steel sector given several destabilizing factors that could drive downside to pricing and spreads in 2021


Technology, Media & Telecom

·     Semiconductors; QCOM shares slip after Bloomberg reports AAPL has kicked off the development of its first cellular modem, citing Apple’s chip chief telling staff. That Apple modem would replace Qualcomm’s modem in iPhones ; AVGO reported quarterly results and guide that were better (noted OctQ strength from wireless ramps with iPhone) and the company raised the dividend 11% while also announced a slew of management changes

·     Software movers; ADBE reported a top and bottom line Q4 beat with new stock repurchase authority, granting the company additional authority to repurchase up to $15B in common stock and issues guidance slightly above views; ORCL total revenue of $9.80B (+2% y/y reported and in CC) was ~$30M above the $9.77B consensus estimate; while PF EPS of $1.06 (+19% y/y reported, +17% in CC) was ~$0.06 above the $1.00 consensus estimate, while guided mid-teens EPS growth next quarter; SNOW downgraded to hold from buy with $335 tgt at Deutsche Bank as shares have risen 28% since the Q3 report despite very little change to the fundamental story and the risk/reward is now balanced

·     Media & Telecom movers; DIS leads the Dow after saying at its analyst day that Disney+ has 86.8M subscribers as of December 2nd (had hit 74 million as of early October) and sees Disney+ subscribers at 230M-260M by FY24 vs. prior view of 60M-90M and sees as many as 350M total subs by end of FY24; in tower sector, Deutsche Bank upgraded CCI to buy from hold and raise tgt to $180 from $177 and downgraded AMT to hold from buy saying co is well positioned long-term, but is facing a tougher path in 2021; SE prices upsized 13.2MADS offering (from 11M) at $195.00 per share

·     Hardware & Component news; JPMorgan with changes in the Networking Equipment & IT Hardware 2021 Outlook as they downgrade GLW, JNPR to Neutral, upgrade COMM to Overweight, say the 5G thematic ideas for 2021: QCOM, COMM and Value/Cyclical trade ideas: VIAV, FFIV, DELL, with Secular stocks: AAPL, KEYS, CIEN and Stocks to avoid: NATI, AAOI; JBL with an “opening positive catalyst watch” at Citigroup as see upside to JBL’s revenue driven by strong Apple product demand and potential share gains from Catcher; ERIC filed a lawsuit against Samsung Electronics in the US for violating contractual commitments, and cautioned on delayed royalty payments and legal costs for which Samsung will have to bear cost between 1B-1.5B Swedish kronor ($118.1M-177.2M) a quarter.


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