Market Review: February 04, 2020

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Closing Recap

Tuesday, February 04, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     The resiliency of U.S. stocks has been astounding the last few days, managing to shake-off heavy losses late last week (which pushed total returns for the S&P and Dow negative for the year at the end of January), as investors once again take the opportunity to scoop up beaten stocks. With today’s broad based rally, the Nasdaq Composite trades to fresh all-time record highs despite coronavirus market fears – hitting the 9,480 level – as markets were helped by technical difficulties in the Iowa caucus last night for Democrats – seen a positive for President Trump who has been very market friendly. Signals of improving factory activity in major economies around the world also helped boost sentiment along with stimulus from China into its economy for a second straight day to combat the shock to its economy from the coronavirus outbreak. China added more stimulus to its economy, adding another 500B yuan ($71.2B) of liquidity via reverse repo agreements into the financial system, in addition to the $143B injection seen Monday. The chaos in Iowa’s Democratic caucuses meant there was no initial announcement of a clear winner, with results expected somewhere around 5:00 PM EST today. In stock news, TSLA on steroids as shares top $950 per share as the upward momentum continues, while GOOGL shares slipped following its weaker revenue results ahead of another busy slate of earnings (DIS, Ford, GILD, SNAP, MCHP, ALL, KLAC, among those tonight). Oil prices remain a big drag as WTI crude slips for the 10th time in eleven days to settle below $50 per barrel while gold and Treasuries sink.



·     Oil prices couldn’t hold earlier gains, as WTI crude slipped for the 10th time in the last eleven sessions, falling 50c, or 1% to settle at $49.61 per barrel, remaining more than 20% lower from its recent peaks, slipping despite earlier reports that OPEC+ said the group considers output cuts in response to potential demand impact from global coronavirus fears. Oil had climbed to $51.55 highs initially as officials from OPEC+ gathered on Tuesday for an urgent meeting to assess the impact of the coronavirus on global demand, and how the group should respond. April god prices tumble -$26.90 or 1.7% to settle at $1,555.50 an ounce, falling on a further bounce in the dollar and stocks, lessening the demand for safe-haven assets.


Currencies & Treasuries

·     Treasury yields pushed higher, as the 10-year rallied 7 bps to around 1.60% (after falling over 32 bps the last 2-weeks in a flight to safety given coronavirus outbreak fears) and the 2-year rose over 6 bps to move back above 1.4% after touching multi-year lows of 1.31% the end of January as U.S. stocks melt-up as Wall Street extends its rally. The U.S. dollar has benefitted the last few days from better economic data, and a resurgence in stocks, with safe-haven currencies such as the yen dropping from recent highs.


Economic Data

·     Factory Goods Orders for December rose 1.8%, topping the 1.2% estimate while November orders were revised down to -1.2%, from -0.7% previously; new orders ex-trans rose 0.6% in Dec. after rising 0.2% the prior month and new orders ex-defense for Dec. fell 0.6% after rising 0.1%. Durables orders for Dec. rose 2.4% after falling 3.1% in November and nondurables shipments for Dec. rose 1.1% after rising 0.7% in November






WTI Crude















10-Year Note





Sector News Breakdown


·     Auto’s; TSLA defying normalcy, rallied for a sixth day, with shares topping $950 per share (up as much as 23% after its incredible run yesterday that saw the stock skyrocket also run 20%). Overnight, Panasonic said its business turned profitable in Q4 as Tesla’s battery output helped push that division into the black; RACE slips after the automaker’s full-year EBITDA guidance comes in with an implied range below expectations (€950M to €1B vs. €1.04B consensus); Ford (F) expected to report earnings tonight after the close and GM tomorrow morning

·     Consumer Staples; CLX lifts low end of 2020 profit forecast range on lower input costs after a Q3 profit beat; ELF was upgraded to overweight at Piper as believe the brand has gained and will continue to gain share over the foreseeable future despite a tepid beauty backdrop; DEO was downgraded at Argus noting it is facing challenges in the alcoholic beverage market amid changing consumer tastes, rising costs, and the impact of tariffs; WW upgraded to buy at Goldman Sachs with $48 tgt as think the company’s efforts are driving interest higher, and we expect subscriber growth to accelerate to +14% in 2020.

·     Retailers; RL just topped its holiday-quarter revenue estimates helped by demand for its winter wear in Europe and North America (revs $1.75B vs. $1.72B est.) and said it continued to expect fiscal 2020 revenue, excluding fluctuations in foreign exchange, to rise 2% to 3%; CPRI, TPR among top gainers in the S&P as luxury retailers benefiting from the RL earnings results; RCII and AAN rolled to lows due to recent articles on the proposed state budget in California that calls for the formation of a new mini-CFPB

·     Casino & Leisure movers; Casino operators with interests in Macau such as WYNN, MLCO, LVS, MGM volatile after officials in Macau said they will ask casinos to close for half a month as part of efforts to contain the coronavirus outbreak; RRR upgraded to buy at SunTrust with $30 tgt as see upside from a strong core Locals outlook, $500M+ of excess monetizable land, and a new tribal contract potentially moving out of litigation; cruise lines bouncing early after a bright outlook for RCL after its quarterly results; PENN rises after Ron Baron lauds the company’s acquisition of Barstool Sports during a CNBC interview



·     Energy stocks get a small bounce as oil prices recover off yearly lows; COP mixed Q4 results as reported a decline in profit (76c adjusted vs. est. 80) in part because of a non-cash impairment tied to a pending asset sale, due to lower realized prices and lower volumes because of dispositions; HP Q1 results helped boost the equipment company as Q1 earnings surpassed consensus and was higher YoY along with better than expected revenues; COG said it expects Q4 production of 2.46 billion cubic feet equivalent per day, above the top end of its own guidance



·     Bank stocks outperformed following the confusion in the Iowa caucuses signaling a boost to President Donald Trump’s chances of re-election, which has been seen as better for financial services companies like big banks than a win by either a moderate or progressive Democrat; shares of JPM, GS, MS, C, WFC along with regional banks gained; HLI shares rallied as Q3 results topped expectations; in insurance, HIG Q4 results topped consensus views, though shares slipped

·     Consumer finance and lending; GDOT was upgraded to buy at Citigroup following reports late yesterday that Starboard Value took a 9.3% stake in the company and expects the activist investor’s involvement to lift shares; FNMA, FMCC shares active after the companies’ regulator picked HLI to help free the mortgage giants from federal control



·     Medical equipment and devices; ZBH swung to q Q4 profit (narrowly topping ests) and provided guidance for earnings growth in the year ahead/sales rose by 2.6% to $2.13 billion–equal to a 3.2% increase at constant currency; WAT slides as Q4 top/bottom line beat views, but issued a lower outlook for Q1 and FY20; HAE fiscal Q3 beat/raises non-GAAP EPS guidance

·     Healthcare services and providers; CNC shares slide as the co’s health benefits ratio, a key measure of medical costs, worsened to 88.4% in Q4 from 86.8% a year earlier and missed estimates of 87.6% (Q4 medical costs rose nearly 17% to $15.2B); MCK posted better quarterly earnings and revenues; CTLT 8.4M share secondary priced at $59.20; PAHC surges despite mixed quarterly results and guidance; PINC shares fell after reporting the acquisitions of Acurity and Nexera for more than $290 million post earnings and reaffirmed guidance


Industrials & Materials

·     Industrial & Machinery; ETN Q4 miss as adjusted earnings of $1.37, represents a decrease of 6% over Q4’18, while expect organic revenues for 2020 to be between down 1 percent and up 1 percent versus 2019; KMT shares fall as quarterly miss was driven by a weaker top-line mostly in infrastructure and slightly lower margin performance; RBC beats Q4 expectations and provides FY20 outlook that had the mid-point above estimates; EMR Q1 EPS just top views on in-line revenue while boosts year adjusted EPS view on higher operating cash flow

·     Transports; Dow Transports jumped early, moving back above its 100-day MA 10,720 with all 20 components trading higher – led by airlines AAL, JBLU, UAL; not much in way of specific news for transports – group just rallied with broader markets after what has been a mixed earnings season (mostly disappointments in trucking, better airline and rail results)

·     Metals & Materials; ATI posts Q4 EPS and sales beat, helping shares bounce off 6-month lows; lithium producers surging (ALB, SQM, LTHM), moving in sympathy with gains related to TSLA and the bullish outlook for the company as well as Panasonic saying its business turned profitable in Q4 as Tesla’s battery output helped push that division into the black; with China adding additional monetary stimulus to its banking system the last two days, markets have rebounded and commodity stocks highly leveraged to the country have rebounded (copper, steel names); gold miners slump with gold prices (fell 1.7%), as NEM, AEM, GOLD, HMY slip


Technology, Media & Telecom

·     Internet; GOOGL slides as reports mixed 4Q results with total FX-neutral revenue growth of 19% driven by Google Properties growth of 18% y/y offset by weaker hardware revenues/reported lower operating income (amid higher legal costs) and disclosed revenue for YouTube ($15B for 2019, 36% y/y) and will also break out cloud going forward ($2.6B in 4Q, 53% y/y); EBAY rises after Dow Jones reported ICE has approached EBAY about a takeover – the late day report followed earlier news that activist investor Starboard Value L.P. disclosed a letter it wrote to the e-commerce site’s board saying the company was "deeply undervalued" and that more value could be created by separating the classifieds business; SNAP earnings tonight, SPOT tomorrow

·     Semiconductors; NXPI posted a solid 1Q and better guide which included MRVL assets contribution of $75M so on an organic basis more in line; NVDA powered on its GeForce NOW online computer gaming service, expanding the chipmaker’s connection to the growing video-gamer industry; ON only name lower in the SOX, adding to day prior losses after earnings miss; equipment names AMAT, LRCX, KLAC, TER among top gainers

·     Software movers; AYX announces strategic partnership with PwC to serve ‘escalating demand for advanced analytics and automation; WORK initiated outperform and $25 tgt at RBC as believe Slack is the leader in this space from both a brand and feature/functionality perspective, and remains in an early growth phase; GLUU initiated overweight at Morgan Stanley, bullish on its stable of game franchises, which they see driving higher than expected earnings and multiples; MTSC shares drop following its top and bottom quarterly miss

·     Media & Telecom movers; DIS expected to report earnings after the close; ALLT reported 4Q eps, revs better, guided FY higher; SIRI reported Q4 revenue that topped consensus as its Pandora sees ad revenue rise 10% in 2019, monthly users decline; MTCH another name in the media space with expected earnings tonight; MSGN Q2 results missed views on lower revs and subs declined 8% in the quarter, but shares still managed to rise

·     Hardware & Component news; HLIT shares slipped following a 4Q19 beat coupled with disappointing 2020 revenue guidance; VSH mixed Q w margins weaker but next Q revs guided higher and GM tick back to 24%; ENTG solid 4Q but 1Q guide is light of mid-point of guide; BDC shares rise after Q4 EPS and revs ahead of consensus

·     In optical, FN share jumped to record highs after Q2 results topped estimates and announced a significant project from CSCO, while LITE also record highs after its Q2 results and Q3 guidance (Q3 EPS $1.00-$1.7 on revs $400M-$425M vs. est. $1.03 and $408.7M) – shares of CIEN, IIVI, AAOI rise in sympathy


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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