Market Review: June 19, 2020

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Closing Recap

Friday, June 19, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stock ended mixed on Friday, staging a powerful reversal lower early afternoon after Apple Inc. (AAPL) said it would temporarily close some of its stores in four states due to a rapid rise in coronavirus cases in those U.S. states (FL, SC, NC, AZ). The headline pushed stocks lower, erasing strong gains prior (more than 600-point move off the highs for the Dow). Markets have been closely watching the recent uptick in coronavirus cases in several states over the past week – and those numbers continued to rise on Friday. The Apple comments stoked fears that additional companies may follow suit to help reduce another outbreak, as retailers slumped. Between Apple and the rising COVID cases, markets forgot about the positive trade news overnight after Bloomberg reported China plans to accelerate purchases of US farm products to comply with phase one trade deal after buying fell behind recently due to coronavirus disruptions.

·     The number of new cases in Florida, Arizona and California have hit daily record highs, though authorities so far have shown no signs of putting lockdown-measures back in place, though some have instituted mandatory mask wearing out in public in California and parts of Arizona the last few days. China, where the pandemic originated but had been contained, also reported an uptick in new cases of the disease. Still, for the week, the S&P 500, the Dow and the Nasdaq Composite all posted solid percentage gains as the S&P 500 and the Dow are now about 9% and 13% shy of their respective all-time highs reached in February.

·     Biotech one of the bright spots today as the IBB ETF traded to 52-week highs. Stocks sensitive to the economic reopening (airlines, cruise lines, theme parks) were hit hard in afternoon trading following additional disappointing news related to rising COVID-19 cases. Energy stocks advanced behind rising oil prices (WTI crude gained 10% this week). Volumes ramped up late day ahead of quadruple witching options expiration, which occurs on the third Friday of the month of every quarter, in March, June, September, and December, and refers to the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock-futures.

·     The concerns of excessive valuations, record levels of debt and deteriorating fundamentals remain a concern as well as the recent rise in COVID-19 cases – but will it still not be enough to fight the Fed which has implemented various monetary and stimulus related measures to try and keep the economy afloat during this global pandemic that shut the world down for nearly 2-full months? Just today, Boston Fed President said “the continued spread of the novel coronavirus could hamper the U.S. economic rebound from the pandemic, and more fiscal and monetary support will likely be needed.” Several other Fed members (Clarida, Quarles) echoed similar comments that more will be needed and they are prepared to act.

·     Florida reported 89,748 Covid-19 cases on Friday, up 3,822 from a day earlier, the biggest daily increase since the pandemic began. On a percentage basis, total cases rose 4.4% in the past day, compared with an average increase of 3.2% in the previous seven days. Deaths among Florida residents reached 3,104, an increase of 1.4%. An additional 3,246 new coronavirus cases, and 41 deaths, have been reported in #Arizona in the last 24 hours. This is the largest 24-hour increase the state has seen yet. New York stays steady, with Covid-19 cases rise 0.2%, in-line w/ avg. Hospitalizations for COVID-19 are increasing in 17 states across the country.



·     Oil prices finished the day higher, but off its best levels ($40.49), with WTI crude up 91c or 2.34% to settle at $39.75 per barrel (a 3-month high) as increasing demand amid state reopenings has helped push prices higher. Reports yesterday that Iraq will fully meet it OPEC’s output-cut agreements that it failed to deliver on last month when OPEC+ announced additional production cuts also helped prices this week. Prices for the week ended higher by roughly 10%.

·     Gold prices jumped on Friday, with August futures rising $21.90 or 1.3% to settle at $1,753 an ounce, finishing the week with around a 1% gain. Prices remain firm on low interest rates, a safe-haven hedge in rising coronavirus case environment. Goldman Sachs raised its 12-month forecast on gold to $2,000 an ounce, from $1,800. It also lifted its three-month view to $1,800 from $1,600 and its six-month forecast to $1,900 from $1,650 on the back of low real interest rates and concerns over currency debasement, even as developed markets emerge from COVID-19 lockdowns, lifting risk-on sentiment.


Currencies & Treasuries

·     Treasury prices advanced midday, pushing yields lower as stocks pulled back from morning highs. The yield on the 10-year benchmark yield fell to 0.69% from 0.72% (and off earlier highs around 0.74%) after stocks slipped on reports Apple was temporarily closing some of its stores in four states in an abundance of caution. The U.S. dollar ended the day higher, rising to its best levels late day as the dollar index (DXY) rose 0.25% following a strong week of economic data, and as investors roll out of riskier currencies and into safe-havens (yen also higher). The euro now down more than 200 bps from its highs above 1.14 vs. the buck over a week ago.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; KMX slips on mixed Q1 as lower revenue in F1Q was limited by more than just reduced vehicle sales as dealerships closed during the coronavirus pandemic/revenue from warranties and service-department sales fell as well, leading to a 38.9% YoY decline in CarMax’s other-sales-and-revenues category which mirrored the broader 38.6% decline in used-vehicle sales; TGT was upgraded to buy at Cleveland Research saying near-term trends appear well above expectations and the channel remains positive; ULTA upgraded to overweight from equal-weight at Barclays with $276 tgt saying the retailer is seen as uniquely positioned to capture market share in the beauty segment in a post-COVID-19 world

·     Consumer Staples & Restaurants; WING positive mention at Northcoast following recent checks that point to favorable chicken wing costs and strong digital sales through May; CLX traded to a new all-time high as investors continue to hold the defensive name; defensive safe have staples didn’t see the buying action one would expect with rising COVID cases as food names slipped

·     Housing & Building Products; HOME reported quarterly comps inline at -46.5% but GM missed big which caused EPS to be below consensus, but reopened stores are comping “solid double digits” they said; Wayfair (W) tgt raised to a Street-high view of $250 from $210 at Gordon Haskett saying has more room to run despite massive surge in shares

·     Casino & Leisure movers; PENN announced that 30 of its 41 gaming and racing properties have resumed operations, representing more than 70% of the Company’s regional gaming portfolio in 13 of the 19 states in which it operates; DKNG upsized 40M share Secondary priced at $40.00; theme park stocks (SIX, SEAS) slipped after AAPL announced was temporarily closing some stores due to COVID-19 case flare-ups – raising spectre of openings being delayed



·     Energy stocks were among leaders given the spike in oil prices the last few days and positive analyst commentary; CLR said it will restore some production but keep 50% curtailed; in research, Mizuho upgraded DVN to Buy and raised OVV to Neutral, while downgraded CXO to Neutral as believe oil price strip has found a floor through 2021 at $40/bbl; E&P’s OXY and EOG were both upgraded to buy from hold (OXY tgt to $25 and EOG to $70) saying for OXY it is in the position to continue improving its balance sheet and says EOG remains one of the most opportunistic large E&Ps by materially flexing all operations and finances; refiners; space has been very strong, outperforming other energy related sub-sectors recently; MPC rises after the WSJ reported overnight it is in talks with potential suitors for its Speedway gas-station business, reviving a sale that fell apart in the early stages of the COVID-19 crisis. The Baker Hughes (BKR) total rig count fell -13 to 266 with oil rigs down 10 to 189 and gas rigs down 3 to 75 (marked the 7th straight week drillers cut oil and gas rigs)



·     Bank movers; regional banks underperformed large cap banks, but financials in general lagged broader market strength, especially in REITs; EEFT was downgraded to neutral at Citigroup following the stock’s ~47% recovery since the mid-March trough (vs. ~44% for the Russell 2K) as it recovered faster than anticipated and exceeded our price target and see more limited upside; DBD rises after extends its partnership with IT consulting and services provider ACN to help streamline its finance, human resources, IT and sales systems

·     REITs; PSA was downgraded from Buy to Hold at Argus amid concern about the stock’s high valuation after a recent run-up in the share price and see better opportunities in other areas of the REIT sector, such as wireless towers, data storage, and healthcare; JPMorgan said it remains bullish on single-family rental REIT stocks, raises 2021 FFO/share estimates for AMH and INVH by 7% and 13% respectively and says for smaller cap RESI 2021 FFO/share estimate up 17% to reflect core business trends including strong rent collections, leasing traffic that has rebounded to levels comparable with last year, and higher occupancy; REITs in general were weak on the day as VTR, WELL, HST, FRT, DLR among top S&P decliners most of the morning



·     Pharma & Biotech movers; ASMB rises after ABBV terminated its microbiome license agreement; therefore, ASMB has regained worldwide rights to the assets in this program; ALPN adds to yesterday gains after analysts raise price targets following news Thursday on the announcement of a licensing agreement with ABBV; in services, ONEM shares rose after Canaccord initiated buy and $39 tgt earlier; BYSI 1.93M share Spot Secondary priced at $13.00; FMTX 13.88M share IPO priced at $20.00, GTH 16M share IPO priced at $16.00; RPTX 11M share IPO priced at $20.00 and KRMD 3.125M share Spot Secondary priced at $8.00


Industrials & Materials

·     Transports; The Baltic Exchange’s main sea freight index, which tracks rates for ships ferrying dry commodities around the world, posted its biggest weekly gain ever and has now surged nearly 300% since tumbling to a low of 393 points in May following a freeze in global trade. The index rose 28 points, or 1.8%, on Friday to a more than six-month high of 1,555, clocking a record weekly gain of 68.5%. The Baltic capesize index jumped 147 points, or 4%, to 3,819, its highest since late September (up 150% on the week) – shares of SALT, GOGL, DSX, NMM leveraged to data); WKHS shares rise as BTIG boosted its Street-high price target to $10 saying the cargo vehicle-maker is on the cusp of getting the green-light from the Department of Transportation for the first delivery of its C-series vans; airlines slumped late day given the increase in COVID cases (UAL, LUV, JBLU)

·     Metals & Materials; STLD guides Q2 adjusted EPS 40c-44c above consensus of 26c while notes Q2 earnings from the company’s steel operations is expected to be significantly lower than Q1 due to lower shipments and selling values as a result of the temporary closures (follows better guidance from rival NUE yesterday in steel sector as well – signaling potential earnings trough); Iron ore on China’s Dalian Commodity Exchange climbed 0.7% this week to 768 yuan/metric ton ($108.55), up 34% YTD; GOLD, NEM and other gold miners rise with price of gold jumping

·     Chemicals; HUN was downgraded to neutral at Seaport Global saying recovery in the prices of MDI, a chemical used primarily to manufacture polyurethane, seems uneven and slower than expected; UBS said they believe stocks with exposure to driving related consumables (fuel, replacement tires) will see a quicker recovery in volumes as highlight CBT and OEC (carbon black for rubber/tires) and GRA (refining catalysts) as relative beneficiaries in this trend; DD tgt raised to $65 from $60 and reiterate overweight at Wells Fargo as continue to believe the "remain co" is undervalued where the quality of the portfolio should stand out during 2Q20; NTR ests reduced at JPMorgan to reflect lower fertilizer prices in nitrogen, phosphate and potash, and higher acquisition-related SG&A expenses in the Retail division


Technology, Media & Telecom

·     Semiconductors; semis get a boost after Tokyo Electron projected a 11% rise in fiscal-year net profit thanks to growing demand for chip making (helping boost semi names); MU tgt raised to $65 from $55 at Wells Fargo saying that concerns over a downturn for DRAM memory chips was overdone

·     Software movers; WORK downgraded to sell from neutral at Goldman Sachs saying competition from Microsoft Teams to weigh on long-term growth and market share; AMSWA shares drop after reported Q4 net earnings dropped YoY though revs of $29.3M topped estimates and YoY and said Subscription fees were $6.3M, up from $3.8Mn for the same period last year; ORCL was downgraded at Argus to hold as they do not see Oracle gaining much traction in the current economic environment.

·     Media & Telecom movers; AMC shares rise after saying it will open the bulk of its U.S. theaters on July 15 (450 locations in mid-July), with the remaining 150 opening up on July 24th; CMCSA estimates raised at JPMorgan to reflect current cable momentum, somewhat improved trends at Sky and NBC, and recent commentary from management at industry conferences (raise 2Q broadband adds to 285k from 225k on continued strength from 1Q trends); FOXA was upgraded to neutral at Macquarie citing improving trends for advertising revenue; DISH and its Sling TV removed NFL Network and NFL RedZone, after they couldn’t come to a distribution agreement

·     Hardware & Component news; AAPL weighed on the Dow and Nasdaq after saying they were closing some stores temporarily starting tomorrow in Florida and Arizona as well as some in South and North Carolina out of abundance of caution; JBL shares rise after mixed Q3 results as EPS missed but revs beat as Diversified Manufacturing Services revenue gained 13% Y/Y, and Electronics Manufacturing Services dropped 2% – guidance showed Q4 EPS 45c-86c on revs $5.8-6.6B (vs. est. 68c/$6.15B)


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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