Market Review: June 23, 2020

Auto PostDaily Market Report

Closing Recap

Tuesday, June 23, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks continued to churn higher as the Nasdaq Composite touched another record high (and 8th straight daily gain), but the market advance was again broad based as investors cheer talk of additional stimulus/relief measures, improving economic data and White House reassurance the trade deal with China is progressing. Commentary from the White House (Kudlow and Mnuchin) about another round of relief checks to Americans helped propel the afternoon move higher for stocks as well as economic data that showed American manufacturing nearing expansion (which followed strong PMI data overnight in Europe that boosted the euro). The S&P 500 pushed to a two-week high as market sentiment remains firmly positive with investors continuing to focus on signs the American economy is bouncing back from the shutdown and ignoring the recent flare up in COVID-19 cases in several parts of the country (CA, AZ, FL,TX) with big numbers again today. Markets side-stepped a landmine overnight after White House adviser Navarro initially said the trade deal was over with China, before clarifying his statement – and was quickly followed up by a tweet from the President saying the trade deal was "fully intact," adding he hoped Beijing would continue to live up to the terms of the agreement. Treasuries were little changed, with the 10-year yielding around 0.71%, while the dollar dropped for a second day. Equities rose in Europe and in Asia. Gold continued its push toward the highest level since 2012 while oil prices pulled back from fresh 3-month highs ahead of inventory data. White House adviser Larry Kudlow said the China trade deal was intact in Fox business interview and that China has "picked up its game" on trade – while also suggesting tax rebates, direct mail checks are on the table in the next coronavirus relief bill. While tech continues to get all the attention for the rally in the Nasdaq (understandably so with AAPL, ADBE, AMZN, NFLX, NVDA, MSFT all touching record highs), the biotech space sets new all-time highs daily as well, as the IBB tops the 140 level, up 1.5% (off March lows 92.15). Lots of uncertainty remains heading into the 2H of the year amid the pandemic, and second-wave fears, its impact on events, hotels and travel and of course the Presidential election – but no fear shown as of the last month as investors take every market pullback as a buying oppty. Stocks did pare gains into the close, finishing well off their best levels of the trading day.

Economic Data

·     Markit US Manufacturing PMI, June-P reported at 49.6 vs. est. 50.0 (prior 39.8) and Markit US Services PMI for same period reported at 46.7 vs. est. 48.0 (prior 37.5); Markit June flash composite PMI at 46.8 (vs 37.0 in May)

·     New Home Sales for May jump 16.6% to 676K vs. est. up +2.7% to 640K (was 623K prior month); new home supply 5.6 months’ worth at current pace vs April 6.7 months and the May median sale price $317,900, up 1.7% from May

·     Richmond Fed index reported at 0 vs. est. -2 (after -27 prior month); Shipments rose to -1 after -26 the prior month and new order volume increased to 5 after -35 the prior month

·     European markets were buoyed by strong flash PMI data which came in well above the prior month and showed continued improvement. The flash EuroZone composite PMI rose to a 4-month high of 47.5 in June from 31.9 in May, Markit said



·     Oil prices erased initial gains as WTI crude fell 36c or 0.88% to settle at $40.37 per barrel ahead of the weekly API inventory report tonight and EIA tomorrow morning (est. for a weekly build of 1.5M barrels of crude). The late day slide (fell off highs of $41.63 per barrel) comes a day after WTI crude settled above the $40 a barrel level for the first time since March. Signs that demand is coming back more quickly than many anticipated as economies reopen has been among the biggest catalysts of late, as well extended production cuts from OPEC+ Gold prices rise $15.60 or 0.9% to settle at $1,782 an ounce, its highest closing settlement since 2012 as the dollar tumbled and investors poured money into safe havens as a hedge against surging global stock prices.


Currencies & Treasuries

·     The U.S. dollar slumped on Tuesday as the euro spiked to one-week highs following positive PMI manufacturing and services economic data overnight while higher-risk currencies in general, including the Australian dollar, were boosted after U.S. officials confirmed that the U.S.-China trade deal is intact. Perceived safe-haven currencies were notable lower with the buck and yen sliding. The euro bounced after data showed that a downturn in the euro zone economy eased again this month. IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) recovered to 47.5 from May’s 31.9, and off the April record low 13.6. The euro hit highs around 1.135 before paring gains (more than 150 bps off last week lows). Treasury prices remained little changed as the 10-year yield held around the 0.71% level most of the day. The U.S. Treasury sold $46B in 2-year notes at a yield of 0.193% compared to 0.197% when issued prior as the bid-to-cover (demand) was 2.46 vs. 2.68 prior auction and indirect bidders awarded 52.0% and directs 16.7%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; SCVL said Q2 -to-date comp sales up 28.1%, with online sales surging 470%; Brick-and-mortar comp sales 4% higher; though said it expects pressure on Q2 profit margin due to higher shipping charges accompanying more e-commerce sales; the WSJ reported that SPG is teaming up with Brookfield Property Partners, another large owner of shopping centers, in exploring a bid for J.C. Penney Co which filed for bankruptcy in May ; PTON shares rise as Cowen ups tgt to $70 from $54 calling the stock his best small-to-mid cap idea despite the shares being up by greater than 75% year-to-date; NKE rises a second day and was among top gainers in the Dow, ahead of earnings this Thursday; YETI rises to record high after Piper boosted its price target on the stock to $47, citing strong demand for coolers and drinkware.

·     Restaurants; LK shares fell after it received a de-listing notice from Nasdaq last week after it failed to file its annual report; RUTH said as of June 21 for company-owned and managed restaurants, 50 dining rooms were open, 18 were operating take-out and delivery only, and 18 were closed, with plans to open an additional 10 to 15 dining rooms by the end of June; CAKE registered 11.9M shares for selling holders; GO will replace EAT in the S&P MidCap 400 and EAT will replace AXE in the S&P SmallCap 600, effective prior to the opening of trading on Thursday; shares of PFGC advanced after the food distributor reported an improvement in sales trends as the economy reopens across the country (shares of SYY, USFD also rise)

·     Housing & Building Products; MHK rises among top gainers in the S&P early after Cleveland Research said Q2 revenue decline might not be as bad as guided; FND was initiated with a buy and $74 tgt at Berenberg helping lift shares initially saying its global supply relationships and domestic distribution efficiency is one of FND’s biggest strengths; housing data for May on new home sales came in well above consensus views (PHM, KBH, MTH, DHI)

·     Casino & Leisure movers; PENN shares jumped in the gaming sector with tgt raised to $39 from $23 at Stifel based on a stronger margin profile than we were previously assuming, while company also spoke on CNBC’s Mad Money overnight as well; RCL said it has decided to extend suspension of sailings for global fleet for all sailings through sept 15 (follows moves by NCLH and CCL in recent days)

·     Auto sector; WKHS shares jumped, extending recent advances after successfully completes Federal Motor Vehicle Safety Standards (FMVSS) testing for its C650 and C1000 all-electric delivery vans (testing for both the vans had been delayed due to the COVID-19 pandemic)



·     Energy stocks benefitted early from gains in oil prices after WTI closed above the $40 per barrel level for the first time since March yesterday, helping boost demand for energy stocks. In research, DCP, HEP and PSX all downgraded to hold from buy at Jefferies saying concerns about physical U.S. crude oil storage limits have receded, the stocks have seen sharp recoveries off their March lows; PLUG shares rise to 6-year highs after boosted guidance earlier;



·     Bank movers; banking stocks lagged broader market gains after opening higher as the fact that Treasury yields remain low despite the meteoric rise for stocks over the last few weeks, keep pressure on the space amid lending margin concerns (though likely benefitting from increased trading volumes as well as a pick up in the IPO and deal markets)

·     Consumer finance and lending; MA was downgraded to perform from outperform at Oppenheimer saying with V’s Europe integration shifting attention from contract adjustments to offense, V is more likely to take market share/accelerate growth in Europe as momentum builds; this morning MA agreed to acquire Finicity, which provides real-time access to financial data and insights, for $825M; PYPL (up for the 11th time in 13 days) and SQ extend gains (up for the 7th time in 8-days) = both at all-time highs

·     Exchanges & Services; INTU Intuit announced in a blog the layoff of 715 employees (out of 9,400 last reported at the end of FY 2019) and the plan to hire 700 more in a restructuring to focus on key growth areas; CBOE was downgraded from Neutral to Sell at Goldman Sachs as see the recent announcement by CS to discontinue TVIX (2x levered VIX ETN) as an incremental headwind to an already challenged VIX franchise



·     Pharma movers; TBIO shares jump as expands vaccines collaboration partnership with SNY to develop a wide range of mRNA vaccines for infectious diseases (TBIO gets upfront payment of $425M, comprising $300M in cash and a common stock investment of $125M through a private placement at $25.59 per share); MYOV reports positive results from a late-stage study of its combination therapy for women with endometriosis-associated pain

·     Cannabis names were higher (ACB, CGC, TLRY) as CGC said sees the addressable legal cannabis market expanding to nearly $70 billion globally by 2023, up from almost $10 billion today. Bank America noted while CGC management expects to provide more specific financial targets later this year (once COVID-19 impacts dissipate), Monday’s message exuded confidence in the opportunity ahead given the size of the addressable market, Canopy’s focus on three markets and its competitive advantages in R&D, consumer insights, supply chain and capitalization

·     Biotech movers; GILD to acquire 49.9% equity interest in Pionyr and exclusive option for $275M, to provide funding for Pionyr’s clinical programs and will have the right to acquire remainder of Pionyr for a $315M option exercise fee (Pionyr eligible to receive up to $1.15B in milestones); IMMU shares active after Guggenheim issues potential M&A acquisition scenarios after major de-risking pipeline events (such as the recent Trodelvy FDA approval) saying they think PFE, MRK, ROG and LLY may be the most likely possible acquirers of IMMU based on fit, need and bandwidth for a ~$7-15Bn deal and analysis suggests a potential $50-$60 per share; INO rises as receives $71M from the U.S. Department of Defense to scale up production of its devices used to administer its experimental COVID-19 vaccine into the skin

·     Healthcare Services, Medical equipment and devices; NUVA was upgraded to buy at Needham with $74 tgt as believe that consensus estimates are likely to prove conservative as elective procedures rebound more rapidly than expected; APYX shares jump after saying that it got regulatory approval to sell Helium Plasma Technology products in Thailand, Brazil, Australia, Israel and Taiwan.


Industrials & Materials

·     Aerospace & Defense; SPR shares fell after disclosed it received a letter from BA which directed the company to further reduce its 2020 737 production plans due to the impact of COVID-19 and accumulated inventory of Spirit’s 737 products (now expects to deliver only 72 shipsets to Boeing, compared with 125 planned earlier)

·     Transports; AAL 74.1M share Secondary priced at $13.50 (down from $14.40 close); in rails, KSU said sees Q2 revs pacing to $550M (street est. $586.8M); said carloads improved 31% since bottoming in early May but remains 8% below pre-COVID levels; said Q2 QTD volume down 23% and revs down 24%; in trucking, KeyBanc said its proprietary Ship-to-Shore data projects a notable sequential uptick in June container import volumes at the Port of Los Angeles, which they expect to translate into improved truckload and intermodal volumes through late summer (upgraded JBHT to overweight and maintains OW on KNX, MRTN, WERN, HTLD)

·     Metals & Materials; HUN said sales trends showed improvement from April to May, expects to see this continued improvement through June; said overall sales for the quarter expected to be down about 30%-35%; reaffirmed general outlook; SHW tgt price raised by several analysts a day after the paint maker boosted its Q2 sales outlook; The Trump administration is considering re-imposing tariffs on aluminum imports from Canada, with an announcement possible by the end of this week, Bloomberg reported


Technology, Media & Telecom

·     Internet; NFLX, AMZN, SPOT among names touching new record highs today as the Nasdaq Composite goes parabolic; Chinese names HUYA, BILI, DOYU are among the 10 livestreaming apps hit by a Chinese regulatory crackdown that has shuttered some of their operations. NTES CC Live and BIDU’s Quanmin also made the list.

·     Semiconductors; AMBA received two positive initiations at Rosenblatt ($60 tgt) and Imperial ($58 tgt) citing the chipmaker’s long-term growth prospects as it adds data-processing services to its products; MU was downgraded from Outperform to Market perform at BMO Capital and cut tgt to $55 from $60 as now see the risk/reward as a lot more balanced; ON was upgraded to overweight at Piper and raise tgt to $24 from $17 as believe the cost reductions ON has put into place, the return to revenue growth and improved visibility into its end-markets provide a strong combination.

·     Software movers; sector higher with broader technology; VRNS upgraded to overweight from EW and up tgt to $110 from $82 at Barclay’s as believes Q2 will be the trough in the company’s transition and that the Street is underestimating the inflection in revenue growth; Wells Fargo initiated FIVN with an overweight ($125 tgt), RP with and $80 tgt while equal-weight rated on DOCU ($160 tgt) and SMAR ($50 tgt); ADBE trades to all-time highs

·     Media & Telecom movers; VIAC tgt raised to $27 from $20 at Citigroup after updates model; SunTrust raised estimates on all three names (IAC, MTCH and ANGI) ahead of MTCH spin-off, as we move DCF-derived PT targets to FY21 from FY20 (IAC goes to $330 from $275; MATCH goes to $115 from $95 and ANGI to $17 from $13)

·     Hardware & Component news; AAPL price target raised by several analysts after yesterday’s WWDC details as UBS raises tgt to $400 and raises June-qtr iPhone shipment est. to 34 mln units from 30 mln as it sees iPhone SE2 offsetting demand decline for older models; raises revenue, profit est. for FY20 and FY21; TECD shares rise after headline to be delisted by Nasdaq set for June 29th (TECD being acquired by APO in cash deal valued at $145 announced in late 2019)


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