Market Review: June 26, 2020

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Closing Recap

Friday, June 26, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     It was an ugly day on Wall Street as stocks fell sharply, led by declines in financials, energy and social media companies as major averages close out the week with losses. Banks were the top decliners in the S&P and Dow (JPM, GS, AXP) with regional banks down (FITB, HBAN, RF, CMA) as well after the Federal Reserve stress tests resulted in banks being unable to increase dividends or resume buybacks through at least Q3 as the coronavirus pandemic weighs, and some analysts suggesting dividend cuts may be in the future for some. Energy markets dropped following weakness in crude oil with prices falling for only their second weekly decline in the past nine weeks, as worries of a coronavirus resurgence spoils a rally. Lastly, social media companies (FB, TWTR) came under pressure after Unilever announced midday it was halting advertising on Facebook and Twitter citing hate speech and divisive content on the platforms (which followed others pulling ads from FB over the last few days, including Verizon). As stocks bled lower into the weekend, U.S. Treasury prices climbed as investors looked to safer assets amid signs that an increase in new coronavirus cases is threatening a full reopening the U.S. economy. Data showed consumer spending surged by a record in May as Americans spent relief payments, though incomes slumped.

·     While financials, energy and tech slipped on sector specific stories, the resurgence of coronavirus cases in several parts of the country grabbed headlines all week as a record 39,972 confirmed covid-19 cases were reported on Thursday, Johns Hopkins said as new daily covid-19 case count tops previous peak of 36,291 in April. Coronavirus count/news update: Arizona virus cases jump 5.4%, above prior 7-day avg. of 2.9% with 3,428 new Covid cases, 45 new deaths; Florida Covid-19 cases rise 7.8% vs. previous 7-day avg. 4.1% as total cases reach 122,860 vs. 114,018 day prior and suspends consumption of alcohol at bars statewide). Texas Governor Abbott rolled back Texas reopening as positivity rate rises above 10% saying bars required to close at noon today, may remain open for delivery & takeout. NY Governor Cuomo says 805 new virus cases in NY, rises 0.2%. Efforts to open more of New Mexico’s economy are on hold because of an uptick in COVID-19 cases in recent days, as per its Governor. California covid-19 cases rise 2.5% vs 2.8% 7-day average, climbing by 4,890.

Economic Data

·     Personal income for May fell (-4.2%) vs. est. down (-6.0%) after April rose 10.8%, while Personal Spending jumped 8.2% vs. est. 9% and well above the April reading of down (-12.6%); personal saving rate for May at 23.2% vs. April 32.2%; real consumer spending up +8.1% vs. April -12.2%

·     Overall PCE price index for May rose +0.1% (in-line) vs. April -0.5% and the core PCE price index rose +0.1% vs. April -0.4%; May YoY PCE price index +0.5% vs. April +0.6%

·     University of Michigan surveys of consumers sentiment final June 78.1 vs. est. 79.0 and compared to preliminary June 78.9 and final May 72.3; the current conditions index final June 87.1 vs prelim June 87.8 and expectations index final June 72.3 vs prelim June 73.1



·     Oil prices slipped, with WTI crude down 23c or 0.59% to settle at $38.49 per barrel sliding on easing demand fears after Texas and Florida re-introduce shutdowns of bars and other businesses in the hopes of cooling the recent surge in positive cases of coronavirus infections. Fears of this type of resumption of shutdowns plagued oil prices all week, and WTI ends this week 3.2% lower for only its second weekly decline in nine weeks. Natural gas prices rose 0.9% to $1.495 mln btus, bouncing off 25-year lows.

·     Gold prices advanced $9.70 or 0.6% to settle at $1,780.30 an ounce, ending the week with a gain of roughly 1.6% amid a further rotation into safe-haven assets amid spiking COVID-19 cases across the U.S. August gold managed to climb despite the dollar rising a third straight session, as prices touched 8-year highs earlier this week.


Currencies & Treasuries

·     The U.S. dollar strengthened initially as investors rotated back into safe-have currencies the tail end of the week (dollar, yen), but profit taking ensued midday with the dollar index ending little changed and the euro recovered. Treasury yields tumbled to 1-month lows as investors rotated into safe-haven assets amid the mass pullback in U.S. stocks on rising coronavirus cases, as well as financial, energy and tech declines. The 10-yr yield was down 5 bps to 0.63%, the 30-yr yield down 6 bps to 1.37% and the 2-yr yield down 2 bps to 0.164%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; NKE reported a big miss on the top and bottom line as well as lower margins (EPS loss (51c) on revs $6.31B vs. est. 10c and $7.38B; Q4 gross margins 37.3% vs. est. 43.5%) – but analysts positive as they focus on the Consumer Direct Acceleration Strategy; GPS shares jumped after expanding its relationship with Kanye West who will design adult and kids’ clothing that will be sold at Gap next year/Yeezy footwear, made with sneaker company Adidas, won’t be sold at Gap; FTCH was upgraded to buy at BTIG after the e-commerce co said in a filing that gross merchandise value (GMV) would increase by 25% to 30% yoy which BTIG said was a clip “at a whole other level;” BIG said it expects Q2 comparable sales % growth to be in mid-to-high twenties and guides Q2 adj profit between $2.50-$2.75 well above consensus saying it is in a strong liquidity position, given positive business trends, recent closure of sale/leaseback transactions; IRBT was downgraded to underperform at Bank America on valuation

·     Consumer Staples & Restaurants; grocer ACI 50M share IPO priced at $16.00 (low end of range); LK shares plunged on news that it will be delisted from the NASDAQ/had received two notices from the Nasdaq about its failure to adhere to listing rules; restaurant sector a focus again today after Texas Governor ordered taverns to close in response to the recent virus break-out in the state (CAKE, BJRI, DRI, EAT, RRGB, CBRL, TXRH among names dropping on reopen slowing fears)

·     Casino & Leisure movers; casino stocks seeing further deceleration (WYNN, LVS, MGM) as COVID cases jumping in several parts of the country, raising fears of halts to reopen plans; ERI won U.S. antitrust approval for its $17 billion bid to purchase CZR putting the two companies one step closer to completing their merger; BYD announced the reopening of two more properties



·     Energy stocks declined along with weakness in oil prices as worries of a coronavirus resurgence spoiled the recent rally. The coronavirus pandemic remains the most significant downside variable for oil prices thus far as the latest surge of the virus in several U.S. states is weighing heavily on the idea of the an economic recovery. The Baker Hughes weekly rig count dipped -1 to 265 (8th straight week drillers cut rigs), with oil rigs down -1 to 188 and gas rigs unchanged at 75 and miscellaneous unchanged at 2. In utilities, PCG 423.4M share Secondary priced at $9.50 ahead of bankruptcy exit.



·     Bank movers slammed across the board for biggest decliners in the S&P; large cap banks (WFC, JPM, GS) fell after the Federal Reserve said after stress tests last night that banks can’t increase dividends or resume buybacks through at least Q3 as uncertainty over the Covid-19 pandemic weighs on lenders. The Fed found that the country’s largest lenders have struggled to model the unprecedented downturn and ensuing rescue programs. Analysts were cautious on COF, WFC saying they may need to cut dividend, while MS and C fared better; regional banks getting clobbered this morning (HBAN, CFG, RF, KEY, FITB, USB, CMA). The Fed found the 34 tested firms could suffer as much as $700 billion in aggregate loan losses under the most severe, "W-shaped" economic recovery.

·     Services and Exchanges; CLGX shares jumped after the analytics company received a buyout offer of $65 per share, in deal valued at $7B from investment firm Cannae Holdings (CNNE) and Senator Investment Group LP (overnight, CLGX had boosted its Q2 revenue and Ebitda outlooks)



·     Pharma movers; ZGNX said the FDA approves Fintepla (fenfluramine) for the treatment of seizures associated with Dravet syndrome in patients age 2 and older/this is a broader patient population than the Phase 3 trial, which consisted of subjects age 2-18; DBVT shares fall after saying it’s yet to receive an update from the U.S. FDA about the marketing application for its peanut allergy patch Viaskin Peanut/also announces a restructuring plan, including a significant reduction in workforce; PYPD 3.75M share IPO priced at $16.00; CHMA received FDA approval for Mycapssa capsules late day

·     Biotech movers; VXRT surges a second day after signing an MoU with Attwill Medical Solutions Sterilflow to use AMS’ resources for lyophilization development and large-scale manufacturing including tableting and enteric coating for Vaxart’s oral COVID-19 vaccine; IBIO set to be added to the Russell 2000 and Russell 3000 indexes after the market opens on June 29th; AKUS 12.5M share IPO priced at $17.00; FUSN 12.5M share IPO priced at $17.00; TELA 3M share Secondary priced at $16.00; TBIO 12.507M share Secondary priced at $22.00

·     Healthcare services and providers; shares of AMED, LHCG, CHE, ENSG among movers after CMS issued a straightforward FY2021 Medicare home health proposed rule, which would increase rates by a net of 2.6%, which includes a 2.7% market basket update offset by a 0.1% rural add-on impact


Technology, Media & Telecom

·     Internet; social media companies fall as companies continue to pull advertising, with VZ pulling ads from FB as part of the "Stop Hate for Profit" protest, while UN also said it would stop ads for the rest of the year from FB and TWTR citing hate speech and divisive content on the platforms; EBAY was upgraded to buy from hold and raise tgt to $57 from $42 at Deutsche Bank saying they believe there is scope for further appreciation over the mid-term saying survey suggests new buyers on the eBay platform have had a positive experience, with over 40% stating they are very likely to make a purchase over the next six months; SunTrust rolled out FY21 PTs for AMZN to $3,400 vs. $2,700, EBAY to $54 from $50, ETSY to $112 from $88 and W to $208 from 163; AMZN is going to announce the purchase of self-driving car developer Zoox, according to reports in The Information and the Financial Times with a price tag at $1.2 billion. The deal will pit Amazon against Waymo, which is backed by Alphabet (GOOGL)

·     Semiconductors; XLNX downgraded to in-line at Evercore noting shares up 35% from a March low, and is "hard pressed to see meaningful upside from current levels; AVGO was upgraded to outperform at Evercore and raised tgt to $380 saying Street is mis-modeling its Apple revs, which will lead to upside to second half of 2020 estimates and future years

·     Software movers; MSFT announced a strategic change in its retail operations, including closing Microsoft Store physical locations. The company’s retail team members will continue to serve customers from Microsoft corporate facilities and remotely providing sales, training, and support; CRWD 7.5M share Block Trade priced at $104.00; API 17.5M share IPO priced at $20.00; PRGS posted a mixed Quarter and better guide as recurring model drove the better than feared results though higher guide was more of a function of FX than increased demand

·     Hardware & Component news; NTAP was upgraded to buy ($55 tgt) at Bank America as see current consensus as too pessimistic and view current valuation as reflecting most of the worries around competitive share loss and macro headwinds; SNX reported a quarterly beat and guided above and announced timeline for Concentrix spinout; CAMP quarterly results topped views overnight, helping lift shares initially; EBON 19.324M share IPO priced at $5.23


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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