Market Review: June 29, 2020

Auto PostDaily Market Report

Closing Recap

Monday, June 29, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stock rose sharply on Monday, recovering some of Friday massive market declines amid surging COVID-19 cases last week and as some states reverse their reopen measures, as major averages remain on track to post their biggest quarterly gain since 1998. Markets cling to hopes of a stimulus-backed economic rebound, as the mantra of “don’t fight the Fed” has continued to push investors into riskier assets this quarter under the assumption that the “Fed has the markets back” with additional programs, low lending rates and buying of several types of assets. But in an interesting note, the Fed’s balance sheet contracted for the second consecutive week after the most massive expansion in history. The Dow Jones Industrial Average gains were buoyed by shares of Boeing (BA) after the Federal Aviation Administration confirmed it had approved key certification test flights for the grounded 737 MAX began today. Markets also saw a rebound in many of the names most affected by the coronavirus economic standstill as leisure, gaming, retailers, restaurants, airlines and hotels all posted healthy bounces today – helped by a drop in COVID-19 cases in key “hot-spot” states such as Florida, California and Arizona today.

·     Tech stocks were pressured early in a bout of profit taking for a second day, but recovered led by a bounce in social media names and semis while software remained weak. A spike in virus infections in Southern and Western states last week sparked a sell-off in equities, but the threat of a deeper-than-feared recession has led investors to expect that the Federal Reserve or Congress will step in with more stimulus. Also helping markets today, data that showed contracts to buy previously owned homes rebounded by the most on record in May, suggesting the housing market was starting to turn around. The Federal Reserve formally opened Monday its $500 billion lending program to support issuance of new debt by large corporations, the last of nine emergency programs it is running to backstop lending markets due to the coronavirus.

·     In coronavirus news: Florida covid-19 cases rise 3.7% vs. previous 7-day avg. 5.5% (still a healthy jump but much better than what markets have been seeing), while Arizona virus cases rise 0.8%, lowest increase since May 31 (drastic improvement in another hot-spot), while New York says covid-19 deaths total 8 on June 28, compared to around 800 deaths a day at peak of crisis, with 391 new virus cases and said will make decision this week about indoor dining. California virus cases rise 2.5%, less than 7-day avg of 2.8%. Over the weekend, coronavirus cases world-wide passed 10 million, with more than 500,000 deaths. The New York Times noted that 54,000 people or 43% of U.S. virus deaths are tied to nursing homes and long-term care facilities.

Economic Data

·     Pending Home Sales for May jumps a record 44.3% vs. est. 19.3% as the increase follows declines of 21.8% in April and 20.8% in March. Northeast up 44.4%; April fell 48.2%, Midwest up 37.2%; April fell 15.9%, South up 43.3%; April fell 15.4% and West up 56.2%; April fell 20%



·     Oil prices jumped late day, as WTI crude rose $1.21 or 3.14% to settle at $39.70 per barrel, while natural gas prices surged 11% to $1.709 mln btu, its biggest one day jump in months – comes just a week after nat gas prices dropped to around $1.40 mln btu at more than 2-decade lows. Brent crude also good gains, rising 1.68% or 69c to settle at $41.71 per barrel. Investors continue to keep betting on global oil demand recovery hopes, but come as US oil inventories are sitting at a record-high 541M bbls

·     Gold prices a non-event today, as August gold rose less than $1 to settle at $1,781.20 an ounce, holding steady despite a bounce in the dollar on better housing data and also in spite of a rally in stocks as investors still hedging market rallies with defensive assets. Gold prices holding not far off recent 8-year highs after ending last week with a 1.6% advance.



·     The U.S. dollar erased overnight losses, rising against major rival currencies following the record surge in pending home sales in May; the euro erased overnight gains of 1.1288 to end only slightly higher around 1.123, while the buck gained vs. the Japanese yen. The British pound weakened as investors grew jittery about the Brexit talks that are set to resume this week.

·     Treasury prices remained little changed despite the bounce in U.S. stocks today, as the 10-year yield held steady at 0.635%, while the 30-yr yield rose 1 bps to 1.38% after each touched their lowest levels in over a month on Friday as investors fled to the safety of Treasuries. Anticipation of month- and quarter-end demand was also supporting prices.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; M, KSS, JWN in retail and CAKE, RRGB, DIN, TXRH were higher in restaurant space as the rate of cases slow today in key hot spot states FL, CA, AZ and as investors continue to weigh the impact of the rising coronavirus cases against the reopening of the U.S. economy that appears to have stalled in parts of the country; UAA will discontinue its partnership with UCLA, a 15y $280M accord announced in 2016; CMG is partnering with GRUB to expand its delivery footprint in the U.S. saying customers can now order from Chipotle locations through the Grubhub app or; PZZA and Shaquille O’Neal launch new Shaq-a-Roni pizza

·     Consumer Staples; BYND was downgraded to underweight at Barclay’s with a $115 tgt; COTY rises after saying it will acquire a 20% stake in Kim Kardashian West’s makeup brand KKW for $200 mln/will develop KKW’s skincare, haircare, personal care and nail products; PPC shares fall after pair of downgrades as Barclay’s downgraded to an Equal-weight rating from a prior Overweight with $20 tgt and BMO cut its rating to EW from OW with $21 tgt

·     Housing and Home Improvement; homebuilders such as KBH, LEN outperformed as the data this morning on existing home sales leading to optimism in the housing sector; shares of LOW and HD also outperformed in the home improvement sector

·     Auto movers; NKLA shares were active after saying Nikola Badger preorders open June 29 at 11 am; preorders available in battery-electric vehicle or hydrogen fuel-cell electric vehicle models; manufacturing expected to go through OEM (shares of WKHS advanced in sympathy in anticipation that NKLA will be overwhelmed with pre-orders for their NikolaBadger (WKHS also being added to the Russell 3000 index); TSLA shares jumped late day after Electrek reported that Elon Musk said the company could break-even in Q2 despite the pandemic



·     Energy stocks were mixed as names leveraged to natural gas (RRC, EQT, COG, AR) outperform as natural gas prices jumped over 11% above $1.72 mln btus amid hopes for hotter weather. In the oil space, Iraq’s oil exports have fallen by almost 9% or 310,000 barrels per day (bpd) in June, loading data and industry sources showed, suggesting OPEC’s second-largest producer has delivered about three-fifths of its pledge in an OPEC-led supply cut deal. In stock news, TA shares weaker after announce stocks offering; CHK was halted after declaring for bankruptcy protection; BP said it would sell its petrochemicals business for $5 billion to British chemicals company Ineos.



·     Bank movers; banks were slammed late last week after the Federal Reserve prevented banks to buyback stocks in the coming quarter after stress tests citing the uncertainties of the coronavirus pandemic; today, not much in way of news but a few analyst calls as UBS upgraded BKU to buy from neutral and downgraded FHB to sell from neutral and cut tgt to $13 from $15 in MidCap banks saying deferral rates should drop for some banks in our coverage in Q2 suggesting lower future losses; ahead of earnings in a few weeks, Wedbush said they like SBNY owing to the defensive positioning of its loan portfolio with high multifamily/capital call exposure, like WTFC as expect an improved credit outlook, strong deposit growth from new client acquisition, strong mortgage banking activity, and strong PPP fees. For the regional banks they like CFG, FITB, CMA and KEY given low valuation vs. peers and don’t expect outsized credit losses vs. peers.

·     Consumer finance and lending; CACC said in an SEC filing that it received a civil investigative demand from the Consumer Financial Protection Bureau/it says it’s cooperating; FISV was downgraded to perform from outperform at Oppenheimer noting in their recent initiation of FIS, FISV, GPN, and JKHY, they point to underlying macro trends they see as partly responsible for YoY revenue growth. We’ve made the hard decision to downgraded FISV as we think investors play FISV vs. FIS and FISV has significantly outperformed FIS over this cycle



·     Pharma movers; HRTX announced that it received a Complete Response Letter from the U.S. FDA on June 26, 2020 regarding its New Drug Application for HTX-011 for the management of postoperative pain. The CRL stated that the FDA is unable to approve the NDA in its present form based on the need for additional non-clinical information (PCRX shares rise, seen as benefitting from HRTX CRL letter from the FDA as PCRX is the maker of competing Exparel, a non-opioid local analgesic); ALT rises as receives $4.7M from U.S. Army Medical Research & Development Command to fund an early-stage trial of nasal spray T-COVID to treat outpatients with early COVID-19 disease; ITCI announces positive top-line results from iti-214 phase i/ii study in patients with heart failure saying the study demonstrated inhibiting phosphodiesterase-1 with ITI-214 in patients with heart failure improved cardiac function; AKBA says Japan’s Ministry of Health, Labour and Welfare approved manufacturing and marketing of vadadustat as a treatment for anemia due to CKD in both dialysis-dependent and non-dialysis dependent adult patients; NBIX was downgraded to sell at Goldman Sachs saying Ingrezza’s near term outlook remains intact, but not quite yet at the next leg of pipeline driven growth

·     Biotech movers; ICPT shares plunge after announcing that it had received a complete response letter (CRL) from the US FDA for its NDA for Obeticholic Acid (OCA) in nonalcoholic steatohepatitis (NASH) – the CRL noted that based on data the FDA has reviewed to date, the Agency has determined that the predicted benefit of OCA does not sufficiently outweigh the potential risks to support accelerated approval in NASH; KNSA shares jumped after its experimental treatment, rilonacept, met primary and major secondary goals of late-stage study in patients with pericarditis, inflammation in fluid-filled sac that surrounds heart/treatment with rilonacept resulted in 96% reduction in risk of recurrence; VXRT rises a 4th day (rose 28% Friday, 96% Thursday and 19% Wed) after saying last week it signed 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; GILD disclosed that remdesivir, its experimental COVID-19 treatment, will cost $2,340 for a course of treatment. The drug hasn’t been approved by the FDA but received an emergency use authorization from the regulator in May. The price, however, is slightly higher for the privately insured population in the U.S., at $3,120 per course of treatment

·     Medical equipment and devices; ABT and TNDM partner to integrate Abbott’s freestyle Libre continuous glucose monitoring technology with tandem’s insulin delivery products; Beckman Coulter, an operating company of DHR announced that its Access SARS-CoV-2 IgG assay has received Emergency Use Authorization from the FDA.


Industrials & Materials

·     Aerospace & Defense; Dow component BA shares rally after reports that U.S. regulators are set to begin flight tests of the grounded 737 MAX, saying the flights, which could begin as early as Monday, and are scheduled to last three days. The 737 MAX planes have been grounded for 15 months, following two deadly accidents (shares of aircraft suppliers SPR, HXL, GE were active)

·     Industrials and Equipment; FLR came to an agreement with VE Partners to sell EQIN, it’s equipment rental business in Europe/deal is in line with FLR’s plans to divest its construction rental businesses; KBR was selected by Uruguay’s sole state-owned refinery, ANCAP, for a strategic upgrade project

·     Transports; index approaching the 9,000 level (off last week lows around 8,750) as airlines recover; airline rating changes at Goldman Sachs as they upgrade LUV to buy from sell as expect its primarily domestic network and industry-leading balance sheet to drive a relatively faster and stronger recovery from the COVID-19-driven downturn in demand for air travel while downgraded ALGT to neutral as believe the current risk/reward does not merit a Buy rating

·     Metals & Materials; in chemicals; LYB was downgraded to neutral at Citigroup as the US advantage is likely to be muted; MOS was upgraded to buy from underperform at Bank America with $15 tgt; metals stocks saw a bounce from Friday weakness


Technology, Media & Telecom

·     Internet; FB and TWTR shares active as more companies continue to suspend/pull advertising from the social media co citing hate speech and divisive content on the platforms; SPOT downgraded to sell from neutral but tgt raised to $223 at Guggenheim as believe Spotify shares are more than fully valued saying the market is now pricing shares for blue-sky growth

·     Software and Hardware movers; software space was among the top lagging sectors after outperformance this year; shares of “stay-at-home” beneficiary software names dropped early (ZM, FSLY, WORK, NFLX); IDEX shares rebounded after the company responded to shirt selling accusations from J Capital and Hindenburg Research last week saying they contain certain inaccuracies and misstatements which Ideanomics refutes based on facts; CDW was upgraded to Outperform at Raymond James following meaningful YTD underperformance (CDW -24% vs. NASDAQ +9%, S&P 500 -7%) as the sharp relative declines began prior to the pandemic

·     Media & Telecom movers; AMC downgraded to underperform (tgt to $2 from $4) and CNK cut to neutral (tgt to $13 from $20) at Credit Suisse warning the movie-theater business continued to look risky as cases of the coronavirus grew in the U.S.; DIS said its “Mulan” movie will now debut in theaters on August 21, after it had already been delayed once due to theater closures amid the Covid-19 pandemic; ZI shares fall amid mixed initiations of coverage (at least 7 buy rated related and 8 hold rated with street high tgt $63 at Mizuho and low $50 by several)


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