Market Review: March 19, 2020

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Closing Recap

Thursday, March 19, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stock markets were higher, recovering from early losses and gaining traction for the first time in about a week as investors scoop up heavily beaten stocks/sectors while awaiting steep government stimulus action to boost market sentiment. Also helping markets, further central bank intervention with the ECB announcing a large QE asset purchase program similar to the U.S. announced this past weekend as banks look to flood markets with liquidity. Banks have also sharply cut rates (U.S. essentially at 0%) and purchased assets to help stabilize markets and ease fears of credit markets being frozen and prevent bankruptcies as companies deal with the impact of the coronavirus shutting down operations. Energy stocks, along with technology and small cap stocks help lead the charge today in what was a broad-based rally. Oil prices jumped 24% for its biggest one-day gain ever (and off 17-year lows) helped this morning after reports Thursday that the U.S. was considering a diplomatic push to get the Saudis to cut oil production back to levels they had originally signaled. Technology shares outperformed with the Nasdaq Composite up over 2%, while Smallcaps surge with the Russell 2000 index rising as much as 7%, topping large caps (though notably underperformed the last few sessions and down 36% YTD). It was generally a strong day on Wall Street as stocks, Treasuries, commodity prices and the dollar all moving sharply higher, though the steady stream of rising coronavirus cases and deaths continued throughout the day (US CDC says COVID-19 cases rises to 10,442 (prev. 7,038), death toll rises to 150 (prev. 97) and now 2,959 confirmed #coronavirus cases in New York State.


Central Bank actions help markets

·     Overnight, the European Central Bank (ECB) announced a massive stimulus plan in the form of a 750 billion-euro ($818 billion) bond repurchase program which will include government and private-sector bonds as well as commercial paper in a bid to calm markets roiled by the virus outbreak (move comes as market borrowing costs for heavily indebted Italy rose). That news has followed several Federal Reserve banking actions over the last 2-weeks (150 bps interest rate cut by the Fed over the last two-weeks, a $700B QE program and boosted Repo operations as well all in an effort to provide much needed liquidity).

·     The Bank of England cuts its bank rate by 15 basis points to 0.1% and will increase its holdings of U.K. government bonds and sterling non-financial investment-grade corporate bonds by £200B ($234B) to a total of £645B, financed by the issuance of central bank reserves. That doesn’t count the numerous steps the U.S. government is putting into action to help companies directly impacted by the virus on business, as well as citizens directly and out of work employees and small businesses.



·     Oil prices surged 24%, with WTI crude higher by $4.85 or 24% to settle at $25.22 per barrel, erasing yesterday’s declines. The rally gave WTI crude its biggest one day gain ever, as the fundamental landscape has not changed with lower demand, oversupply and a price war in the Middle East still hurting the commodity, but bounced off 17-year lows.

·     Gold prices edged higher in volatile trading, ending higher by $1.40 to settle at $1,479.30 an ounce (high $1,502.80 and low $1,460.10 an ounce) as selling pressure amid a rush to raise cash eased today as investors put money to work in bonds and stocks.



·     The dollar index (DXY) remained strong, rising around 1.5%, hitting highs of 102.83 (best levels since April 2017) in a continued flight to the greenback out of other currencies. The euro dropped over 2% vs. the dollar, breaking below 1.07 to new 52-week lows (lowest since April 2017), while the dollar jumps vs. the Japanese yen, rising 2% or about 220 bps to 110.30 highs. The British Pound partially recovers after falling as much as 5% vs. the buck yesterday. Bitcoin prices catch late day rally, up over 16% above $6,200 (overnight lows $5,266)

·     Treasury market’s rally as the 10-yr yield tumbled to session lows just below 1% late afternoon before paring losses, with the yield ending around 1.14% (down 5 bps), but was also well off session higher of 1.27% (overnight). Treasury prices gained simultaneously with bounce in stocks (recall both fell yesterday along with commodity prices).


Economic Data

·     Weekly Jobless Claims jump to 281K vs. est. 220K and above prior unrevised total of 211K; continuing claims reported at 1.701M vs. est. 1.738M (last week revised lower to 1.699M); the 4-week moving average rose to 232,250 mar 14 week from 215,750 prior week (previous 214,000)

·     The current account deficit narrowed to (-$109.86B) from (-$125.4B) prior quarter and compared to estimate of (-108.6B); the balance of goods and services deficit narrowed to $139.9B compared to $158.4B prior quarter






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; GES surged as posted better-than-expected earnings results, but like several other companies, withdrew guidance due to market uncertainty; GIII shares jumped after mixed quarterly results as EPS beat while revs missed; another handful of retailer shutting stores temporarily in dealing with coronavirus impact to operations; TJX closing all stores in US, Canada, Europe and Australia; drawing down $1B from revolving credit lines and evaluating dividend program; GNC jumped after the company said it has enough cash to repay converts in May

·     Consumer Staples; EL was downgraded to underweight from overweight at JPMorgan after saying the duration of international travel restrictions, widespread store closures and the potential for a global recession will negatively impact sales for longer than we had anticipated; CLX was downgraded at Credit Suisse on valuation (hitting 52-week highs day prior); APRN posts its 4th straight day of gains after rising 148%, 71% and 67% the last 3 sessions on hopes for the online meal kit preparer will see a boost of business amid the closing of restaurants; BYND was downgraded to underperform and tgt cut to $50 at Bank America saying significant exposure” to the foodservice category spells trouble

·     Restaurants; a solid rebound after sector crushed from store closures, and bans by individual states around the country to serve (only take-out); DRI reported Q3 sales of $2.35B topping views on comp sales rising 2.3% vs. est. 1.1% on better Olive Garden comps

·     Casino & Leisure movers; today saw a much needed rebound for heavily beaten up sectors such as casinos (WYNN, LVS, MGM, PENN), hotels (MAR, HLT, H), and theme parks (SEAS, SIX, FUN) which have all suffered from closures, travel bans and social distancing to beat the virus; MTN said to suspend operations at all of our North American mountain resorts and retail stores and will remain closed through remainder of 2019/2020 ski season; MAR withdrew its 2020 financial outlook as cancellations mount due to the coronavirus outbreak (just the latest of several other hotel chains that have withdrew guidance on uncertainty)

·     Autos; Ford (F) suspended its dividend and withdrew guidance as it takes action to address effects of coronavirus pandemic/offers new-car customers six-month payment relief/says $15.4B of added cash on balance sheet; UBER said it expects $6B cash on hand at year end with $2B revolver – and also says NY doesn’t seem to be pursuing AB5-type rule; HOG to temporarily idle Pennsylvania, Wisconsin plants amid pandemic; ALV tapped $500M from its revolving credit facility of $1.1B, to pay down existing short-term debt and for general corporate purposes



·     Energy stocks rebound after falling the most over the last few weeks and months as oil prices touched 17-year lows on Wednesday when WTI crude fell over 24% as government’s worldwide accelerated lockdowns to counter the coronavirus pandemic. U.S. crude futures ended the day down 63% for the year-to-date yesterday but rallied over 20% today lifting energy names

·     In stock news today, more of the same as CLR said to cut 2020 cap-ex budget by 55% to $1.2B and sees 2020 production down less than 5% from a year ago; TRGP cut its dividend to 10c from 91c, and slashed its FY20 capex to approximately $800M to $900M from its previously communicated range of $1.2B to $1.3B, which represents a 32% reduction at the midpoint of both ranges (both following suit of many E&P and MLP names over the last few days)



·     Bank movers; banking stocks were mixed in broader market rebound with BAC, WFC, USB among noticeable laggards; PNC was upgraded to outperform at Wells Fargo calling it one of the highest quality banks; RF was added to the Goldman Sachs conviction buy list saying with short-term rates at zero and a 10-year in the 100bp range, we believe RF margins will prove to be much more defensive than others given its hedging of short-term interest rate risk; in broader news, the NYSE trading floor was shut after two staff members were diagnosed with the coronavirus, as the NYSE moves temporarily to fully electronic trading

·     Consumer finance and lending; SQ announced that the FDIC has granted conditional approval of its industrial loan company (ILC) application, while the Utah Department of Financial Institution (UDFI) also granted charter approval, thereby enabling SQ to establish a bank subsidiary called Square Financial Services

·     REITs; Mortgage/Residential REITs (NLY, AGNC, TWO, MFA) have been slammed this week, predominantly related to investor concerns about potential funding risk, particularly for the companies with mortgage credit assets funded with short-term recourse debt according to reports from both RBC Capital and KBW Inc. – RBC also notes likely driven by the mandatory redemptions of two 2x leveraged mortgage REIT exchange-traded notes (MORL and MRRL



·     Pharma & Biotech movers; ICPT shares outperformed after ICER releases draft evidence report on obeticholic acid for nonalcoholic steatohepatitis (NASH) that Raymond James said was net supportive, and expects company to benefit from pricing draft; MRNA shares dropped after FDA’s Hahn says in press conference vaccine trial to take 12-months; REGN, GILD touch 52-week highs on hopes for vaccines

·     Medical equipment and devices; BMRA shares jump after saying it begins shipping samples of 10 minute test for COVID-19 virus exposure; BAX upgraded to buy from hold and raise tgt to $95 from $87 at Stifel as see it as a core holding in today’s turbulent COVID-19 MedTech environment given its highly-diversified and stable portfolio comprised of medically essential products; EXAS suspends field sales visits amid COVID-19 disruption/says is working to facilitate use of online care for patients to access Cologuard, its at-home colon cancer screening test


Industrials & Materials

·     Transports; airlines tumble early again (AAL, UAL, JBLU, DAL) leading the Dow Transport index to lows early before the broader index rebounded helped by FDX, CAR (off 52-week highs 11,359 on January 17th – and all-time highs 11,623 September 2018); AAL disclosed that it entered into a credit pact for $1B senior secured delayed draw term loan credit facility for general corporate uses (says it has ~$8.4B of total available liquidity, consisting of $4.2B in unrestricted cash and short-term investments, $3.2B in undrawn capacity); FDX adds to yesterday gains on better earnings, rising after 5% rise on better results yesterday

·     Metals & Materials; in steel sector, MT said that it is reducing production at several European sites as demand has been falling due to the coronavirus pandemic; NUE guided Q1 EPS 95c-$1.00 vs. est. 88c saying order rates, backlogs and utilization rates at its steel mills have remained strong well into March (helped boost other steel producers – STLD); CMC also boosted steel names after reporting quarterly results; Copper prices plunge to the lowest levels in four years, down as much as 8% to $4,371/metric ton in Asia trading though later recovered to trade at $4,713/mt, still down 16% this week after sliding 8% yesterday (FCX, SCCO)


Technology, Media & Telecom

·     Internet; CARG suspended its 2020 guidance providing dealers a 50% rate reduction on all marketplace subscription billings in April for all of our paying customers; ETSY was downgraded to neutral from buy at Roth Capital and cut tgt to $41 from $61 and reducing our FY20 sales and earnings estimates as our channel checks suggest the SMB and e-commerce environment has begun to suffer in the face of the ongoing COVID-19 outbreak; strength in most Internet names after sell off though weakness in online travel name BKNG

·     Software movers; WORK said that from February 1, 2020 to March 18, 2020, the company added approximately 7,000 new paid customers; says in each of the Q3 and Q4 of the fiscal year ended January 31, 2020, Slack added approximately 5,000 new paid customers per quarter; CTXS shares dropped late day after touching 52-week highs earlier in day at $141 – recently upgraded recently at Raymond James after checks with resellers indicating increased demand for remote access "work from home" solutions; CRWD shares jumped ahead of earnings tonight

·     Hardware & Component news; ROKU was upgraded to hold from sell with $68 tgt at Loop Capital as believes that the company’s platform revenue will be less impacted by coronavirus than most media companies, even though his channel checks suggest that advertising will decline due to the sudden stop in the economy


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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