Market Review: May 01, 2020

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Closing Recap

Friday, May 01, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks drop sharply on Friday amid the increasing possibility of resurgent U.S./China frictions after President Trump threatened China with new tariffs in retaliation for the slow action giving details about the spread of the coronavirus in its country and prompting a worldwide global economic shutdown. All three major U.S. stock averages were down more than 2%, with the Nasdaq Comp posting its worst day in a month. The weakness follows major averages coming off their best monthly returns since 1987 (for the S&P and Dow Jones Industrials). As the saying goes “sell in May, go away” rings loud on the first day of trading of the month, investors keep a watchful eye on several states which started to reopen their economies this week as coronavirus cases and deaths rate have begun to slow. A mixed bag of earnings, particularly a disappointing report from Amazon along with a fresh round of dismal economic data, also weighed on sentiment as the U.S. manufacturing sector skidded to an 11-year low last month as factories were shuttered (though data topped lowered estimates). Oil prices post strong gains on the day, ending higher by 17% on the week while gold prices dipped. Federal Reserve Bank of St. Louis President James Bullard warned Friday that an extended shutdown of the U.S. economy to deal with the coronavirus crisis was ultimately unworkable and could lead to lasting, deep damage. More than half way through this earnings season, coming in as disappointing as expected, ahead of another very busy week coming up.

Economic Data

·     Markit US Manufacturing PMI for Apr-F reported at 36.1 (lowest reading since March 2009) vs. flash reading 36.9 and estimate 36.7 while output dropped to 28.8 in April versus 46.5 in March

·     Construction spending unexpectedly rises 0.9% vs. est. (-3.5%), while February was revised to -2.5% from -1.3% and private construction rose 0.7%

·     ISM Manufacturing better at 41.5, topping the est. for 36.0 (PMI last at 49.1 in March); segment breakdown showed: Production fell to 27.5 vs 47.7 prior (lowest on record) while new orders fell to 27.1 vs 42.2 and employment fell to 27.5 vs 43.8; supplier deliveries rose to the highest levels since 1970’s at 76 reading vs 65.0 prior



·     Oil prices end the day and week higher as WTI crude gains 94c, or 5% to settle at $19.78 per barrel, with front-month oil gaining about 17% for the week. Prices were boosted today after the weekly Baker Hughes rig report showed the count falling -57 rigs to 408 as oil rigs decline for a 7th week in a row, falling -53 to 325 and gas rigs down -4 to 81 (more production offline as the industry attempts to deal with plunging prices, oversupply and lack of demand). That was coupled with production cuts after the OPEC+ deal to cut nearly 10.0 M bpd started. In addition, U.S. producers have been making output cuts as well, to counter the huge levels of demand destruction caused by the pandemic. U.S. production is down nearly 1.0 M bpd from March peaks, with another 1.5 M bpd expected to be shut-in in Q2 of this year.

·     Gold prices end higher by $6.70 or 0.4% to settle at $1,700.90 an ounce, down about 2% on the week after a 6% advance for April yesterday. Renewed concerns about tensions between the U.S. and China as well as remaining concerns over the coronavirus pandemic and its impact on the global economy has kept gold prices well bid.


Currencies & Treasuries

·     Treasury prices were stagnant on the day, as the 10-year yield ends little changed around the 0.63% level, having now held below 0.70% for over 2-weeks as fears about the global economy, the massive stimulus moves by the Fed and Treasury and concerns in general about the coronavirus impact on individuals and businesses has kept Treasury prices higher as investors look to safe-haven assets. The U.S. dollar has edged lower over the last few sessions amid the disappointing U.S. economic data, with many investors hoping April results will mark the bottom.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; AMZN shares slip after touching record highs the prior session after the online behemoth beat on revenues but operating and gross/operating margins declined as the co is spending an incremental $4B – operating profit guidance range was of -$1.5b to +$1.5b was, which is below consensus (vs. our $1.7 billion); COLM reported a 1Q20 below Street expectations on sales & EPS while Wedbush noted ecommerce trends in April have been encouraging

·     Consumer Staples and Restaurants; CLX rises after Q1 beat and raises FY20 EPS view to $6.70-$6.90 from $6.10-$6.25 (est. $6.57) and also up FY20 revenue growth guidance to 4%-6%, 6%-8% organic sales growth, from down low single-digit to up 1% and flat to 2% organic sales growth; CL 1Q adj EPS and sales mostly in-line with estimates as 1Q global unit vol +7% and withdraws 2020 guidance; EL swung to a quarterly loss for Q3 as sales fell -11% YoY to $3.35B (above estimates), though overall beat due to online boost; BYND was downgraded to underweight at Wells Fargo with more cautious stance driven by expectations for much softer foodservice demand in 2020 and sharply eroding economic conditions that risk demand for premium-priced plant-based meat (PBM) at retail; in restaurants, QSR said the pandemic hit on Q2 results will be "more significant" than seen in Q1, which included the last two weeks of March

·     Casino & Leisure movers; casino sector dealing with negative data point that gross gaming revenue in Macau fell 96.8% in April to 754M patacas ($95M) as visa restrictions hampered any kind of comeback at all (not unexpected) – Macau GGR is down 68.7% YTD and most analysts see a 40% to 60% drop for all of 2020; MGM quarterly revenue was down 21% for Las Vegas Strip revenue properties and 10% for regional casinos while MGM China saw a 63% drop in revenue during the quarter and consolidated adjusted EBITDAR plunged 61% to $295M

·     Auto sector; TSLA drops CEO Elon Musk in an apparent tweet said the stocks is too high in what was a string of odd tweets from the company head; TSLA also the starting price for Model 3s manufactured in China by 10% to qualify for subsidies in the nation/new price for the Standard Range Plus Model 3 sedan is now 271,550 yuan ($38,463.17) after new customers receive 20,250 yuan per car as an EV subsidy; TM North America April sales of 84,694 vehicles, down 53.9% on a volume basis, down 55.7% on daily selling rate basis



·     Energy stocks highlighted by big earnings results out of Dow components CVX (cuts capex to as low as $14B from $16B) and XOM (posted a $610 million first-quarter loss, its first quarterly loss in three decades, on a nearly $3 billion inventory write-down); COP was downgraded to neutral at Bank America following a rebound that has allowed the stock to recover greater than 80% of its initial sell-off; IMO swung to a Q1 loss amid falling oil prices and cuts back production; SLCA Q1 net loss attributable to SLCA widens to $72.3M from $19.3M, hurt by impairment charges and expects Q2 oil & gas segment sales to decline sharply. Baker Hughes weekly rig count falls -57 rigs to 408 as oil rigs decline for a 7th week in a row, falling -53 to 325 and gas rigs down -4 to 81.



·     Bank/Investment manager movers; WETF shares slide after Q1 revs missed ests at $63.9M and was down from $68.9M in Q4 2019 and $65.5M in the year-ago quarter while AUM of $50.3B was down 21%; APO reported assets under management of $315.5B, -4.7% QoQ; PIPR shares fall after EPS fell YoY, though profit and revs topped analyst expectations; IBKR said 1,720 thousand Daily Average Revenue Trades (DARTs), 121% higher YoY and 12% lower than prior month.

·     Insurers under pressure (PRU, LNC, VOYA) after WLTW said in earnings results last night that its sees general insurance losses between $32 bln and $80 bln across key classes in U.S. and UK from COVID-19, surpassing claims from the 9/11 attacks (WLTW shares higher after EPS beat)

·     Consumer finance and lending; CURO falls on profit missing estimates as the company increases allowance for loan losses due to impact from COVID-19 and also notes weakness in single-pay segment due to lower volume during last two weeks of Q1

·     REITs; self-storage REIT PSA warned that Q2 revenue will take a hit from COVID-19, citing significant reductions in demand for self-storage space and a significant decline in move-in volumes since late March/said operating costs also rising (shares of comps EXR, NSA, CUBE were lower in reaction)



·     Pharma movers; ABBV reports Q1 sales beat ($8.62B vs. est. $8.33B), while maintains 2020 adjusted profit forecast ($9.61-$9.71) saying strong demand for blockbuster rheumatoid arthritis drug, Humira, and sales boost from coronavirus-related stockpiling of treatments by customers, helped it beat analysts’ estimates for quarterly sales; BMY said the FDA has accepted the company’s New Drug Application (NDA) for CC-486, an investigational oral hypomethylating agent, for the maintenance treatment of adult patients with acute myeloid leukemia.

·     Biotech movers; GILD shares slipped after earnings results with a few analyst downgrades amid limited clarity on remdesivir monetization disappoints/quarterly profit was largely flat from a year ago as a 5% increase in sales was offset by higher costs; MRNA announces deal with Swiss contract drugmaker Lonza Group AG for MRNA’s potential COVID-19 vaccine

·     Medical equipment and devices; CODX rises following performance data on its LogixSmart real-time PCR test that detects RNA from the SARS-CoV-2 virus in lower respiratory tract fluids; SYK topped estimates for Q1 profit and warned of a significant impact to results from COVID-19 outbreak/one analyst notes nearly half of SYK’s global revenue comprises of non-essential procedures; MDGS soars following the signing of a collaboration agreement with L1 Systems Ltd. for the joint commercialization of various Covid-19 related products and solutions

·     Healthcare services and providers; RMD was upgraded to outperform at Oppenheimer while JPMorgan downgraded shares to underweight with $140 tgt following a top and bottom line quarterly beat last night; TNDM shares slip as posted lower-than-expected quarterly profit amid rising costs and guides Q2 sales at least $85M vs. est. $87.1M; PRAH shares drop after Q2 guidance and William Blair downgraded based on “lackluster billings”


Industrials & Materials

·     Industrial & Machinery; in the E&C space, MTZ shares rise after stronger Q1 results ($1.60/$1.4B vs. est. 45c/$1.29B), though guidance for Q2 and year below views; FLR said it planned to suspend its dividend as of April 29 to help with cost-reduction efforts (prior div was 10c); JCI reports organic sales declined 5% in Q2, includes a 6% to 7% point headwind related to the estimated impact of COVID-19/adjusted segment EBITA declined 8% to $619M and the company expects 2H organic revenue decline of 15% to 20%; HUBG falls as reports Q1 revenue decline of 10.1% Y/Y to $838.9M while Intermodal revenue decreased 8% Y/Y to $495M due primarily to an 7% decline in volume

·     Transports; in airlines, UAL reported a Q1 loss of $1.7B due to the impact of the coronavirus travel restrictions and said it expects Q2 cash burn to be $40M-$45M a day (better than AAL comments yesterday of $70M per day during the same period)/says it had $9.6B in liquidity as of April 29, up from $7.2B at the end of March; AAL tgt cut to $1 at Evercore/ISI from $10 saying they entered the crisis with the weakest relative balance sheet among airlines; FWRD shares slip in trucking after EPS and revenue miss and suspends quarterly guidance; ODFL announced a $700M share buyback plan

·     Metals & Materials; WY suspended its dividend, reduced operating capacity by 20% for lumber and 15% for oriented strand board in April and sees extending lumber and oriented strand board capacity reductions at similar levels in May (follows Q1 EPS, Ebitda, sales beat); US Steel (X) posted a plunge in Q1 sales (down 21% YoY) and swung to a $391M loss as sales of flat-rolled steel dropped 18% amid the widespread shutdown of U.S. manufacturing

·     Chemicals; DOW was downgraded at both Credit Suisse and Citigroup saying problems at the company likely will persist for some time to come (notes Dow is idling ~10% of its polyethylene and elastomer capacity in the Americas); NWL reported a Q1 loss and a drop in sales (missing estimates) citing disruptions caused by the coronavirus pandemic, while is withdrawing its full-year guidance; HUN said it sees Q2 ebitda around breakeven and says Q2 volume could be down more than 30% vs year ago; LYB plunges after Q1 earnings miss expectations as revenues fell 15% Y/Y to $7.49B and said Q1 EBITDA ex-LCM fell to $1.07B from $1.43B a year ago


Technology, Media & Telecom

·     Apple (AAPL) reported Q2 total revenue of $58.31B (down 5% y/y) but above the Street’s $54.78B estimate, (with no future guidance) with a $50B share buyback and 6% dividend boost while iPhone revs of $28.96B (down 7% y/y), iPad revs of $4.37 billion (down 10% y/y) and Mac revs were $5.35B (down 2% y/y) and wearable revs were $6.28B (up 23% y/y) – lastly services revs of $13.35 billion (up 17% y/y) was very impressive and a clear highlight

·     Semiconductors; WDC shares tumble as reported an in-line MarQ and guided to an in-line JunQ, noting strong data center demand trends but retail channel business (~19% of MarQ rev) hit by COVID-19. Although WDC noted no debt covenant issues, it suspends dividends

·     Software movers; ADSK was downgraded to underperform at Bernstein and cut tgt to $155 from $197 saying the depth of this recession, and the secondary economic ripple effect, will stifle near-term revenue growth more than investors expect; ZEN reports a wider than expected Q1 EPS loss on slightly better revs and pulls 2020 forecast due to pandemic-related uncertainties

·     Media & Telecom movers; CHTR said its biggest exposure to the economic effects of the coronavirus pandemic is from its small-business customers, largely made up of restaurants, bars and movie theaters, while also expects advertising to take a hit, but posted in-line revs for the quarter; ATUS said the company continued to see "an accelerated pace of declines," of cable customers during the first quarter/Altice lost 42,000 subscribers in the first quarter, ending the period with about 3.2M cable TV customers; CMCSA was downgraded at KeyBanc a day after the company saw revenues decline in Q1, led down by disappointing results in the media businesses at Sky and NBCUniversal.


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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