Market Review: May 11, 2020

Auto PostDaily Market Report

Closing Recap

Monday, May 11, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks were mixed as the Dow Jones Industrials and S&P 500 battled between gains and losses, helped by healthcare names but dragged lower by financials while the Nasdaq Composite outperformed, making it a 6th straight day of gains. The Nasdaq Comp jumped more than 1% amid strong gains in software and biotech stocks (IBB trades to 52-week highs). Markets remain hopeful as US states begin to reopen their economies, helping propel sentiment higher amid lower coronavirus case numbers and as several countries ease lockdowns. The tech-heavy index is now just about 7% below its February record high, but analysts have warned of another selloff as macroeconomic data gets worse, foreshadowing a deep and lasting global recession. After financial markets began pricing in negative U.S. interest rates for the first time ever last week, all eyes will be on Federal Reserve Chair Jerome Powell’s outlook on the economy at a webcast event on Wednesday. House Democrats said a vote on their next proposal for coronavirus relief will come no sooner than Friday, as party leaders put the final touches on their bill even as they remain at odds with Senate Republicans and President Trump on the central points of the next package. U.S. Treasury yields rose amid anticipation of new government securities being issued to pay for massive stimulus efforts to prop up the economy amid the COVID-19 pandemic (comes after the 2- and 5-year yields touched record lows on Friday). In COVID-19 news, New York reported encouraging statistics while the White House has directed staff working in the West Wing, where the daily operations of President Donald Trump’s administration are carried out. Oil prices reversed earlier gains to end the day lower by over 2%.



·     Oil prices took a turn lower midday, with WTI crude down 60c or 2.4% to settle at $24.14 per barrel, off earlier highs $25.58 per barrel, pulling back after both U.S. and Brent contracts posted their largest weekly percentage gains on record on Friday (about 30%) due to hopes that a global deal to cut crude supply worldwide will emerge early next week. Demand concerns remain along with oversupply despite Saudi Arabia pledging to cut 1 million barrels per day of its crude output in June. That comes on top of the production cut agreement among major oil producers that began on May 1. The United Arab Emirates and Kuwait have also announced additional output cuts to support Saudi Arabia’s move. Gold prices slide -$15.90 or 0.9% to settle at $1,698 an ounce, falling amid a bounce in the dollar


Currencies & Treasuries

·     The U.S. dollar was broadly higher, rising more than 1% late day to 107.70 against the Japanese yen while also bouncing against the euro and British Pound as safe-haven appeal boosted the dollar against its major peers. Investors adjusted risk expectations with an eye on warnings of a second wave of COVID-19 infections as more countries eased lockdown restrictions (rises in South Korea, Germany). Japan said it could end its state of emergency in many regions this week and New Zealand said it could ease restrictions on Thursday. The UK has also set out plans to ease the lockdown while in France shops re-opened on Monday. Treasury prices erased initial declines, as yields inched higher across the board following record low yields late last week for the 2-year and 5-year, as investors extend gains into stocks and out of safe-haven instruments. The 10-year yield rose 3 bps above 0.715%. The U.S. Treasury is scheduled to auction $32B worth of 10-year notes on Tuesday and $22B worth of 30-year notes Wednesday.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; UAA reported a larger Q1 EPS loss of (34c) on revs $930.2M (a fall of 23%) vs. est. loss (19c) and $933.6M as the coronavirus outbreak forces retailers across the world to remain shut (weakness in retail today – PVH, TPR, CPRI); COTY agrees to sell a majority of its professional beauty and retail hair businesses, including Wella and Clairol brands, to investment firm KKR in a deal valued at $4.3B; under the deal, the businesses will become a standalone company, with KKR acquiring a 60% stake; VRA it plans to have reopened more than half of its 149 Full Line and Factory stores by the end of this month and nearly the entire store base by the end of June; SSI files for bankruptcy protection; YETI 15M secondary offering priced at $28.20

·     Auto movers; TSLA slides as sales of Tesla’s Model 3 sedan in China fell more than 64% in April from March, according to the China Passenger Car Assn/sold 3,635 Model 3 cars in April vs. 10,160 in March; auto retailer AN with positive earnings results with a beat on EPS and revenue while same-store sales declined 4.9% in Q1, new vehicle revenue -8.6% to $2.28B, Used vehicle revenue -6.8% to $1.25B; LYFT, UBER

·     Casino & Leisure movers; in lodging; CHH reported a slight beat for Q1 earnings and in-line revs; MAR reports comparable system RevPAR fell -22.5% in Q1, with a -30.5% drop for the international business and -19.5% decline in North America and adjusted EBITDA of $442Mwith up to 25% of hotels closed vs. $821M a year ago due to stay-at-home orders across the U.S.; in gaming; BYD mentioned positively in Barron’s noting the Las Vegas Strip has essentially been shut down since mid-march but casino operators are not all created equal, and investors looking to bet on a recovery in gambling in the age of COVID-19 should look at regional casinos; PENN announces $250M offering of stock and $250M of convertible senior notes due 2026



·     Energy stocks were mixed supported by Saudi Arabia’s move to reduce output by 1 mln bpd in addition to cuts agreed under an OPEC+ pact, while at the same time pared gains pressured by fears of a second wave of COVID-19 infection; in stock news, CHK said after filing its form 10-Q and withdrawing the financial outlook it provided in February, citing the unprecedented market environment/says it does not expect to be in compliance with financial covenants beginning in Q4; other companies moving on earnings included NOG, CPE



·     Pharma movers; BMY will buy out its ex-U.S. milestone and royalty obligations to BLUE for $200M and assumes responsibility for ex-U.S. vector manufacturing/the parties will continue to equally share profits and losses in the U.S.; AZN and MRK announce the FDA nod for the use of Lynparza (olaparib), combined with bevacizumab (Roche’s Avastin), as first-line maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube or primary peritoneal cancer; MYOK rises after the company said it saw positive topline data from its Phase III clinical trial (EXPLORERS Clinical trial) of mavacamten for the treatment of patients with symptomatic, obstructive hypertrophic cardiomyopathy (shares of CYTK advanced in sympathy – tgt raised to $35 at HC Wainright saying MYOK data suggest compelling evidence of activity for drugs in the same class as mavacamten and Cytokinetics’ drug); MYL reported Q1 results just below estimates but reaffirms its year outlook for revs and Ebitda

·     Biotech movers; APOP announces the publication of preclinical data on ApoGraft in Nature Research covering transplantation of bone marrow in humans/results, included in the company’s IND application for a Phase 1/2 clinical trial, showed robust engraftment and the retention of anti-leukemic effects; AMAG shares dropped following a larger than expected Q1 earnings loss while noting the FDA still reviewing matter of Makena, cuts its workforce; REPH posted a 1Q top-line beat, but adj. EBITDA missed due to lower-than-expected gross margins and the Company is lowering FY20 guidance; CRSP rises with VRTX after CTX001 gets RMAT designation

·     Medical equipment and devices; ortho maker ZBH reported a beat for Q1 earnings, while revs of $1.78B were mostly in-line and withdrew year guidance; QDEL rises after the FDA ranted emergency-use authorization to the company for the first antigen test for the Covid-19 virus; MYGN rises as the FDA approved its myChoice CDx test for use as a companion diagnostic to identify advanced ovarian cancer patients for treatment with Lynparza in combination with bevacizumab; DXCM announced to offer $850M of convertible senior notes

·     Healthcare services and providers; CAH reports Q3 revenue of $39.2B topping the $36.95B estimate in strong EPS beat driven by acceleration in overall pharmaceutical sales in March due to the COVID-19 outbreak though expects significant net negative impact to Q4 results due to cancellation or deferral of elective medical procedures on account of virus outbreak; for COO, ALC, Baird said ongoing checks suggest global contact lens revenues have been impacted more than they initially anticipated when we last updated our COO/ALC models in early April; MGLN shares higher following earnings beat and backed its year outlook for eps and revs


Industrials & Materials

·     Transports; Dow Transports started the day weaker, led by more weakness in airlines which fail to rally with broader markets over the last few weeks; SALT cuts dividend by 75% to 5c from 20c in tanker space after posting Q1 loss (-$124.7M); the Baltic Dry Index fell 7.78% to 474 points to mark the 14th straight day of a decline (DSX, STNG, NAT, EURN) – the Index bottomed out at 411 on February 10 and traded as high as 2,518 last September (Capesize rates fell back 20.9% and Panamax rates were down 1.6%)

·     Chemicals, Metals & Materials; CLF shares slide falling as Q1 EPS and revenue miss, as its loss widened and profit fell as the pandemic slowed production, despite a growth in sales driven by a recent acquisition with AK Steel Holding Corp.; CF, CTVA, MOS, NTR all downgraded to underperform at Bank America stating that while 2020 had an optimistic start for agricultural chemicals, the trend has reversed significantly and notes that record corn acres, lower fuel ethanol consumption, and record soybean production in Brazil could lead to the lowest cash prices for corn and soybeans in 14 years; MT said that it will raise around $2 billion through a share and debt issuance to cut the company’s debt levels.


Technology, Media & Telecom

·     Internet; YELP was downgraded at BMO Capital after quarterly results were below their expectations and forward estimates head lower; GOGO shares benefit after reports Q1 revenue and EPS above views while recorded an $8.6M charge for expected credit losses due to impact of COVID-19, largely from one international airline partner

·     Semiconductors; NVDA trades to all-time highs with its tgt raised to Street high $360 at Needham which was optimistic about NVDA’s gaming business and data-center division; ON shares slip after reports FQ1 results that miss estimates on the top and bottom lines and weaker guidance for revs as sees $1.1B-$1.26B vs. est. $1.25B as well as significant declines in Auto due to US/Europe softness; AMD outperformed in a generally weak sector on the day

·     Media & Telecom movers; AMC shares rally after the Daily Mail reported that e-commerce giant AMZN had expressed interested in acquiring the struggling movie theater chain ; DIS opened up its Shanghai Disneyland theme park today, but at partial capacity with strict guidelines on the day (Disney will increase Shanghai park attendance by 5,000 per week, CEO says); AVYA rose after Q1 results showed loss that included non-cash goodwill charge of $624M, withdraws year guidance, sees Q3 revs $675M-$705M vs. est. $611M

·     Software, Hardware & Component news; NTAP was downgraded to hold from buy at Stifel given clear indicators from IT distributors, resellers, and EMS providers that public and private enterprises have paused major IT infrastructure spend amid the ongoing pandemic ; software names outperform in tech after better results from many names last week (TWLO)


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