Market Review: November 23, 2020

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Closing Recap

Monday, November 23, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks push higher following mixed results last week (S&P and Dow had slipped as Nasdaq rose) with the same sectors that have recently paced market gains back near record highs doing the heavy lifting, with strength in retailers, REITs, energy, financials, and Smallcaps. The rotation out of large cap tech and into cyclical sectors trade (over the last few weeks) amid economic recovery hopes has lifted interest in beaten down sectors for the year, aided by positive vaccine related updates on a daily basis (PFE, MRNA, JNJ, AZN). Today, investors weighed positive vaccine related headlines against worsening virus case trends as 1) AZN coronavirus vaccine reduced the risk of Covid-19 infection by an average of 70.4%, according to an interim analysis of large Phase 3 trials (was as much as 90% effective and as low as 62% depending on the dosage given), 2) REGN Covid-19 antibody cocktail received Emergency Use Authorization from the FDA and 3) MRK announced a deal to buy Covid-19 treatment clinical-stage biopharmaceutical company OncoImmune for an upfront payment of $425 million in cash. Markets got a further late day lift after the WSJ reported Joe Biden would tap Janet Yellen as his Treasury Secretary.

·     Markets ignored a potential increase in political tensions after Reuters reported the Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of U.S. goods and technology. Markets also downplayed news that Fed Chair Powell will return unused credit facility funds to the Treasury when programs shut at end of year as per Mnuchin request last week. President Donald Trump is also facing rising pressure from prominent Republicans to begin a transition to President-Elect Joe Biden, or even concede defeat as Trump’s long-shot legal challenges failed to gain traction.

·     Retailers rise further on hopes for a bullish holiday season (after good results from several names last week – TGT, GPS, LB and as the NRF forecast U.S. holiday sales to rise up to 5.2% this year, saying lower spending on personal services, travel and entertainment during COVID-19 has freed up money for retail spending). Electric vehicles rip roaring these days soar on growth expectations for that industry (TSLA, NKLA, BLNK, AYRO, NIO, SBE among names higher). Oil stocks outperform along with financials on rotation into cyclical sectors (lifting the Smallcap Russell 2000 yet again), while gold prices tumble. Financials also among market leaders.

Economic Data

·     The November Markit U.S. PMI Composite Flash reported at 57.9 vs. 56.3 prior (best reading since March 2015) as the Employment gauge rose to 57.4 from 53.2 in October (best reading since this data series began more than 10 years ago). Markit November flash manufacturing PMI at 56.7 (vs 53.4 in October) – best since Oct 2014. UK reports 15,450 new covid-19 cases on Monday compared with 18,662 a day earlier and 206 more related deaths (vs. 398 day prior).



·     Oil prices rise as WTI crude gains 64c or 1.5% to settle at $43.06 per barrel, its best levels since early September as signs that Covid-19 vaccinations in the U.S. could improve the demand outlook for the energy sector. Markets broadly rallied after AstraZeneca became the latest company to report a vaccine that protects most people from coronavirus. Brent crude rises $1.10 or 2.45% to settle at $46.06 per barrel and natural gas finishes 2.3% higher at $2.711/MMBtu, unseasonable U.S. heat looks to moderate.

·     December gold slides -$34.60 or 1.8% to settle at $1,837.80 an ounce to its lowest in four-months as better-than-expected U.S. business activity data, a rebounding dollar and optimism over progress in COVID-19 vaccines boosted hopes for a swifter economic rebound. Stocks jumped sending safe-haven assets lower in what was a “risk-on” day.


Currencies & Treasuries

·     The U.S. dollar edged higher vs. most currencies, though fell vs. some emerging market comp as the Mexican peso strengthened below 20 per dollar on Monday for the first time since early March as further positive updates on COVID-19 vaccines boosted appetite for Latin American assets. The buck was boosted after better Markit PMI outcomes as the dollar index (DXY) recovered from near three-month opening lows of 92.02 The euro slipped from just over 1.1900 at the open to lows 1.1801 before rebounding, while dollar rallied to 1-week highs vs. the Japanese yen off 103.70 lows to 104.45 late day.

·     Treasury yields inch higher as prices fall, with the 10-year yield at 0.85%, up over 2 bps after yields dropped last week, while the long-end 30-year yield up 2 bps to 1.55%. The U.S. Treasury sold $56B in 2-year notes at a yield of 0.165% vs. 0.167% when issued prior with a bid-to-cover (demand) at 2.71 and indirects awarded 46.05% of the auction. The U.S. Treasury sold $57B in 5-year notes at a yield of 0.397% vs. 0.39% when issued prior as the bid-to-cover (demand at 2.38 and indirects awarded 56.46%, with direct 14.32%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; the combination of positive vaccine news and some positioning ahead of the holiday shopping season has investors checking back into the mall sector; GPS was upgraded to Overweight at JPMorgan with favorable risk/reward setups into 2021 and raise tgt to $30, while the firm raised tgt on LB to $52 and AEO to $22; FL downgraded to underweight from neutral at Piper saying temporary closures of over 10% of FL’s global fleet creates soft start to holiday quarter, and also sees long-term pressure for FL from Nike’s move to sharpen focus on its own direct-to-consumer channel; stay-at-home winners (PTON, NLS) pressured early on the ongoing positive vaccine related news over the last week – KSS, JWN, DDS, AEO, Macy’s (M) higher

·     Auto sector; the electrical vehicle sector trading on “animal spirits” these days with shares of AYRO, BLNK (shares ran 133% last week), LI, NIO, NKLA, SBE, XPEV, WKHS joining the euphoria along with TSLA (record highs), all looking to add to last week momentum; SOLO slipped early after mixed shelf offering; TSLA tgt raised to $560 from $500 at Wedbush saying bull story" is now all about stepped-up electric vehicle (EV) demand trajectory into 2021 and raises its bull case tgt to $1,000 from $800 as sees global EV demand to go up to 10% of total auto sales by 2025 from ~3%; BLNK pared gains after Citron cautious comments

·     Consumer Staples; PM downgraded to neutral from Buy at UBS and cut tgt to $80 citing emerging negative excise tax headlines, and Google Trend data suggesting slowing IQOS growth; MKC increases quarterly dividend to $0.68 from $0.62; RBC said on SAM while continues to believe the hard seltzer category has a lot of runway (20% share of the beer category is attainable a few years out), also believes the (ready-to-drink) cocktail category is also gaining significant traction; Kellogg (K) downgraded to neutral at Credit Suisse and cut tgt to $68 from $77 as expects mgmt to guide to a year of elevated investment in 2021 without promising elevated sales growth; in restaurants; DRI and TXRH both upgraded to outperform from neutral at Baird

·     Leisure and Gaming; in cruise industry (CCL, NCLH, RCL), the CDC raised its travel warning for cruise travel over the weekend, citing an extremely high level of Covid-19. The warning, which recommends that travelers get tested after the trip and stay home for seven days after travel, comes after the agency lifted its ban on cruise sailings but required operators to apply for a permit

·     Services; BMO upgrades staffing sector to overweight as a gradual economic recovery makes investors more optimistic about the sector – raises rating on CCRN, MAN, RHI, and TBI to outperform saying heightened uncertainty and potential increased regulations could increase the use of temporary staffing early this cycle; KFY Q2 revenue falls ~13% to $437.8M but came in above the estimates of $376.1M while also posts adjusted profit above estimates as well



·     Energy stock movers; industry gains as oil prices rise, extending last week’s gains as traders expect coronavirus vaccine trials to spur a recovery in demand – gainers again widespread in refiners (VLO), services (b), E&P (FANG, DVN); WMB said it will take ownership of some of Chesapeake Energy Corp’s assets in exchange for accepting lower gas gathering fees from the bankrupt shale producer (note WTI and Brent oil spiked 5% last week as Covid-19 vaccine news boosts hopes for demand prospects)

·     Utilities & Solar; AEP was upgraded to neutral from sell at Guggenheim saying they have seen most of their initial concerns play out including the balance sheet, incremental equity vs. expectations, performance and regulatory lag from the utilities, and the sense that mgmt. would set expectations with investors that could fall short



·     Bank movers; banks movers higher as yields rebound and cyclical sectors extend recent bounce; CFG, FITB, HBAN, SNV, and TFC all mentioned positively in Barron’s this weekend saying despite their gains in November, these five regional bank stocks are still cheap, with stocks down year-to-date; PNC upgraded to neutral from sell and raise tgt to $122 from $88 at UBS which results from much higher earnings estimates as excess capital generated from the sale of the BlackRock stake will be deployed towards the acquisition of BBVA USA; PACW downgraded at Raymond James after recent stock price appreciation (+27% in the last 2 weeks) has reduced upside potential

·     Blockchain technology; Bitcoin surged to $18,766.79, the highest since December 2017 on Friday and has soared about 160% this year driven by demand for its perceived quality as an inflation hedge – shares of cryptocurrency miner MARA and bitcoin-focused RIOT rise along with XNET, as well as SI a commercial bank focusing on digital currency business

·     Keybanc downgrading industrial REITs PLD to sector-weight as the group could be sources of funds during the expected value rotation while upgraded FR to Overweight as the stock represents a value name within the industrial group, allowing exposure both to the capital rotation and solid industrial fundamentals; Raymond James downgraded PK and RLJ in lodging REITs saying fundamentals, stocks veering opposite directions; Jefferies also makes changes in lodging REITs as upgraded PK to Buy while downgraded SHO to Hold as consider the prospects for continued volatility through 1H21, but believe that ultimately, higher leverage to recovery should prevail, provided the portfolios remain intact; SPG received a positive mention in this weekend’s edition of Barron’s; in M&A news, RESI agreed to a revised takeover deal with a group led by investment firm Pretium Partners LLC and funds managed by ARES that raises the purchase price to $16.25 a share from $13.50.



·     Pharma movers; AZN said that its coronavirus vaccine reduced the risk of Covid-19 infection by an average of 70.4%, according to an interim analysis of large Phase III trials conducted in the U.K. and Brazil (was as much as 90% effective and as low as 62% depending on the dosage given) – note Leerink cautious saying results "embellished," and raising questions after safety data disclosures); MRK to acquire privately owned Covid-19 treatment clinical-stage biopharma co OncoImmune for an upfront payment of $425 million in cash; in drug pricing, U.S. President Donald Trump announced late Friday that his administration is issuing two rules to "very dramatically" lower the price of prescription drugs for the American people, especially for seniors; BLPH falls after co puts late stage covid-19 treatment trial on hold

·     Biotech movers; REGN said the antibody cocktail Casirivimab and Imdevimab administered together, a therapy currently being investigated for use in COVID-19, has received Emergency Use Authorization (EAU) from the FDA; EIGR said the FDA approved its experimental drug Zokinvy for treating Hutchinson-Gilford Progeria Syndrome and processing-deficient Progeroid Laminopathies, genetic disorders that cause children to age rapidly; ABIO said the FDA has given fast-track development approval to AB201 as a potential treatment for Covid-19; SDGR rises on collaboration with BMY to discover, develop, and commercialize therapeutics in multiple disease areas; CYTK down after AMGN ends collaboration with co over heart drugs development

·     Healthcare services and providers; SDC has partnered with MET to deliver in-network coverage of SmileDirectClub’s convenient, affordable, remote orthodontic care to the more than 20 million individuals insured under its dental plans; in research, TVTY upgraded to Buy from Neutral at Guggenheim following the sale of its Nutrition segment (expected to close in 4Q), as will revert to exclusively focusing on Healthcare. Guggenheim downgraded HQY to neutral from buy noting shares are up meaningfully in recent weeks, +35% in November vs. S&P 500 +9%, driven by improving investor confidence in the potential recovery of the business; Cowen consumer survey suggests that roughly 39% of refill retail scripts could switch to AMZN pharmacy and the impact is worse for WBA than for CVS given CVS‘ greater diversification

·     MedTech and Equipment; TNDM announced health Canada approval of T:slim x2 insulin pump with control-IQ technology and expects to begin shipping t:slim x2 insulin pumps with control-IQ technology in Canada in q1 of next year


Industrials & Materials

·     Materials, Industrial & Machinery; BA shares led gains in the Dow after ALK signs deal to lease 13 new Boeing 737 MAX 9 planes from aircraft lessor Air Lease Corp’s; sector remains strong on improving China economy, vaccine related hopes and positive economic recovery momentum; in research, ROK upgraded to overweight from equal-weight and raise tgt to $288 from $267 at Morgan Stanley while downgraded DOV to EW from OW, but up tgt to $134 from $131; CF was upgraded to overweight at Stephens and raise tgt to $144

·     Transports; Dow Transports edge higher on airline strength (AAL, ALK, DAL) after the TSA said total traveler throughput was 1,047,934 (highest level since March 16th of 1,257,823) as well as optimism on more positive vaccine related news and data today; in trucking sector, Bank America downgraded KNX, WERN, TFII to neutral from buy and cut USX to underperform (and lower tgts) as believes selected truck stocks will struggle to move higher in the near-term given what he sees as this sentiment headwind


Technology, Media & Telecom

·     Internet, media & Telecom; SNAP unveils spotlight to attract, feature popular videos – SnapChat’s spotlight to award $1 million a day to video makers; ATUS announces commencement of tender offer to repurchase up to $2.5 billion of its class a common stock; WMG posts Q4 revenue of $1.13B beating the $1.11B estimate and posts a 15.4% rise in digital revenue to $778M from $674M last year; stay at home names PINS, FB, NFLX, AMZN were lower

·     Semiconductors; AMD tgt raised to $100 at RBC Capital as see potential for $5.50 in EPS out in 2025E, potential for $300 to $600M in communications revenue synergies within the first 12-18 months post-closing XLNX deal, and notable margin expansion; semiconductor equipment demand remains strong according to KeyBanc saying a late-2020 surge in NAND capex supporting 4Q guidance upside through earnings – raising price targets to $472 for LRCX and $266 for KLAC to better reflect the strong outlook; AMBA to report earnings tonight, ADI tomorrow morning; UMC chares surged after a weekend report that the company is expanding its 28nm and 22nm capacity due to strong demand, according to Economic News Daily

·     Software, Hardware & Component news; ROKU tgt raised to $315 (up $60) at Needham saying the COVID-19 pandemic pushed forward 1-2 years of key market upside value drivers for co and benefits from long-term upside trends in its ad platform "CTV" such as upside in political ad spending, accelerated cord-cutting and 43 mln streaming-only U.S. homes; NTNX expected to report earnings after the close tonight; TTD tgt raised to Street high $1,000 from $750 saying the pandemic pulled forward by 1-2 years key connected TV upside drivers for Trade Desk


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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