Market Review: October 06, 2020

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Closing Recap

Tuesday, October 06, 2020





DJ Industrials




S&P 500








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Equity Market Recap

·     Stocks were cruising higher all session, trading at intraday highs late afternoon (S&P up 0.6%, Nasdaq up 0.5%) before the rug was pulled out from under it after President Trump accused House Speaker Pelosi of not negotiating in good faith on coronavirus relief and called on his administration to stop negotiating on relief until after election. The tweet reverberated throughout major markets as stocks plunged and safe-haven related assets (that had been under pressure all morning such as treasuries and the dollar) surged. The hopes that a relief bill would eventually come to pass between the White House and Democrats had been the wind in the sail for major averages over the last week, but this commentary put an end to hopes for now.

·     Trump’s late afternoon tweet read “Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request and looking to the future of our Country. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business. I have asked @ senatemajldr Mitch McConnell not to delay, but to instead focus full time on approving my outstanding nominee to the United States Supreme Court, Amy Coney Barrett.”

·     Prior to the tweet, stocks had been enjoying big gains, especially in financials and energy amid rising Treasury yields and oil prices while tech held up and the “re-open” trade lifted consumer, restaurants, travel and leisure names following hopes of a vaccine after Trump’s health improved from his positive COVID-19 test diagnosis. U.S. stocks saw modest early gains fade after Federal Reserve Chairman Jerome Powell repeated his call for additional fiscal stimulus to support the economy, arguing it would be better for Congress to risk doing too much rather than too little.

Economic Data

·     The U.S. posted its largest monthly trade deficit since 2006 in August, the Commerce Department said Tuesday, as imports of consumer goods recovered to pre-pandemic levels and exports of services and manufacturing products stalled. August trade deficit (-$67.1B) vs. est. (-$66.1B) and vs. July deficit (-$63.4B) – Aug exports rose +2.2% and imports rose +3.2%



·     Oil prices finish higher as WTI crude gains $1.45 or 3.7% to settle at $40.67 per barrel for its highest close in about 2-weeks on growing optimism for more U.S. fiscal stimulus and as President Donald Trump left hospital following treatment for Covid-19. Other factors, Norwegian oil workers plan to expand their ongoing strike from Oct. 10 onwards, adding 93 more workers to the 169 who are already part of the conflict. Hurricane Delta shuts 29% of U.S. gulf offshore crude oil production as its on track to become the record 10th storm to hit the U.S. this season and approaches the Gulf of Mexico. Weekly API data on U.S. inventories and monthly EIA short-term outlook are due. The EIA said today that U.S. crude oil production is expected to fall by 800,000 barrels per day (bpd) in 2020 to 11.45 million bpd, a smaller decline than its previous forecast for a drop of 870,000 bpd. The agency now expects U.S. petroleum and other liquid fuel consumption to decline 2.31 million bpd to 18.23 million bpd in 2020, a slightly bigger decline than its previous forecast for a drop of 2.12 million bpd.

·     Gold prices fell -$11.30 or 0.60% to settle at $1,908.80 an ounce as safe-haven assets pulled back on the day (Treasuries, US buck flattish), while markets eagerly await news out of Washington – with today’s pullback, gold slips from 2-week highs. Federal Reserve Chairman Jerome Powell today reiterated his belief that the U.S. economy needs more fiscal support, even as the recovery from pandemic has been strong thus far.


Currencies & Treasuries

·     The U.S. dollar jumped late day following the President tweet; prior to that, the buck was slightly higher with investors still waiting for any signs of a relief bill compromise in Washington to support the economic recovery from the coronavirus pandemic ahead of next month’s election. The dollar index (DXY) was up slightly around the 93.50 level, little changed against the euro at 1.778 and yen 105.60. The buck has fallen around 1% from a two-month high a week ago as investors rotated into riskier assets. The British pound fell with hopes of a Brexit deal keeping the currency in check.

·     Treasury yields moved to 4-month highs for the 10, 20 and 30 year as investors bailed on safe-haven related assets – but reversed lower as stocks slipped late day. The U.S. Treasury sold $52B in 3-year notes at a yield of 0.193% vs. 0.191% when issued prior as the bid-to-cover was 2.44 and indirect bidders awarded 55.66% of the auction and directs 12.63%.






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10-Year Note





Sector News Breakdown


·     Retailers; COST upgraded to overweight at Barclays and raise tgt to $400 from $330 saying comps in 2021 are not particularly tough, and many components of its recent margin expansion appear sustainable; for PTON, Bank America said month end data suggests Sep site visits remain strong (+197% v +129% in Aug) and the traffic gap to competitors remains large; TPR estimates raised at Bank America on better sales outlook for Coach as its new multi-year strategic plan should allow for outsized earnings growth when conditions stabilize; WMT said Walmart Insurance Services will begin selling Medicare insurance plans during this year’s Annual Enrollment Period (AEP), Oct. 15 through Dec. 7 (shares of EHTH slipped); LEVI reports earnings tonight

·     Auto sector; AAP upgraded to Overweight at JPMorgan and establishing a $190 target based on strong/sustainable current trends bridging to an easy winter weather comparison as well as increasing top-line benefits from the peak repair cohort (6-12 years old) in 2021 and 2022 and margin story blossoms in 2021; GPI reported preliminary third quarter 2020 results, new share repurchase authorization, and intention to reinstate dividend; BLNK announced the installation of 40 Level 2 EV charging stations at The Elysian residential building in the historic Victor Heights neighborhood near downtown Los Angeles, California; DDAIF said that the company’s flagship Mercedes-Benz brand would slash costs by more than 20% over the next five years and move its vehicles upmarket in an attempt to boost profit

·     Consumer Staples; BYND tgt raised to $178 from $130 at Piper as latest Teen survey included questions on plant based meat, and of the teens surveyed, 47% either consume or are open to consuming plant-based meat, in-line with prior survey; JP Morgan sees potential near-term volatility in tobacco stocks, but also attractive valuations and ranks IMB, SWMAY, BATS, PMI for the near-term and BATS as the top longer-term pick

·     Restaurants; WING Q3 prelim system-wide sales up 32.8% to about $509.2M, domestic same store sales increased 25.4%, company-owned restaurant same store sales increased 15.2% and digital sales increased to 62.0%; FRGI said that Q3 Pollo Tropical comp store sales fell (-11.1%), improving from the (-31.6% level in Q2) while Taco Cabana fell (-14.2%)

·     Leisure and Gaming; SEAS was upgraded to Outperform from Neutral and raising tgt to $30 from $13 at Credit Suisse as believe the data points surrounding headwinds have either changed or are now fully priced in, making us more constructive on a stock with relatively low expectations; cruise stocks (CCL, NCLH, RCL) advanced along with airlines, theme parks and gaming names as vaccine hopes increased as President Trump recovers from the coronavirus.



·     Energy stock movers; stocks bounced a second day behind a jump in crude oil prices, lifted by a new hurricane in the Gulf of Mexico, supply disruptions in Norway and U.S. President Donald Trump’s return to the White House from the hospital; HES to sell its 28% working interest in the Shenzi Field in the Deepwater Gulf of Mexico to BHP for $505M; REGI announced it plans to expand its Louisiana biorefinery capacity to 340M gallons/yr from 90M by late 2023 and its price target was raised to $70 from $50 at Roth; WTI estimates Q3 production volumes in the range of 32,500-33,900 Boe/d, with about 35% oil, 12% natural gas liquids and 53% natural gas. Storms and unplanned downtime at Mobile Bay hurt production by almost 9,000 Boe/d in the quarter

·     Utilities & Solar; OGE reached a unanimous settlement on its Grid Enhancement Mechanism, which now awaits approval by the Oklahoma Corporation Commission, and the stock was reiterated as a Buy with an increased target at Mizuho and UBS; FCEL emphatically denied short-seller claims yesterday related to its disclosures with respect to the LIPA 2 and LIPA 3 power project awards, though Bloomberg noted a Long Island Power Authority representative told Bloomberg via email that the two Fuelcell contracts (the 18.5 MW Brookhaven Rail Terminal and the 13.9 Clare Rose project) were not canceled, they were never executed; SPWR was upgraded to Buy from Sell at GLJ Research with a $23.40 pt



·     Banks; JP Morgan said it expects bank stocks to outperform near term given valuations and earnings expectations, specifically favoring banks with likely increases in fee revenues (TFC), and also raises its PTs on BAC, C, CFG, FITB, PNC, RF, USB, WFC; SCHW completed its $22B acquisition of AMTD, and TD announces a 13.5% stake in Schwab after the merger; Bank of America downgrades TD to UP ($68 pt) from Neutral and upgrade BNS to Buy ($68 pt) from Neutral, BMO to Neutral ($88pt) from Underperform in Canadian banks; CBOE reports average daily options volume increased 27.7% YoY in September

·     Insurance; JP Morgan remains downbeat on life insurance stocks in the long-term but sees attractive risk-reward in life insurance stocks given YTD underperformance and valuation levels, naming GL, MET as top longs and also raising estimates on AFL, BHF, EQH, PFG, UNM, VOYA, but lowering estimates on AIG, LNC, PRU, RGA; RE priced its $1B offering of 3.5% senior notes due 2050; PLMR expects Q3 pretax catastrophe losses to be $34-38M after Hurricanes Hanna, Isaias, Laura, and Sally

·     Consumer Finance; PAYX reported 1Q adj EPS 63c (-8c Y/Y) on 1Q revenue $932.2M (-6% y/y), beating estimates 55c, $895.2M; INTU tgt raised to $373 at Piper after conversation with CFO reinforced thesis that Intuit’s FinTech platform has multiple growth avenues, differentiated product offering, and relentless customer focused innovation; MGI announced a three-year extension to its partnership with WMT to continue providing services at over 4,700 Walmart’s and the two companies’ co-branded digital platform;

·     REITs; Raymond James increased estimates on self-storage properties and upgrades LSI to OP from MP (target price $120), EXR to MP from UP, downgrades CUBE to MP from OP, PSA to UP from MP; GEO cut its quarterly dividend to 34c/share from 48c



·     Pharma movers; BNTX and PFE said they have initiated rolling submission in Europe with PFE for their lead vaccine candidate against COVID-19; ALXN said it plans to raise 2020 full-year revenue outlook by more than $200 mln when reporting Q3 results (in July they said expects 2020 revenue between $5.55B-45.6B vs. est. $5.67B); VIR and partner GSK to expand early-stage trial of an experimental antibody to treat COVID-19 – after testing on 20 U.S. participants for safety, the trial will now expand as planned to 1,300 patients globally; CRBP slides after saying its lead candidate, lenabasum, to treat cystic fibrosis did not meet main goal in a mid-stage trial; KNSA rises as announces positive data from mid-stage trial of mavrilimumab in giant cell arteritis which causes inflammation of blood vessels

·     Biotech movers; TXG to acquire ReadCoor, developer of foundational In Situ technologies, for $350 mln in cash and stock; IOVA shares fell after saying it has not reached agreement with the FDA on the required potency assays to fully define its tumor-infiltrating lymphocyte therapy lifileucel in metastatic melanoma; AMGN announced positive top-line Phase 2 data from sotorasib in NSCLC patients bearing KRAS G12C-mutant; GMDA rose after saying its late-stage study of omidubicel, an investigational bone marrow transplant therapy for patients with blood cancer met all three of its secondary goals; YMAB announced that the FDA issued a Refusal to File letter for the BLA for omburtamab

·     Healthcare services and providers; CNC expands Medicare advantage offerings for 2021 saying Medicare plans will operate in 1,249 counties across 33 states in 2021; SDC granted U.S. patents on electric toothbrush, trackable aligner case; Cantor notes large cap managed care 3Q20 earnings are slated to kick off next week (UNH, ANTM, HUM, CNC) and expects higher MLRs and continued caution regarding 2021; QGEN upgraded to buy from neutral and $59 tgt at Bank America saying with a new CEO in place and new products in the portfolio, QGEN has the opportunity to reinvent itself; SYNH upgraded to buy at Mizuho as believe the recent stock performance does not reflect the company’s improved operating performance over the last few quarters, high earnings visibility for 2021

·     MedTech and Equipment; SPNE guided Q3 revs $42.9M-$43.3M above the $39.4M estimate and sees Q4 revs $47M-$548M vs. est. $45.1M; CDXC said patients with mild-to-moderate COVID-19 who received its nutritional supplement along with standard of care experienced 29% reduction in recovery time, in mid-stage trial


Industrials & Materials

·     Industrial & Machinery; VNT will be added to the S&P 500 effective prior to the opening of trading on Friday, October 9, replacing NBL, which will be removed from the S&P 500 effective prior to the open of trading on Monday, October 12; GNRC init outperform at JMP Securities calling it dominant supplier of residential backup power solutions, with its Guardian line of home standby units as well as smaller portable generators; GE slides after announcement SEC staff issued wells notice and is considering recommending sec bring a civil injunctive action against

·     Transports; rail price tgt changes raised at Susquehanna UNP from $211 to $231, keeps Positive, KSU from $181 to $198, stays Neutral, NSC from $266 to $284, maintains Positive, CP from $297 to $326, stays Neutral, CSX from $92 to $100, keeps Positive and CNI from $101 to $106, maintains Neutral; airlines recover after recent weakness (AAL, UAL)

·     Aerospace & Defense; SPCE traded to 2-month highs, continues bounce last week after analyst were positive on shares (from Bofa and Susquehanna late Sept); BA shares slipped as AAL delays plan to start 737 max training to December from November

·     Metals & Materials; LTHM rises after peer E3 Metals Corp (ETMC) said it and LTHM agreed to an updated development plan to advance ETMC’s direct lithium extraction tech – updated plan prioritizes completing Stage 1 as soon as possible, after which the process is expected to be demonstrated in a pilot plant; other lithium names extend gains including PLL, ALB


Technology, Media & Telecom

·     Semiconductors; HIMX issued prelim Q3 revs of $239.9M, above the $175.3M estimate as Q3 rev, gross margin and EPS all exceed outlook issued on Aug. 6 citing continued strong business momentum across all our major business sectors in Q4; NVDA tgt price raised by some analysts following its analyst day yesterday (JPM to $605, Opco to $600) on initial customer uptake of the company’s new Bluefield 2 SmartNIC (DPU) platforms with new enterprise customers; AMSC reports preliminary Q2 EPS less than (30c) vs. est. loss (19c) and preliminary Q2 revenue $20.5M-$21.5M vs. est. $18.77M; MRVL tgt raised to $47 from $38 at UBS saying ne growth vector including 5G, cloud service along with its edge computing platform to lay out a path to EPS of more than $2.50 for MRVL

·     Software movers; software space benefits after AYX raises Q3 revenue guidance view to $126M-$118M from prior $111M-$115M view (est. $113.6M) representing 22% to 24% YoY growth; AVLR announced the acquisition of Transaction Tax Resources (TTR) for $337 million in cash, a subscription-based, enterprise-focused transaction tax and compliance vendor

·     Media & Telecom movers; AMC said more than 80% of its theaters in the United States to remain open as several new movies are lined up for release in October and November; TRI is exploring the sale of its 50% stake in 3 Times Square, its Manhattan hub, Bloomberg reported

·     Hardware & Component news; SONO and LOGI slipped after Bloomberg reported AAPL has stopped selling headphones and wireless speakers from rivals as it gears up to launch new audio products; AAPL shares bounced midday after announcing it would hold a special event on October 13th; ROKU hitting new record highs today, rising for the 7th time in the last 8-days


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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