Market Review: September 04, 2020

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Closing Recap

Friday, September 04, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     A breath-taking sell-off on Thursday was followed up with an even more astounding rebound off lows on Friday as Wall Street closed out an incredible two days of trading with stocks finishing well off their lows, with the Dow turning positive late day (a 900-point swing before sliding in the final minutes). It appeared the “tech-wreck” was in place heading into the long holiday weekend with the Nasdaq falling more than 5% in early market action after its 5% drop on Thursday on profit taking…but as remains the case, investors take any-and-all opportunities to buy the dip, with the Nasdaq closing down around 1% (around 11,300), well off its 10,875 morning lows. The S&P 500 and Dow performed better amid strength in financials and “reopen-trade” related sector (airlines, cruise lines, lodging, gaming, etc.) Treasury yields erased the losses seen this week as a bullish August jobs boosted confidence in economic growth, with the 10-year Treasury yield touching highs of 0.712%, up 9 bps while the 30-yr rose more. Oil prices dropped on the day and week along with gold as the dollar rebounded. The Dow swung as much as 900 points on the day, turning positive late while major averages overall finished significantly higher than the morning lows in another impressive buying melt-up rally. A strong monthly jobs report (reported inline job gains along with a drop in unemployment and a rise in wages) lifted futures early, but markets quickly succumbed to selling pressure, led again by a decline in technology stocks. In addition to another coronavirus package (talks still not worked out in Washington), U.S. lawmakers must approve spending to keep government open past Sept. 30th.

Economic Data

·     Nonfarm payrolls for August rose 1.371M, mostly in-line with ests but down from the 1.734M reading in July; August private sector jobs rose 1.027M vs. est. 1.2M (July was 1.481M) and factory jobs rose 29K missing the 50K estimate (July upped to 41K from 26K); the unemployment rate at 8.4% vs. est. 9.8% and compared to July 10.2%; hourly earnings rose 0.4% vs. est. flat; the labor force participation rate 61.7% in August vs. 61.4% in July



·     Oil prices declined on Friday, posting its biggest weekly decline since June as concern around a slow economic recovery added to worries about weak oil demand. WTI crude dropped -$1.60 or 3.87% to settle below $40 per barrel for the first time in a month at $39.77. WTI crude was down 7% for the week, snapping a 4-week win streak. Demand remains a key issue after Russian Energy Minister Alexander Novak said on Friday that global oil demand could fall by 9-10 million barrels per day (bpd) this year due to impact of the COVID-19 pandemic. Novak also said oil prices could potentially rise to around $65 per barrel next year, but that he expected them to be volatile.

·     Gold prices slipped on Friday, down -$3.50 or 0.2% to settle at $1,934.40 an ounce, reversing course as better-than-expected U.S. employment data bolstered the dollar as gold prices settled the week lower by 2.1%. The dollar index (DXY) rose on better jobs data, posting its best week since early April and making the metal expensive for holders of other currencies. But no change from the Fed is expected anytime soon as Fed’s Rosengren said "at this point markets well understand that we are not planning raising rates any time soon" in CNBC interview. Gold has gained over 26% so far, helped by near-zero interest rates globally and easy monetary policy.


Currencies & Treasuries

·     Treasury yields climbed sharply on Friday after the official jobs report showed the labor market was continuing to make a steady recovery. The 10-year Treasury note yield rose 7 basis points to move back above the 0.7% level, the 30-yr jumped over 9 bps to 1.46% and the shorter-term 2-yr yield rose 15 bps to 0.14% after what had been a soft week for yields prior. The U.S. economy added 1.37 million jobs in August, in-line with consensus estimate of 1.2 million while the unemployment rate fell sharply to 8.4%, from 10.2% in July. The dollar was flat on the day vs. the yen, euro and Pound, but dollar index posted solid gains on the week as data improved.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; LULU shares slide after being downgraded to neutral from buy at Citigroup citing its 63% rally this year as thinks highly of the brand and growth prospects, but the stock seems to be pricing in perfection; UAA to close all retail location in the U.S. for Thanksgiving to thank workers for pandemic efforts; OXM also downgraded at Citigroup with 3Q expected to be similar to the weak 2Q, and a lot of uncertainty for holiday; OSTK was initiated neutral and $78 tgt at Bank America with the stock up 13x YTD, would require "several quarters" of COVID-less performance to gauge the company’s performance

·     Housing & Building Products; Wayfair (W) downgraded to neutral from buy at bank America citing the rally in shares, saying expectations and valuation are high vs. history, and we expect revenue deceleration ahead, which has been a historical valuation headwind for the stock; LGIH closes on 669 homes in August vs. 677 in August 2019; company ended the first eight months of 2020 with 5,120 home closings, a 13.2% increase Y/Y

·     Consumer Staples & Restaurants; YUMC said its global and Hong Kong public offering priced, with the company raising HG$17.27 billion ($2.23 billion) – offering of 41.91 million shares was priced at HK$412.00, or the equivalent of $53.16; in protein space, Bloomberg reported that BOBE sued TSN, PPC and SAFM for inflation chicken prices

·     Leisure and Gaming; PTON reportedly plans to introduce a cheaper treadmill and a higher-end exercise bike as new Tread treadmill that will be priced under $3,000 as per Bloomberg; WYNN quietly rolled out its sports betting casino app to New Jersey and has plans to extend it into Colorado and Indiana in partnership with SMGS; CCL, RCL also rising again in cruise space a day after Carnival announced a partial resumption of cruises out of Italy



·     Energy stock movers: crude oil futures added to their biggest weekly loss since June, weighed by concerns over weak demand prospects and strength in the U.S. dollar. A rebound in the dollar this week off 2-year lows also weighed on commodity prices along with the broader market pullback in stocks amid profit taking. The buck rose today after better than expected monthly U.S. employment data, which included an 8.4% August unemployment rate from 10.2% in July.

·     In stocks news; Baker Hughes (BKR) weekly rig count showed total rig count rose 2 to 256, with oil rigs up 1 to 181 and gas rigs unchanged at 72 miscellaneous rigs unchanged rose 1 to 3; PLM shares surge after a Ramsey County District Court judge found that the Minnesota Pollution Control Agency (MPCA) did not engage in any procedural irregularities in connection with the processing of the National Pollutant Discharge Elimination System permit for the NorthMet copper-nickel-precious metals project, a wholly owned subsidiary of the Company; RIG active after a federal judge authorized it to proceed with a disputed restructuring of as much as $2B of debt; in utilities, Dominion (D) said it filed an application with the Nuclear Regulatory Commission to extend the operating licenses of two reactors at its North Anna Power Station in Virginia for an additional 20 years.



·     Bank movers; banks actually performed better than other sectors today, rising with a bounce in treasury yields as well as investors putting money to work in underperforming sectors for 2020 as technology shares fell sharply for a second straight day off record highs; KCAC adds to huge gain in previous session (rose over 87% after Volkswagen backed EV battery startup QuantumScape said it plans to go public in $3.3B merger with the SPAC); consumer finance names outperformed with gains in credit cards such as COF, ADS, DFS, while fintech fell (PYPL, SQ); insurance names also massive outperforms UNM, LNC, BHF, ATH among them



·     Pharma movers; IMAB rises after announced a collaboration agreement with ABBV to develop and commercialize I-Mab’s lemzoparlimab for the treatment of multiple cancers (I-Mab will receive $200M, including a $180M upfront payment and $20M in a milestone payment); CALA delivered written notice to INCY terminating their January 2017 collaboration and license agreement effective September 30

·     Biotech movers; ANPC rises following positive results from a successfully completed a multi-year lung cancer prognosis and recurrence study in collaboration with a major hospital in China; NBIX will present new data as part of 30 abstracts accepted from its movement disorder programs for tardive dyskinesia and Parkinson’s disease next week; BNTX said it will start enrolling patients this month for an early-stage trial of its fifth vaccine candidate – expects to enroll 120 people; CVAC has received financial injection of 252 million euros from German government for accelerated development and production of a coronavirus vaccine

·     Healthcare services and providers; BAX downgraded to hold from buy at Argus noting the company has a broad product portfolio that has partially offset the impact of the pandemic but notes mgmt has warned of a potential decline in full-year sales due to weakness in key areas of the business

·     MedTech and Equipment; OSUR rises after its device included in EUA granted to Miradx for Sars-Cov-2 test; COO rises after mixed Q2 results, but Q3 sales guidance that came in above consensus views ($665M-$693M vs. est. $664m); MESO said the independent Data Safety Monitoring Board has completed its first interim analysis of data from a Phase 3 clinical trial evaluating its Limited’s remestemcel-L, an allogeneic mesenchymal stem cell product derived from bone marrow


Industrials & Materials

·     Transports; GOL and AZUL both upgraded to outperform from market perform and downgraded ICAGY and RYAAY downgraded at Raymond James as adjusted near-term ratings in the Airline space to reflect the belief that demand trends and news flow are likely to turn positive in domestic Brazil heading into the "seasonally strong" Q4, while it is likely to be challenging in Europe heading into the slower winter months; Virgin Airlines announces more job cuts after securing $1.6 billion rescue deal; UAL said plans to fly 40% of its full schedule in October 2020 compared to October of last year and in September, expects to fly 34% of its full schedule


Technology, Media & Telecom

·     Semiconductors; AVGO reported results above Consensus on better guidance driven by healthy demand from cloud and telecom customers, which more than offset weakness in the wireless market; the SIA announced July monthly sales of $34.2 billion (down 8.2% MoM), above our estimate of $33.3 billion (down 10.7% MoM) but below seasonality of down 7.5% MoM due to lower than expected DRAM and microprocessor revenue; ON CEO announced plans to retire

·     Software movers; DOMO a bright spot, rising after forecasts smaller-than-expected loss for Q3 and FY21; revenue estimates higher than Street expectations for same period; DOCU reported strong F2Q results, displayed the largest magnitude beats on subscription revenue (+7.5%) and total revenue (+7.2%) since IPO, and raised guidance, but shares fell with tech sell-off

·     Hardware, Media & Telecom movers; AAPL shares traded as low as $110 before bouncing back around the $120 level late day; NCMI rises after an upgrade to Outperform at Barrington Research, from Market Perform earlier; VUZI shares fell after struck a deal for a $15.5 million direct offering at $4.23


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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