Market Review: September 22, 2020

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Closing Recap

Tuesday, September 22, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks rise as the S&P 500 and Nasdaq Composite snapped their 4-day losing streaks, helped by a sharp bounce in technology shares (AMZN rises over 5% after an analyst upgrade), stabilizing after a bout of volatility tested investors’ confidence of late. Real estate stocks, consumer discretionary and technology were among the top gainers while healthcare lagged. There was follow through weakness for the healthcare sector, with hospitals (HCA, UHS, CYH) and managed care (UNH, HUM, ANTM) falling a second day as President Trump is expected to unveil his Supreme Court nominee selection this weekend to replace the recently passed Supreme Court Justice Ginsberg. If Trump gets his Supreme Court appointment and Obamacare is completely thrown out, making pre-existing conditions an issue again, and Covid becomes a pre-existing condition, could be a nightmare for the insurance industry. There is also a concern that the likely delay in the passage of new fiscal stimulus by Congress will stifle a faster economic recovery from the coronavirus pandemic. The U.S. dollar jumped to near 2-month highs against the euro amid surprising hawkish comments by the Fed’s Evans as well as better economic data in the housing space. Fears of a new round of lockdowns in Europe amid surging coronavirus cases, which dented market sentiment yesterday failed to carry over to today. Chicago Fed President Charles Evans warned that the U.S. economy risks a longer, slower recovery, if not another outright recession, if Congress fails to pass a fiscal package. Earnings also resume tonight as Dow component Nike reports its fiscal first-quarter results after the closing bell.

Economic Data

·     Richmond Fed composite manufacturing index +21 in sept vs +18 in Aug, manufacturing shipments index +13 in sept vs +22 in Aug; Richmond Fed services revenues index +6 in sept vs +2 in August

·     Existing Home Sales for August rise 2.4% to 6.00M, in-line with estimates and compared to July 5.86M; Aug inventory of homes for sale 1.49 mln units, 3.0 months’ worth; the national median home price for existing homes $310,600, +11.4% from Aug 2019



·     Oil prices edge up ahead of weekly inventory data tonight and tomorrow morning, with WTI crude rising 29c or 0.74% to settle at $39.60 per barrel, up despite another strong bounce in the U.S. dollar that weighed on commodity prices. The modest gains in crude were driven by an uptick in US stock market prices, which helped boost risk appetite in commodity markets. Gold prices slip for a second straight session, with December gold down a modest -$3.00 or 0.2% to settle at $1,907.60 an ounce, holding up fairly well despite a 100-bps move higher in the dollar index over the last 2-days. Prices marked the lowest settlement since late July.


Currencies & Treasuries

·     The U.S. dollar extended yesterday’ gains as the dollar index (DXY) rises above the 94 level, up about 0.5% (and about 100 bps move last 3 days), as the euro extends losses to fresh 7-week lows around the 1.17 level vs. the buck (down 0.5%) as investors look to safe-haven assets as risk appetite deteriorate further. Also helping the buck today, Chicago Fed President Charles Evans said the U.S. economy risked a longer, slower recovery, if not an outright recession without another fiscal support package. He also said he does not see open-ended quantitative easing as providing an important part of the answer. The dollar climbed in earlier trading after parts of Europe imposed new restrictions aimed at curbing surging coronavirus cases. The dollar also gained against the yen, rising for a second day in a row up around the 105 level. Treasury prices again little changed despite volatility in the equity sector. The U.S. Treasury sold $52B in 2-year notes at a yield of 0.136% vs. 0.134% when issued prior, with a bid-to-cover (demand) at 2.42 as indirect bidders awarded 52.5% and directs 14%






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10-Year Note





Sector News Breakdown


·     Retailers; NKE to report earnings after the close tonight (implications for UA, FL); PTON, NLS slip early after AMZN unveiled its "Echelon Smart Connect Fitness Bikes," for $499 which offers live and on-demand classes, and said one membership works for all machines; GME shares rise after stakeholder RC Ventures discloses it has held recent talks with the retailer’s management and board members and slightly upped its stake in shares; OSTK tgt raised to $75 from $55 at Cowen saying they are incrementally positive; RL said it will be cutting its global workforce at the end of fiscal year 2021, which will drive pre-tax charges of $120 million to $160 million; KSS positive mention at Cleveland Research notes 3Q comps looking slightly ahead of ests and expects gross margin support from lean inventory while said for JWN it sees 3Q sales trending below ests, but gross margin better, for TGT sales appear to be re-accelerating and was mixed on Macy’s (M)

·     Auto sector; TSLA holds its highly anticipated Battery event day; BLNK rises after saying it sold or deployed 539 EV charging stations, indicating a ~100% Y/Y increase in U.S. and internationally during the summer Covid-19 lockdowns of June, July, and August 202; LI announces a strategic cooperation with chipmaker NVDA and its Chinese partner, Huizhou Desay SV Automotive; in auto retail, AZO reported a top and bottom line Q4 beat as Q4 comp sales rose 21.8%; Bloomberg reported HTZ is evaluating two loan offers of about $1B to $1.5B as it looks for new sources of cash; VRM upgraded to buy from neutral at Goldman Sachs

·     Consumer Staples; in the tobacco sector, RBC Capital upgrades BTI and IMMBY to Outperform saying its hard to see how the sector can extricate itself from investors’ ESG penalty box, but argues that the companies should use their plentiful FCF to buy back shares instead; UTZ files to sell 86.55M shares of Class A common stock for holders; KO is targeting a launch of the company’s first hard seltzer in the U.S. sometime during the first half of 2021 – company plans to bring the hard seltzer product to market under the Topo Chico brand; PG, CLX rising amid lockdown fears in Europe – resumption of stay at home winners rising

·     Leisure and Gaming; boat stocks got a boost after Baird upgraded MBUU, MCFT and ONEW all to Outperform ratings from Neutral as thinks positive trends in the sector can sustain into next year and sees attractive valuation; in casinos (WYNN, MLCO), Reuters reported that fears China is broadening a crackdown on offshore gambling in Macau has sparked a rush to withdraw billions of dollars from the world’s biggest gambling hub, threatening a recovery in the coronavirus-stricken economy



·     Energy stock movers; oil edged higher, recovering from its biggest loss in almost two weeks even as a resurgent coronavirus looms over the demand outlook. Brent also found technical support, with prices rising from their 100-day moving average today.

·     In energy stock news; OXY disclosed today it will pay ~$200M in dividends on preferred shares to Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) in cash, after making the payments with stock since April to conserve cash; MTDR was upgraded to buy at Truist saying it is one of very few E&Ps that they forecast will not only have solid continued annual FCF starting next year, but will achieve this while continuing to notably grow production; WPX was upgraded at Truist as well noting shares have declined 20%+ in the past month

·     Utilities & Solar; SEDG said it intends to offer $500 mln worth convertible senior notes due 2025 in a private offering; SPWR secures attractive financing for residential solar lease business through 2021 and now expects new fund to help meet expected customer demand through mid-2021; POR receives its third analyst upgrade this week, with Guggenheim raising to a buy as mgmt. has no indications to date that POR equipment has been involved in any of the wildfires (shares were raised at Mizuho and Barclay’s yesterday)



·     Insurance; KBW Inc. said although they are cautious overall on personal auto insurers, within the sector, they think the current multiple gap underestimates the strategic benefits of ALL’s increasing focus on the independent agency channel and overestimates PGR‘s 2021E earnings potential as it lowers personal auto rates, upgrading shares of both to outperform

·     Services and Consumer Finance; CLGX raised Q3, FY20 and FY21 revenue outlook above estimates driven by strength in property tax processing, insurance and spatial as well as continued strong housing market fundamentals



·     Pharma movers; BMY and BLUE said that the US FDA had accepted its application under priority review and had set a PDUFA of 3/27/2021 for its ide-cel/bb2121 (this PDUFA date is set several days before the deadline for the CVR (BMY-R)); AIM rises after announces receipt of statistically positive pancreatic cancer survival results from a multi-year Early Access Program conducted at Erasmus University Medical Center in the Netherlands; TARA 4.6M share Spot Secondary priced at $16.87; BPMC rises after reports positive data from early- and mid-stage trials of Ayvakit in patients with advanced systemic mastocytosis; SNY and GSK announced they signed agreements with Canada to supply up to 72 million doses of their COVID-19 vaccine, starting in 2021

·     Biotech movers; VCNX shares tumble after saying an experimental Huntington’s disease treatment, pepinemab, did not meet the primary endpoints in a Phase 2 double-blind, placebo-controlled clinical trial; in research, Guggenheim upgraded FPRX to buy with an $11 PT based on increased conviction for a positive outcome for bemarituzumab in patients with FGFR2+ gastric cancers, while they downgraded shares of EIDX, CTMX to neutral from; GNCA said the FDA has accepted the company’s Investigational New Drug (IND) Application for GEN-011, an adoptive T cell therapy targeting neoantigens; CRSP said the European Medicines Agency has granted Priority Medicines (PRIME) designation to CTX001, an autologous, ex vivo CRISPR/Cas9 gene-edited therapy for the treatment of severe sickle cell disease

·     Healthcare services and providers; BLFS was downgraded at Oppenheimer noting the stock is above the firms price target; APT announced a $5M share buyback plan; TDOC was initiated with a buy and $250 tgt at Davidson as it points to the rapid rate of growth for the company and notes its expanding markets due to the pandemic.

·     MedTech and Equipment; ILMN downgraded by several analysts following its acquisition of Grail yesterday with analysts citing the dilution, limited visibility and lack of a clear ROI associated with the acquisition; FLGT is joining the S&P SmallCap 600 index, replacing GTX, which is filing for bankruptcy and has to leave the index; NNOX shares tumble after Muddy Waters say it is short the stock, which comes out a week after Citron said NNOX stock is heading to $0


Industrials & Materials

·     Transports; JBLU it has seen "modest improvement" in revenue and bookings since early August, while now expects capacity for the third quarter to be down 55% from a year ago, compared with previous expectations of a decline of "at least" 45%; FDX and UPS are starting to look like vaccine plays as vaccine distribution is expected to be major consideration for shippers well into the back half of 2021 and possibly into 2022 as the process of applying hundreds of millions of doses is worked out in the U.S.; UBER and LYFT shares fell after Piper noted this morning that download activity has failed to regain momentum after an initial post COVID increase, and ridership is only moderately higher MoM

·     Aerospace & Defense; JPMorgan upgraded LDOS, CACI to overweight from neutral in the defense sector citing visible growth for both while downgraded KTOS to neutral on valuation as expects improvement in Q3 results for LDOS, particularly in the health segment after two consecutive sales downgrades by the company, and solid growth in 2021; LMT up slightly as Reuters reports the U.S. hopes to reach a deal on the sale of F-35 stealth fighter jets to UAE, one of its closest Middle East allies, by December, sources close to the negotiations tell Reuters; Truist reiterated its negative aero call across our exposed names with current SELL ratings include ATRO, ROLL, SPR, TGI, WWD but holds vulnerable too AIR, B, HEI, TDG as forecasts 2019 total capacity to be down 50% YOY in 2020 while also pointing to additional potential downside risk this year

·     Materials, Industrial sector; Evercore ISI said that the global chemicals sector still has room to run near term, with a V-shaped economic recovery well established in a 12-stock initiation this morning – noted even with the group up about 65% from March 20 lows, a more inflationary backdrop combined with negative real rates could boost valuations and estimates (was outperform rated on APD, CE, ECL, LIN and LYB)


Technology, Media & Telecom

·     Internet; CVNA rises after saying it expects to achieve company records in performance across several important metrics in Q3 including: Retail units sold, Total revenue, Total gross profit per unit, EBITDA margin – the guidance came after an upgrade at Goldman Sachs to buy with $250 tgt saying its scale and vertical integration position it best to drive the used auto category online for many years, while Piper said downloads recently trending higher by about 15% YoY; AMZN was upgraded to outperform with $3,400 at Bernstein noting the stock has sold off -16% in the last couple of weeks, creating an attractive entry point; YNDX rose after a filing noting it’s coming to terms to buy TCS Group for $5.48B,

·     Software, Hardware & Component news; BB said the U.S. Air Force selected its BlackBerry Spark technology for Unified Endpoint Management and Unified Endpoint Security services; SNCR CEO resigns following allegations of personal misconduct; UNIT rises as announces effectiveness of previously announced settlement with Windstream Holdings Inc, as latter emerges from bankruptcy; MSFT Azure launches services that compete with TWLO, AMZN


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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