Market Review: September 25, 2020

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Closing Recap

Friday, September 25, 2020





DJ Industrials




S&P 500








Russell 2000




Equity Market Recap

·     Stocks close out the week firmly higher, climbing throughout the trading session to close near the highs, though the S&P suffers its 4th straight weekly decline, while the Nasdaq Composite gains for the first time in 5 weeks. Gold prices tumbled about 5% on the week, its biggest percentage decline since March as the dollar outperformed, which also took oil prices down -2% this week. Investors’ confidence has been crimped recently by elevated levels of new coronavirus infections in the U.S. and Europe, as well as some signs that the global economic recovery is slow and uneven. The uncertainty and political risks generated by November’s presidential election as well as uncertainty over fiscal stimulus has also added to market jitters. The White House and Democrats have agreed to revive talks, but skepticism remains given the gap between Democrats and Republicans over the size and scope of the relief package. Dow component Boeing (BA) jumped after FAA chief is set to fly 737 Max next week ahead of approval, the EU Aviation Safety Agency could grant regulatory approval as soon as November. Casino and gaming stocks jumped after William Hill said it was in talks with Caesars Entertainment and Apollo Management International following separate takeover approaches from the two groups. Cruise lines rallied behind an analyst upgrade of the group (CCL, RCL, NCLH) to be among the top gainers in the S&P while energy again falls apart, the worst performers in the S&P 500. It was a nice finish to a busy week highlighted by several Fed speakers and a rebound in technology shares and market speculation late day that a stimulus deal may be reached this weekend (remains to be seen)


·     U.S. WTI crude edged lower by 0.1% to settle at $40.25 per barrel in a choppy, range-bound session while posting a 2.1% weekly decline as modestly bearish sentiment returned following last week’s 10% rally higher. Energy stocks underperformed amid renewed fears that global demand will remain weak due to a lingering coronavirus pandemic, and a potential bump higher in global supplies as Libya resumed production (though fears partially offset by declining inventories as was reported this week).

·     Gold prices dropped -$10.60 or 0.6% to settle at $1,866.30 an ounce, finishing the week lower by nearly 5% (the largest weekly percentage loss since mid-March) after the dollar surged. The longer-term outlook remains positive for precious metals with expectations of additional stimulus needed to help support the economy due to the pandemic.


Currencies & Treasuries

·     The U.S. dollar closed out the week in strong fashion, as the dollar index (DXY) posted its biggest weekly gain since early April as investors sought safety amid a slowing economic recovery, rising coronavirus infections, Washington’s failure to create a stimulus package and uncertainty surrounding the upcoming U.S. elections. Durable Goods orders for August rose a modest 0.4% (missing estimates) after jumping 11.7% in July, but that did not derail the dollar which advanced for a 5th time in the last 6-sessions, rising firmly vs. the euro which is dealing with aa renewed outbreak of coronavirus cases in several regions. Treasury yields dipped slightly on the day, but the benchmark 10-year remains in a narrow trading range over the last 2-weeks (about 6 bps).


Economic Data

·     Durables orders for August rose +0.4%, missing the 1.5% estimate and compared to July +11.7%; Durables ex-transportation orders +0.4% vs. est. 1.2% and July 3.2% while durables ex-defense orders +0.7% vs. July +10.4%; nondefense cap orders ex-aircraft +1.8% vs. est. 0.5%






WTI Crude















10-Year Note





Sector News Breakdown


·     Retail and Consumer Staples; COST topped profit estimates with its FQ4 report $3.04 vs. est. $2.84 despite higher-than-anticipated COVID-19 expenses with core comp growth of 14.1% and strong earnings leverage due to the DD sales growth (EBIT is up ~22%); SAM tgt raised to $1,142 from $977 at Guggenheim, revising sales and margin estimates to incorporate the planned launch of Truly Iced Tea Hard Seltzer as continue to think there is plenty of room for new innovations to expand the broader hard seltzer segment; GIS upgraded to outperform at Credit Suisse saying it has become one of the most sophisticated e-commerce vendors in the consumer packaged goods industry; COTY was upgraded to neutral at Citigroup after an 80% drop this year

·     Casinos and Gaming; British betting firm William Hill (WIMHY) shares jumped after saying it had received separate cash proposals from buyout firm APO and casino operator CZR about a possible takeover, giving no indications of the offer value. William Hill confirmed the receipt of the two offers and has until Oct 23 to strike a deal or walk away. (shares of other gambling names bounced); PENN 14M share Secondary priced at $61.00; CHDN was upgraded from Neutral to Positive at Susquehanna to take advantage of the stock’s (10%) sell-off yesterday afternoon (equates to ~50% of the value attributable to the HRM contribution) following news of the KY Supreme Court ruling, which after weighing likely scenarios outlines in our view little-to-no risk of out-year EBITDA disruption; DKNG initiate buy and $65 tgt at Argus

·     Leisure sector; cruise lines CCL, NCLH and RCL were all upgraded to overweight from equal weight at Barclays as believes the risk/rewards are the most attractive under universe saying sees a catalyst for the industry in the next few days when the CDC and Prevention will address the September 30 no-sail date; in towables/RVs (CWH, THO, WGO, LCII), RV shipments increased 17.3% last month to 39,489 from 33,674 a year earlier, according to the RV Industry Association’s survey and shipments of all-towable vehicles rose 20.8% while motorhomes dropped 7.1%; MTN reports Q4 EBITDA ($103.8M) vs consensus ($95.6M) and revenue $77.2M vs consensus $138.3M (Mountain much worse, Lodging worse)

·     Auto sector; UBER and LYFT near-term revenue estimates lowered for both at JPMorgan while also recalibrating expenses, which takes EBITDA higher in 2021; BLNK after earlier announcing partnership with Sustainable Westchester, a leading nonprofit consortium of local municipalities in Westchester County, N.Y.



·     Macro: Reuters reports that Iranian oil exports, which have shrunk since 2018 when the U.S. withdrew from a nuclear deal and reimposed sanctions, have risen sharply in September in defiance of U.S. sanctions, three assessments based on tanker tracking showed, throwing a lifeline to the Islamic Republic and its collapsing economy. Goldman Sachs reiterated its $65 Brent forecast for 3Q2021 due to expectations of a jet fuel demand recovery next year on travel demand returning and loss of output amid lower oil prices from producers outside of OPEC and non-OPEC producers, led by Russia

·     Baker Hughes (BKR) weekly rig count showed the total count rose 6 to 261, with oil rigs up 4 to 183, gas rigs up 2 to 75, and miscellaneous rigs unchanged at 3; in stock research; COP was initiated at OW, $46 pt at KeyBanc due to its strong balance sheet, high dividend yield vs peers, and low corporate decline profile; In the MLP sector, Morgan Stanley upgraded PAA, PAGP, TRGP and initiated coverage of 8 SMID midstream stocks, including EW ratings on BPMB, ETRN, HESM, and UW ratings on AM, ENBL, ENLC, NBLX, WES; Wells Fargo initiated OW ratings on BCEI ($33 pt), NOG ($10 pt) and a UW rating on CPE

·     Utilities & Solar; OGS was upgraded to Buy from Neutral at Mizuho, who lowered their pt to $80 from $87; Wells Fargo reit OW rating on ETR following its analyst day, but lowered its price target to the $115 range from $120 as higher equity needs could prove to be a headwind in this risk-averse environment; CSIQ is close to raising 1.8 billion yuan, equivalent to $264 million, for its China manufacturing business, the WSJ reported



·     Bank movers; banks slipped early as the yield on 10-year Treasury notes dip to 0.651%, from 0.6640% on Thursday; FITB rises on two positive analyst calls as Wedbush adds to Best ideas List as likes their new expense initiative to combat a tougher revenue environment as most of the expense savings are expected to fall to the bottom line and Morgan Stanley upgraded to overweight saying market is not properly valuing FITB’s new expense initiatives, outlook for much lower provision expense and aggressive capital return post pandemic

·     Insurance; GNW jumps after DealReporter publishes an update on China Oceanwide’s progress in lining up financing for its acquisition of Genworth, saying Genworth is speeding up work on post-close accounting; BRO closed its $700M offering of its 2.375% senior notes due 2031;

·     Consumer Finance; BMO reiterated their Buy rating and $35 pt on ALLY, revising their forecasts that anticipate credit costs remaining suppressed, material NII growth from strong lease gains and modest loan growth, and other income boosted by seasonal strength in insurance and investment gains; Following earnings yesterday, FDS price target was raised at Wells Fargo ($310 from $280), UBS ($313 from $298), Deutsche Bank ($315 from $293), Barclays ($325 from $315), and Goldman ($241 from $237)

·     REITs; CLNY rises after announcing the sale of six of its hospitality portfolios to real estate investment and hospitality management firm Highgate in deal valued at $2.8B; BPY’s CEO said they have plans to reduce the number of malls they own in the future, though they are not rushing any sales



·     Healthcare; In a speech in North Carolina yesterday, Trump promised to send the country’s 33M Medicare beneficiaries a $200 card in the mail to help pay for prescription drugs co-pays. White House officials indicated that the program would be funded by savings made by a Medicare waiver program and potentially from the MFN executive order. There was focus on the funding of a similar prescription card to seniors in the administrations recent negotiations with PHRMA, though the industry group had balked at the idea

·     Pharma: BMY announced that in an interim analysis its CM274 Ph3 trial, evaluating Opdivo vs. placebo in the adjuvant setting in patients with high-risk MIUC, (a type of bladder cancer) met the primary endpoint of disease-free survival for patients regardless of PD-L1 expression levels, as well as in the subset of patients with PD-L1 expression >1%; ENDP rises after entering into a non-exclusive agreement with NVAX to provide fill-finish manufacturing services for NOVX COVID-19 vaccine candidate; PRLD 8.325M share IPO priced at $19.00; PMVP 11.765M share IPO priced at $18.00; BHC and ETON said FDA approves Alaway Preservative Free ophthalmic solution antihistamine eye drops as the first OTC preservative-free formulation eye drop

·     Biotech movers; GRAY 5.625M share IPO priced at $16.00; GLSI 1.26M share IPO priced at $5.75; GNFT announces Phase 3 study evaluating elafibranor in Primary Biliary Cholangitis (PBC); NVAX rises after started a late-stage trial of its experimental COVID-19 vaccine in the UK as study is expected to enroll up to 10,000 people and data from the trial expected over the next 4-6 weeks

·     Healthcare services and providers; ANTM shares higher after Blue Cross Blue Shield has reached a tentative $2.7B settlement in an antitrust litigation accusing the insurance group’s member companies, including ANTM, of colluding to limit competition and boost prices for policyholders, according to reports (yesterday, JPM noted the Dow Jones report of the tentative settlement saying while no details are available, they estimate ANTM’s share of the settlement liability could be $750M-$1B; CAH was upgraded to buy from hold at Deutsche Bank with $61 tgt; OTRK was rated a new buy and $100 tgt at Benchmark noting the stock sells at a steep discount to its high growth digital health peers, especially on a Price-to-Growth basis; EHTH was initiated buy and $101 tgt at Goldman Sachs lifting shares


Industrials & Materials

·     Industrial & Machinery; FLR said it will exit competitive engineering, procurement, and construction (EPC) lump-sum bidding for energy and chemicals segment – said is determined to pursue only reimbursable or open-book lump-sum conversion engineering prospects; CMI reiterated Overweight rating on at Wells Fargo with $245 tgt as Q3 20 EPS estimate of $3.14 from $2.62 is 37% above street consensus of $2.29 – also positive on PCAR; in materials, WRK, IP, PKG rose in paper sector after KeyBanc said they learned from industry contacts that International Paper announced a $50/ton containerboard price increase on shipments effective November 1

·     Aerospace & Defense; BA grounded 737 MAX could receive regulatory approval to resume flying in November and enter service by year-end 2020, the Executive Director of the European Union Aviation Safety Agency says. Late day, prices extended gains after FAA chief is set to fly 737 Max next week ahead of approval; UBS with preview piece on defense sector (RTX, LMT, NOC, GD) ahead of election – notes it’s generally assumed that the Democrats are bad for defense and the Republicans are good. Firm also noted looking at the last 10 presidential election cycles, defense stocks have outperformed the broader market by ~15% in the year leading up to the election in 9 out of those 10 cycles


Technology, Media & Telecom

·     Internet; Piper launched coverage of six names in the Ecommerce and Home Marketplace segments as assume coverage of AMZN and EBAY at Overweight, on the back of a strong demand environment and consensus estimates that generally look conservative, initiate coverage of ZG and RDFN at Overweight – neutral on ANGI but OW on IAC; BIDU tgt raised to $177 saying the growth of the DAU base and engagement, increased share in mobile time spent, and the Company’s efforts on managed pages and closed-loop transactions could support monetization upside after demand normalizes; Piper cautious on the travel space following the bookings collapse in 2Q of ~90% y/y (BKNG, EXPE)

·     Semiconductors and Software movers; SPLK two positive analyst mentions as Baird upgraded to outperform and $240 tgt at Baird noting strong growth in ARR as indicative of strong underlying biz fundamentals, while Cleveland Research positive indicating near-term feedback suggests gaining traction; QCOM shares pared gains late day after Reuters reported U.S. federal trade commission moves to have antitrust appeal against Qualcomm reheard by 11-judge panel of U.S. appeals court

·     Media & Telecom movers; GNUS strikes a deal with Samsung Electronics Co Ltd to stream its Kartoon Channel! across Samsung Smart TVs, effective immediately; Goldman Sachs said they are incrementally encouraged on the outlook for cable broadband net adds into 3Q20 and beyond amidst increasing demand due to at-home work and school tailwinds and low penetration of gigabit-capable broadband platforms – raise 3Q20E net adds by 50% driven by higher combined estimates for CMCSA, CHTR and ATUS


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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