Mid-Morning Look: April 08, 2020

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Mid-Morning Look

Wednesday, April 08, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities with another nice start to the day, bouncing back after yesterday’s late day swoon that erased gains of more than 3%, as markets again dominated by headlines pertaining to the coronavirus daily totals and deaths. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and one of the biggest proponents of “social distancing/staying at home”, says the U.S. death count related to the coronavirus is now lower than initially thought, and he anticipates a turnaround after this week…but notes virus efforts should be intensified. U.S. stocks also getting a boost on reports overnight the Trump Administration is said to be developing plans to get the U.S. economy back in action, a strategy that depends on testing far more Americans for the coronavirus. Economic data sparse this week after awful jobs data the week prior and volumes slowing ahead of the three day holiday weekend and into earnings season starting next week. Materials stocks see more interest amid hopes for Federal infrastructure spending, while energy bounces behind oil recovery ahead of OPEC meeting tomorrow and transports outperform early led behind airlines and package delivery names. Treasury prices are down slightly as yields inch higher and the dollar is steady.


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar is little changed overall, essentially flat vs the euro and yen given the lack of economic data and stock markets modestly higher; commodity prices are edging higher with a rebound in oil prices (WTI crude up over 4%) ahead of tomorrow’s virtual OPEC+ meeting where markets hope for a meaningful coordinated production cut to help prices, while gold edges by slightly. Treasury market’s slip as yields inch higher, back around the 0.75% for the benchmark 10-year note







WTI Crude















10-Year Note





Sector Movers Today

·     Restaurants; MCD Q1 comp sales down -3.4% and says will cut capex this year by $1B while withdraws forecast; DRI was upgraded at Wedbush to Outperform from Neutral and raising our PT to $94 from $37 in restaurant sector while view TXRH and DRI as best positioned among casual diners in both the near, medium, and longer-term; DENN reported Q1 domestic system-wide same-store sales are expected to be reported down approximately 6% Y/Y/same-store sales were up 2% through the end of February before plummeting 19% in March

·     Consumer finance and lending; NLY shares bounce after co update as guided q1 eps 20c-21c vs. est. 27c/estimate on a preliminary basis our book value per common share at March 31 was between $7.40 and $7.60; Wells Fargo downgraded shares of ADS, JKHY, and WU while lowering estimates and target prices as believe investors should take an approach of balancing low with companies exposed to digital and B2B payments (highlight EVOP, FLT, PYPL, and QTWO as names that fit this criteria)

·     REITs; Raymond James downgraded EXR, LSI, CUBE rating – notes self-storage REIT sector has outperformed the REIT average by 1,600 bps since the start of the COVID-19 pandemic (Feb. 21). As a recession-resilient – though not recession-resistant – asset class, that comes as no surprise. That said, we believe the cash flow resiliency and safety provided by these names is reflected in current valuations and the outlook from here is less-attractive; in mortgage REITs, NMYT said they are now current with their repurchase agreement payment obligations and no longer need forbearance agreements while IVR said counterparties already sold $3.5B of pledged securities; building REITs MAA, CPT, SLG downgraded to market perform from outperform at BMO

·     Medical equipment and devices; GNMK rises after guides 2020 revenue to $112M-122M, up from prior view of $100M-110M citing a positive impact from COVID-19, and sees Q1 revenue of ~$38.7M, up about 80% from a year ago and 46% above consensus of $26.5M; PACB announces that it is working with commercial, academic and government research teams investigating SARS-CoV-2 citing the highly accurate long leads produced by its Single Molecule, Real-Time (SMRT) Sequencing technology; MYGN withdrew its F20 financial guidance, though noted volume trends prior to mid-March were consistent with expectations across all products; NUVA was upgraded to outperform from neutral at Baird and says virus outbreak will narrow the lead of NUVA’s rivals MDT, GMED whose spine robots are already in the market; IART, HOLX with COVID-19 updates

·     Transports; ODFL downgraded at Bank America to underperform on valuation as shares have rallied over 30% since mid-March, and are now less than 5% off their all-time high in February; FDX and UPS rise after AMZN decided to suspend its U.S. shipping from June as the company needs people and capacity to handle a surge in its own customers’ orders/says is dealing with a demand surge in the U.S., where most residents are under stay-at-home orders; CSX upgraded to buy at Goldman Sachs in rail sector saying while the upcoming quarters certainly bring elevated EPS risk, they believe CSX on a 12-month basis offers solid risk/reward

·     Internet; PINS shares spiked higher after guiding March revs to $269M-$272M which was above the $266.7M estimate while withdrawing guidance for the full year, while warning that it is seeing softening advertising demand; said sees global monthly active users of 365M-367M; TWTR was upgraded to market perform at Bernstein saying after underperforming in the COVID selloff, the valuation of Twitter is now more reasonable; ANGI was upgraded to Buy at Citigroup saying while there are tough times ahead, the current stock price reflects a more challenged 2021 than is expected at this time (cuts tgt to $6.50); BKNG offers $750M in aggregate principal amount of its convertible senior notes due 2025 to qualified institutional buyers and said it entered into an amendment to its $2 billion revolving credit facility



·     APT +17%; after saying it has booked orders worth $36.7M for its N-95 masks since Jan 27, compared with its last update of $22.6M in orders on March 11/says orders for its face shields has also jumped to $11.6M, up from the $1.6M reported on March 11

·     FDX +5%; and UPS rise after AMZN decided to suspend its U.S. shipping from June as the company needs people and capacity to handle a surge in its own customers’ orders

·     GNMK +20%; after guides 2020 revenue to $112M-122M, up from prior view of $100M-110M citing a positive impact from COVID-19, and sees Q1 revenue of ~$38.7M, up about 80% from a year ago and 46% above consensus of $26.5M

·     JWN +9%; as retailers on pace for its best week since Nov 28, 2008 as KSS up 58% WTD on pace for its best ever back to its IPO in 1992 while JWN up 49% WTD on pace for its best week ever back to its IPO in July 1971, as per CNBC

·     LEVI +5%; reported Q1 EPS beat by a nickel with sales better at +6% (constant currency) vs. estimate up 5% helped by a large beat in the Americas division/gross margins beat by 90 bps

·     NVAX +15%; rises after saying it has identified its vaccine candidate to combat the coronavirus and expects to start its first-in-human trial in mid-May with preliminary data in July

·     PINS +11%; after guiding March revs to $269M-$272M which was above the $266.7M estimate while withdrawing guidance for the full year, while warns it is seeing softening ad demand

·     PRGO +3%; said it experienced a Q1 sales boost due to the COVID-19 pandemic/expects adjusted operating income of $220M-$$225M of about $1.3B vs. est. $195M and $1.26B

·     RCII +8%; said trends were running +4% in January and February, but were -5% for March. Says that while sales did decline, “they are now stabilizing”



·     EHTH -14%; after Carson Block of Muddy Waters reveals short call on CNBC segment this morning

·     GLUU -8%; after Stephens cut to underweight and $4 tgt based on the view that Disney Sorcerer’s Arena would disappoint relative to expectations

·     KR -3%; as food, grocers and other names that have benefitted from increased demand due to the coronavirus impact seeing some profit taking

·     LAUR -5%; downgraded at Morgan Stanley saying the material de-rating and potentially tough year for the education segment across Latam is likely to postpone LAUR plans to divest assets

·     PTCT ; announced that the FDA had extended the review of risdiplam by three months following the submission of additional data, to August 24, 2020

·     TAL -9%; after disclosing that certain employee wrongdoing was discovered in the company’s routine internal auditing process which consisted of the employee conspiring with external vendors to inflate light class sales


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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