Mid-Morning Look: April 13, 2020

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Mid-Morning Look

Monday, April 13, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities open lower, falling ahead of what is expected to be an earnings season unlike any we have ever seen before, marked by the uncertainties cause by the coronavirus business shutdowns, while investors also take profits early after major US averages posted their best weekly returns in several decades after more Federal Reserve stimulus on Thursday (to the tune of $2.4 trillion). The S&P 500 index rose over 12% last week, its best weekly percentage gain since 1974 ahead of earnings results from several big banks this week including JPM, WFC tomorrow and BAC, Citi, GS, PNC, USB results expected Wednesday. Oil prices holding higher after a record global output cut agreement was reached by major producers Thursday and confirmed this weekend, as demand worries stemming from the coronavirus outbreak remained. No major economic data today, European markets were closed for holiday, commodity prices are mixed ahead of a busy week ahead. Overall, the number of cases of COVID-19 around the world rose to 1.86 million on Monday, while the number of fatalities rose to 114,331, according to aggregated data from Johns Hopkins. At least 435,074 people around the world have recovered from the novel coronavirus that has sickened people in 185 countries, the data show. The U.S has the most cases at 557,590 and the most deaths at 22,109


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar drops more than -0.5% to 107.85 against the Japanese yen, falling to lowest levels in about 2-weeks and off overnight highs of 108.543 as stocks slide and the dollar extends recent losses given all the moves by the Fed in recent weeks. The euro dipped vs. the dollar (though note European stocks markets were closed for holiday). Commodity prices are mixed as gold slips from recent 8-year highs though oil prices steadily higher after last Thursday’s OPEC+ 9.7M oil production cut announced to help stem oversupply. Treasury market’s dip as yields inch higher in the early going (no major economic data today).







WTI Crude















10-Year Note





Sector Movers Today

·     Industrial & Machinery; GE announced strategic debt issuance to fund an immediate tender for GE bonds maturing through 2024; ETN was downgraded to neutral at JPMorgan as see less upside potential for diversified industrials from here, especially for ETN (down 13% YTD, in line with the S&P 500) given its outsized exposure to later cycle US construction; CAT was downgraded to underperform at Bank America noting energy and mining stocks are signaling another severe capital spending downturn in two of CAT’s most important end market; DE was downgraded at Baird to neutral saying the rapidly changing environment points to pressure on its earnings that could be greater than in prior downturns

·     Medical equipment and devices; DXCM will be joining the NASDAQ-100 Index, NASDAQ-100 Equal Weighted Index and NASDAQ-100 Ex-Tech Sector Index beginning April 20 (replaces AAL); MTD said Q1 sales declined 4% and sees Q1 EPS below guidance while withdraws guidance on COVID-19 impact; SYK was downgraded at Barclays’s to underweight saying the market is not appreciating the severity and likely duration of revenue declines amid the coronavirus outbreak; NTRA sees prelim Q4 revs $89M-$91M vs. est. $79.5M and withdraws 2020 outlook; DHR provided preliminary 1Q results, expecting revenue growth of 3% and non-GAAP core revenue growth of 4.5%, noting positive results in each of the company’s three reporting segments, though saw a meaningful slowdown in the later part of the quarter

·     Semiconductors; NVDA was downgraded to hold from buy at Needham and cut tgt to $300 while lowers gaming estimates in FY21 to reflect the impact from the coronavirus and potential delay in next-gen GPU/says NVDA’s next generation GPU could be delayed few months because of the COVID-19 pandemic; TXN was downgraded to underweight at Morgan Stanley noting it has performed in line with semis and well above some analog and MCU peers, posing greater risk to negative news still ahead; NXPI was downgraded at Evercore/ISI; MU was downgraded to neutral at Goldman Sachs from buy as they reduce out-quarter DRAM bit growth and NAND pricing assumptions for COVID-19 and cut normalized EPS (incl. SBC) from $6.70 to $4.85 (firm also assumed STX with a sell and WDC a neutral rating in HDD); IPHI was upgraded to OW at Morgan Stanley as believe has a good chance to beat and raise through a global recession, as the company’s physical layer solutions continue to inflect, particularly in cloud, which we see driving 25% growth despite macro weakness

·     REITs; data center REITS DLR and COR downgraded at Baird to neutral noting DLR was top idea to start the year but with stock’s outperformance, with one third of co’s annualized base rent set to roll over during 2020/2021 and continued pressure on embedded market rents for legacy product, he doesn’t expect the premium to widen further; Commercial Mortgage REITs CLNC, XAN downgraded to market perform at Raymond James and reducing estimates and price targets for commercial mortgage REITs as impacts from COVID-19 include loan extensions, future funding commitments, lower new originations, higher expenses, little gain on sale income; AMH said it has collected ~86% of April rent as of April 9, 2020, which is in excess of 95% of historic collections for the same timeframe

·     Auto movers; Ford (F) said Q1 vehicle wholesales were down 21% from a year ago, largely as a result of lower production and demand related to the coronavirus; in suppliers, KeyBanc said those who should relatively outperform through the COVID-19 environment amid low leverage and FCF resilience and be best-positioned in the early recovery MGA and BWA (which they upgraded), those with unique earnings growth levers post-COVID, strong track records and only modest (<2 qtrs.) covenant risk (APTV, LEA) and those possessing the highest risk/reward, deeper value characteristics over the next 3 years (DAN, MTOR)



·     ALNY +2%; after BX invests $2 billion in the company through a combination of equity and debt to help co-develop its pipeline

·     ATHX +8%; after announced that the FDA has signed off on a pivotal Phase 2/3 clinical trial, MACOVIA, evaluating MultiStem therapy in COVID-19 patients with moderate-to-severe acute respiratory distress syndrome

·     CTSO +26%; after CytoSorb received Emergency Use Authorization (EUA) for its blood purification technology to use in patients with Covid-19 infection from the FDA

·     GILD +1%; reported data from the first 53 patients on compassionate use who were moderate/severe (with SpO2<94%, or need for O2, and 75% were men over 60 with comorbidities) and the majority showed clinical improvement

·     NFLX +3%; along with gains in AMZN as TV watching figures continue to rise given the “stay at home” social distancing

·     PXD +3%; as oil names get a boost from the bounce in oil, while PXD was also upgraded to hold at SunTrust saying it continues to pull levers to ensure a pristine balance sheet that should eventually payoff

·     WORX +240%; jumps as announces first installment of purchase order for 48 million covid-19 rapid testing units over twenty-four weeks at $35 million dollars per week



·     AMC -19%; is in talks to hire law firm Weil Gotshal & Manges to explore a potential Chapter 11 filing, The NY Post has learned https://on.mktw.net/3b8gAaw

·     CAT -7%; downgraded to underperform at Bank America noting energy and mining stocks are signaling another severe capital spending downturn in two of CAT’s most important end market

·     CCL, RCL, NCLH shares slide on CDC order saying cruise ships may be banned from sailing in US waters until July, according to an order issued by the CDC on Thursday. That ban could be lifted earlier if the CDC or HHS determine cruises or COVID-19 are no longer a major health risk.

·     F -4%; says expects q1 adjusted earnings before interest and taxes of about negative $600M

·     GRUB -7%; after saying it experienced a decrease in orders the last couple weeks of March, particularly in its corporate business, and now expects first-quarter daily average grubs (DAGs) to be “up flattish” from a year ago

·     NXTC -13%; after decides to temporarily delay starting the NC318 combination clinical trial and Phase 1 portion of a Phase 1/2 NC410 trial amid COVID-19


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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