Mid-Morning Look: April 24, 2020

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Mid-Morning Look

Friday, April 24, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities are posting modest gains on the day, but still on track to end the week lower despite a rebound in oil prices late week and economic data, though still showing effects of the coronavirus on the economy, has been coming in better than economist estimates. Gold prices drop after the University of Michigan’s consumer sentiment survey proved to be better than expected. New York gold futures drop into negative territory, having started the day higher. Stocks got a boost overnight after Congress passed a $484B relief package to boost funding for small businesses, hospitals and virus testing, as the country continues to grapple with the COVID-19 fallout. Positive sentiment also on the COVID-19 situation as some states were prepared to relax curbs imposed to contain the coronavirus pandemic as Georgia expected to “open” parts of their economy today, while others (Ohio, Montana, Tennessee, South Carolina) governors announced their plans as well. Hopes are that cases have “peaked” and demand can start slowly coming back (though still no timetable for hardest hit states (NY, NJ). Intel (INTC) weighing on the Dow after better Q1 results, but mixed Q2 guidance following a rally in shares into results.


Economic Data

·     Durable Goods Orders for March fell a slightly greater (-14.4%), worse than the est. down (-12%), while Durable goods new orders revised down to (-1.1%) for Feb. from 1.2% prior. New orders ex-transportation fell (-0.2%) in March after (-0.7%) fall

·     University of Michigan sentiment falls to 71.8 from 89.1 last month and compared to est. 68.0; the expectations index fell to 70.1 vs. 79.7 last month, while the current economic conditions index fell to 74.3 vs. 103.7 last month







WTI Crude















10-Year Note





Sector Movers Today

·     Utilities sector; Jefferies noted covered utilities came under considerable pressure as COVID-19 fears spread in March, economic repercussions expanded, and indiscriminate selling took hold – firm notes they had upgraded at that point but as the group has now sharply recovered, they downgraded NI & SWX to Hold, from Buy; Wells Fargo upgraded PNW to overweight as consider the current valuation discount to be excessive considering the regulated business model and long-term outlook (but lower tgt to $87 from $110), while downgraded WEC, XEL rating reflect relative valuation considerations as the COVID-19 driven flight to quality within the sector has resulted in material expansions to the P/E multiple premiums vs. Regulated Electric peers; in earnings, POR with in-line earnings and revises year EPS lower while FE Q1 EPS slightly ahead of estimates on weaker revs and reaffirms year outlook

·     Medical equipment and devices; EW 1Q results were well above COVID-adjusted estimates as TAVR (+30% y/y) demonstrated surprising resilience, especially during the second half of March, while company guided Q2 and year revs below consensus; ILMN was downgraded to neutral at Citigroup following the stock’s significant outperformance since COVID-19 concerns began negatively impacting broader stock performance on 2/20/20 with ILMN shares +4%

·     Software movers; ZM was added to the Nasdaq 100 index on April 30th (replaces WLTW); Cowen downgraded WDAY to market perform and cut tgt to $160 (from $220) as see it carrying outsized disruption risk to its growth trajectory and given new firm forecast of mid-teens growth the next 2 years, shares likely to be range-bound; Cowen also downgraded SPLK rating as it was already entering the year with a lot of business transition to absorb and now add in COVID-19 related disruptions along with SPLK’s heavy reliance on large deals; SunTrust downgraded shares of NET and ZS to hold from buy

·     Transports; HTZ fell as Reuters reported the co is working with debt restructuring advisers to explore options for shoring up its finances after the coronavirus pandemic killed demand for car rentals; Latin American airlines GOL, AZUL, LTM all downgraded at Morgan Stanley saying CPA remains top pick and though riskier, also stay OW Volaris/high uncertainty leads us to shift from OW to EW on Gol & Azul, but of the two, prefer Gol on its better liquidity position and a more resolved fleet situation

·     Bank movers; PBCT Q1 operating EPS of 33c/$527.5M revs topped the 30c/$500M est. while Q1 provision for credit losses of $33.5M, includes a $22.9M increase reflecting the application of current expected credit loss accounting and the impact of COVID-19; SIVB with a Q1 EPS miss of $2.55 vs. est. $3.56 (and $5.44 YoY) and Q1 provision for credit losses $243.5M vs. $17.4M in Q4; ASB 1Q core EPS missed by 4c as the adoption of CECL drove an elevated provision, and beyond that quarterly trends were generally within expectations; TRV downgraded to Underperform at Raymond James in insurance sector after reported 1Q20 results that included an $86 million pre-tax charge or ~1.2 points on the combined ratio related to COVID-19



·     EBS +8%; after JNJ struck a deal valued at ~$135M to use EBS’ manufacturing plants to make a vaccine being tested for the coronavirus

·     FCX +8%; said it is cutting 2020 estimated operating costs by $1.3B, or about 18%, reducing planned capex spending by $800M, or about 30%, cutting exploration and administrative costs by $100M, or about 20%; posted smaller than expected quarterly loss

·     SKX +5%; 1Q EPS of 39c was in-line, with sales 1.5% better vs. expectations and gross margins beat by 20 bps while noting they were on track for record sales in 1Q before the Covid impact

·     PSTI +20%; as The European Investment Bank (EIB) approves financing of €50M for the co to support its R&D activities in the EU to advance its pipeline and regenerative cell therapy platform

·     WWE +16%; after Q1 EPS topped estimates and revs of $291M rose 60%, beating est of $266.5M while announced cost cutting initiatives and delayed about $140M in cap-spending and said operating income $53.3M compared to loss of $6.8M last year

·     ZM +4%; added to the Nasdaq 100 index on April 30th (replaces WLTW)



·     BA -3%; is expected to announce a significant production cut to the 787 Dreamliner program when it reports earnings next week, according to reports, pressuring shares

·     EHTH -7%; reported strong 1Q results that were above consensus and raised its 2020 revenue and adjusted EBITDA guidance, but concerns arise as churn was somewhat elevated vs. the percentage of the company’s 4Q18 cohort churning in 1Q19

·     HTZ -9%; Reuters reported the co is working with debt restructuring advisers to explore options for shoring up its finances after the coronavirus pandemic killed demand for car rentals

·     INTC -3%; despite strong quarterly results with Q1 sales up +24% YoY, $1B above consensus on better margins/EPS at 62%/$1.45 were 110bp/11% better/Q2 sales guide also 3% above, but GM outlook and EPS disappoint

·     VZ -1%; reported mixed Q1 results as EPS narrowly beat while revenues were slightly below views ($31.6B vs. est. $32.2B) and guides full-year EPS to down -2% up 2% below its prior view up 2%-4%/Q1 wireless postpaid net adds -50,000 vs. +61,000 YoY


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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