Mid-Morning Look: August 05, 2020

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Mid-Morning Look

Wednesday, August 05, 2020






DJ Industrials




S&P 500








Russell 2000






The remarkable U.S. stock market once again finds itself in familiar territory, firmly to the upside with the Nasdaq Composite on track for its 31st record high of the year, with markets buoyed once again from mixed economic data as ADP private payroll data missed for month, but revisions from prior month were much higher but the Institute for Supply Management (ISM) said its non-manufacturing activity index increased to a reading of 58.1 last month, the highest since March 2019. Markets also cheer positive vaccine news (NVAX, JNJ) along with anticipation for the finalization of the latest stimulus package in Washington after weeks of bickering about key points that allowed unemployment benefits to lapse last week. Dow component DIS posts a big adj earnings beat despite losing over $4B in the quarter due to its park closures, but strong Disney+ figures lift sentiment. FinTech also gets a boost after Square (SQ) with an easy quarterly beat and the telemedicine space active on an LVGO/TDOC merger deal. Energy stocks Oil-related stocks rise with oil prices at their highest since early March – helped after the API reported U.S. crude inventories down by 8.6 mln barrels in week. Gold touched above $2,050 as prices have jumped 12 of the last 13 days as rates remain lower and the dollar destruction continues. U.S. Treasury’s move to levels below the expected pace of inflation is making gold, which doesn’t generate an income, more attractive as a store of value. Federal Reserve’s Richard Clarida, told CNBC that he’s sticking to his prior forecast of an improving economy over the remainder of the year. The S&P 500 index moves to within 2% of its February record highs while tech again leads there remain no hint of higher interest rates from the fed in the near future, even if there’s an uptick in economic activity. This week, new coronavirus cases have inched lower, lending to optimism for faster economic recovery. Also helping sentiment, trade news as senior Chinese and U.S. officials will review on August 15th, the implementation of the Phase 1 Trade deal; under the deal, China pledges to boost purchases of U.S. goods by about $200 billion compared to 2017 levels. No fear again as stocks march higher.


Economic Data

·     ADP employment for July shows 167K jobs were added vs. estimate for 1.2M jobs added (prior month revised up to 4.31M from 2.36M)

·     U.S. services industry activity gained momentum in July as new orders jumped to a record high. The Institute for Supply Management (ISM) said its non-manufacturing activity index increased to a reading of 58.1 last month, the highest since March 2019, from 57.1 in June. The index slumped to 41.8 in April, which was the lowest reading since March 2009.

·     Trade deficit narrowed to $50.7B in June vs. est. $50.2B and from $54.8B in prior month, the Commerce Department said (trade deficit fell 7.5% in June); Imports rose 4.7% in June to $208.95b from $199.49b in May and exports rose 9.4% in June to $158.25b from $144.69b

·     U.S. IHS Markit July final composite PMI at 50.3 (vs flash 50.0) and Markit July final services PMI at 50.0 (vs flash 49.6)







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10-Year Note





Sector Movers Today

·     Consumer Staples; BYND Q2 EPS loss (2c) on revs $113.3M vs. est. loss (4c)/$78.94M; Q2 adjusted gross profit of $39.6M, or adjusted gross margin of 34.9% of net revenues, reflecting exclusion of expenses attributable to COVID-19; 2020 outlook remains suspended; TSN and SAFM downgraded to neutral from outperform at Credit Suisse warning of another weak year ahead for the company’s chicken and prepared foods divisions; MNST estimates and tgt (to $95) raised at Bank America after taking in the company’s strong Q2 and July sales update

·     Housing & Building Products; MBA mortgage applications index fell 5.1% in week ended July 31 after falling 0.8% in prior week; Purchases down 1.8% after falling 1.5% in prior week; Refi’s fell 6.8% after falling 0.4% in prior week; Wayfair (W) swung to a big profit beat in Q2 as orders delivered more than doubled (Orders delivered increased 106.2% to 18.9 million, while the average order value declined to $227 from $255) – number of active customers in the Direct Retail business grew 46.0% to 26.0 million

·     Pharma movers; TEVA 2c EPS beat and reaffirms outlook; HZNP rises as sees FY net sales $1.85 billion to $1.90 billion, saw about $1.4 billion to $1.45 billion and raises Ebitda view; LLY and Boehringer Ingelheim report top-line phase 3 results Empagliflozin; met primary endpoint in reducing risk of cardiovascular death or hospitalization for heart failure in adults with and without diabetes; JAZZ reported 2Q20 adjusted diluted EPS of $3.71 on revenue of $562M, compared to Street estimates of $3.11 and $503M, respectively and Xyrem volume growth was a healthy 5% in 2Q20 versus 2Q19; PFE says the Phase 3 CROWN study of Lorbrena (lorlatinib) in people with previously untreated advanced anaplastic lymphoma kinase (ALK)-positive non-small cell lung cancer met its primary endpoint; JNJ said it has agreed to supply the U.S. government with 100 million doses of its SARS-CoV-2 investigational vaccine

·     Metals & Materials; gold miners have surged (GOLD, NEM, AEM, AUY) with gold rising for its 12th dup day in the last 13, setting new record high for 3rd straight day with gold firmly above $2,000 an ounce now; FMC delivered a Q2 EPS beat, but sales missed due to greater FX headwinds, which impacted sales by ~7%; LYB upgraded to neutral from underperform and price objective to $68 from $59 at Bank America

·     Software movers; LPSN reported a strong Q2 and raised guidance ahead of consensus (second consecutive beat and raise after COVID-19); TWLO posted strong Q2 results and above-consensus Q3 guidance highlighted that TWLO stands to be a significant beneficiary of COVID-19 in the short-term, boosting usage volumes dramatically; PAYC reported mixed Q2 results versus consensus expectations and given the strong headwinds from the rise in unemployment due to COVID-19, the company did not guide for 2020, but guided a mixed Q3; UPWK delivered a nice beat in raise in 2Q, but shares fell on a surprise CFO transition; NEWR falls as analysts note included a beat on revenue and EBIT versus the company’s guidance, but flattish ARR growth q/q and a deceleration in net expansion rate to 100% from 116% last quarter weighed



·     CPRI +10%; beats Q1 revenue estimates and reports a smaller-than-expected loss – reports a 66.5% fall in overall Q1 revenue, which was lesser than the 70% drop it predicted in July, helped by higher online sales

·     DIS +8%; EPS beat with help from lower programming costs and announced Hulu international expansion as the pandemic closed Disney’s theme parks, virtually eliminated movie distribution and curtailed live sports – losing $4.72B in quarter, but strong Disney+ adds help sentiment

·     HZNP +15%; rises as sees FY net sales $1.85 billion to $1.90 billion, saw about $1.4 billion to $1.45 billion and raises Ebitda view

·     NVAX +12%; announced Phase 1 data from its Phase 1/2 randomized, observer-blinded, placebo-controlled trial of its COVID-19 vaccine with and without Matrix-M adjuvant in healthy adults 18-59 years of age (analysts boost tgt with JPM raising to $275

·     SQ +12%; trades to record highs as online payment volume jumped more than 50%; Rev on the cash app surged 64%; guidance commentary on Q3 not as upbeat



·     ANET -10%; posted Q2 beat and raise while Raymond James said despite the better outlook, management continues to forecast flat cloud (40% of sales) in 2020, which could be considered disappointing in light of better spending forecasts from its top two customers

·     BYND -4%; despite Q2 revenue handily topping consensus but a Covid-related expense hit to reported gross margin and a lack of incremental news flow may have weighed

·     GLUU -8%; Truist notes reported a mixed 2Q20. Positives: 1) 2Q revenue/EBITDA were well ahead of Truist and consensus while negatives: 1) In terms of pipeline, Originals seems unlikely to make it to market and Deer Hunter has been pushed from 4Q20 to 2021

·     LVGO -4%; agree to merge with TDOC in a deal valued at $18.5B in the telehealth sector; LVGO holders to receive 0.592 shares of TDOC plus $11.33 per share in cash https://on.mktw.net/33uRPnM

·     MCHP -7%; reported JunQ (F1Q21) rev/EPS of $1.3B/$1.56, in line with its updated June-2nd guide of down ~3% q/q, though guided to a surprisingly weaker than expected SepQ, down ~4% q/q vs. cons down 1%

·     NEWR -21%; results beat on revenue and EBIT versus the company’s guidance, but flattish ARR growth q/q and a deceleration in net expansion rate to 100% from 116% last quarter weighed

·     NKLA -10%; after posts wider Q2 EPS loss and RBDC notes its first earnings report likely had fewer major announcements than investors were hoping for

·     TDOC -17% after agreeing to merger with LVGO


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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