Mid-Morning Look: February 03, 2020

Auto PostDaily Market Report

Mid-Morning Look

Monday, February 03, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities in full rally mode after ending Friday with sharp declines and finishing the month of January mixed as concerns over the coronavirus outbreak weighed on sentiment. China stock markets resumed trading after more than a week long holiday, falling as much as 9% before paring losses to over 7% after China’s central bank lowered the interest rates of reverse repurchase agreements while injecting a large amount of liquidity into the banking system in a bid to provide support to the economy. Outside of the virus headlines, markets turning their attention to another busy week of earnings with some 90 S&P companies expected to report results, headlining with GOOGL after the bell tonight. Economic data this morning mixed with investors focusing on the stronger ISM report, helping boost Treasury yields after plunging the last 2-weeks amid a flight to safety on virus concerns. The Dow Jones Industrial Average snaps back from Friday’s 600-point loss, rallying about 300 points as Apple reversed higher after big losses, while an analyst upgrade of Nike helped boosted the index. Given the strong bounce off last week declines, volatility has increased as the S&P 500 remain on track for its fourth 1% move in either direction in the last six trading days (a far cry following the prior stretch that saw the gauge not post a closing move of over 1% for 3-1/2 months through Jan. 24 without such a large swing).


Treasuries, Currencies and Commodities

·     In currency markets, the dollar surging to highs, with the dollar index up nearly 0.5% after selling pressure late last week, rising vs. safe haven currencies as well as the British Pound (which is down over 1.45%). Commodity prices are general lower with gold down over $10 off recent 7-year highs and oil prices add to January losses on slowing demand fears. Treasury market’s slip following the better ISM manufacturing reading, as yields rise following two-weeks of declines (10-yr yield bounces about 6 bps to around 1.57% after falling 16 bps last week while 2-yr also up 6 bps to 1.375% after falling to more than 2-year lows last week)


Economic Data

·     Markit US Manufacturing PMI for Jan-F reported at 51.9 vs. est. 51.7 and falling from 52.4 in December (and below last year 54.9 reading) as employment falls to 51.1 vs 51.4 in Dec. and new orders decline from prior month

·     Construction Spending MoM for Dec fell (-0.2%) below the est. for up 0.5%; Private construction fell 0.1% in December, Private residential construction rose 1.4% and Private residential home improvement spending rose 0.5% in Dec. to $193.7B

·     ISM Manufacturing for January rises to 50.9 (highest since July) from 47.8 the prior month and above the est. 48.5 as Production rose to 54.3 vs 44.8 (best levels since April), new orders rose to 52 vs 47.6 (best since May) and employment rose to 46.6 vs 45.2







WTI Crude















10-Year Note





Sector Movers Today

·     Media & Telecom movers; ROKU and FOXA reached a distribution deal late Friday, narrowly avoiding a blackout that would have removed Fox apps from the Roku streaming platform ahead of the Super Bowl; Credit Suisse downgraded VZ to neutral as do not see any near-term catalysts for shares and also cut VIAC to neutral as a result of a second meaningful downward FCF revision post the Viacom/CBS merger announcement; CHTR was upgraded to outperform at Credit Suisse as they reassess the value being created by successful Time Warner Cable integration overlaid with our overweight view on the cable sector; TMUS mentioned positively in Barron’s saying the company has continued to grow throughout the merger push with Sprint (S), and it doesn’t need Sprint to succeed saying even if the deal fails

·     Consumer Staples; MNST upgraded to overweight from equal-weight at Morgan Stanley with $78 tgt as the firm expects U.S. sales trends to accelerate again even against the recent launch of Coke Energy; CL upgraded to OP from SP at RBC Capital and raises tgt to $91 from $69 as see 2020 guidance beatable, expect CL will continue to drive efficiencies out of their supply chain via automation/robotics and anticipate a more favorable input cost environment; LK denies allegations of financial fraud after short seller Muddy Waters Research on Friday cited an unattributed report that accused them of fabricating financial and operating numbers; SYY falls after mixed results with 1c EPS beat and slightly missing on revs

·     Aerospace & Defense; NOC downgraded to sell from buy at Goldman Sachs citing book-to-bill ratio and organic sales growth below peers as reason for double downgrade/notes the stock is now trading at 24.5x 2020 economic P/E and 21.8x 2021 economic P/E, the high-end of its own historical range, making it the most expensive large-cap defense stock on that metric; GD was upgraded to buy at Argus with $195 tgt saying over the long term, GD mgmt. is focused on driving growth through modest sales increases, margin improvement, share buybacks, with a history of delivering positive EPS surprises; LMT awarded $2.34b contract for repair, upgrade or replacement/other services for assemblies associated with MH-60R and MH-60S helicopters

·     Semiconductors; AMAT upgraded to buy from hold at Deutsche Bank and raise tgt to $72 from $60 as sees upside to both consensus earnings estimates and valuation multiples; ON shares slid as reports mixed Q4 results that beat on revenue and missed on EPS; Citigroup noted the SIA announced December monthly sales of $36.8 billion (up 3.3% MoM), below their estimate of $37.3 billion (up 4.5% MoM) and typical seasonality of up 3.6% MoM due to weaker than expected analog revenue/overall C19 semi sales forecast was down 12% YoY; STX was upgraded to buy at Stifel citing improved fundamentals for hyperscale/data center and a more attractive valuation given recent market weakness.



·     AIMT +5%; as the FDA approved the first drug for children and teenagers with peanut allergies; the drug will be sold under the brand name Palforzia

·     BIDU +7%; said it expects revenue to be in the range of RMB 28.3-28.9 billion ($4.06B-$4.15B), rising 4%-6% YoY compared to its previous guidance in the range of RMB 27.1 billion to RMB 28.7 billion, or -1% to 6% increase year over year

·     GILD +5%; after offering experimental coronavirus drug for testing in China

·     INSM +32%; announces phase 2 WILLOW study of INS1007 in patients with non-cystic fibrosis bronchiectasis meets primary endpoint

·     NKE +4%; upgraded to buy from neutral at UBS and raise tgt to $136 from $103 as now think the market will pay a much higher P/E for NKE as it realizes how Nike’s business model changes

·     NKTR +8%; upgraded to buy from neutral at Mizuho and raise tgt to $35 from $21 as sees a good risk/reward going into 2020 and 2021 bladder cancer indications

·     PCG +9%; as trades to best levels since August after the company submitted an updated reorg plan , including a new board of directors and two newly expanded roles of chief risk officer and chief safety officer, aimed at addressing concerns raised by California Governor Gavin Newsom

·     TSLA +9%; tgt raised to $808 from $556 at Argus as positive view assumes continued revenue growth from the legacy Model S and Model X, as well as strong demand for the new Model 3, which accounted for more than 80% of 4Q19 production

·     ULTA +3%; upgraded to buy from neutral and raise tgt to $307 from $285 at Goldman Sachs as see the slowdown cyclical in their view and operating margins to remain intact



·     ACM ; reports Q1 EPS of 46c, well below the 69c estimate and revenue of $3.2B also well below consensus of $4.99B, but shares bounce from early declines

·     NOC -2%; downgraded to sell from buy at Goldman Sachs citing book-to-bill ratio and organic sales growth below peers as reason for double downgrade

·     ON -8%; as reports mixed Q4 results that beat on revenue and missed on EPS

·     SYY -4%; after mixed results with 1c EPS beat and slightly missing on revs

·     UTHR -3%; said that Unituxin (dinutuximab) failed to achieve the primary endpoint in a Phase 2/3 clinical trial, DISTINCT

·     VZ -1%; Credit Suisse downgraded to neutral as do not see any near-term catalysts for shares

·     XOM -2%; downgraded to sell from neutral and tgt cut to $59 from $72 at Goldman Sachs following 4Q2019 results given downside to long-term consensus estimates, elevated relative valuation versus peers


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.

Live Trading

Open an Account

Paper Trading