Mid-Morning Look

Wednesday, July 22, 2020

U.S. equities rebound after overnight losses, while the tech heavy Nasdaq Composite is back to its winning ways after a brief move lower yesterday (but not before hitting another intraday record high on Tuesday of 10,839). Tech shares are pushing forward ahead of earnings tonight from Dow component MSFT as well as TSLA. Investors remain optimistic about further stimulus for the economy, which is keeping a bid in the market, but global markets dropped overnight amid rising U.S.-China tensions after the U.S. government ordered China to close its consulate in Houston. The move comes a day after the DOJ also accused two Chinese hackers of working for the government to steal terabytes of data, including coronavirus research. China based ADR’s are under pressure (BIDU, BABA, HUYA, JD) following the increasing tensions. Treasury prices extend recent gains, as the 10-year yield falls 2 bps to 0.58% (July low stands at 0.567% on 7/10), while the 2-yr yield steady at 0.14%. Precious metals add to gains with gold up around the $1,855 an ounce level (approaching record highs of $1,891.90, which was in August 2011), while silver prices touched 6-year highs yesterday. Oil prices slide following bearish weekly inventory data from both the API and EIA, both showing a surprise weekly build (EIA build of 4.892M barrels of crude oil vs. a forecasted -2.2M barrels).

Economic Data

·     Existing Home Sales rose nearly 21% in June, the National Association of Realtors reported, occurred at a seasonally adjusted annual pace of 4.72 million. It was a major turnaround from May when sales activity dropped to the lowest level since July 2010. All four major regions nationwide experienced a pick-up in sales activity last month, the trade organization said

Sector Movers Today

·     Brokers & Exchanges; Pershing Square Tontine Holdings (PSTH) 200M share IPO priced at $20.00; NDAQ beats Q2 profit estimates as more people took to trading from home and as the pandemic-driven market volatility also boosted trading volumes to record levels/said revenue at Nasdaq’s market services unit rose 22% to $276M; online trading brokers AMTD, IBKR report quarterly beats as daily trading figures soar following the stay-at-home measures due to the global pandemic, which has boosted trading volumes (AMTD said Q3 number of trades 213.9 million vs. 51.9 million YoY and 3Q net new client assets $32.8 billion, +68% YoY)

·     MLPs; ENB, ET, OKE and PSXP downgraded to Equal-weight and CEQP and NGL to Underweight in MLPM space at Wells Fargo as they are getting more defensive driven by view that oil prices are likely to be pressured as the recovery in demand stagnates, U.S. producers reverse curtailments, and OPEC++ likely chooses to prioritize market share gains over oil prices and that most oil basins outside of the Permian will struggle under a sub $50/Bbl oil price environment

·     Medical equipment and devices; BDX said it received FDA approval for a pre-market approval supplement for an expanded version of its BD Onclarity HPV Assay; BSX announced it has received U.S. FDA approval for the WATCHMAN FLX Left Atrial Appendage Closure Device; ISRG delivered a strong beat against COVID-conservative estimates in Q2, with both system sales ($261M actual vs. $126M estimate) as well as procedure volume (-19% Y/Y actual, vs. -29% Y/Y estimate) well ahead of consensus projections; TMO posted a beat on top/bottom line for Q2

·     Transports; in rails, CNI posted an adjusted 2Q EPS beat relative to street estimates while Cowen said recent record grain volumes are set to continue with sustained demand and CNI purchasing 1 500 new grain cars next year, while CP also posted better earnings and revs for Q2; HTLD 3.261M share Spot Secondary priced at $20.50; KNX reported a Q2 EPS beat and slightly better revs of $1.06B; in airlines; in airlines UAL said travel demand would remain suppressed until there is a widely accepted treatment or vaccine for COVID-19 as expects Q3 consolidated system capacity to fall 65% and expects average daily cash burn of $25M in Q3 vs. $40M a day in Q2 – follows massive quarterly loss for Q2 which was not unexpected

·     Semiconductors; TXN similar to recent pre-announcements from industry peers, delivered better-than-feared Jun Q results and Sep Q outlook – reported a strong JunQ and guided SepQ well above consensus at up 5% q/q (below seasonal trends of up ~8% q/q); ON was upgraded to buy from neutral at B Riley following the TXN beat and raise as upside shows analog strength in auto and industrial; TER reported a strong Q2 beat along with upward guidance for Q3 as said sees Q3 adjusted EPS $1.01-$1.17 on revenue $745M-$805M vs. est. 64c/$603.16M; AMD shares outperform, trading to all-time record highs

Stock GAINERS

·     BBY +9%; after saying quarter-to-date sales rose about 2.5%, buoyed by jump in online shopping while online sales jumped more than three-fold in the quarter through July 18 with overall sales up about 15% after it started reopening stores on June 15

·     BIIB +1%; reported a Q2 EPS beat helped by higher sales from its multiple sclerosis treatment, Tecfidera while also raised its 2020 adjusted profit forecast to between $34-$36 per share, from between $31.50-$33.50 prior

·     BNTX +6%; and PFE rise after the U.S. gov’t placed an initial order of 100 million doses for $1.95 billion and can acquire up to 500 million additional doses/the two remain on track to begin an anticipated Phase 2b/3 safety and efficacy trial later this month

·     HCA +10%; posted a Q2 revenue beat of $11.07B vs. est. $10.3B and better Ebitda of $2.67B (up 16% YoY) while noting Q2 same facility equivalent admissions -12.8% vs. +2.60% YoY

·     ISRG +3%; delivered a strong beat against COVID-conservative estimates in Q2, with both system sales ($261M actual vs. $126M estimate) as well as procedure volume (-19% Y/Y actual, vs. -29% Y/Y estimate) well ahead of consensus projections

·     LAD +17%; reports better-than-expected Q2 EPS and revenue, helped by higher used car sales which jumped 23% amid easing coronavirus-led lockdowns and raised its dividend

Stock LAGGARDS

·     APA -3%; as energy stocks give back partial gains from Tuesday when stocks jumped on a spike in oil prices – bearish weekly inventory data weighing on names early

·     COF -4%; reported a larger than expected Q2 EPS loss on light revs ($6.6B vs. est. loss $6.82B) as provision for credit losses $4.25 billion vs. $1.34 billion YoY, net interest margin (NIM) 5.78% vs. 6.80% YoY and net interest income (NII) $5.46 billion, -5% YoY

·     FE -29%; follow through weakness as KeyBanc downgraded shares after news of the arrest and charges of the Ohio House Speaker in connection with his activities related to HB-6, the bill that created subsidies for two Ohio nuclear plants currently owned by Energy Harbor

·     M -7%; downgraded to sell with $3 tgt along with KSS downgrade saying COVID-19 is accelerating the shift to online shopping and data suggests the effect will persist after the pandemic ends

·     SNAP -7%; Q2 daily active users were 238M, below the est. 239M while not providing Q3 view after posting in-line Q2 EPS loss and slightly better revs

Syndicate:

·     Casi Pharmaceuticals (CASI) 20M share Spot Secondary priced at $1.90

·     CytoSorbents (CTSO) 5.263M share Secondary priced at $9.50

·     Heartland Express (HTLD) 3.261M share Spot Secondary priced at $20.50

·     Jamf Holding Corp. (JAMF) priced its IPO at $26 a share, significantly higher than the $17-$19 range announced last week, raising about $468 million. The Enterprise Management software provider will offer 18 million shares, up from its previous offering size of 16 million shares

·     Kiniksa (KNSA) 5.953M share Secondary priced at $21.00

·     Option Care Health (OPCH) 18M share Secondary priced at $12.50

·     Pershing Square Tontine Holdings (PSTH) 200M share IPO priced at $20.00