Mid-Morning Look: June 08, 2020

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Mid-Morning Look

Monday, June 08, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities extend their recent bounce, with the S&P 500 index back above the 3,200 level, the Dow Jones Industrial Average rising nearly 1% above 27,350 (led by 10% gains in Boeing after a 40% advance last week on demand improvement expectations in travel/airlines) while the Nasdaq pulls back after touching a fresh record high on Friday, as YTD winners in Internet, software and semi’s being used as a source of funds for lagging YTD sectors such as energy, financials, retail and travel. Smallcaps also add to recent gains, outperforming large caps. Materials and Industrials get another leg higher after China’s trade surplus surged to a record in May as exports fell less than expected, helped by an increase in medical-related sales; imports slumped with commodity prices; exports decreased 3.3% in dollar terms from a year earlier, beating estimates, while imports plunged 16.7%. Oil prices dip after jumping a 6th straight week on Friday in a “sell-on-the-news” reaction after Saudi Arabia and Russia got what they wanted from the OPEC+ meeting this weekend: a one-month extension to existing output curbs and an agreement that any member who fails to implement all its cuts will make deeper reductions later. The protests and demonstrations this weekend around the globe were generally peaceful while the virus cases for COVID-19 continue to slide, adding to the improving market sentiment.


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar adds to last week losses as the dollar index slides to lowest levels since early March ( no major economic data today) as investors again pile into riskier assets such as stocks and commodity prices betting on the economic recovery. Gold prices bounce after sliding last week as another leg lower in the dollar supporting prices early. Oil prices erase initial gains, slipping after WTI crude rose a 6th straight week into the virtual OPEC+ meeting this weekend that saw an extension of production cuts. Treasury markets are rising slightly despite the bounce in stocks, with the 10-year yield dipping back under 0.9% (touched highs of 0.95% last week, its best levels since March).







WTI Crude















10-Year Note





Sector Movers Today

·     Bank movers; Bank America upgraded banks BKU, FHB and TCB to buy from neutral as update tgts to reflect the improved macro outlook, higher market multiples and updated methodology of 50%/50% ‘20e/’21e TBV vs 75%/25% previously; alternative asset managers APO, BX, CG all downgraded to neutral from buy at Citigroup given their recent inclusion in the Russell index as sees the “deepest downside” at RMR which was downgraded to sell from neutral but also recognizes its lack of trading liquidity

·     Industrial & Machinery; in heavy duty truckers (CMI, PCAR, NAV), North America preliminary class 8 orders declined 39% YoY in May to 6,700 units. The May pace annualizes near 90K units, a sequential improvement from April’s 50K-unit trough. Medium-duty orders declined 57% YoY in May to 8,900 units and annualize near 110K. This was a sequential step up (+13%) from the 98K unit annualized pace in April; AYI upgraded Perform to Outperform at Opco as believe AYI’s recently established supply agreement for Ushio America’s germicidal/disinfectant UV module/excimer lamp with patented filtering technology affords a truly promising value

·     Internet; AMZN tgt raised to Street high $3,300 at RBC Capital saying recent survey results and industry data suggest that adoption of Online Shopping has accelerated materially, and we view Amazon, Walmart, Etsy, and eBay as beneficiaries of this secular shift; TWTR mentioned positively in Barron’s saying the co.’s battle with President Trump may be good for the stock, saying it is benefiting through increased user growth; Airbnb said U.S. bookings increased Y/Y during the period between May 17 and June 3, showing the first signs of growth since the coronavirus pandemic hit the industry in March

·     Retailers; another day another bounce for retailers; GIII and PVH were both downgraded to equal-weight from overweight in retail at Wells Fargo saying they are less confident in a recovery and noting since mid-March, global brands in our space are +75% (vs SPX +34%) and the two that have seen the biggest gains are GIII (+280%) and PVH (+120%); AAN shares rose after solid guidance as expects Q2 revs $975M-$1B (est. $892M) while says for Q3/Q4 revs will be highly correlated to the volume of new lease originations/Aaron’s Q2 comps will be -1.5% to -2.5% (better than its -4.6% in 1Q); MIK upgraded to overweight at JPM and placing it on JPM’s US Equity Analyst Focus List as a value idea based on an expected re-rating to PE on 2021 EPS due to the path to positive comps over the next four quarters

·     Consumer Staples; restaurant suppliers SYY, USFD, PFGC all with positive mentions in Barron’s this weekend noting shares are sharply lower on the year but could rise as states reopen/even if a lot of local restaurants never reopen, distributors can still turn profits by servicing fewer locations, gaining efficiency, and lifting operating margins; BYND said it inked a deal with Chinese food distributor Sinodis to expand product distribution in China; SAM tgt raised to $575 from $427 at RBC as expect current industry leaders in the hard-seltzer industry Truly and White Claw to remain the leaders, as see the hard seltzer category evolving more like the energy drink



·     BA +9%; adding to last week gains of over 40%, pushing the Dow higher as airlines demand rebound hopes continues to push up shares along with airlines (UAL, AAL, ALK, LUV)

·     CCL +12%; extension of gains in the cruise industry as investors continue to bet on the economic recovery and slowing of coronavirus cases (NCLH, RCL higher)

·     CLW +9%; after saying due to favorable demand, production, and cost trends in April and May, now expects Q2 Adjusted EBITDA in the range of $71M-$77M vs. prior outlook of $45M-$55M

·     GILD +1%; following weekend report from Bloomberg that AZN had approached GILD for a potential merger last month, but the U.S. firm was not interested in combining with another big pharmaceutical company https://bit.ly/30iYD6b

·     MRO +12%; among the top gainer in energy as oil prices rebound, economic recovery and rising demand expectations pushing names higher

·     THO +8%; posted a strong EPS and revenue beat while North American Towable revenue fell 38% Y/Y to $773.4M in FQ3 and North American Motorized revenue decreased 42.5% to $264M

·     TSLA +3%; sold 11,095 Shanghai-made Model 3 vehicles in China in May, triple the volume of 3,635 cars in April, according to China Passenger Car Association (CPCA), reports Reuters.



·     FTNT -3%; as software names down across the board (NOW, TWLO) with more sector rotation out of big winners YTD and piling further into lagging sectors (financials, travel, leisure, retail)

·     NFLX -2%; stay at home beneficiaries that thrived during the complete economic lock down from the coronavirus, pare recent gains (ZM, PTON, WORK, ATVI)

·     NVDA -2%; same story as software as YTD winners (Philly semi index touched a record high late last week), being sold as investors rotate into lagging sectors

·     REGN -2%; biotech another source of funds this morning (another top YTD sector gainer) as money continues to be put to work in beaten up sectors (financials, energy)


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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