Mid-Morning Look: June 25, 2020

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Mid-Morning Look

Thursday, June 25, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities kicked off the session lower but has since bounced led by a gain in energy and financials, two of the biggest weekly sector decliners. Bank got a boost after US regulators ease the Volcker rule ahead of stress test results as the Office of the Comptroller of the Currency approved changes to the Volcker Rule Thursday that let banks increase their dealings with certain funds by providing more clarity on what’s allowed, according to an agency spokesman. The OCC also scrapped a requirement that lenders hold margin when trading derivatives with their affiliates. Energy stocks also jumped following a recovery in oil prices, boosting shares of E&P and major oil names and helping push the S&P and Dow higher. Economic data was mixed as weekly jobless claims were higher than expected, but still down from the week before and continuing claims manage to dip below 20M. The fears of rising COVID-19 cases in several “hot-spots” around the country (TX, FL, CA, NC, SC, AZ) has spooked markets recently, with many of those states instituting mandatory mask wearing in public while some stores have voluntarily shut down (AAPL closed 18 total stores) amid the surge in cases. Treasury prices rise as yields slip and the dollar is up modestly while gold prices edge lower after touching 8-year highs this week.


Economic Data

·     U.S. Final GDP for Q1 was down (-5%), in-line with estimates; US Q1 consumer spending fell (-6.8%) also in line with estimates while Q1 business investment fell (-6.4% vs. est. -7.9%); core PCE QoQ was 1.7% topping the 1.6% estimate and GDP Price index was an in-line 1.4%; Q1 exports fell (-9%) and imports fell -15.7%

·     Weekly Jobless claims fell to 1.48M from an upwardly revised 1.54M last week (from 1.508M), but was above the 1.3M estimate while the 4-week moving average fell to 1.620M from 1.781M prior; continued claims fell to 19.522M from 20.289M prior and vs. est. around 20M; insured unemployment rate fell to 13.4% from 13.9%

·     U.S. Durables Goods Orders for May rose 15.8% vs. the est. up 10.9% and well above the prior month of down (-18.1%); Orders ex-defense rose 15.5% vs. April down (-17.1%); May durables ex-transportation orders rose 4% vs. est. 2.5% and prior month down (-8.2%); US May durables shipments rose +4.4% vs. April down (-18.6%)

·     U.S. advance goods trade deficit widened to -$74.3B in May from -$70.7B (was -$69.7B); exports fell -5.8% to $90.1B after plunging -25.1% to $95.6B in April; imports dropped -1.2% to $164.4B following the -13.6% decline to $166.3B previously







WTI Crude















10-Year Note





Sector Movers Today

·     E&P sector; SunTrust upgraded FANG to buy as forecast to have a notably better FCF profile next year vs current Street estimates with our forecast pointing to a ~10% 2021 FCF yield; ESTE upgraded to buy at SunTrust as well saying it continues to be one of the most financially stable & operationally efficient small cap E&Ps with minimal debt, consistent Midland wells, and low overhead/opex leading to sustainable spending within CF; PXD upgraded to buy at SunTrust believe there is much more room for this industry long stock to run as we forecast Pioneer’s 2021 FCF to handily top Street estimates generating $800mm+; Wells Fargo said they with U.S. inventories at historic highs, refining utilization still well below seasonal levels and U.S. curtailed volumes set to return to market, they are cautious on near term oil prices and downgrade MRO; CLR executive chairman Harold Hamm added $57.1M of shares in the company in recent days, at an average price of $16.62, according to an SEC filing. The 3.44M shares he purchased brings his total of direct and indirect shares to 288M, or ~79% of the company.

·     Chemicals; DD was upgraded to Outperform from Sector Perform at RBC Capital based on improving fundamentals from cost reduction measures and greater exposure to early recovery markets, portfolio transformation with the sale of N&H business and diminished PFAS uncertainty; DOW estimates were lowered at SunTrust citing incrementally bearish comments from its CFO during a conference presentation yesterday; FUL reported a sales and EPS beat for FQ2, primarily driven by 7% YoY organic growth in its Hygiene, Health, and Consumable Adhesives (HHC) segment, as well as benefits from restructuring and lower raw material costs

·     Healthcare services and providers; CTLT said it will provide vial filling and packaging for MRNA’s Covid-19 vaccine candidate at Catalent’s biologics facility; RAD shares surged early as reported Q1 results that showed revs rise 12% YoY to $6.03B, above est. $5.6B while comp sales rose 6.6% and said sees positive free cash flow in fiscal 2021; PDCO was upgraded to neutral at Goldman Sachs as see greater stability in the earnings outlook for FY21, as PDCO’s GM initiatives and cost discipline are driving stronger operating margins, as well as improved cash flow



·     ACN +6%; Q3 revenue falls nearly 1% to $10.99B but topped the $10.87B est on better Q3 adj EPS while forecasts its FY20 revenue growth view to 3.5%-4.5% vs. prior view of 3%-6% in higher operating cash flow outlook ($6.45B-$6.95B vs. prior $6.15B-$6.65B)

·     ALLY +12%; as the company and CardWorks mutually agreed to terminate their $2.65B merger agreement, which had been announced on February 18 after carefully considering the impacts of COVID-19 on global markets and the economy

·     DRI +6%; posted a smaller-than-expected Q4 loss and beats sales estimates and noted weekly same-store sales, including at Olive Garden and LongHorn Steakhouse restaurants, have improved steadily in June as more restaurants open dining rooms

·     EXAS +3%; positive catalyst watch at Citigroup given conviction around the company’s near-term opportunity to gain CRC screening market share following the launch of its online ordering platform

·     FUL +4%; reported a sales and EPS beat for FQ2, primarily driven by 7% YoY organic growth in its Hygiene, Health, and Consumable Adhesives (HHC) segment, as well as benefits from restructuring and lower raw material costs

·     MKC +3%; advanced after quarterly earnings topped estimates on the top and bottom line

·     PXD +4%; upgraded to buy along with FANG and ESTE but energy sector as a whole rebounding on the day, among top gainers in the S&P

·     RAD +21%; as reported Q1 results that showed revs rise 12% YoY to $6.03B, above est. $5.6B while comp sales rose 6.6% and said sees positive free cash flow in fiscal 2021

·     WFC +3%; financials bounce higher after US regulators ease the Volcker rule ahead of stress test results



·     BA -1%; was downgraded to Sell from Hold at Berenberg with a price target of $150

·     BYND -7%; shares rolled early after a report out of Canada said MCD ended its Beyond Meat burger trial in Canada with no set plans for a vegetarian option

·     DIS -1%; after saying its Disneyland Park in California will remain closed and reopen at a later date while the company is also mulling postponing the July 24 release of its “Mulan” film

·     KBH -11%; leads homebuilders lower after reporting weaker-than-expected Q2 orders and sales (Q2 EPS 55c/$914M vs. est. 56c/$1.07B and net orders of 1,758 vs. consensus of 2,754 and 4,064 in year-ago quarter)

·     LVS -3%; as casino and gaming names slip further on rising COVID cases; MGM will require masks for all guests and visitors in public spaces at every property in the US, effective Friday

·     QURE -14%; downgraded by a handful of analysts following its global licensing deal with CSL Behring for hemophilia B gene therapy etranacogene dezaparvovec, reducing M&A speculation

·     ZBH, SGRY ; shares fade after the Texas Governor suspends elective surgeries in Bexar, Dallas, Harris, and Travis counties as COVID-19 cases and hospitalizations surge in Texas


·     BRP Group (BRP) 11.5M share Secondary priced at $13.25

·     Castle Biosciences (CSTL) 2M share Secondary priced at $37.00

·     Evelo Biosciences (EVLO) 12M share Secondary priced at $3.75

·     Kaleyra (KLR) 7.78M share Secondary priced at $4.50

·     Magenta Therapeutics (MGTA) 1.125M share Secondary priced at $8.00

·     NantKwest (NK) 7.41M share Spot Secondary priced at $9.50

·     1Life Healthcare (ONEM) 8.3M share Secondary priced at $31.00

·     Yandex (YNDX) 8.12M share Secondary priced at $49.25


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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