Mid-Morning Look: March 03, 2020

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Mid-Morning Look

Tuesday, March 03, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities get bailed out by the Fed again, as the FOMC provides an emergency intra-meeting 50 bps rate cut, the first such since the 2008 financial crisis (had been speculated by several Wall Street economists this week – so not coming as a massive surprise – and was main reason for the single best point gain in the Dow yesterday) in a unanimous decision saying fundamentals remain strong but coronavirus poses evolving risks to economic activity and that they are closely monitoring developments and will use its tools and “act as appropriate to support the economy”. Following the 50 bps move to range of 1%-1.25%, stocks surged off morning lows, lifting oil prices and gold while the dollar sunk (the dollar had slipped the last few days on rising expectations of such a move by the Fed). The move seen as a help to the stock market for now, but certainly isn’t going to get more people flying, taking cruises, eating at restaurants or going to large events (concerts) as the virus likely to still have an impact on the economy. Australia’s RBA Central bank cut rates last night and expectations rise for the Bank of Canada to cut tomorrow. Prior to the jump in stocks on the rate cut, there were a few factors again driving today’s volatile action with investors positioning themselves against election news later with Super Tuesday as results are expected to narrow the picture for the Democratic Presidential nominee, while coronavirus fears not going away anytime soon with New York reporting its second confirmed case and one school closing after a suspected COVID-19 case. The statement from G7 finance ministers and central bank governors indicates a willingness to use fiscal and monetary policy to fight the coronavirus impact on the economy but doesn’t outline any specific steps. “Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks. The comments were seen as disappointing with no action to back up commentary at this point. Stocks are trying to recover after last week’s drubbing that saw the Dow fell 12.4%, the S&P 500 lost 11.5% and the NASDAQ shed 10.5%, representing their worst weekly skids since 2008. Last week’s decline saw all three equity indexes fall into correction territory, widely defined as a drop of at least 10% from a recent peak, as fears of the coronavirus outbreak spread.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar sunk quickly against other rival currencies following the 50-bps point rate cut by the Fed to offset the impact of the coronavirus on the economy while earlier the Canadian loonie slipped vs. the dollar with expectations the Bank of Canada to cut its overnight rate by 50 bps to 1.25% on Wednesday. Commodity prices volatile as gold and oil initially spiked on the rate cut, only to later pare those gains. Treasury market’s rise initially as the yield on the 10-year sinks to 1.09% after touching overnight highs above 1.16%, falling as stocks pulled back from overnight gains on additional – volatile again after the Fed rate cut.







WTI Crude















10-Year Note





Sector Movers Today

·     Retailers; TGT EPS beat while issued weaker FY20 profit forecast, and revenue miss as sees adjusted earnings of $6.70-$7.00 per share where at the midpoint misses the $6.87 estimate while Q4 revenue of $23.40B just misses the $23.50B est; KSS reports comparable sales were flat in Q4 vs. -0.1% consensus, while total revenue was up 0.1% during the quarter and gross margin fell 81 bps to 32.7% of sales during the quarter and guidance for year EPS $4.20-$4.60 vs. $4.58; YETI was upgraded to buy at Citigroup saying sell-off seems overdone

·     Semiconductors; AMD was upgraded to overweight at Piper and raise tgt to $56 from $45 saying the 19% pullback from the February high offers an attractive entry point for long-term investors as the products in the laptop/desktop and data center markets have never been better; MCHP reduced its F4Q revenue outlook and withdrew EPS guidance (now sees Q4 revs to be flat QoQ vs. up 5.5% previously) as China customers and supply chain partners returned to normal operations at a slower rate than MCHP had anticipated; QRVO also cut its revenue outlook, citing the estimated impact the coronavirus outbreak is having on the smartphone supply chai (sees Q4 revs $50M below the midpoint of the prior guidance range); VECO upgraded to buy at Stifel

·     Consumer finance and lending; Visa (V) warned that it sees Q2 revenue growth 2.5-3.5 percentage points lower than prior view as cross- border growth rates have deteriorated week by week since the coronavirus outbreak in China (follows recent lowered view from MA); JPMorgan cut ests for V, MA and PYPL as COVID-19 fears have negatively impacted cross-border travel, especially tied to Asia, and to a lesser extent, e-commerce activity; Citigroup downgraded WEX to neutral from buy saying that FLT and WEX are the only U.S. stocks outside of the energy sector that are positively correlated with fuel prices and in heightened periods of volatility (up and down), the relationship strengthens significantly and with coronavirus fears becoming front and center, we see both stocks tracking more closely to the reset in fuel prices

·     In cannabis, TLRY shares dropped after its Q4 results missed expectations with a wider-than-expected Ebitda loss ($35.3M vs. est. loss $21.8M) on weaker revs $46.9M vs. est. $55.4M; CANF shares jumped after saying its drugs, Piclidenoson and Namodenoson, have shown favorable safety profiles and risk-benefit ratios in more than 1,500 patients; CRON downgraded at Stifel with C$8 per share tgt to reflect the uncertainty surrounding the company’s inability to file its SEC filings and the investigation around its revenue recognition practices

·     Transports; UPS was upgraded to buy from hold at Deutsche Bank citing valuation following a recent decline, and singled out the shipping company’s dividend yield as a source of strength; DAL shares get a boost after Warren Buffett’s Berkshire Hathaway boosted its stake in the airline, buying about 1M shares in the price range of $45.48-$47.14, according to an SEC filing; in tankers, (DSX, NM, SB, SALT), the Baltic Dry Index rose 1.86% to 549 points in London to make it 13 straight days of incremental gains for the measure of dry bulking shipping rates with port activity in China improving from a near standstill at certain locations. The Baltic Dry Index bottomed out at 411 on February 10



·     AMD +3%; upgraded to overweight at Piper and raise tgt to $56 from $45 saying the 19% pullback from the February high offers an attractive entry point for long-term investors

·     GNMK +23%; as reports it ships ePlex RUO test kits for SARS-CoV-2 detection offsets its earnings miss and lower guide

·     INO +17%; said it is accelerating the timeline for development of a vaccine to treat the coronavirus saying the company had designed its DNA vaccine INO-4800 in three hours after the publication of the genetic sequence of the virus

·     OMER +30%; after reports an update on clinical data from its pivotal trial of narsoplimab that markedly exceeding the FDA-agreed threshold for the primary efficacy endpoint

·     QGEN +15%; to be acquired by TMO for 39 euros per share in cash, which is a 23% premium to Monday’s close in a deal valued at $11.5 billion, including the assumption of $1.4 billion of debt https://on.mktw.net/3arvaJp 

·     TSLA +6%; was upgraded to outperform with $1,060 tgt at JMP Securities saying the recent market-driven pullback provides investors with a good opportunity to enter the stock

·     WIFI +21%; said it engaged advisors to assess opportunities after saying has multiple inquiries on potential transaction/company suspends financial guidance until further notice



·     AZO -1%; in auto retail after Q3 EPS topped views but sales missed and comp store sales unexpected declined (-0.8%) vs. est for a 2.8% increase while inventory rose 7%

·     HAL -3%; oil service stocks, SLB and HAL were both downgraded to neutral at UBS, more cautious given the challenging backdrop for oil service

·     LVGO -5%; reported another quarter of triple-digit (100%+) organic revenue growth and guided year revs $280M-$290M vs. est. $278M (note lockup expiry next week)

·     MDRX -6%; reported a top and bottom line earnings miss and provided weaker than expected 2020 guidance that implies revenue growth of only 1-2%

·     SIVB -5%; among many sharp declines in the large cap and regional banking sector (CMA, SCHW, ZION, MTB) among others after the Fed announces a surprise 50 bps cut

·     TLRY -11%; shares dropped after its Q4 results missed expectations with a wider-than-expected Ebitda loss ($35.3M vs. est. loss $21.8M) on weaker revs $46.9M vs. est. $55.4M


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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