Mid-Morning Look

Tuesday, May 12, 2020

U.S. equities opened higher but has pared back from the opening, as the Nasdaq Comp looks to rise for a 7^th straight day of gains, which would be the longest streak since September as investors again weigh the news of several states and countries reopening their economics from the forced stay home policies to prevent the spread of the coronavirus pandemic. Economic data today showed tame inflation with consumer prices falling (-0.8%) and core prices (ex food & energy) falling the most on record by (-0.4%). Traveler throughput at Transportation Security Administration checkpoints was 215,645 yesterday, a week-over-week improvement from last Monday when 163,692 people went through TSA checkpoints showing that more people are beginning to fly/travel, which has helped boost oil prices over the last 2-weeks. Mall REITs are rising after Simon and Macerich announced they will begin opening up some malls starting next week. The list of companies that have been raising cash grows by the day, with some 20 or more names pricing secondary stock deals or announcing debt raises. Also overnight the Fed was at it again after they announced a new lending facility and will begin purchasing corporate bond exchange-traded funds on Tuesday, the New York Fed announced. The Fed said most of the purchases would be in exchange-traded funds with exposure to U.S. investment-grade corporate bonds, but some of the purchases will be of ETFs whose primary exposure is to U.S. high-yield corporate bonds. Consumer Prices for April fell (-0.8%), in line with estimates while core prices (ex food & energy) fell (-0.4%) – the biggest drop on record – vs. est. (-0.2%); CPI YoY for April rose 0.3% vs. est. 0.4% and core prices rose 1.4% vs. est. 1.7%. Oil and gold prices are higher while the dollar slides and Treasuries are flat.

Sector Movers Today

·     Consumer Staples; food prices were 1.5% higher month-to-month in April and 3.5% higher compared to a year ago, as per the CPI data – Some of the categories showing price increases from March were crackers/bread (+4.0%), ground beef (+4.8%), frankfurters (+5.7%), chicken (+5.8%), oranges (+5.6%), carbonated drinks (+4.5%), apples (+4.9%) and eggs (+16.1%) – (food stocks include: CPB, GIS, K, CAG, CALM, POST); IPAR reports Q1 sales declined 17.8% on constant currency basis while sales by European based operations declined 20.6% to $114.1M and U.S. based operations declined 10.9% to $30.7M/gross margin rate down 10 bps to 61.5%.

·     Asset managers; BLK’s largest shareholder is cashing out as PNC will sell its $17B holding in a secondary offering, with BlackRock buying back $1.1B directly; in monthly assets under mgmt (AUM) data: 1) AB said preliminary assets under management increased to $576 billion during April 2020 from $542 billion at the end of March; 2) BEN preliminary month-end assets under management of $599.4 billion at April 30, 2020, compared to $580.3 billion at March 31, 2020; 3) IVZ reported preliminary month-end assets under management (AUM) of $1,118.6 billion, an increase of 6.2% versus previous month-end; 4) LM preliminary assets under management (AUM) of $763.1 billion as of Apr 30, 2020. This month’s AUM included long-term net outflows of $1.4 billion, driven by fixed income net outflows of $2.5 billion, partially offset by equity net inflows of $0.9 billion and alternative net inflows of $0.2 billion; 5) TROW reported preliminary month-end assets under management of $1.13 trillion as of April 30, 2020. Client transfers from mutual funds to other portfolios, including trusts and separate accounts, were $1.4 billion in April 2020

·     Metals & Materials; in the steel sector, ThyssenKrupp shares fell after it reported a widening and worse-than-forecast loss for its Q2 as sales from continuing operations fell 6% and orders dropped 10% and said a Q3 operating loss of “€1 billion cannot be ruled out; MT 80.9M share Secondary priced at $9.27; in chemical movers; ALB was downgraded to neutral at Goldman Sachs while upgraded shares of AXTA to buy

·     REITs; SPG shares rise 8% after the biggest U.S. mall operator said it would reopen about half of its over 200 retail properties in the country by next week while smaller rival MAC plans to reopen 35 U.S. properties by the end of May and expects to open vast majority of properties by mid-June/SPG said it will still declare a Q2 dividend and expects to pay out 100% of its taxable income in 2020 in cash; EQIX 2.25M share Secondary priced at $665.00; LXP 15M share Spot Secondary priced at $9.60; REXR 6.25M share Spot Secondary priced at $39.85

Stock GAINERS

·     ALXN +2%; after shareholder/activist Elliott Advisors urges the company to put itself up for sale while also questions strategy to acquire PTLA (says believes Alexion is trading at 40%-50% discount to fair value)

·     CBAY +135%; after saying that an independent expert panel unanimously concluded there is no evidence of liver injury induced by co’s experimental drug in a mid-stage NASH study/CBAY to reach out to FDA as the panel recommended restarting clinical development of the drug, seladelpar (upgraded by at least four analysts)

·     DDOG +21%; reported a very good 1Q, with revenue and EPS coming in significantly above estimates and meaningfully raised full-year guidance

·     GDOT +14%; after reported Q4 adj EPS $0.14, beating estimates of $0.11, on better revenue of $249.3M vs. estimate of $238.5M with upbeat year EPS and Ebitda guidance

·     GMDA +39%; after announcing positive topline results from its Phase 3 study evaluating the safety and efficacy of omidubicel, an investigational advanced cell therapy as a potential life-saving treatment option for patients in need of bone marrow transplant

·     IIVI +28%; after delivered strong results and guidance with record orders and backlog level, highlighted by demand in transceivers being 40% above its original expectations

·     NVAX +62%; after better Q1 results and said the Coalition for Epidemic Preparedness Innovations will invest up to $384 million in the development of NVX-CoV2373, its vaccine candidate for SARS-CoV-2, the coronavirus that causes COVID-19.

·     PTON +9%; after saying the company surpassed 1.0M aggregate connected fitness subscribers

·     SPG +3%; after the biggest U.S. mall operator said it would reopen about half of its over 200 retail properties in the country by next week while smaller rival MAC plans to reopen 35 U.S. properties by the end of May and expects to open vast majority of properties by mid-June

Stock LAGGARDS

·     BLK -5%; after its largest shareholder is cashing out as PNC will sell its $17B holding in a secondary offering, with BlackRock buying back $1.1B directly

·     CRC -29%; after saying t’s unable to file its quarterly report due to the Covid-19 pandemic; also says it’s withdrawing all of its guidance for periods after March 31 due to the high level of economic uncertainty; says if it isn’t successful in restructuring, there is substantial doubt about its ability to continue as a going concern

·     EB -17%; following its larger than expected quarterly loss, while secures $225M term financing

·     GNFT -66%; after a Phase 3 clinical trial, RESOLVE-IT, evaluating its elafibranor in adults with nonalcoholic steatohepatitis (NASH) failed to achieve the primary endpoint; did not sufficiently separate from placebo as measured by the proportion of patients achieving NASH resolution

·     ZG -7%; announced plans to raise $1 billion through stock and convertible debt offerings/plans include a $500 million offering of Class C common stock and $500 million in convertible senior notes due 2025

Syndicate

·     Akebia (AKBA) 11M share Spot Secondary priced at $12.00

·     ArcelorMittal (MT) 80.9M share Secondary priced at $9.27

·     AtriCure (ATRC) 3.98M share Secondary priced at $44.00

·     Chefs’ Warehouse (CHEF) 5.6M share Spot Secondary priced at $13.25

·     Energy Recovery (ERII) 1.5M share Block Trade priced at $7.50

·     Equinix (EQIX) 2.25M share Secondary priced at $665.00

·     Lexington Realty (LXP) 15M share Spot Secondary priced at $9.60

·     Penn National (PENN) 16.667M share Secondary priced at $18.00

·     Protagonist Therapeutics (PTGX) 7M share Secondary priced at $14.00

·     Rexford Industrial (REXR) 6.25M share Spot Secondary priced at $39.85

·     Sequans (SQNS) 4.854M ADS offering priced at $5.15

·     Sutro Biopharma (STRO) 11M share Spot Secondary priced at $7.75