Mid-Morning Look

Friday, September 18, 2020

US futures are mixed amid a couple of market moving headlines and events including news the Commerce Department will roll out a ban of transactions in the U.S. using TikTok and WeChat starting Sunday, while in the banking sector the Fed said that it will announce by the end of September whether to extend current restrictions on dividends and share buybacks into Q4. Democrats and Republicans appeared further apart on key components of a fifth coronavirus relief bill on Thursday according to reports overnight. House Speaker Pelosi said Democrats could push for more than their previous offer of $2.2T given financial imperative has grown since May. On a technical basis, the Nasdaq Composite broke below its 50-day moving average yesterday (10,991) and still holding below, while the S&P 500 is trying to hold tis 50-day MA (3,345). Stocks are volatile early ahead of quadruple witching option expiration, when both futures and options linked to individual stocks and stock indexes expire on the same day.

Economic Data

·     University of Michigan sentiment prelim sept 78.9 vs. est. 75.0 vs. final Aug 74.1; surveys of consumers current conditions index prelim sept 87.5 topping the consensus of 83.9 vs. final Aug 82.9; the expectations index prelim sept 73.3 vs. est. 67.8 and vs. final Aug 68.5

·     Leading economic indicators 1.2 vs. est. 1.3; July leading economic indicators revised to 2.0%

Sector Movers Today

·     Metals & Materials; in the steel sector, STLD guides Q3 EPS of 46c-50c above estimate 38c as expects Q3 earnings from steel operations will come in lower than Q2 results, due to metal spread compression more than offsetting increased shipments driven by improved automotive and strong construction demand (follows better EPS guidance from NUE yesterday morning in its update); U.S. Steel (X) said it sees Q3 2020 adjusted EPS loss about ($1.45) and adj Ebitda is expected to be approximately $100M loss while says improving market conditions experienced in June and July have accelerated through August and September; in gold mining, KGC was upgraded to outperform after saying it will pay its first dividend since 2013 (3c quarterly dividend) and said it plans to raise production 20% from 2.4M gold equiv. oz. to 2.9M oz. in 2023

·     Auto sector; UBER is bringing in a new chief technology officer from AMZN, Sukumar Rathnam, filling a position that has been vacant for more than three months; NIO said it will redeem about 8.6% equity interests in Nio China for about 511.5 mln yuan ($75.56M), entered share transfer agreement with Jianheng New Energy Fund; TSLA tgt raised to $515 from $480 and reit OW at Piper after analyzing two poorly-understood aspects of Tesla’s business: 1) the Energy segment and 2) Elon Musk’s compensation

·     Biotech movers; MRTX downgraded to neutral from buy at Citigroup as believes market has now assigned appropriate credit to co’s cancer therapy, MRTX849, and other pipeline therapies; SGEN announced that a phase 3 trial of PADCEV(R) met its primary endpoint of overall survival compared to chemotherapy; trial stopped early due to positive results at planned interim analysis; IMMU announces encouraging Phase 1 data on antibody-drug conjugate Trodelvy (formerly IMMU-132) in patients with brain tumors

·     Services, Leisure and Gaming; VTRU 6M share IPO priced at $16.00; U.S. cruise (CCL, NCLH, RCL), hotel (HLT, H) and airline stocks (AAL, DAL, LUV) fall hit by speculation about whether the UK government will introduce a new lockdown or new restrictions; casino related names also under pressure (WYNN, LVS, MGM), while online betting names rise (DKNG, PENN)

·     Media & Telecom movers; CHTR and CMCSA estimates raised as Covid factors are causing upgrades to higher speeds and expect wireless competition to grow on investments from cable and as VZ/T become more aggressive; ERIC announced the acquisition of Cradlepoint, a U.S.-based provider of wireless internet connectivity products, for an enterprise value of $1.1 billion. https://on.mktw.net/3ky2weF

Stock GAINERS

·     BLNK +6%; as its unit Blink Mobility, buys BlueLA Carsharing from Blue Systems USA Inc

·     PIC +21%; XL Fleet, a provider of electric vehicle technology, said Friday it has agreed to merge with Pivotal Investment Corporation II (PIC), a special purpose acquisition corporation, or SPAC, in a deal with a pro forma enterprise value of about $1 billion. https://on.mktw.net/35MhQA1

·     PLAY +14%; upgraded by two analysts (Stifel and Raymond James) as they believe the stock’s 26% decline yesterday (in response to media reports highlighting bankruptcy risk) seems overdone and creates an attractive risk/reward

·     RDY +8%; BMY has settled its patent infringement litigation against Dr. Reddy’s related to the latter’s U.S. application seeking approval of a generic version of multiple myeloma med Revlimid

·     SNAP, FB; shares rise, benefitting from news the Commerce Department will roll out a ban of transactions in the U.S. using TikTok and WeChat starting Sunday

·     STLD +3%; guides Q3 EPS of 46c-50c above estimate 38c as expects Q3 earnings from steel operations will come in lower than Q2 results

·     TSLA +4%; tgt raised to $515 from $480 and reit OW at Piper after analyzing two poorly understood aspects of Tesla’s business: 1) the Energy segment and 2) Elon Musk’s compensation

Stock LAGGARDS

·     BYND -4%; downgraded to Underweight from Neutral at JPMorgan with an unchanged price target of $122

·     FSLY -1%; after Reuters report that Trump administration plans to ban downloading Chinese-owned video-sharing app TikTok (on Q2 earnings call FSLY disclosed TikTok was its largest customer, representing 12% of revenue in first half of 2020)

·     GTX -8%; slides a second day after the WSJ reported the auto equipment maker is preparing for a possible bankruptcy filing as tensions rise with former parent Honeywell International Inc. over asbestos injury payments

·     HD -1%; and LOW downgraded to perform from outperform at Oppenheimer saying they are increasingly concerned that the market is becoming too lax toward chances of a post-COVID 19 sales growth downshift at both

·     MRTX -2%; downgraded to neutral from buy at Citigroup as believes market has now assigned appropriate credit to co’s cancer therapy, MRTX849, and other pipeline therapies

Syndicate:

·     Athira Pharma (ATHA) 12M share IPO priced at $17.00

·     COMPASS Pathways (CMPS) 7.5M share IPO priced at $17.00

·     Essential Properties Realty Trust (EPRT) 8M share Spot Secondary priced at $19.00

·     Humanigen (HGEN) 8M share IPO priced at $8.50

·     OneWater Marine (ONEW) 3.171M share Secondary priced at $20.00

·     Unity Software (U) 25M share IPO priced at $52.00

·     Vitru (VTRU) 6M share IPO priced at $16.00