Early Look

Monday, August 10, 2020

Stock futures are mixed, getting a boost after President Donald Trump initiated an executive order this weekend to defer payroll taxes and replace an expired unemployment benefit with a lower amount after negotiations with Congress on a new coronavirus rescue package collapsed. Trump’s orders encroached on Congress’ control of federal spending and seemed likely to be met with legal challenges. Trump moved to continue paying a supplemental federal unemployment benefit for millions of Americans out of work during the outbreak. However, his order called for up to $400 payments each week, one-third less than the $600 people had been receiving. The previous unemployment benefit, which expired on Aug. 1, was fully funded by Washington, but Trump is asking states to now cover 25%. However, global tensions with Beijing escalates as China announced unspecified sanctions against 11 U.S. politicians and heads of organizations promoting democratic causes, including Senators Marco Rubio and Ted Cruz. Foreign ministry spokesperson Zhao Lijian said the 11 had “performed badly” on issues concerning Hong Kong, where China has cracked down on opposition voices. The number of Americans named by the ministry exactly equals the number of Hong Kong and Chinese officials placed on a sanctions list by the U.S. last week over the crackdown. China also arrested leading independent media tycoon Jimmy Lai and raiding the publisher’s headquarters. In Asian markets, The Nikkei Index fell -88 points to 22,329, the Shanghai Index rose 25 points to 3,379 and the Hang Seng Index dropped -154 points to 24,377. In Europe, the German DAX is up a few points to 12,680, while the FTSE 100 gains about 15 points to 6,050. Quiet news over the weekend pertaining to the coronavirus outbreaks

Market Closing Prices Yesterday

·     The S&P 500 Index gained 2.12 points, or 0.06%, to 3,351.28

·     The Dow Jones Industrial Average rose 46.50 points, or 0.17%, to 27,433.48

·     The Nasdaq Composite dropped -97.09 points, or 0.87%, to 11,010.98

·     The Russell 2000 Index advanced 24.56 points, or 1.59% to 1,569.18

Economic Calendar for Today

·     10:00 AM EST    JOLTs Job Opening for June

Earnings Calendar:

·     Earnings Before the Open: ACTG, AVYA, BHVN, BKI, CASI, DUK, FOLD, FWONA, GLIBA, GOGO, ICPT, ITCI, LSXMA, LTRPA, MAR, ON, PPL, PRTK, RCL, RDUS, RETA, SAGE, SEAS, SNCR, SPPI, TGNA, TH, VYGR

·     Earnings After the Close: ACRX, ADPT, ANGI, BKD, CBAY, CCXI, CDR, CHMA, CPRX, CSOD, EOLS, GEVO, GO, HALO, IAC, IEA, IFF, INO, IPAR, JCOM, LIND, OXY, QRTEA, RUN, SPG, STAY, WES, ZI

World News

·     President Trump signed four executive orders over the weekend, including one that extends federal unemployment benefits at a rate of $400 a week from the expired level of $600 a week, and another that temporarily cuts payroll taxes

·     Hong Kong’s privacy chief criticized the U.S. Treasury Department for “doxing” Chief Executive Carrie Lam by releasing her personal info as part of its latest sanctions on 11 officials.

·     Regarding national security law, Jimmy Lai, the outspoken publisher of Hong Kong’s pro-democracy newspaper Apple Daily, was arrested Monday on suspicion of foreign collusion, sending a chill across the financial hub.

Sector News Breakdown

Consumer

·     Estee Lauder (EL) mentioned positively in Barron’s noting it was a winning stock before the pandemic hit, and says investors should consider buying on the dip as recessions historically have had little lasting impact on the business

·     SeaWorld (SEAS) Q2 EPS loss ($1.68) vs. est. loss (92c); Q2 Ebitda loss $53.8M vs. est. loss $31M

·     New Age, Inc. (NBEV) Q2 EPS loss (10c) and revs $62.6Mvs. est. loss (9c)/$65.93M; announced the signing of a definitive agreement to acquire ARIIX and four other e-commerce/direct selling companies on July 20 as the combination creates a company with expected annual revenues of more than $500M, a blended gross margin of 70%, and expected EBITDA of more than $30M

Energy, Industrials and Materials

·     Roper Technologies (ROP) is in talks to acquire PE-owned insurance software vendor Vertafore for nearly $5.5B, and an agreement could be announced as soon as this month, Reuters reports.

·     General Dynamics’ (GD) Bath Iron Works unit and ~4,300 unionized workers reached a tentative contract agreement to end a strike that has stretched for more than a month

·     Virgin Galactic (SPCE); Abu Dhabi’s Mubadala Investment Company and its affiliates have disclosed their holdings in Virgin Galactic, according to a U.S. securities filing Friday

·     Barrick Gold (GOLD) Q2 adjusted EPS 23c/$3.06B vs. est. 18c/$2.89B; raises quarterly dividend 14% to 8c

·     FedEx (FDX) upgraded to Outperform from Market Perform at Bernstein with $225 tgt

·     Halliburton (HAL) and Honeywell (HON) announced a collaboration to maximize asset potential, reduce execution risk and lower the total cost of ownership for oil and gas operators

·     Olin (OLN) downgraded to Neutral from Buy at Bank America

·     WillScot Mobile Mini (WSC) Q2 EPS 10c on revs $256.9M vs. est.7c/$257.77M; adjusted EBITDA margins expanded by 480 bps, and free cash flow of $39.0M increased by $37.4M YoY

Financials

·     Berkshire Hathaway Inc (BRK/A) announced a $9.8 billion write-down and 10,000 job losses at its Precision Castparts aircraft parts unit, but still said Q2 net income surged 87% because of gains in stock investments such as Apple Inc as markets rebounded; operating profit fell 10%, cushioned by a temporary bump at the Geico auto insurer

·     Simon Property Group (SPG) is in talks with Amazon (AMZN) to transform some of its anchor department-store spaces into Amazon fulfillment centers, the Wall Street Journal reports, citing people familiar with the matter.

Healthcare

·     Bristol Myers Squibb (BMY) announced positive results from an open-label randomized Phase 3 clinical trial, CheckMate-743, comparing the combination of Opdivo and Yervoy (O+Y) to platinum-based chemo in patients with unresectable malignant pleural mesothelioma

·     Eli Lilly (LLY) and China development partner Innovent Biologics announce detailed results from a China-based Phase 3 clinical trial, ORIENT-11, evaluating the combination of PD-1 inhibitor Tyvyt (sintilimab), Alimta (pemetrexed) and platinum chemo for the first-line treatment of patients with nonsquamous non-small cell lung cancer

·     Eastman Kodak (KODK) shares plunge over -40% after the federal agency that announced a $765 million loan to Kodak less than two weeks to make generic drugs ago said the offer is on hold pending probes into allegations of wrongdoing

·     Trevena (TRVN) said the FDA approved the drugmakers Olinvyk, an opioid agonist for the management of moderate to severe acute pain in adults, where the pain is severe enough to require an intravenous opioid and for whom alternative treatments are inadequate

Technology, Media & Telecom

·     Twitter Inc. (TWTR) has held early talks about a potential combination with TikTok, the Chinese-owned video-sharing app that the Trump administration has declared a national-security threat, Dow Jones reported, citing people familiar with the matter. It’s unclear whether Twitter will pursue a deal, which would involve TikTok’s U.S. operations https://on.wsj.com/3kwUjbw

·     Qualcomm (QCOM) is telling U.S. policymakers their export ban won’t stop Huawei from obtaining necessary components and just risks handing sales to the U.S. firm’s overseas competitors, according to a presentation reviewed by WSJ.

·     ON Semiconductor (ON) Q2 EPS 12c on revs $1.21B vs. est. 2c/$1.18B; sees Q3 revenue $1.2B-$1.33B above consensus $1.27B based on product booking trends, backlog levels, and estimated turns levels, and Q3 gross margin is expected to be between 32.0%-34.0%.

·     ChipMOS (IMOS) reports July revenue of $64.3M (+5.7% M/M) (+8.6% Y/Y).

·     United Microelectronics (UMC) reports July sales of NT$15.49B (+12.9% Y/Y); YTD sales of NT$102.15B (+24.05% Y/Y).

·     Fastly (FSLY) files automatic mixed securities shelf

·     Veeco Instruments (VECO) files mixed securities shelf