Morning Preview: August 28, 2020

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Early Look

Friday, August 28, 2020





DJ Industrials




S&P 500










Stock futures are mixed as the S&P 500 is on track to open at a new record high while Nasdaq futures are down slightly despite another round of positive earnings results overnight, which are lifting shares of NTNX, WDAY, HPQ, MRVL and DELL in what has been a strong quarter for tech. More news and comments expected from Fed officials today at the Jackson Hole virtual symposium, but there are no more big surprises expected like Fed Chairman Powell’s news that the FOMC will keep interest rates low to help prop up the pandemic ravaged economy even if inflation rises above its target level of 2% for periods of time. In Asian markets, The Nikkei Index fell -326 points to 22,882, the Shanghai Index rose 53 points to 3,403, the Hang Seng Index gained 140 points to 25,422. In Europe, the German DAX is down over 50 points to trading above the 13,000 level, while the FTSE 100 is little changed holding the 6,000 level. In Japan, Shinzo Abe, Japan’s longest-serving prime minister, says he’s resigning because a chronic illness has resurfaced. Abe, whose term ends in September 2021, is expected to stay on until a new party leader is elected and formally approved by the parliament.


It was another new record for the S&P 500 on Thursday as the index crossed the 3,500 level for the first time and posted its 19th closing record high of the year, helped by financials as banks bounced given the spike in Treasury yields as the 10-year Treasury yield climbed 5 bps to 0.74%, its highest levels since mid-June. The recovery in yields came as the Fed changed its stance on how it treats the 2% inflation target. The Dow Jones Industrial Average outperformed, led by the aforementioned financials (GS, JPM, AXP, TRV) as well as a jump in components MSFT and WMT after the two are teaming up for a TikTok bid. The tech heavy Nasdaq slipped from record highs and snapped its 5-day win streak.


Market Closing Prices Yesterday

·     The S&P 500 Index gained 5.82 points, or 0.17%, to 3,484.55

·     The Dow Jones Industrial Average rose 160.35 points, or 0.57%, to 28,492.77

·     The Nasdaq Composite dropped -39.72 points, or 0.34%, to 11,625.34

·     The Russell 2000 Index advanced 4.37 points, or 0.28% to 1,564.56


Economic Calendar for Today

·     8:30 AM EST      Personal Income for July…est. (-0.3%)

·     8:30 AM EST      Personal Spending for July…est. 1.6%

·     8:30 AM EST      Advance Goods Trade Balance for July…est. (-$72.0B)

·     8:30 AM EST      PCE Deflator MoM for July…est. 0.4%

·     8:30 AM EST      PCE Deflator YoY for July…est. 1.0%

·     8:30 AM EST      PCE Core Deflator MoM for July…est. 0.5%

·     8:30 AM EST      PCE Core Deflator YoY for July…est. 1.2%

·     9:45 AM EST      Chicago PMI, for August…est. 52.6

·     10:00 AM EST    University of Michigan Sentiment, Aug-F…est. 72.8

·     1:00 PM EST       Baker Hughes Weekly Rig Count


Earnings Calendar:

·     Earnings Before the Open: BIG, HIBB






WTI Crude















10-Year Note





World News

·     Shinzo Abe, Japan’s longest-serving prime minister, says he’s resigning because a chronic illness has resurfaced. Abe, whose term ends in September 2021, is expected to stay on until a new party leader is elected and formally approved by the parliament


Sector News Breakdown


·     Big Lots (BIG) announced a share repurchase of up to $500M; Q2 Non-GAAP EPS of $2.75 beats by $0.05; revenue of $1.64B (+31.2% Y/Y) beats by $30M; comparable sales +31.3% vs. consensus of 28.1%.

·     Gap Stores (GPS) Q2 EPS loss smaller at (17c) vs. est. loss (41c) and Q2 revenue $3.28B tops the $2.91B consensus; Q2 comparable sales were up 13%, driven by the strength of Gap Inc.’s scaled e-commerce business; qtrly net sales for Old Navy global were down 5%, net sales for Banana Republic global were down 52%, qtrly net sales for Athleta were up 6%

·     Hertz Global (HTZ) is shopping for a bankruptcy loan totaling as much as $1.5B, WSJ reports, after regulators blocked the company from pursuing a controversial stock sale.

·     Malibu Boats (MBUU) 4Q EPS $0.30 vs. est. $0.12 on sales $118.7MM vs. est. $100.4Mm, says moved quickly to reopen plants to meet demand for boats at beginning of summer season and were able to reopen all brand production at pre-shutdown levels

·     Nio (NIO) announces an offering of 75M American Depositary Shares (ADSs)

·     Ollie’s Bargain (OLLI) 2Q adjusted EPS $1.04 on sales $529.3M vs. est. 94c and $513.8M; 2Q comparable sales +43.3% vs. -1.70% YoY; 2Q gross margin 39.1% vs. 37.2% YoY; 2Q inventory -7.7% vs. +23.4% YoY; due to uncertainty related to covid-19, not providing guidance for second half of fiscal 2020

·     Ulta Beauty (ULTA) shares rise 16%; Q2 EPS 73c on sales $1.23B (-28% YoY) with comp sales -26.7% vs. +6.20% YoY and estimate -28.6% but e-commerce sales increased more than 200%; 2Q gross margin 26.8% vs. 36.4% YoY; cuts cap-ex outlook to $180M-$200M; still sees sales challenged for the year


Energy, Industrials & Materials

·     Boeing (BA) has discovered two “distinct manufacturing issues” for the 787 Dreamliner and has told carriers operating eight of the affected planes, including Singapore Airlines, United (UAL) and Air Canada, to remove them so they can be serviced

·     Exxon Mobil (XOM) is pressing Guyana’s new government for approval of the planned 220K bbl/day Payara offshore oil project – its third in the country; XOM operates the 8B-barrel Stabroek block as part of a consortium with Hess (HES) and CNOOC (CEO)

·     QEP Resources (QEP) has received its expected alternative minimum tax credit refund of $170.7 million; company expects to use the proceeds from the refund towards the repayment of its senior notes due in March 2021

·     Dycom Industries (DY) has filed a prospectus for an unspecified mixed shelf offering.

·     Amazon (AMZN) is buying 1,800 electric delivery vans from Mercedes-Benz (DDAIF), marking the biggest ever such order for the German automaker.



·     The FDA approves Roche (RHHBY) unit Foundation Medicine’s FoundationOne Liquid CDx, a comprehensive pan-tumor liquid biopsy test for solid tumors

·     Moderna (MRNA) said it’s in talks with the Ministry of Health, Labour and Welfare of Japan to potentially purchase 40 million or more doses of mRNA-127, its COVID-19 vaccine. Under the terms of this arrangement, the vaccine would be supplied by Moderna and distributed in Japan by Takeda Pharmaceutical


Technology, Media & Telecom

·     China’s ByteDance told engineers of its popular short-video app TikTok this week to make contingencies should it need to shut down its U.S. operations, even as it works toward divesting them, people familiar with the matter said on Thursday – Reuters

·     Dell Technologies (DELL) Q2 adj EPS $1.92 on sales $22.8B vs. est. $1.38 and $22.5B; saw strength in government sector and education, with orders up 16% and 24%; ended qtr with cash & investments of $12.3B, paid down $3.5B in debt; said total deferred rev of $28.8B during qtr, up 14%

·     Hewlett Packard (HPQ) Q3 EPS 49c on revs $14.29B vs. est. 43c and $13.29B; guides Q4 EPS 50c-54c vs. est. 50c and year EPS $2.16-$2.20 vs. est. $2.11 with free cash flow guidance of $2.5B-$3B

·     Lam Research (LRCX) raises quarterly dividend from $1.15 to $1.30/share

·     Marvell technology (MRVL) 2Q adj EPS $0.21 vs. est. $0.20 on revs $727Mm vs. est. $720.4Mm; guides 3Q adj EPS $0.22-0.28 vs. est. $0.25, sees 3Q revs $750Mm +/-5% vs. est. $777.5Mm, sees 3Q adj gr margin about 63% vs. est. $62.9%

·     Nutanix Inc (NTNX) announced that Bain capital private equity will make an investment of $750 mln in senior convertible notes; 4Q EPS ($0.93) vs. est. ($0.67) on revs $327.9Mm vs. est. $320Mm; $ board has authorized repurchase of up to $125M of common stock

·     Okta (OKTA) Q2 EPS 7c on revs $200.4M vs. est. loss (2c)/$186.29M; Q2 calculated billings up 27% at $198.1M; sees Q3 EPS loss (2c) to (1c) on revs $202M-$203M vs. est. loss 96c) and $195.68M; sees FY21 $800M-$803M vs. est. $777.6M

·     Veeva Systems (VEEV) 2Q adj EPS $0.72 vs. est. $0.64 on revs $353.7Mm vs. est. $340.1Mm; guides 3Q adj EPS $0.66-0.68 vs. est. $0.63, sees 3Q revs $360-362Mm vs. est. $347Mm; guides FY revs $1.415-1.42B vs. est. $1.392B, sees FY adj EPS $2.64-2.67 vs. est. $2.56

·     VMWare (VMW) 2Q EPS $1.81 on revs $2.88B vs. est. $1.45 and $2.80B; 2Q billings growth +2% vs. +17% YoY, free cash flow $643M up +5.2% YoY; 2Q license rev. $719 million, -29% YoY, Services revenue $1.53 billion, +6.8% YoY; 2Q adjusted operating margin 33% vs. 32.9% YoY

·     Workday (WDAY) shares jump 12%; 2Q adj EPS $0.84 vs. est. $0.66 on revs $1.06B vs. est. $1.04B, qtr-end subscription backlog $8.6B +22.3% YoY; cash & equiv $2.75B; guides 3Q subscription revs $948-950Mm vs. est. $925Mm; sees FY21 subscription revs $3.73-3.74B, sees FY21 adj op margin 18%


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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