Early Look

Monday, July 6, 2020

Stock futures are surging to start the week as the path of least resistance remains sharply to the upside for global averages despite another day of record spikes in coronavirus cases in several U.S. states again this weekend. The gains were massive in Asia as the Nikkei Index rose over 400 points to settle at 22,714, while the Shanghai Index jumped 5.7% (180-points) to record its largest one-day gain since 2015 and close at 3,332 and the Hang Seng Index catapulted higher by 966 points, or 3.81% to 26,339. Over in Europe, the German DAX is up over 200 points to 12,750, while the FTSE 100 gains around 2% to 6,275. Markets extend the gains from Friday amid further signals of an economic recovery when the nonfarm payrolls report showed jobs expanded by 4.8 million in June. At the same point, global stock markets continue to jump despite reports that number of coronavirus cases continued to surge in the U.S., with at least 120,000 new cases reported over the weekend. Fears of global business and state reopenings amid record high COVID-19 cases of late in many states has failed to dent market optimism, with the Nasdaq Composite setting news record highs and other major averages still pushing higher heading into earnings season which kicks off mid-next week. Utility stocks in focus as Warren Buffett’s Berkshire Hathaway announces a major acquisition in the sector this weekend. At some point, the markets attention will likely focus on earnings, which are expected to be abysmal for the upcoming quarter, with few companies providing outlooks for the current year, but investors continue to give many “passes” as they look the future and the global market recovery from the coronavirus shutdown impact.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 14.15 points, or 0.45%, to 3,130.01

·     The Dow Jones Industrial Average rose 92.39 points, or 0.36%, to 25,827.36

·     The Nasdaq Composite climbed 53.00 points, or 0.52%, to 10,207.63

·     The Russell 2000 Index advanced 4.55 points, or 0.32% to 1,431.86

Economic Calendar for Today

·     9:45 AM EST      Markit US Services PMI, June-F

·     9:45 AM EST      Markit US Composite PMI, June-F

·     10:00 AM EST    ISM Non-Manufacturing Index for June

World News

·     President Donald Trump on Saturday signed into law a temporary extension of a subsidy program for small businesses battered by the coronavirus the PPP program). The legislation extends the June 30 deadline for applying for the program to Aug. 8. About $130 billion of $660 billion approved for the program remains eligible for businesses to seek direct federal subsidies for payroll and other costs such as rent

·     Florida reported 11,458 new COVID-19 cases Saturday, the highest number of daily cases since the pandemic began, only second to the daily peak of 11,571 in New York last April. During the past week, Florida (190.1K cases) and Texas (185.6K) surpassed New Jersey (172.7K), which had been the third-most affected state, in the cumulative number of COVID-19 cases

·     German Manufacturing orders increased 10.4% in May in adjusted terms after a downwardly revised 26.2% decline in April, while economists polled by The Wall Street Journal had expected orders to grow at a higher rate of 15% from the previous month. On an annual basis, orders fell 29.3%, adjusted for calendar and price effects.

Sector News Breakdown

Consumer

·     Uber Technologies Inc. (UBER) has agreed to purchase food-delivery service Postmates for around $2.65 billion, according to media reports https://on.mktw.net/2VKLxf9

·     Sally Beauty Holdings (SBH), the largest beauty-products distributor in the U.S., generates about half of its revenue from sales to salon professionals, somewhat insulating the company from Amazon’s (AMZN) competition, according to Barron’s

·     Carnival’s (CCL) Costa unit further extended its pause for all its cruises until Aug. 15 and canceled cruises in Northern Europe for the remainder of the 2020 summer season

·     Regis (RGS) said that 84% of its system-wide salons were open as of July 1st and that it closed on the sale of 88 company-owned locations to franchisees during the month of June.

·     Red Rock Resorts (RRR) President Richard J. Haskins died on Saturday in a watercraft accident while vacationing in Michigan, the company said.

Energy

·     Duke Energy Corp. (DUK) and Dominion Energy Inc. (D) said they were abandoning the proposed $8 billion pipeline. The builders of the Atlantic Coast Pipeline are pulling the plug on the project as companies continue to meet mounting environmental opposition to new fossil fuel conduits in the U.S.

·     Dominion Energy (D) said that it’s selling substantially all of its natural gas pipeline and storage assets to Berkshire Hathaway Inc. for $4 billion, along with Berkshire’s assumption of $5.7 billion in debt.

·     Dominion Energy (D) cut its operating EPS view to $3.37-$3.63 from prior $4.25-$4.60 (est. $4.34)

·     The utilities sector has some bargains said Barron’s and one strategy is to watch hedge fund Elliott Management’s bets, noting one of them is CenterPoint (CNP), which analysts believe has a “meaningful probability” of a sale at the urging of Elliott. Evergy (EVRG) may also offer nice returns; its first-round bids for a sale are expected to be due in early July

Healthcare

·     Sanofi (SNY) and GlaxoSmithKline (GSK) are close to a £500M deal to supply the British government with 60M doses of their coronavirus vaccine, according to the Sunday Times.

·     Regeneron (REGN) and Sanofi (SNY) said their U.S. Phase 3 trial of Kevzara didn’t meet its primary and key secondary endpoints compared to placebo

·     CytoDyn (CYDY) signed an exclusive Distribution and Supply Agreement with American Regent, a Daiichi Sankyo Group company for the distribution of leronlimab for the treatment of COVID-19 in the U.S

·     Endologix (ELGX) has initiated a voluntary case under Chapter 11 of the U.S. Bankruptcy Code and simultaneously filed a consensual plan of reorganization

Industrials & Materials

·     Following up on last week’s formal certification flight tests performed by Boeing (BA) and the FAA, the next challenge for bringing 737 MAX jets back into service is slated to play out as early as this week, WSJ reports.

Technology, Media & Telecom

·     Himax Technologies (HIMX) said it expects Q2 revenues of $187M compared to prior guidance for a slight decrease of within 5.0% sequentially and consensus of $175.18M; sees the gross margin rate ~21%, exceeding the outlook of 20.2%-20.6%.

·     ON Semiconductor (ON) said it will supply Danfoss Silicon Power with high-power IGBTs and diodes for inverter traction modules used in the electric vehicle market.

·     Britain’s decision to allow China’s Huawei to play a limited role in building its 5G network is not “fixed in stone” and is being reviewed following the imposition of U.S. sanctions, culture minister Oliver Dowden said on Monday