Early Look

Tuesday, July 7, 2020

Stock futures are pointing to a lower open with major averages overseas mixed overnight, as the strong stock rally takes a brief pause. In Asia markets, The Nikkei Index dipped -99 points to 22,614, the Shanghai Index rose 12 points, extending the prior day’s 5.7% gains to settle at 3,345 and the Hang Seng Index dropped -363 points to 25,975. In Europe, the German DAX is down -185 points to 12,550, while the FTSE 100 is lower by over 80 points to the 6,200 level. The European Commission cut its economic forecasts for 2020 (GDP contraction of 8.3% vs. 7.4%) and its rebound in 2021 (GDP growth of 5.8% vs. 6.1%). Markets have confounded expert expectations, surging over the last few months despite COVID-19 cases spiking as states in the U.S. reopen, as investors have focused on the positive future and economic recovery. Stocks surged again on Monday, as investors focused on positive data showing unexpected growth in the U.S. services sector last month and a revival in China’s economy, helping lift several sectors higher, including another record close for the Nasdaq Composite, advancing for a 5^th consecutive session along with the S&P 500 index (longest streak since December). The Nasdaq Comp registered its third straight record closing high, after a rash of records for the likes of Amazon, Apple, Tesla, Nvidia, while the S&P 500 ended the day just 6% below its February record close – but was on lighter than normal volume.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 49.71 points, or 1.59%, to 3,179.72

·     The Dow Jones Industrial Average rose 459.67 points, or 1.78%, to 26,287.03

·     The Nasdaq Composite spiked 226.02 points, or 2.21%, to 10,433.65

·     The Russell 2000 Index advanced 11.02 points, or 0.77% to 1,442.88

Economic Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     10:00 AM EST    JOLTs Job Openings for May

·     4:30 PM EST       API Weekly Inventory Data

Earnings Calendar:

·     Earnings Before the Open: ASPU, PAYX

·     Earnings After the Close: LEVI, SGH

World News

·     The European Commission cut its economic forecasts for 2020 (GDP contraction of 8.3% vs. 7.4%) and its rebound in 2021 (GDP growth of 5.8% vs. 6.1%).

·     Coronavirus tally: Global cases of COVID-19 hit 11.64 million; U.S. leads with 2.94 million as cases climb in 40 states

·     Atlanta Fed President Raphael Bostic said in an interview the U.S. economy was levelling off. “There are a couple of things that we are seeing and some of them are troubling and might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise,” Bostic said to the Financial Times

Sector News Breakdown

Energy, Industrials & Materials

·     SunRun Inc. (RUN) will acquire rival Vivint Solar Inc. (VSLR) in an all-stock transaction that implies an enterprise value of about $3.2 billion for the full-service residential solar provider, with VSLR shareholders to receive 0.55 SunRun share for each Vivint share, leaving them with about a 36% stake in the combined entity https://on.mktw.net/2BOKNyC

·     Dominion Energy (D) said it will take $2.7B-$3.2B in pre-tax charges related to its cancellation of the Atlantic Coast pipeline, mostly during Q2, according to an 8-K filing.

·     Prices could rise for gasoline and diesel in the Midwest over the coming months following today’s court ruling that ordered the Dakota Access pipeline to be shut within a month, which hurt shares of Energy Transfer (ET); William Blair said companies with access to crude supplied by rail likely will benefit, such as Par Pacific Holdings (PARR) and PBF Energy (PBF)

·     Patterson-UTI Energy (PTEN) announced an average of 65 drilling rigs operating for the month of June vs. 80 in May

Financials

·     Chubb (CB) announced 2Q global net catastrophe loss estimates of $1.81 billion pretax, or $1.51 billion after tax, including COVID-19 global pandemic losses of $1.37 billion pretax, or $1.16 billion after tax

·     Retail Properties of America, Inc. (RPAI) said compared to the previously reported 60.3% of April rent collected as of May 28, 2020, the Company has received 67.4% of April rent as of June 30, 2020. Compared to the previously reported 52.4% of May rent collected as of May 28, 2020, the Company has received 63.7% of May rent as of June 30, 2020. Rent collection for June as of June 30, 2020 totals 64.7%

·     Simon Property Group (SPG) to sell $500M of 3.500% senior notes due September 2025, $750M of 2.650% senior notes due June 2030 and $750M of 3.800% senior notes due June 2050.

Healthcare

·     Novavax (NVAX) said Operation Warp Speed award funds large-scale manufacturing of its NVX-CoV2373 COVID-19 vaccine candidate including production of 100M doses starting in late 2020. That includes a pivotal Phase III clinical trial with up to 30,000 subjects in the fall of 2020.

·     Chembio Diagnostics (CEMI) rises following announcement it was awarded BARDA contract for development of DPP Covid-19 point-of-care antigen system

·     Cellectis (CLLS) said its Phase 1 MELANI-01 trial in multiple myeloma patients was placed on clinical hold by the FDA after one participant who received candidate UCARTCS1A experienced a fatal heart attack.

·     Pacira BioSciences (PCRX) reported preliminary Q2 revenue of $75.5M; prelim 2Q Exparel net product sales $73M; proposed offering of $300M Conv Sr notes due 2025

·     Quidel (QDEL) said it expects Q2 revenues to increase more than 80% to ~$201M – $202M, compared to consensus of $172.6M, driven by demand for COVID-19 diagnostic products.

·     Evolus’ (EOLS) partner, Daewoong Pharmaceutical will invest $40M in a five-year, unsecured, subordinated, 3% convertible note in the Company at a conversion price of $13.00.

·     Evolus (EOLS) down over 30% after the Administrative Law Judge (ALJ) overseeing the United States International Trade Commission released a Notice of Initial Determination for a case filed by AbbVie’s (ABBV) Allergan and its Korean partner Medytox in January 2019 to block imports of Evolus’ and Daewoong Pharma’s Jeuveau, a rival to Allergan’s Botox wrinkle treatment.

Technology, Media & Telecom

·     Samsung Electronics Co. said operating profit for the last quarter likely rose 23% from the same period last year; projected its operating profit during the April-June period to come in at 8.1 trillion won ($6.8 billion) and revs expected to fall 7% to 52 trillion won ($43.6 billion).

·     Ping Identity (PING) files to sell 7.5M shares of common stock for holders; says for Q2, sees ending ARR at June 30 of $234.5M-$235M and sees total revenue of $55.5M-$56.5M

·     Ambarella (AMBA) double-upgraded to Buy from Underperform at Needham

·     Fortinet (FTNT) downgraded to Neutral with $135 target at JPMorgan

·     Skyworks (SWKS) upgraded to Overweight from Sector Weight at KeyBanc