Early Look

Tuesday, September 8, 2020

Futures	Up/Down	%	Last
DJ Industrials	-32.00	0.11%	28,042
S&P 500	-26.50	0.78%	3,391
Nasdaq	-278.50	2.41%	11,270

 

 

Stocks futures are edging lower, with sharp declines in the Nasdaq futures down over 2.5% after dropping over 3% last week as more profit taking continues with valuations stretched given its sharp 75% gain from a bottom hit in March. In Asian markets, The Nikkei Index gained 184 points to 23,274, the Shanghai Index gained 23 points to 3,316 and the Hang Seng Index rose 34 points to 24,624. In Europe, the German DAX is down about -125 points to 12,975, while the FTSE 100 slides-17 points to 5,920. Putting some pressure on markets, President Trump is thinking about “decoupling” the U.S. from China, he said during a Labor Day press conference at the White House. Companies that outsource to China won’t get federal contracts, he added. U.S. equities ended lower on Friday after rebounding sharply off session lows, capping a week that saw benchmark equity indexes hit new records and the tech-heavy Nasdaq log its biggest one-day selloff since June. For the week, the S&P was down 2.3%, the Nasdaq fell 3.3% (largest weekly decline since March), and the Dow lost 1.8% having rebounded after Friday’s sharp recovery off the lows. Throughout Friday’s ferocious selloff, unloved sectors like financials gained ground at expense of tech equities, which have showed the most impressive gains since the March lows. Investors also eyed data from the Labor Department showing the economy had regained 1.4 million jobs in August and the unemployment rate fell to 8.4% from 10.2%.

Market Closing Prices Yesterday

·     The S&P 500 Index plunged -28.10 points, or 0.81%, to 3,426.96

·     The Dow Jones Industrial Average fell -159.39 points, or 0.56%, to 28,133.31

·     The Nasdaq Composite dropped -144.96 points, or 1.27%, to 11,313.13

·     The Russell 2000 Index declined -9.38 points, or 0.61% to 1,535.30

 

Economic Calendar for Today

·     6:00 AM EST      NFIB Small Business Optimism for Aug…prior 98.80

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     3:00 PM EST       Consumer Credit for July…est. $13.75B

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: NSCC

·     Earnings After the Close: ABM, CASY, COUP, CVGW, HQY, SEAC, WORK

 

Other Key Events:

·     Barclay’s Consumer Staples Virtual Conference, 9/8-9/10

·     Citigroup Global Technology Virtual Conference, 9/8-9/10

·     Credit Suisse Virtual Asset & Wealth Manager CEO week, 9/8-9/11

·     Deutsche Bank Aircraft, Finance & Leasing virtual conference, 9/8-9/9

·     UBS Business Services, Leisure & Transport virtual Conference, 9/7-9/9

 

 

Macro	Up/Down	Last
WTI Crude	-1.66	38.11
Brent	-0.86	41.15
Gold	-17.50	1,916.00
EUR/USD	-0.0026	1.1791
JPY/USD	0.10	106.37
10-Year Note	-0.034	0.68%

 

 

World News

·     U.S. Treasury Secretary Steven Mnuchin on Sunday said a deal between the White House and Congress would fund the federal government through the beginning of December and that details of the spending bill should be finalized by week’s end. The measure would help avert a government shutdown when current funding runs out Sept. 30. Mnuchin and U.S. House Speaker Nancy Pelosi had agreed to extend funding

·     China’s exports in August rose 9.5% from a year earlier, following a 7.2% increase in July, the General Administration of Customs said Monday. Economists in a Wall Street Journal poll had expected a 7.3% growth.

·     Chinese imports dropped 2.1% from a year earlier in August, compared with a 1.4% decrease in July and steeper than economists’ expectations of a 0.2% fall.

·     China recorded a $58.93 billion trade surplus last month, dropping from the $62.33 billion surplus in July, and higher than the $51.85 billion surplus that economists had expected

 

Sector News Breakdown

Consumer

·     Etsy Inc. (ETSY), Teradyne Inc. (TER), and Catalent Inc. (CTLT) will move to the S&P 500, replacing H&R Block Inc. (HRB) Coty Inc. (COTY) and Kohl’s Corp. (KSS), all of which will move to the S&P MidCap 400, effective prior to the open of trading on Monday, September 21^st (note TSLA shares fell after hours on Friday as they were surprisingly not added to the S&P 500 index)

·     Wingstop Inc. (WING), Medpace Holdings Inc. (MEDP), and Fox Factory Holding Corp. (FOXF) will move to the S&P MidCap 400, replacing PBF Energy Inc. (PBF), Allegheny Technologies Inc. (ATI) and Mack-Cali Realty Corp. (CLI), all of which will move to the S&P SmallCap 600, effective prior to the open of trading on Monday, September 21^st

·     Beyond Meat (BYND) has signed a deal to open a production facility near Shanghai.

·     Peloton (PTON) has been one of the great COVID-19-era success stories Barron’s noted, with demand soaring and shareholders reaping the benefits. Just how big a benefit will become clear this week, with the company due to report earnings on Thursday

·     Brunswick Corp. (BC) said it is resuming its share buyback program after suspending it earlier this year during the coronavirus pandemic

·     SeaWorld Entertainment (SEAS) said it will not bring back some of the thousands of workers it had furloughed earlier during the coronavirus pandemic.

 

Energy, Industrials and Materials

·     Saudi Aramco has cut the October official selling price for Arab Light crude it sells to Asia by the most since May, while the world’s top oil exporter also lowered prices to the U.S. for the first time in six months. The move compounded losses in the WTI crude benchmark, which fell 3.5% to $38.38/bbl on the news, after tumbling 7.5% last week

·     Boeing’s (BA) biggest labor union is girding for a showdown over possible consolidation of 787 Dreamliner production at a nonunion plant, saying Boeing’s study of the issue is a “charade” and warning that the company may seek contract concessions

·     PG&E (PCG) may be affected as California warned of potential rolling blackouts amid a heat wave. The state narrowly averted another round of power cuts Saturday after officials made desperate pleas to conserve power as reserves fell below critical levels

·     White House economic adviser Larry Kudlow on Friday said he thinks the Trump administration will in a matter of weeks unveil additional aid for U.S. airlines (AAL, DAL, LUV, UAL), which have been dealt a blow by a coronavirus pandemic that has grounded most flights.

·     India and China said on Saturday they had agreed to work towards reducing tensions along their contested border, following a meeting of the defense ministers of the nuclear-armed Asian giants

·     Shale oil producers are stockpiling federal drilling permits in the Permian Basin. In the 90 days up till Aug. 24, producers received 404 permits in the Permian, compared with 225 and 11 in the same period in 2019 and 2018, respectively.

 

Financials

·     Barron’s said banks including JPMorgan (JPM) may be reserving more than the losses they will actually incur. Citigroup (C) and Regions Financial (RF) may also be set to release some of their reserves into earnings once conditions normalize and losses are covered. Citigroup has set aside the largest percentage of its loan book, with reserves totaling 3.9% of the bank’s total loans. Bank stocks could rally on that release of reserves, especially given weakness this year in the SPDR S&P Bank exchange-traded fund (KBE)

·     Warren Buffett’s Berkshire Hathaway Inc (BRK/A) said it had cut its Wells Fargo & Co (WFC) stake to 3.3%, further reducing what had once been a $32 billion investment in the bank.

·     Mr. Cooper Group Inc. (COOP) and R1 RCM Inc. (RCM) will replace Express Inc. (EXPR) and Pennsylvania Real Estate (PEI) respectively in the S&P SmallCap 600, effective prior to the open of trading on Monday, September 21^st

 

Healthcare

·     Sanofi (SNY) senior executive said the French pharmaceutical giant’s COVID-19 vaccine will cost less than €10 and revealed plans to list its drugs ingredients unit in the next few months. In the meantime, Sanofi is set to publicly list its active pharmaceutical ingredients company, with an initial public offering planned in the coming months

·     Mylan (MYL) has agreed to acquire Aspen Pharmacare Holdings Limited’s thrombosis business in Europe for EU641.9M to be paid in two tranches

·     Jazz Pharmaceuticals plc (JAZZ) will replace Transocean Ltd (RIG) in the S&P MidCap 400, effective prior to the open of trading on Monday, September 21^st

·     Biocept (BIOC) announces 1-for-10 reverse stock split

·     Geron (GERN) files $350M mixed securities shelf

·     Pfizer (PFE), Moderna (MRNA), Johnson & Johnson (JNJ) are among the drugmakers planning a public pledge to not send any Covid-19 vaccine to the FDA for review without extensive safety and efficacy data, according to people familiar with the effort, Bloomberg reported

 

Technology, Media & Telecom

·     Epic Games Inc. late Friday filed a preliminary injunction against Apple (AAPL) reiterating arguments made in a federal lawsuit last month when it accused the tech giant of monopolistic behavior after pulling “Fortnite” from the App Store. The closely held software developer also sued Google (GOOGL) for removing the game from its Google Play store the same day.

·     The U.S. Defense Department said on Friday it has completed a comprehensive re-evaluation of its $10 billion JEDI cloud computing contract proposals and determined that Microsoft Corp’s (MSFT) submission still represents the best value for the government.

·     The Trump administration is considering whether to add China’s top chipmaker SMIC to a trade blacklist, a Defense Department official said on Friday, as the United States escalates its crackdown on Chinese companies – Reuters reported

·     Sumo Logic (SUMO) to offer 14.8 million shares in planned IPO, priced at $17 to $21 each