Early Look

Tuesday, September 22, 2020

Futures	Up/Down	%	Last
DJ Industrials	-19.00	0.07%	27,036
S&P 500	6.50	0.18%	3,281
Nasdaq	77.50	0.70%	11,066

 

 

Stock futures point to a mixed open, as Nasdaq futures are sharply higher while the S&P and Dow look mixed as investors brace for Fed Chairman testimony, Tesla’s battery event, economic data and earnings from Dow component Nike after the close. Stocks dropped broadly Monday though ended well off the session lows as the Nasdaq Composite nearly turned positive in the final minutes of trading. The Dow Jones Industrial Average fell as much as 942 points before settling down just over 500 points amid weakness in healthcare stocks (UNH), financials (JPM), energy (XOM), industrials (MMM) while NKE slipped ahead of earnings today. The S&P ended down 1.2% and the Nasdaq was off 0.1%, both down for four days in a row. Several factors were cited for the market weakness including pressure from last week’s European lockdowns amid a resurgence in Covid cases and skepticism surrounding new fiscal stimulus, in addition to US-China tensions highlighted by pending TikTok merger. Also, healthcare stocks dropped as Supreme Court Justice Ginsburg’s death this weekend and the potential appointment of a more conservative judge raises further fears for the repeal of Obamacare. In Asian markets, The Nikkei Index rose 40 points to 23,360, the Shanghai Index fell-42 points to 3,274 and the Hang Seng Index declined -233 points to 23,716. In Europe, the German DAX is up 130 points to 12,675, while the FTSE 100 rises about 20 points to 5,825. Europe is mixed after posting its biggest decline in three months yesterday following second COVID-19 wave concerns caused lockdowns. After a 3.2% nosedive on Monday, the Stoxx Europe 600 rose 0.7%.

Economic Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     10:00 AM EST    Existing Home Sales MoM for Aug…est. +2.4% to 6.0M

·     10:00 AM EST    Richmond Fed Index for September…prior 18

·     1:00 PM EST       U.S. Treasury to sell $52B 2-year notes

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AZO, NEOG

·     Earnings After the Close: KBH, NKE, SCS, SFIX

 

Other Key Events:

·     Tesla (TSLA) Battery Event Day

·     Davidson Diversified Industrials and Service Virtual Conference, 9/22-9/23

·     Mizuho Virtual Software Tout, 9/21-9/22

·     Stephens Virtual Bank Forum, 9/22-9/24

 

Market Closing Prices Yesterday

·     The S&P 500 Index declined -38.41 points, or 1.16%, to 3,281.06

·     The Dow Jones Industrial Average fell -509.72 points, or 1.84%, to 27,147.70

·     The Nasdaq Composite dropped -14.48 points, or 0.13%, to 10,778.80

·     The Russell 2000 Index plunged -51.53 points, or 3.35% to 1,485.25

 

 

Macro	Up/Down	Last
WTI Crude	0.63	39.94
Brent	0.46	41.90
Gold	-6.90	1,905.60
EUR/USD	-0.0017	1.1754
JPY/USD	-0.21	104.44
10-Year Note	+0.003	0.67%

 

 

World News

·     The Congressional Budget Office’s (CBO) annual long-term budget outlook showed some of the impact the coronavirus pandemic and bills aimed at easing its economic fallout. In short, the country’s debt-filled future looks to be in danger of becoming only more so. “CBO now projects that debt as a percentage of GDP will be 45% points higher in 2049 than the agency projected last year. Larger projected deficits in 2020 and 2021 contribute significantly to that difference.

·     Federal Reserve Chairman Jerome Powell will appear with U.S. Treasury Sec. Steven Mnuchin in front of a House committee to discuss the largely unspent credit facilities, though he may address other topics. In prepared remarks, Powell said activity has picked up from its depressed second-quarter level, when much of the economy was shut down, but the path forward will “come only when people are confident that it is safe to reengage in a broad range of activities.”

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) CEO Elon Musk tweeted last night ahead of today’s Battery Day event: “Important note about Tesla Battery Day unveil tomorrow. This affects long-term production, especially Semi, Cybertruck & Roadster, but what we announce will not reach serious high-volume production until 2022.” “However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 & beyond unless we also take action ourselves,” he adds.

·     GameStop (GME) shares rise 13%; stakeholder RC Ventures discloses it has held recent talks with the retailer’s management and board members; RC Ventures said it believes that under the right circumstances it could produce the best results for shareholders if it were more involved.

·     Kforce (KFRC) raises Q3 EPS greater than 82c on revs $362M, topping the 76c/$356.9M estimate saying results have demonstrated a remarkable level of resiliency, especially the performance of our technology business

·     Fortune Brands (FBHS) announces $500M share buyback program

·     Amazon (AMZN) upgraded to outperform at Bernstein with $3,400 tgt

·     Carnival Cruise (CCL) announced it is selling two of its Princess Cruises ships – Sun Princess and Sea Princess – to undisclosed buyers

·     DAVIDsTEA (DTEA) shares rise over 60%; reports Q2 EPS loss (7c) vs. (24c) last year and revs $23.0M vs. $39.2M last year; said was pleased by the momentum experienced in the first quarter carrying over to the second quarter, resulting in sequential sales growth of 35%

·     Li Auto (LI) rises after announces a strategic cooperation with chipmaker Nvidia Corp (NVDA) and its Chinese partner, Huizhou Desay SV Automotive

·     Amazon (AMZN) launches exercise bike with Echelon: Meet the Prime Bike (watch shares of PTON and NLS)

 

Energy, Industrials & Materials

·     Occidental Petroleum (OXY) disclosed today it will pay ~$200M in dividends on preferred shares to Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) in cash, after making the payments with stock since April to conserve cash

·     Airbus SE (EADSY) CEO warned on forced job cuts as sharper-than-expected decline in travel leads carriers to push back deliveries of new jets.

·     FTS International (FTSI) will file its prepackaged filing for Chapter 11 bankruptcy tomorrow. The company last month had reached restructuring support agreements with about 75% of holders of its 6.25% senior secured notes due 2022 and about 64% of secured debt claims.

 

Financials

·     Allstate (ALL) upgraded to Outperform from Market Perform at Keefe Bruyette

·     Progressive (PGR) downgraded to Underperform from Market Perform at Keefe Bruyette

·     RE/MAX Holdings (RMAX) said it sees Q3 revenue $69M-$71M vs. est. $71.47M and sees Q3 adjusted EBITDA $28M-$30M; said agent count to increase 4.0%-4.5% YoY and outlook includes the wemlo and Gadberry Group acquisitions and assumes no further currency movements, acquisitions or divestitures

 

Healthcare

·     ADC Therapeutics (ADCT) submits biologics license application to the U.S. FDA for loncastuximab tesirine for treatment of relapsed or refractory diffuse large b-cell lymphoma

·     Agile Therapeutics Inc. (AGRX) reaffirmed its previously announced operating expense guidance for full year 2020 to be in range of $52M-$56M and net revenue guidance for q4 of 2020 to be in range of $1M-$2M

·     Fulgent Genetics (FLGT) is joining the S&P SmallCap 600 index, replacing Garrett Motion (GTX), which is filing for bankruptcy and has to leave the index.

 

Technology, Media & Telecom

·     Oracle (ORCL) told reporters that TikTok owner ByteDance will have no ownership stake in the new TikTok Global, The Verge reported (which CNBC’s Eamon Javers said yesterday as well). In the statement, Oracle announced that its new TikTok venture will be entirely divested from ByteDance, contradicting previous reports of the agreed deal between the two companies

·     Windstream Holdings (WINMQ) has emerged from bankruptcy after completing its financial restructuring. In the process the company cut debt by about two-thirds (more than $4B) and has access to about $2B in new capital. Concurrently, Uniti Group (UNIT) announced its previously announced settlement with Windstream becomes effective.

·     Qutoutiao (QTT) 2Q adjusted net loss 173.3 million yuan on revs 1.44 billion yuan; said Q2 adjusted loss per American depositary receipts 64 RMB cents; sees Q3 revenue down 18% to down 20% from last year

·     Synchronoss Technologies (SNCR) appoints Jeff Miller as interim President and CEO, effective immediately, in addition to his role as chief commercial officer.

·     Kingsoft Cloud (KC) files for a public offering of 8M ADSs from the company and 9,677,310 from selling shareholders