{"id":12616,"date":"2020-05-04T15:07:26","date_gmt":"2020-05-04T20:07:26","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/04\/market-review-may-04-2020\/"},"modified":"2020-05-04T15:07:26","modified_gmt":"2020-05-04T20:07:26","slug":"market-review-may-04-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-04-2020\/","title":{"rendered":"Market Review: May 04, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Monday, May 04, 2020<\/span><\/b><\/o:p><\/span><\/b><\/p>\n\n\n\n\n\n\n\n
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Index<\/o:p><\/span><\/p>\n<\/td>\n

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Up\/Down<\/o:p><\/span><\/p>\n<\/td>\n

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%<\/o:p><\/span><\/p>\n<\/td>\n

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Last<\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

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DJ Industrials<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

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26.07<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.11%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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23,749<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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S&P 500<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

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12.03<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.42%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2,842<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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Nasdaq<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

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105.77<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.23%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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8,710<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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Russell 2000<\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.49<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.28%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,263<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n


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Equity Market Recap<\/o:p><\/p>\n

·     <\/span><\/span><\/span>U.S. stocks stage a steady intraday march higher, erasing earlier losses for major averages as the tech focused Nasdaq Composite outperformed (rose over 1% as trades above the 8,700 level late day) ahead of busy earnings action this week. A jump in oil prices, with WTI crude rising over 3% to 3-week highs also helped boost energy and industrial related names, in what was a day of cautious trading. Stocks started sharply lower amid increased trade tensions with China after Secretary of State Mike Pompeo said this weekend there was "a significant amount of evidence" that the coronavirus emerged from a Chinese laboratory, though he did not dispute U.S. intelligence agencies’ conclusion that it was not man-made. That followed remarks from President Donald Trump on Friday that raising tariffs on Chinese goods was a possibility in response to the COVID-19 pandemic caused by the novel coronavirus. But investors took advantage of the recent pullback in stocks, specifically the tech sector with a big bounce in mega cap Internet and software names. Airlines stocks plunged after Warren Buffet noted this weekend in Berkshire Hathaway earnings that he pulled his stake from the sector (AAL, DAL, LUV, UAL). However, market participants chose to focus on upbeat news today including positive vaccine and testing headlines as official’s fast track development with aim of having one ready by around year’s end. GILD’s Remdesivir in hands of doctors and most urgent patients as soon as this week, whilst Roche received emergency-use authorization from FDA for its new coronavirus test. The news that several states began reopening their economies (slowly) also helped boost sentiment as about half of all U.S. states have lifted shutdowns, at least partially, as the number of new cases of the COVID-19 illness has begun to decline or level off. <\/o:p><\/p>\n

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Commodities<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Oil prices jumped<\/b>, erasing earlier losses as WTI crude gained 61c or 3.1% to settle at 3-week highs of $20.39 per barrel as more states begin to reopen their economies, hoping to fuel demand while several measures have been put into place to cut supply. Starting last week, OPEC+ and other oil producing countries began cutting production in an effort to curb supply and improve prices while oil rigs fell to their lowest levels since 2016. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Gold prices<\/b> meanwhile gained $12.40 or 0.7% to settle at $1,713.30 an ounce, getting a lift as a safe haven investment amid talks of new tariffs between the U.S. and China in retaliation that Beijing misled the world about the scale and risk of the coronavirus that has crippled global economies.<\/o:p><\/p>\n

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Currencies & Treasuries<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Treasury yields were up slightly<\/b>, with the 10-year yield up 2 bps to 0.63%, as heavy corporate debt issuance weighed on prices and brought yields off session lows after an early round of safe-haven buying. Yields initially declined amid rising concerns about increased tensions between China and the United States, which has threatened to retaliate over the spread of the novel coronavirus…but hedging of corporate debt sales brought yields off their lows. The U.S. Treasury Department on Monday said it plans to borrow nearly $3 trillion in the second quarter of 2020 – a record for any quarter – as the federal government contends with the impact of the coronavirus. The U.S. dollar<\/b> also gained ground with stocks and commodities, firmly higher ahead of a busy week of earnings and key economic data (jobs data on Friday).<\/o:p><\/p>\n

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Economic Data<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Factory orders in the U.S. slumped<\/b> (-10.3%) in March as the coronavirus pandemic began to shut down large parts of the economy. Durable goods orders fell (-14.7%), a bit higher than the prior estimate of (-14.4%), the Commerce Department said. Orders for nondurable goods slid a smaller 5.8%. Orders are expected to fall sharply and remain weak for months amid efforts to contain the coronavirus.<\/o:p><\/p>\n

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Macro<\/o:p><\/span><\/p>\n<\/td>\n

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Up\/Down<\/o:p><\/span><\/p>\n<\/td>\n

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Last<\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

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WTI Crude<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

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0.61<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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20.39<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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Brent<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

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0.76<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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27.20<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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Gold<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

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12.40<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,713.30<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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EUR\/USD<\/o:p><\/span><\/b><\/p>\n<\/td>\n

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-0.0073<\/o:p><\/span><\/p>\n<\/td>\n

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1.0908<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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JPY\/USD<\/o:p><\/span><\/b><\/p>\n<\/td>\n

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-0.22<\/o:p><\/span><\/p>\n<\/td>\n

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106.70<\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

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10-Year Note<\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.023<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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0.635%<\/span><\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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Sector News Breakdown<\/o:p><\/span><\/p>\n

Consumer<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; TSN<\/span><\/b> posted a sharp EPS miss for Q2 on lighter than expected sales as foodservice segment losses more than offsetting blockbuster retail takeaway\/reports volume was up 2.6% in FQ2 and prices were 1.6% higher on average\/operating margin was down 150 bps to 4.6% of sales on drops across every segment.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Restaurants; DENN<\/span><\/b> shares fall after saying Q1 comp store sales fell 6.3% YoY and noted about 74% of domestic, international Denny’s restaurants are operating solely or primarily with take-out and delivery options; PLAY<\/span><\/b> announced a $100M share offering to raise cash; DNKN <\/span><\/b>said delivery with Uber Eats is now available at over 1,700 restaurants, with more than 4,000 total locations nationwide to offer the service by the end of May; BJRI <\/span><\/b>rises after the company raises $70M through private placement as sold 3.5 mln shares at $20 to accounts advised by TROW<\/span><\/b><\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; cruise lines fall, CCL<\/span><\/b> said all North American cruises from June 27 to July 31 will be cancelled\/pause in service extended, in combination with gradual schedule from select homeports; in lodging, UBS upgraded CHH<\/span><\/b> to buy as expectation for recovery in the lodging sector is more bullish vs. cruise lines because hotels involve less mass gathering than cruise lines and not as much cross-border travel (maintain Buy on HLT <\/span><\/b>and our Neutral on MAR<\/span><\/b>)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Retailers; PBI <\/span><\/b>reported Q1 sales of $796.3M, flat compared with a year earlier, and a wider loss which included a non-cash goodwill impairment charge tied to the company’s global ecommerce unit, which focuses on domestic retail and ecommerce shipping; privately held J. Crew has filed for Chapter 11 bankruptcy protection as part of a financial reorganization that will hand over control to top creditors; PETS <\/span><\/b>posts a 15% rise in Q1 sales, helped by online demand from pet owners confined to their homes amid the COVID-19 lockdowns<\/o:p><\/p>\n

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Energy<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Energy sector; OXY <\/span><\/b>shares slid on lower oil prices and after the WSJ reported that the Algerian govt. has withheld approval of OXY’s sale of assets it acquired in the country as part of Anadarko takeover (note in May last year, OXY agreed to divest Anadarko’s Algeria, Ghana, Mozambique and S. Africa assets to France’s Total for $8.8 bln – however, Algeria’s energy minister told reporters later in that month the country will block deal); Goldman Sachs removed CVX<\/span><\/b> from its conviction buy list and added COP<\/span><\/b>; in refiners VLO<\/span>, PSX<\/span>, HFC<\/span><\/b> all upgraded to Buy from Neutral at Mizuho saying as a direct result of COVID-19, North America will become even more gasoline intense to the benefit of U.S independent refiners; REPYY<\/span><\/b> says it made two deepwater oil discoveries in the Salina Basin offshore Mexico through its Polok-1 and Chinwol-1 wells.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Utilities; PCG<\/span><\/b> was upgraded to buy from neutral at UBS saying it looks poised to re-emerge from bankruptcy, which along with the pricing of new equity represent the necessary catalysts for outperformance; SO <\/span><\/b>was upgraded to neutral at Credit Suisse saying now see much of the risk of major delays and ROE penalties for the Vogtle new nuclear project as priced in after recent underperformance<\/o:p><\/p>\n

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Financials<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Bank movers; UBS downgraded large cap\/regional banks WFC<\/span>, PNC<\/span><\/b> to sell, KEY downgraded to neutral and upgrade CFG<\/span><\/b> to buy while reduce 2020E EPS by an average of 25% (ex PPP) and 2021E EPS by 18% for banks they cover; FMNB<\/span><\/b> downgraded at Raymond James following its release of 1Q financial results, due to valuation\/while the loss provision in 1Q was lower than projected as it deferred adoption of CECL, the quarter was solid<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Insurance; life and P&C insurers fall a second day (MET<\/span>, LNC<\/span>, HIG<\/span>, PRU<\/span><\/b>) – follows comments by WLTW<\/span><\/b> on Friday as the insurance broker estimated general insurance losses between $32B and $80B across key classes in the U.S. and UK, surpassing claims from the 9\/11 attacks as the coronavirus pandemic hit businesses; Loew’s (L)<\/b> turned in a Q1 net loss of $632M, or $2.20 per share vs. net income of $394M, or $1.27 per share, in the year-ago quarter due to the economic disruption cause by the COVID-19 pandemic, (Q1 results include $408M drilling rig impairment charges at DO<\/span><\/b>, a $363M decline in net investment income at CNA<\/span><\/b> and book value per share fell<\/o:p><\/p>\n

·     <\/span><\/span><\/span>REITs; QTS <\/span><\/b>and CONE<\/span><\/b> both upgraded to buy from hold and raise tgts at Jefferies given view that the work-from-home digital transformation has staying power and that enterprise applications that have been put in the cloud to enable more efficient work-from-home are likely never coming out; Morgan Stanley upgraded O<\/span><\/b> to OW given it has the lowest exposure to tenants impacted by social distancing (24% of rent), while downgraded STOR<\/span><\/b> and SRC <\/span><\/b>to equal-weight relatively higher than average exposure to tenants impacted by social distancing<\/o:p><\/p>\n

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Healthcare<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Pharma movers; RHHBY<\/span><\/b> said the U.S. FDA issued an emergency use authorization for its new Elecsys antibody test to help determine if people have been infected with the coronavirus; STML shares surge as agreed to be acquired by privately held Italian company Menarini Group in a deal worth up to $677 million, as holders receive $11.50 per share<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; GILD<\/span><\/b> late Friday received GDA emergency use authorization for remdesivir, its experimental therapy first tested on Ebola disease patients, as a COVID-19 treatment; EGRX<\/span><\/b> said it plans to seek another meeting with the U.S. FDA to discuss fulvestrant product candidate, EA-114, which has the potential to enhance estrogen receptor inhibition and improve patient outcomes; GeneTx Biotherapeutics LLC and RARE<\/span><\/b> said the FDA has granted Fast Track designation to GTX-102 for the treatment of Angelman syndrome (AS)<\/o:p><\/p>\n

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Industrials & Materials<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Chemicals; WLK <\/span><\/b>operating beat driven lower corp (10c), olefins (3c) and vinyls (1c); Bank America downgraded DOW<\/span><\/b> and LYB<\/span><\/b> to underperform citing an anticipated margin squeeze in in polyethylene and sees polyethylene price pressure building into 2Q and dragging through 3Q; KeyBanc remains cautious near-term on LYB<\/span><\/b> noting that ethylene\/polyethylene margins are heading into the toughest months of the cycle in 2Q<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; airline stocks decline after Warren Buffett says Berkshire Hathaway sold its entire stakes in the four largest U.S. airlines in April (had an 11% stake in DAL<\/span><\/b>, 10% in AAL<\/span><\/b>, 9% in LUV<\/span><\/b> and 9% in UAL <\/span><\/b>at the end of 2019); tankers DHT<\/span>, FRO<\/span><\/b> downgraded to in-line from outperform and cut NAT <\/span><\/b>to underperform in tankers at Evercore ISI saying all benefitted from VLCC exposure and big dividend potential, but the valuation premiums should revert as soon<\/o:p><\/p>\n

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Technology, Media & Telecom<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; Credit Suisse raised tgt prices on video game makers saying the current crisis caused by the COVID-19 should drive users to not only download more games but also increase comfort with buying in-game contents (ATVI <\/span><\/b>target is now $79 vs prior $69, EA<\/span><\/b> target is now $131 vs prior $123, and TTWO<\/span><\/b> $131 vs prior $130)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Media & Telecom movers; DIS <\/span><\/b>downgraded at MoffettNathanson to neutral as fear that the uncertainty of the present situation creates significant and unrivaled earnings risk for the foreseeable future; Guggenheim cut its tgt on MSGS<\/span><\/b> to $216 from $350 as see concern associated with current conditions as creating an attractive buying opportunity for scarce assets with growing global appeal; SBGI<\/span><\/b> was downgraded to Underweight at Wells Fargo citing the company’s exposure to an accelerating cord-cutting trend, particularly at the company’s nascent regional sports network operations<\/p>\n<\/div>\n

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