{"id":12703,"date":"2020-05-14T15:12:19","date_gmt":"2020-05-14T20:12:19","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/14\/market-review-may-14-2020\/"},"modified":"2020-05-14T15:12:19","modified_gmt":"2020-05-14T20:12:19","slug":"market-review-may-14-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-14-2020\/","title":{"rendered":"Market Review: May 14, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Thursday, May 14, 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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377.37<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.62%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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23,625<\/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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32.50<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.15%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2,852<\/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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80.55<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.91%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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8,943<\/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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4.30<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.35%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,237<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n


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 <\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>U.S. stocks with a resounding rebound off session lows, with the Dow recovering nearly 800-points off its bottom, the Nasdaq Comp with a more than 225-point recovery off its low and the S&P 500 a more than 80-point spike, helped by the weakest market sectors including financials, energy and discretionary. Stocks showed signs of a third-day of declines initially as safe-haven bonds rose amid disappointing U.S. jobs data and signals by central banks that further government stimulus may be needed to help struggling economic affected by the worldwide lock down due to the coronavirus pandemic. Overseas, markets didn’t fare as well as the Stoxx Europe 600 finished Thursday’s trading down 2.2%, FTSE 100 dropped 2.8%, and the DAX fell 2.0%. But late day, it was a big push for stocks, helped by a 9% rally in crude oil prices to 6-week highs and a surge in semiconductors after a Dow Jones report that Taiwan Semi is set to announce plans to build an advanced chip factory in Arizona, boosting equipment names ahead of earnings from AMAT. Economic data was weaker as initial jobless claims fell -195K to 2.981M vs. 3.176M prior (revised from 3.169M), but still came in above the 2.5M estimate as total job losses over past seven weeks are now over 36M, or more than 20% of the U.S. workforce. After yesterday\u2019s concerned comments from hedge fund founder David Tepper, Trian Partners face Nelson Peltz said today that there are still loads of value in the market in a CNBC interview, and that he has initiated two new positions (did not mention). However, the Fed\u2019s Kashkari warned today that a \u201cV\u201d shaped recovery is off the table and that when the 2-month bridge under PPP program expires, you will see more bankruptcies. Kashkari also noted that stocks rallied in part because the Fed stopped financial system from collapsing<\/a>. <\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Weekly jobless claims<\/b> showed another 2.981M filing for first time unemployment claims which compared to estimates of 2.5M, while continuing claims rose to 22.83M below the est. 25.12M (and vs. 22.67M prior week); 4-week avg fell to 3,616,500 may 9 week from 4,180,500 prior week (previous 4,173,500)<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Import prices<\/b> MoM for April falls (-26%) vs. expected decline of (-3.2%) while export prices MoM were down (-3.3%) vs. est. down (-2.3%)<\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Oil prices jumped<\/b> back to 6-week highs, with WTI crude up $2.27 or 9% to settle at $27.56 per barrel after the IEA forecast lower global stockpiles in the 2H\u201920, although worries remain that a second surge in coronavirus infections could occur in coming months. Crude prices have ticked up in the last two weeks as some countries relaxed coronavirus restrictions to allow factories and shops to reopen. Oil prices recovered after Wednesday’s losses helped by an unexpected drop in U.S. stockpiles. On Thursday, the IEA again forecast a record drop in demand in 2020, although it trimmed its estimate for the fall, citing measures to ease lockdowns. Gold prices another boost today<\/b>, as June gold rises $24.50 or 1.4% to settle at $1,740.90 an ounce to its best levels in three weeks as investors rotate back into safe haven assets as stocks slid initially, but held gains late day on geopolitical fears as well. <\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>In currency markets,<\/b> the U.S. dollar outperforms vs. most rival currencies despite another negative economic data point in the U.S.; the Mexican Peso fell against the buck after the Mexican Central Bank cuts rates by 50 bps to 5.5%; the dollar index was up another 0.25% to 100.50 as the euro dropped below 108 and the Pound below 1.22 vs. the greenback. Treasury market’s rally<\/b> as stocks slip, as the yield on the 10-yr down 3.5bps to 0.615%; 2-yr little changed at 0.155% and 5-yr yield down 1 bps to 0.30%. Treasury prices remain well-bid given the ongoing raft of weaker economic data as the U.S. economy suffers through the COVID-19 crisis.<\/o:p><\/p>\n

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 <\/o:p><\/span><\/p>\n\n\n\n\n\n\n\n\n\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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2.27<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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27.56<\/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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1.94<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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31.13<\/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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24.50<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,740.90<\/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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-0.0025<\/o:p><\/span><\/p>\n<\/td>\n

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1.0793<\/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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0.20<\/o:p><\/span><\/p>\n<\/td>\n

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107.23<\/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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-0.032<\/o:p><\/span><\/p>\n<\/td>\n

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0.622%<\/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

\u00b7     <\/span><\/span><\/span>Consumer Staples; MKC <\/span><\/b>was upgraded to Outperform at Credit Suisse and raising estimates above consensus as now expect sales to grow 5.7% in FY 20 (compared to consensus of 2.6%) due to a net benefit from food consumption patterns during the COVID-19 pandemic; FLO <\/span><\/b>rises as the food company said sales momentum from March has continued into Q2, with the first 3 weeks posting a 7% to 8% growth over last year<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Restaurants; CMG<\/span><\/b> and Uber Eats today announced a delivery partnership in Canada; JACK <\/span><\/b>F2Q20 adjusted EPS was $0.50, below est. $0.63, largely driven by higher than expected SG&A expenses and a slightly lower restaurant level margin (restaurant-level margin declined by 700 basis points to 20.6% of sales vs. 27.6% a year ago); SBUX<\/span><\/b> said it is asking for a break on rent for the next year<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Casino & Leisure movers; CCL <\/span><\/b>said it plans to cut jobs, reduce salaries and shorten work weeks to cope with the pandemic-driven halt of cruising; New Jersey reports April gaming revenue down 68.9% YoY to $82.6M (from $265.4M in April 2019); overall cruise lines and casino related names opened lower, but many bounced late morning to pare losses; SIX<\/span><\/b> to open drive-thru safari as New Jersey loosens some Covid-19 guidelines<\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Top news: the U.S. Energy Department says it will buy up to 1 mln barrels of sweet crude oil for strategic reserve from small to midsize domestic producers; says oil purchase for SPR will serve as a test of conditions of physical crude oil available to the reserve \u2013 Reuters reported late yesterday. Meanwhile this morning the IEA said the world’s demand for crude will drop by 21.5 million barrels a day this month, while crude-producing nations and companies will slash output by 12 million barrels a day<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>In energy research, Goldman Sachs busy as they upgraded CNQ<\/span><\/b> to Buy noting previous concerns around balance sheet leverage, and an uncertain commodity price environment for Brent, WCS and natural gas are in\ufb02ecting from a negative to a positive; ENPH<\/span><\/b> downgraded to Neutral from Buy at Goldman following outperformance and we now see limited upside; and KOS<\/span><\/b> downgraded from Buy to Neutral saying simply put, we have been wrong on this stock call<\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Bank movers; UBS<\/span><\/b> shares weak after Berkshire Hathaway (BRK\/A) said in a regulatory filing that it sold almost 498,000 shares of the regional bank, bringing the multinational conglomerate’s holdings to 150.5 million shares; ETFC<\/span><\/b> reports April darts 927,671 vs 902,340 in March while April net new accounts 138,409 vs. 272,499 in March and net new retail and advisor services assets $5.0B vs. $10.9B in prior month; WFC<\/span><\/b> rises following speculation of deal with GS<\/span><\/b> as per Fox\u2019s Gasparino yesterday, while JPMorgan today said any bank acquisition by Wells is "banned by law" as the bank already exceeds the 10% deposit market share limit<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Consumer finance and lending; MA<\/span><\/b> said it sees normalization in some markets, as restrictions ease and consumer spending levels gradually recover from new lows\/says services growth will continue to outperform its core products in Q2\/says cross-border volume continues to be impacted by decline in travel, but saw modest improvements over the last week; FISV <\/span><\/b>upgraded to positive st Susquehanna with shares having underperformed some peers and now back to the year-ago levels and down ~22% from the highs, we see an attractive opportunity<\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Pharma movers; AIM <\/span><\/b>said in a regulatory filing says U.S. FDA has approved Roswell Park Cancer Institute to conduct an early-stage study of its experimental drug, Ampligen, along with IFN alpha Regimen, in cancer patients with mild or moderate COVID-19 infections; EXEL<\/span><\/b> tgt raised to $40 at SunTrust as believe that EXEL has delivered on that signal with initial positive data with its recently released ASCO abstract for COSMIC-021 C7 in NSCLC; AXLA<\/span><\/b> 11M share Secondary priced at $4.75; KNSA<\/span><\/b> 2.4M share Spot Secondary priced at $18.25; BMY’s<\/b> phase 3 CheckMate-9LA trial in 1L lung (Abstract #9501) showed OS HR of 0.69 (p=0.0006) at 8.1 months follow-up and OS HR 0.66 at 12.7 months follow-up<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Biotech movers; ALLO <\/span><\/b>rises after announced the release of the abstract related to upcoming oral presentation at ASCO which will be the first data from Allogene\u2019s Phase 1 dose escalation study of ALLO-501 in relapsed\/refractory non-Hodgkin lymphoma; TRIL <\/span><\/b>sinks after Phase 1 data on its TTI-622 medicine were posted with abstracts for the ASCO meeting\/among 19 patients with advanced relapsed or refractory lymphoma, 1 patient with stage 4 non-GCB DLBCL (5 prior therapies) initially achieved partial response by week 8 and complete response by week 36, with response ongoing\/two patients saw grade 3 or worse neutropenia and other patients; IMUX<\/span><\/b> rises as gets first approval from German regulatory health authority, BfArM, to begin a mid-stage clinical trial of IMU-838 to treat COVID-19 patients; MGNX <\/span><\/b>slides after clinical data from two investigational pipeline molecules MGD013 and MGC018; CTMX <\/span><\/b>announces clinical presentations for CX-072 (Abstract 3005), CX-2009 (Abstract 526) as well as CX-2029 (Abstract 3502) developed in partnership with ABBV<\/span><\/b><\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Healthcare services and providers; ONEM<\/span><\/b> posted a larger Q1 EPS loss (40c)\/$78.8M vs. est. loss (17c)\/$75M but shares slide on weaker Q2 revs view of $56M-$66M vs. est. $64.3M (stocks recovered to trade up); CVS <\/span><\/b>was upgraded to outperform at Credit Suisse citing low valuation, solid dividend, and defensive business characteristics support more favorable view; SDC<\/span><\/b> posted a larger than expected Q1 loss\/share 28c vs. est. loss\/share 20c on revs $197Mm below est. $209.9Mm and Q1 adj EBITDA loss $67Mm wider vs. est. loss $48.7Mm; TDOC <\/span><\/b>slides after announced plans for an offering of $800 million in convertible senior unsecured notes due 2027; CODX<\/span><\/b> shares slid after short-seller Hindenburg Research said in a tweet it expects CODX will be back to single digits in short order<\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Industrial & Machinery; HON<\/span><\/b> files prospectus supplement related to a potential three-part senior notes offering; in research, KeyBanc downgraded ETN<\/span>, TT<\/span><\/b> to sector weight while upgraded RBC<\/span><\/b> in diversified industrials as recommend increasing exposure to short-cycle industrial and reducing exposure to nonresidential (i.e., longer-cycle); Cowen also downgraded TT<\/span><\/b> to market perform given narrowing valuation upside in the face of a tough C20-21 transition while upgraded JCI <\/span><\/b>to outperform given its relative margin resilience vs. peers through the COVID-19 recession; MMM<\/span><\/b> said monthly sales declines as a result of the COVID-19 pandemic were in line with the trends discussed prior\/said April sales fell 11% from a year ago to $2.3 billion; URI<\/span><\/b> upgraded to Buy from Neutral with $136 tgt at as believe rental metrics are poised to inflect positively, compared to the shutdown impacted March-April time period, as construction activity resumes in several cities.<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Transports; airlines sinking again with AAL<\/span>, DAL<\/span>, LUV<\/span><\/b> touching 52-week lows; DAL <\/span><\/b>authorized plan to remove Boeing 777 aircraft from service by end-2020 and also previously decided to accelerate retirement of MD-90 aircraft by June which they expect the aggregate non-cash impairment charges to range from $1.4 billion to $1.7 billion before tax; FDX<\/span><\/b> has limited the number of items that KSS<\/span><\/b> and about two dozen other retailers can ship from certain locations, as the delivery company tries to prevent its network from being overwhelmed during the coronavirus pandemic.<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Metals & Materials; copper prices dropped for a fourth day as global inventories tracked by the LME surged, refocusing investors\u2019 attention on demand conditions as governments make tentative efforts to restart their economies; metals in general remain weak on softer analyst outlooks due to economic downturn as well as China trade tension concerns<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Paper sector; Georgia-Pacific, the fourth-largest N.A. containerboard producer, with ~9% of industry capacity, has decided to shut its 900,000 tons\/ year Toledo, OR, containerboard mill for a week or possibly longer beginning May 21 owing to a lack of demand (shares of IP<\/span>, WRK<\/span><\/b>, active in reaction); PKG <\/span><\/b>was upgraded to buy at Argus saying there was strong demand in the Packaging segment, which accounts for about 85% of the company’s business, as corrugated product shipments rose 5.6% from the prior year.<\/o:p><\/p>\n

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

\u00b7     <\/span><\/span><\/span>Hardware and Networking; CSCO<\/span><\/b> reported revenue of $11.98B vs. consensus of $11.70B and guided F4Q20 in line at (8.5)-(11.5%) y\/y growth vs. consensus at (12%) while order growth was down (5%) y\/y vs. (6%) in F2Q20 and against a tough comp at +4% in F3Q19<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Semiconductor sector; semi-equipment stocks in focus ahead of AMAT<\/span><\/b> earnings after the close tonight as well as a Dow Jones report saying TSM<\/span><\/b> to build Advanced Semiconductor factory in Arizona, and they could be producing chips by the end of 2023 at the earliest (shares of LRCX<\/span>, KLAC<\/span><\/b> among others advanced on the headlines)<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Internet; WIX <\/span><\/b>posts Q1 EPS beat with COVID-19 tailwind as net premium subscription adds grew 207% in April, and Wix says the Q2 guidance is well ahead of what was originally expected (revs $231M-$233M vs. est. $227.2M) while total collections grew 24% Y\/Y to $249M; GRUB<\/span><\/b> slides after CNBC\u2019s David Faber reported that recently disclosed merger talks with UBER<\/span><\/b> could end in the coming days if a deal isn’t struck<\/o:p><\/p>\n

\u00b7     <\/span><\/span><\/span>Software movers; Jefferies downgraded shares of VMW<\/span>, SMAR<\/span><\/b> and ZUO<\/span><\/b> saying with VMW, the stock hit our $135 PT, and current valuation reflects a more balanced risk\/reward with potential near-term license pressure amid an accelerated shift to the cloud. SMAR achieved our PT (raise to $55) as well, and believe strong fundamentals are reflected in the multiple. With ZUO, they see short-term headwinds and elevated execution risk <\/p>\n<\/div>\n

<\/p>\n