{"id":12709,"date":"2020-05-15T09:41:46","date_gmt":"2020-05-15T14:41:46","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/15\/mid-morning-look-may-15-2020\/"},"modified":"2020-05-15T09:41:46","modified_gmt":"2020-05-15T14:41:46","slug":"mid-morning-look-may-15-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/mid-morning-look-may-15-2020\/","title":{"rendered":"Mid-Morning Look: May 15, 2020"},"content":{"rendered":"
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Mid-Morning Look<\/o:p><\/span><\/b><\/p>\n

Friday, May 15, 2020<\/span><\/b><\/o:p><\/span><\/b><\/p>\n\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

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

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-63.13<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.27%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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23,562<\/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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-9.99<\/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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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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-30.89<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.33%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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8,913<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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

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

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0.68%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,245<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

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U.S. equities dealt a handful of negative headlines and data, pushing stocks lower on the final day of trading this week. Pressure started after headlines the Trump administration moved to block shipments of semiconductors to China’s Huawei Technologies, a move that could ramp up trade tensions between Washington and Beijing. A tweet out of the Global Times followed shortly thereafter saying “based on what I<\/span> know, if the US further blocks key technology supply to Huawei, China will activate the “unreliable entity list”, restrict or investigate US<\/span> companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes”. That took a toll on large cap trade related names (BA<\/span>, AAPL<\/span>). Lastly, amid the coronavirus outbreak, April retail sales month-over-month came in at a record low of minus (-16.4%) vs. a minus (-12%) estimate while ex-autos number was minus (-17.2%) vs. the minus (-8.6% estimate). Factory production plummeted to the lowest on record during coronavirus-related shutdowns. Semi chip stocks were among the hardest hit early on the Huawei news. The news overshadowed positive economic data overnight in China as Factory output in China rose 3.9% in April from a year earlier, an improvement over the previous month’s 1.1% contraction. Treasuries are higher along with commodity prices with oil at its best levels since March while the dollar slides. <\/o:p><\/p>\n

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Treasuries, Currencies and Commodities<\/o:p><\/p>\n

·     <\/span><\/span><\/span>In currency markets, the dollar pares recent gains amid another round of weak data. Commodity prices led by a boost in oil prices (trades to the best levels since March) following OPEC comments saying they are cautiously optimistic that the worst of the oil crisis is over and that they are rapidly cutting production. Gold prices inches higher as the dollar pulls back after solid gains this week and as investors park some money in defensive assets with trade tensions intensified between the U.S. and China. Treasury market’s rally as yields dipped as investors bought debt following dreadful monthly data for retail sales and industrial production as the coronavirus pandemic kept Americans at home and put the economy on track for its biggest contraction in Q2 in nearly a century. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Retail sales for April fell<\/b> a greater-than-expected (-16.4%), vs. est. (-12%) and March reading down (-8.3%) while April retail sales ex-autos fell (-17.2%) vs. est. (-8.5%) and March (-4.0%) and lastly April retail sales ex-autos\/gasoline fell (-16.2%) vs. est. (-7.6%)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>NY Fed Empire State<\/b> current business conditions index fell to reading -48.5 in May better than the consensus for negative -60 and last month’s negative -78.2 reading as the new orders index was -42.4 in May vs. -66.3 in April, prices paid index +4.1 in May vs. +5.8 in April, employment index at -6.1 in may vs -55.3 in April; 6-month biz conditions index +29.1 in May vs. +7.0 in April<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Industrial Production for April fell<\/b> a minus (-11.2%) vs. est. minus (-12.0%) and Capacity Utilization was reported at 64.9% vs. est. 63.8% (prior month 72.7%). U.S. factory production plummeted in April by the most in records as output slumped 13.7% from the prior month after a revised 5.5% decrease in March<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Preliminary May Michigan Sentiment rose<\/b> to 73.7 from 71.8 the prior month and above the 68 estimate; the current economic conditions index rose to 83.0 vs. 74.3 last month and the expectations index fell to 67.7 vs. 70.1 last month<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Business Inventories for March fell<\/b> (-0.2%) MoM in-line with estimates; business sales fell (-5.2%) in March after falling 0.5% the prior month<\/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

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

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

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28.73<\/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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0.66<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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31.79<\/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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6.90<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,747.80<\/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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0.0037<\/o:p><\/span><\/p>\n<\/td>\n

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1.0842<\/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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-0.24<\/o:p><\/span><\/p>\n<\/td>\n

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107.01<\/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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-0.003<\/o:p><\/span><\/p>\n<\/td>\n

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0.618%<\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

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Sector Movers Today<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Retailers; NKE<\/span><\/b> warns of financial hit in Q4 as only 5% to 40% of Nike-owned stores are open globally\/product shipments to wholesale customers have slowed resulting in lower wholesale revenue and higher inventory; VFC<\/span><\/b> EPS of 10c missed by 3c on lower sales $2.1B (est. $2.3b) and gross margin decreased 150 basis points to 53.1%, primarily driven by elevated promotional activity to clear excess inventory; GOOS<\/span><\/b> downgraded to underperform at Bank America given outlook for significant y\/y declines in N. America & Europe revenue on restrained international tourism; DDS<\/span><\/b> 1Q release provides EPS loss of $(6.93) well worse than estimates due to a material gross margin (GM<\/span>) decline, partly offset by better sales and cost control; PRPL<\/span><\/b> 10.79M share Secondary priced at $10.50<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Semiconductors; industry pressured after headlines the Trump administration moved to block shipments of semiconductors to China’s Huawei Technologies. Morgan Stanley noted a H Silicon ban would likely be most negative for the foundry supply chain (notably, equipment stocks such as AMAT<\/span>, KLAC<\/span><\/b> and LRCX<\/span><\/b>) and companies that have maintained high shipments to Huawei under the de minimis exception (MU<\/span>, QRVO<\/span>, TXN<\/span><\/b>); AMAT<\/span><\/b> posted good F2Q results, but declined to provide formal F3Q guidance amid pandemic uncertainty though said sees F3Q (JulQ) up q\/q and further strength into F4Q as the company sees true end-market supply\/demand returning towards the end of C2020E (noted record backlog for its semis\/services businesses moving into the JulQ, with strength in data center\/PC); TSM<\/span><\/b> confirmed plans to build a $12B chip factory in Arizona as the U.S. tries to wrestle global supply chains back from China<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Financials: Busy morning in research at BMO Capital as they upgraded shares of GS<\/span>, DFS<\/span>, ALLY<\/span>, CIT<\/span><\/b>, and RM<\/span><\/b> to outperform from market perform saying these five deep-value stocks offer upside ranging from +45% to +150%, after falling in absolute terms by between -25% and -70% year-to-date. The firm also recommends FIG investors shift away from defensive subsectors (like payment technology and alternative asset management) and toward credit-sensitive subsectors as they downgraded PYPL<\/span>, APO<\/span><\/b>, and SLM<\/span><\/b> to market perform<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; CAH<\/span>, MCK<\/span><\/b> both upgraded to buy from neutral at UBS stating that the companies can outperform the current FY21 and FY22 consensus estimates by up to 6% citing channel checks, market data, and recent results from Cardinal Health as well as ABC<\/span><\/b> pointing to higher sustainable generic margins and improving sales mix; LH<\/span><\/b> was upgraded to buy from neutral and raise tgt to $186 from $158 at Mizuho saying only a small percentage of companies can say they are part of the COVID-19 solution and LH is one of those<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Housing & Building Products; Wayfair (W<\/span>)<\/b> downgraded to sell from neutral at Citigroup citing concerns about valuation, profitability and post-pandemic sales trends\/says the stock is “overvalued” following its 800% gain since a mid-March intraday low of $21.70; homebuilders KBH<\/span>, PHM<\/span><\/b> downgraded to sector weight from overweight at KeyBanc based on: 1) less comfort in a 2H20 COVID-19 recovery despite sustained government stimulus, which 2) creates a higher threshold for a compelling risk to return outcome, 3) with transition from book valuation to earnings less clear, in our view.; Piper raised Q1 and Q2 comp estimates (and lowering EPS estimates) on HD<\/span><\/b> ahead of earnings next week as industry work suggests sales strength for both names with continuation into May<\/o:p><\/p>\n

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Stock GAINERS<\/o:p><\/span><\/p>\n

·     <\/span><\/span><\/span>ACB<\/span><\/b> +37%; posted better-than-expected revenue in cannabis space amid cost-cutting efforts, and as sales jump (Q3 revs C$75.5M vs. est. C$66.7M) as consumers stockpiled cannabis ahead of lockdowns\/sold 12,729 kg of cannabis in Q3<\/o:p><\/p>\n

·     <\/span><\/span><\/span>CCL<\/span><\/b> +5%; as cruise lines rebound early after falling sharply this week<\/o:p><\/p>\n

·     <\/span><\/span><\/span>MCK<\/span><\/b> +3%; CAH<\/span>, MCK<\/span><\/b> both upgraded to buy from neutral at UBS stating that the companies can outperform the current FY21 and FY22 consensus estimates by up to 6%<\/o:p><\/p>\n

·     <\/span><\/span><\/span>NBL<\/span><\/b> +3%; as energy stocks resume upward momentum as oil prices rise to its best level since March, lifting many names in the sector<\/o:p><\/p>\n

·     <\/span><\/span><\/span>NEWR<\/span><\/b> +12%; as posts Q4 revenue of $160M topping the $153M est and a 21% increase compared with $132M YoY as more customers opted for its cloud-based services over the last two months<\/o:p><\/p>\n

·     <\/span><\/span><\/span>NLOK<\/span><\/b> ; reported a good F4Q, as revenue, margins, and EPS significantly exceeded consensus as experienced a slightly positive net impact from COVID-19 on its overall business<\/o:p><\/p>\n

·     <\/span><\/span><\/span>SRNE <\/span><\/b>+92%; after co’s covid-19 antibody candidate shows positive results in preclinical studies<\/o:p><\/p>\n

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Stock LAGGARDS<\/o:p><\/span><\/p>\n

·     <\/span><\/span><\/span>CODX<\/span><\/b> -14%; follows up with more weakness after mixed earnings report last night (shares dropped 5% Thursday on negative short call report from Hindenburg Research)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>FTCH<\/span><\/b> -11%; shares tumble after the online luxury retailer reported mostly in line results with prior announcement but warned the COVID-19 pandemic could delay its Fall-Winter 2020 collections<\/o:p><\/p>\n

·     <\/span><\/span><\/span>LRCX<\/span><\/b> -5%; after headlines the Trump administration moved to block shipments of semiconductors to China’s Huawei Technologies, a move that could ramp up trade tensions<\/o:p><\/p>\n

·     <\/span><\/span><\/span>SAVA<\/span><\/b> -75%; after a Phase 2b study of PTI-125, its lead investigational drug, failed to meet its primary endpoint in patients with Alzheimer’s disease<\/o:p><\/p>\n

·     <\/span><\/span><\/span>VFC <\/span><\/b>-2%; EPS of 10c missed by 3c on lower sales $2.1B (est. $2.3b) and gross margin decreased 150 basis points to 53.1%, primarily driven by elevated promotional activity to clear excess inventory<\/p>\n<\/div>\n

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