{"id":12715,"date":"2020-05-18T15:12:43","date_gmt":"2020-05-18T20:12:43","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/18\/market-review-may-18-2020\/"},"modified":"2020-05-18T15:12:43","modified_gmt":"2020-05-18T20:12:43","slug":"market-review-may-18-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-18-2020\/","title":{"rendered":"Market Review: May 18, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Monday, May 18, 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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911.95<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.85%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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24,597<\/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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90.21<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.15%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2,953<\/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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220.27<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.44%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,234<\/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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76.70<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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6.10%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,333<\/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 extend their recent rally, with major averages climbing for a 3rd<\/sup> consecutive session as improved sentiment amid signs of a vaccine treatment for COVID-19 helps boost major stock averages as the Dow rises around 1,000 points. Shares of Moderna (MRNA) advanced after saying a phase-one human trial for a coronavirus vaccine showed the production of antibodies to the virus in all of its participants involved in the study. The positive data was enough to propel stocks broadly higher as all eleven S&P 500 sectors jumped and SmallCaps outperformed with the Russell 2000 rising over 6%. Sectors hardest hit during the coronavirus pandemic such as theme parks (DIS, SIX), airlines (AAL, DAL, UAL), cruise lines (RCL, CCL), online travel (BKNG, EXPE), hotels (HLT, MAR), gaming (WYNN, PENN), retailers (LB, PVH), credit cards (COF, DFS, ADS) as well as office\/mall REITs (SPG, SLG, KIM) were among the day’s top gainers. At the same time, recent stay at home beneficiaries such as grocers and food stocks are lagging broader markets on the day (KR, CPB, SJM, and K). Energy stocks also jumping as oil prices spike above $32 per barrel supported by optimism about the re-opening of economies and output cuts by major producers.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Futures had already been pointing to a higher open after Federal Reserve Chairman Jerome Powell said last night in a 60-Minutes interview that Americans need to prepare for a tough road ahead in the aftermath of the COVID-19 pandemic but that he wouldn’t bet against the domestic economy’s ability to persevere. He also stressed the Central bank is not out of ammunition and there’s no limit with its lending programs in another effort to assuage investor concerns. U.S. NAHB housing market index bounced 7 points to 37 in May after the record -42 point plunge to 30 in April, which was the weakest reading since June 2012 (data go back to 1985) as all of the components increased. European stocks gain as oil prices rebound and as investors cheer the gradual easing of coronavirus lockdowns as the Stoxx Europe 600 jumps 4.1%, the FTSE 100 advances 4.3%, the DAX adds 5.7% and the CAC-40 increases 5.2%. Fear subsides further as the CBOE Volatility index (VIX) falls over 10% to lows of 28.35 (down from March highs 85.47 on 3\/18 – 2 months ago to the day). Treasury prices sunk as yields jumped across the board in rotation out of safe havens as the 30-year yield topped 1.44%, its best levels since March, while gold prices tumbled on positive vaccine headlines. Technology has been the big leader during the rally since March lows as the Nasdaq-100 index moves within 4% of its all-time highs. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>WTI crude climbed<\/b> $2.39 or 8.1% to settle at a two-month high of $31.82 per barrel (off earlier highs of $33.32 per barrel) while benchmark Brent hit a one-month high supported by optimism about the re-opening of economies and output cuts by major producers. The move comes ahead of June settlement tomorrow (much different from last month settlement when prices turned negative for the first time. Natural gas prices climb<\/b> 7.7% to $1.78 mln btus. Energy prices got a boost as well following a report that China demand continues to improve, approaching pre-COVID levels as more people return to work and school. Gold prices fall after jumping initially<\/b>, hitting highs of $1,775 before reversing lower with “risk-off” trade as stocks jump as vaccine hopes rise, pushing June gold lower by -$21.90 or 1.3% to settle at $1,734.40 an ounce<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>In currency markets, the U.S. dollar pulls back broadly<\/b> vs. major rival currencies, which is helping fuel gains in commodity prices as Treasury market’s fall as yields rise. The euro extends gains vs dollar, now up 0.8% at near 2-week high of $1.092 as German call for 500 bln euro EU recovery fund and joint EU debt to finance it. The dollar, which had been rallying as a safe haven play over the last 2-months despite weaker US data, saw selling pressure as stocks surged. Yields for both short and long term Treasuries advanced on the day with the 10-yr rising over 6 bps above 0.7%, while the 2-yr yield up 3 bps to 0.177% and the U.S. Treasury 30-year prices fall more than 3 points, yields hit highest since late March (1.44%).<\/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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2.39<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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31.82<\/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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2.31<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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34.81<\/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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-21.90<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,734.40<\/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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0.0092<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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1.0911<\/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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0.33<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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107.39<\/span><\/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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0.082<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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0.725%<\/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>Retailers; a beneficiary of loosening restrictions to begin reopening, with many retailers bouncing on the day in broad market rebound; ENR<\/span><\/b> upgraded at Morgan Stanley as believe it offers an attractive risk-reward with compelling valuation and potential upside vs consensus; LB <\/span><\/b>outperforms, helped as Wedbush upped its tgt to $12 form $10 saying sales at LB’s Bath and Body Works unit remained relatively strong amid the coronavirus pandemic and will help offset some of the margin pressure caused by co’s struggling Victoria’s Secret business; earnings coming up tomorrow in retail for AAP<\/span>, KSS<\/span><\/b>as well as Dow components HD<\/span><\/b> and WMT<\/span><\/b><\/o:p><\/a><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; KR<\/span>, CPB<\/span>, GIS<\/span>, CHD<\/span><\/b> among leading decliners in the S&P in the food sector given the improved sentiment about economy reopening; KHC <\/span><\/b>was upgraded to buy at Bank America and raised tgt to $38 from $32 noting shares have underperformed packaged food peers and trades at a 40% valuation discount to the group; in restaurants, CMG <\/span><\/b>very quietly touched all-time highs today, topping the $1,000 per share level for first time (now off March 18 low of $415)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Housing, Home Improvement & Building Products; markets prepare for earnings results from HD<\/span>, LOW<\/span><\/b> this week (HD touched record highs); WSM<\/span><\/b> was upgraded to Outperform from Neutral at Wedbush and raise the target to $80 from $46 saying a new retail paradigm is emerging as the coronavirus pandemic wears on\/not only are consumers shopping much more online, but they are shifting their discretionary spending to the place they are spending nearly all of their time, their home; Wayfair (W)<\/b> shares fell\/mentioned cautiously in Barron’s saying shares may drop after surging the last 2-months from $22, to $197, before settling back to a recent $175) <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; boating sector strong early after B Riley upgraded MCFT <\/span><\/b>to buy and up tgt to $16 from $10 saying checks indicating that retail demand has been strengthening week-to-week into the Memorial Day holiday weekend while firm also raised tgts on BC<\/span><\/b> to $57.50 from $54, MBUU<\/span><\/b> to $42 from $33 and HZO <\/span><\/b>to $19 from $17; WYND <\/span><\/b>said it is planning a phased reopening strategy starting in q2 and ramping through the summer\/says lockdown has created pent-up demand for vacations and expect adj ebitda in range of flat to negative $20M in Q2; PII<\/span><\/b> ests and tgt cut to $86 from $114 at UBS due to supply chain disruption, dealer closures, and expected demand impact from Covid but recent checks show strong retail demand continuing; cruise lines CCL<\/span>, RCL<\/span>, NCLH<\/span><\/b> among top gainers early in buying momentum for beaten up sectors; IGT <\/span><\/b>rises after its profit beats for a second consecutive qtr, helped by increase in non-terminal revenue, while terminal revenue continues to be impacted by casino closures<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Auto’s; WSJ reported while merger discussions between UBER<\/span><\/b> continued over the weekend, price remained a sticking point, as Uber’s latest offer of 1.9 of its shares for each GrubHub share was deemed too low by CEO Matt Maloney https:\/\/on.wsj.com\/2ThsVlz<\/a> ; HTZ<\/span><\/b> named insider Paul Stone as CEO days after HTZ raised going-concern doubts\/hit record low last week after it posted a bigger quarterly loss due to the COVID-19 pandemic; TSLA<\/span><\/b> rises after saying it had been given the green light from local officials to resume operations at its Fremont, Calif., auto plant; UBER<\/span><\/b> said it would cut additional 3,000 jobs, and reduce investments in non-core projects and Uber CEO says will pursue strategic alternatives for Uber Works<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks led the S&P sector standings on a day of broad gains with all 11 groups gaining 1% or more, as WTI June crude soars as much as 13% above $33.03 per barrel, its highest level since mid-March, and July Brent above $35 per barrel to its best level in more than a month. Stocks and sentiment were helped following a Bloomberg report that China demand continues to improve, approaching pre-COVID levels as more people return to work and school. Strength was across various market segments including majors, services, E&P, refiners and equipment. In utilities PCG<\/span><\/b> shares rose after the company said early voting results for its joint plan of reorganization with Pacific Gas and Electric Co. indicates "overwhelming" acceptance of the plan by the wildfire victims entitled to vote.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank movers; bounce in banks with broader markets and small recovery in Treasury yields in sector that has very few catalysts to boost shares; in broker sector, LPLA<\/span><\/b> was upgraded to OW and tgt up to $70 at Wells Fargo while downgraded RJF<\/span><\/b> to underweight (PT to $61 from $64) and cut SF<\/span><\/b> to UW as well (cut tgt to $40) noting stocks of all three are down similarly this year (down ~30% vs down 11% for the S&P 500 index) which we think is unfair due to varying risks and opportunities among the companies<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer finance and lending; SQ<\/span><\/b> was downgraded to underperform at Bank America saying with shares trading at ‘21 EV\/gross profit and EV\/EBITDA multiples of 13x and 75x, respectively, they simply feel the stock has moved too far and too fast relative to its near-term fundamental prospects and from a profitability standpoint, SQ doesn’t have many cost levers, growth investments need to continue; ADP<\/span><\/b> was also downgraded at Bank America and lowering F21 (June) estimates for ADP given extreme stress on employment markets. ADP is exposed to the current recession not just in terms of the number of employees on its clients’ payrolls, but also in terms of client retention, new bookings, and lower float income; PYPL<\/span><\/b> touched 52-week highs<\/o:p><\/p>\n

·     <\/span><\/span><\/span>REITs; SPG<\/span>, SLG<\/span>, KIM<\/span>, ARE <\/span><\/b> rise as office related REITs another beneficiary of improved mkt sentiment about reopening\/vaccine news; MAA <\/span><\/b>was upgraded to Outperform at Raymond James as are greatly encouraged by MAA’s remarkably resilient operating performance through mid-May (collecting 98% of April billed rent). Looking ahead, we are also increasingly convinced that operators of safe, clean, and affordable rental housing in Sun Belt markets will continue to shine bright; NXRT<\/span><\/b> also upgraded to strong buy at Raymond James among same principles as MAA upgrade<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; SRNE<\/span><\/b> adds to Friday gains of 158% after last week saying that its anti-SARS-CoV-2 antibody, STI-1499, demonstrated 100% inhibition of SARS-CoV-2 virus infection in an in vitro virus infection experiment at a very low antibody concentration; TEVA<\/span><\/b> said China’s National Medical Products Administration approves Austedo for treatment of Huntington’s disease; drug would be priced somewhat lower in China than in the United States. However, it is yet not eligible for coverage under China’s national insurance scheme; in cannabis sector, ACB<\/span><\/b> adds to Friday gains following its recent earnings results<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; MRNA<\/span><\/b> surges after the co’s experimental COVID-19 vaccine, mRNA-1273, shows promise in an early-stage study and company is looking to move into late-stage trial\/FDA had granted "fast track" designation to mRNA-1273; BIIB <\/span><\/b>said additional data from Spinraza clinical development program further demonstrated the sustained efficacy and longer-term safety of the drug in a broad range of patients with spinal muscular atrophy; DCPH<\/span><\/b> rises after the FDA approved company’s lead drug, Qinlock, to treat patients with a form of stomach cancer based on efficacy results from a late-stage trial<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services, Medical equipment and devices; PKI<\/span><\/b> shares slipped after Reuters reported the company is facing a federal investigation into its role in an alleged massive Medicare fraud (company came out confirmed subpoenas but denied reports saying it is not aware of any wrongdoing, as implied by Reuters); FLGT<\/span><\/b> shares rise after saying its subsidiary, Fulgent Therapeutics, LLC has received Emergency Use Authorization (EUA) from the U.S. FDA for its RT-PCR test for detecting the novel coronavirus, that causes the COVID-19 disease<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Aerospace, Industrial & Machinery; Industrials were among the top sector gainers today in a big up day; RBC<\/span><\/b> upgraded to Outperform at Oppenheimer on increased evidence of long-term profit improvement initiatives taking hold; HEI <\/span><\/b>was downgraded to hold at Canaccord as believe HEI will continue to trade at a premium to both the broader market and its A&D peers, but believe the lower growth in the remainder of FY20 will contribute to increased multiple compression; FLR <\/span><\/b>shares rise after being selected by the U.S. Department Of Energy (DOE) for Hanford Site Tank closure contract valued at ~$13 bln and over a 10-year period<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; airlines strong recovery today (AAL<\/span>, DAL<\/span>, LUV<\/span>, UAL<\/span><\/b>) with broader market rebound; in tankers (DSX<\/span>, EURN<\/span>, SBLK<\/span>, STNG<\/span><\/b>), the Baltic Dry Index +5% to start the week to 427 points in London to gain for the second day in a row after a long stretch of weakness. The Baltic Dry Index bottomed out at 411 on February 10 and traded as high as 2,518 last September (Capesize rates jump 20.1% and Handysize rates up 2.38%); SAVE <\/span><\/b>was upgraded to outperform at Evercore\/ISI in airline sector pointing to stabilizing demand trends and Spirit’s strong liquidity position.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Semiconductors; NVDA<\/span><\/b> was upgraded to Outperform from Market Perform and raising our target price to $425 from $285 at BMO Capital saying while there is no one single event they can point to which has led to change of thinking, the continued execution on the data center side, along with the latest product rollout, has helped; Philly semi index rises over 4% to the 1,770 level (jumped back above its 100-day MA earlier 1,727) with all 30-components trading higher<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; FSCT<\/span><\/b> shares fall after Advent said it would not be proceeding to consummate the acquisition of ForeScout by May 18th deadline, though talks are continuing regarding time and price; PANW<\/span>, SPLK<\/span>, TTWO<\/span><\/b> among earnings this week on software side; PANW <\/span><\/b>was upgraded to buy with $270 tgt at Davidson based on improving demand trends, conservative estimates and a reasonable valuation, while UBS downgraded shares to neutral; SE<\/span><\/b> rises as Q1 EPS loss (52c)\/$913.92M vs. est. loss (32c)\/$915.42M and E-commerce revs GMV 5.1% vs. 6.30% q\/q<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Media & Telecom movers; EB <\/span><\/b>was upgraded to buy at SunTrust with a $12 PT, as we view the ~40% decline in the stock post 1Q results (vs. IWM -5%) as an overreaction to EB’s reported exposure to a $293M potential liability from its APO program; TMUS<\/span><\/b> shares rise after the WSJ reported that Japan’s Softbank group is in talks to sell a significant portion of its stake in TMUS to Deutsche Telekom\/a deal would boost German telecom giant’s share in TMUS from nearly 44% to over 50% https:\/\/on.wsj.com\/2zISNQt<\/a> ; theme park names rise as DIS<\/span><\/b> said it will partially reopen its Disney Springs entertainment and shopping complex at Walt Disney World Resort in Florida on May 20<\/p>\n<\/div>\n

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