{"id":12729,"date":"2020-05-20T15:05:38","date_gmt":"2020-05-20T20:05:38","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/20\/market-review-may-20-2020\/"},"modified":"2020-05-20T15:05:38","modified_gmt":"2020-05-20T20:05:38","slug":"market-review-may-20-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-20-2020\/","title":{"rendered":"Market Review: May 20, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Wednesday, May 20, 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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369.04<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.52%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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24,575<\/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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48.67<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.67%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2,971<\/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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190.67<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.08%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,375<\/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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39.20<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.00%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,346<\/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 bounce back nicely following Tuesday’s late day slide, with all major averages posting solid gains, rising for the 4th<\/sup> time in the last five sessions as increasing signs of the economy reopening helped boost sentiment. Gains were broad based yet again, but technology leads the way (again) with 52-week highs for AMZN, FB, EA, PYPL, EBAY and TTWO (ahead of earnings tonight). As of today, all 50 states in the U.S. have at least partially reopened their economies with big moves in casinos, travel and leisure related sectors while energy stocks jump as oil prices spike nearly 5% to its best levels in over two-months following a surprise draw in weekly stockpiles. Retailers mixed as large cap names such as Target and Lowe’s report stellar quarterly results, followed better WMT totals the day prior, while specialty retail names remain weak as URBN sales disappoint. Semiconductors move to their best levels since late February after better ADI results, an upgrade of CREE and ahead of NVDA earnings tomorrow night. ETF’s that allow investors to bet on Chinese companies slipped midday after the U.S. Senate approved sweeping new legislation that could ultimately bar many Chinese companies from listing shares on U.S. exchanges. Still, with economic data likely to be dismal in the coming weeks, there is concern that stocks may have gotten ahead of themselves, with the S&P up nearly 33% from its March 23 closing low. Minutes from the Federal Reserve’s most recent policy meeting showed the central bank pledged to act as appropriate to support the economy until it is on track to recovery.<\/o:p><\/p>\n

FOMC Minutes<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Minutes from the April FOMC meeting<\/b> showed that Fed officials reacted with growing distress to the economic implications of the coronavirus pandemic last month, which sent unemployment soaring and froze commercial activity. The Fed affirmed plans to maintain interest rates near zero until they are confident the economy is on track for inflation to rise to their 2% target and for unemployment to fall. Officials spent much of last month’s meeting reviewing progress on nine different lending programs that had been established or were in the process of being started, backstopping everything from short-term funding markets to markets for corporate debt and municipal bonds. They also reviewed the success of aggressive and open-ended purchases of Treasury and mortgage securities they initiated in mid-March. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil prices jumped<\/b> $1.53 or 4.8% to settle at $33.49 per barrel, closing at its best levels in about 10-weeks, following bullish weekly inventory data as the EIA showed a weekly decline of 5 million barrels for U.S. crude supplies, along with a 5.5 million-barrel fall in stocks at the Cushing, Okla., storage hub. The data showed improved demand, helped by loosening restrictions to reopen the economy. Overnight, the API also reported bullish data with a draw of -4.84M barrels of crude oil for the week ending May 15, ending a streak of six consecutive builds.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Gold prices edge higher<\/b>, rising $6.50 or 0.4% to settle at $1,752.10 an ounce, rising further after settlement following FOMC meeting minutes showing that Fed officials discussed being more explicit about the future path of interest rates. Gold has been supported by global growth fears, lower interest rates and fears around a second wave of coronavirus outbreak<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>U.S. Treasury yields slipped<\/b>, with the 10-year yield dipping back under 0.7%, while the first auction of 20-year bonds since the 1980’s was met with "decent" demand. For the first time since 1986, the U.S. Treasury sold $20 billion in 20-year bonds at a high yield of 1.22%. The bid-to-cover ratio was 2.53 as primary dealers took 24.6% of the deal. More 20-year bonds are coming as a total of $54 billion is expected over three months. The U.S. dollar was lower<\/b>, as the euro hit its best level in 3-weeks above 1.0975, finding strength from survey data on Tuesday that showed German investor sentiment improved. Overall, the dollar index fell for a third straight session as the4 Canadian dollar strengthened on bullish oil prices. <\/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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1.53<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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33.49<\/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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1.10<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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35.75<\/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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6.50<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,752.10<\/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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0.0063<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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1.0986<\/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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-0.18<\/o:p><\/span><\/p>\n<\/td>\n

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107.53<\/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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-0.004<\/o:p><\/span><\/p>\n<\/td>\n

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0.683%<\/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; TGT<\/span><\/b> posted a strong beat on top and bottom line as Q1 EPS 59c on sales $19.62B beats the 45c\/$18.75B estimate and said Q1 comp sales rose 10.8% vs. est. 7.5% and vs. 4.8% YoY\/did note Q1 gross margins 25.1% vs. 29.6% YoY; Q1 Ebitda fell -39% YoY to $1.09B but beat estimate; URBN<\/span><\/b> said Q1 total Company net sales decreased -31.9% YoY to $588M and comp retail segment net sales decreased -28%, driven by negative retail store sales due to mandated store closures (by brand, fell -19% at Free People, -24% at Urban Outfitters and -33% at Anthropologie)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples and Restaurants; CLX<\/span><\/b> active after UAL <\/span><\/b>said it will use Clorox products at the gate and terminal areas of its hub airports\/Clorox to work with the airline on its cleaning program and disinfection procedures; SAM<\/span><\/b> shares trade to new record highs; LK<\/span><\/b> resumes trading after over a month-long halt on April 7 as earlier in week, said Nasdaq notified it of plans to delist its shares, a month after coffee chain disclosed inflated annual sales following an internal probe revealed some 2019 sales were fabricated<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Housing & Building Products; LOW<\/span><\/b> a better earnings result than peer HD<\/span><\/b> yesterday, as Q1 adj. EPS $1.77\/$19.7Beasily tops the est. $1.31\/$18.08B and Q1 comp sales rose 11.2% well above the 4% estimate and US comp sales for U.S. home improvement business up 12.3%; FND<\/span><\/b> 4.97M share Spot Secondary priced at $45.00; EXP<\/span><\/b> upgraded to Outperform at Raymond James saying construction has been deemed an essential service in most of Eagle’s states, supporting near-term results<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; regional casinos PENN<\/span>, BYD<\/span><\/b> extend recent gains after reports casinos in Louisiana and Mississippi are reopening this weekend; HOG<\/span><\/b> is reopening factories this week at reduced production rates and sending dealers fewer motorcycles, according to a memo sent to dealer; in cruise lines, RCL <\/span><\/b>said the company started the year in a strong booked position before COVID-19 and says the 2021 booked position is within normal historical ranges\/estimates its cash burn to be currently be in the range of approximately $250M to $275M per month<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks rise as oil rose for a fifth day as investors weighed signs the market is rebalancing against what’s still a precarious economic outlook. Futures in New York for July delivery gained to above $32\/bbl. A report that a virus vaccine study didn’t produce enough critical data to assess its success added some caution to markets, which have been buoyed by a rebound in demand and sharp reductions in supply. Data in the U.S. and Europe pointed to declining stockpiles.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>E&P sector; HAL<\/span><\/b> slashed its quarterly dividend by 75% to 4.5c from 18c, the latest move by the company to shore up cash to cope with a dramatic plunge in oil prices that began in March. U.S. oil prices experienced huge drops throughout March and April, brought on by the demand destruction caused by coronavirus-related lockdowns and a price war between producing nations. As oil and gas explorers slam the brakes on drilling to survive low prices, service companies that provide drilling equipment and services have taken a major beating.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank and Asset Managers; JPM<\/span><\/b> was upgraded to buy from hold by Dick Bove at Odeon citing a money explosion in the past several months due to aggressive moves by the Federal Reserve and the government, including new loan programs and the CARES Act; EV<\/span><\/b> Q2 adj EPS 80c on revs $405.9M vs. est. 76c and $427M; consolidated AUM $465.3B on April 30, down 1% from $469.9B of consolidated managed assets YoY; NRZ<\/span><\/b> raises $600M through a senior secured loan agreement. Alongside, the company estimates book value per common share is unchanged from the $10.71 reported for March 31.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Insurance; PGR<\/span><\/b> net premiums written rise 3% in April to $3.76B and net premiums earned increased 9% to $3.63B during the month\/companywide loss\/loss adjustment expenses ratio for April was 18.7 points lower than the ratio reported in April 2019<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; SURF<\/span><\/b> spikes after saying it has entered into a clinical trial collaboration with MRK<\/span><\/b> through a subsidiary, to evaluate the safety and efficacy of combining Surface’s SRF617, an investigational antibody therapy targeting CD39, with Merck’s Keytruda; OCUL<\/span><\/b> 8.182M share Spot Secondary priced at $5.50; JNJ<\/span><\/b> discontinuing its talc-based baby-powder products in the US and Canada, after a drop in demand driven by pending lawsuits related to potential cancer cases related to the products<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; INO <\/span><\/b>rises after saying it experimental COVID-19 vaccine produced protective antibodies and immune system responses in mice and guinea pigs, according to results published in journal Nature Communications\/safety data from early human trials found to be benign; KPTI<\/span><\/b> submits supplemental New Drug Application to the FDA seeking approval for XPOVIO as a new treatment for patients with previously treated multiple myeloma; KIN<\/span><\/b> enters into agreement with VXRT<\/span><\/b> for manufacture of Vaxart’s oral vaccine candidate for COVID-19\/KIN will produce the candidate vaccine bulk drug substance and provide it to Vaxart to be formulated into tablets<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Medical equipment and devices; MYGN <\/span><\/b>shares active after the FDA approves use of its BRACAnalysis CDx test as companion diagnostic to identify men with metastatic castration-resistant prostate cancer and also test their suitability for treatment with MRK<\/span><\/b> and AZN’s<\/b> Lynparza\/BRACAnalysis CDx was developed in collaboration with AstraZeneca; BDX<\/span><\/b> announces concurrent offerings of $1.5B of common stock and $1.5B of depositary shares, each representing 1\/20 interest in its mandatory convertible preferred stock<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; MCK<\/span><\/b> shares slid after its forecast for fiscal 2021 missed analysts’ expectations $13.95-$14.75 vs. est. $15.36) noting guidance reflects anticipated headwinds as a result of the COVID-19 pandemic and a continuation of disciplined, efficient capital deployment, including investments in the business<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Transports higher; railroad stocks rally behind several positive analyst comments as UBS upgrade shares of UNP<\/span><\/b> to Buy and raise tgt to $181 from $156 as believe a combination of strong current cost takeout actions and attractive leverage to upside when demand improves create an attractive reward to risk profile while raised CSX <\/span><\/b>to buy and raise tgt to $80 from $63 as believe CSX will provide strong leverage to a cycle turn and volume growth in 2021 while the company’s cost reduction actions are likely to limit downside risk; NSC <\/span><\/b>was upgraded to outperform at Evercore; UAL <\/span><\/b>paced gains in airlines earlier after CEO in interview on CNBC said is starting to see rebound in passenger numbers, and the timing on recovery is getting better every day (but says while demand is improving, it’s not anywhere close to normal)<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Semiconductors; The Philadelphia Semiconductor Index (SOX) rose as much as 4.2% on Wednesday to the highest intraday level since Feb. 21; ADI <\/span><\/b>Q2 EPS of $1.08 topped estimates of $1.03 while revs just miss at $1.32B vs. est. $1.33B while forecast midpoint for Q3 topped views; CREE<\/span><\/b> was upgraded to neutral at JPMorgan with $60 tgt saying near-term prospects look quite poor owing to COVID-19’s impact on today’s EV demand, but believe the transition to EVs, to 5G, to electrification of the global economy is only delayed, not stopped by the pandemic<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Hardware, Software movers; CRWD<\/span><\/b> tgt raised to $95 from $80 as believe that CrowdStrike has emerged as a key beneficiary of the remote working paradigm that has accelerated during the COVID-19 Crisis; PLAN<\/span><\/b> downgraded at Wells Fargo and lower tgt to $50 from $55 as shares have now rebounded >75% from March lows and see a more difficult near-term setup taking shape; FSCT<\/span><\/b> shares fall after filing with the Delaware Court of Chancery, as accuses Advent International of violating the terms of the $1.9B merger agreement; earnings tonight from TTWO<\/span><\/b> in video games; KRNT <\/span><\/b>surges to record high after saying it sees at least 30% sequential growth in Q2 with high single-digit YoY revenue growth in H2 and positive operating profit for the entire year<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Media & Telecom movers; Guggenheim raised price targets for AMCX<\/span>, DIS<\/span>, DISCA<\/span>, DISCK<\/span>, FOXA<\/span><\/b>, and VIAC<\/span><\/b> saying they prefer FOXA and VIAC in media space as notes the SP500 is down 13% from its recent peak on 2\/19 vs. a median decline of -28% for media shares. – said while they maintain concern toward the secular industry outlook (declining live ratings, cord cutting), they view aggressive conclusions of incremental negativity as overdone; DIS <\/span><\/b>shares jumped late Wednesday after saying it was submitting reopening plans on Thursday (also lifted SEAS<\/span><\/b> shares)<\/p>\n<\/div>\n

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