{"id":12742,"date":"2020-05-22T15:07:17","date_gmt":"2020-05-22T20:07:17","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/22\/market-review-may-22-2020\/"},"modified":"2020-05-22T15:07:17","modified_gmt":"2020-05-22T20:07:17","slug":"market-review-may-22-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-22-2020\/","title":{"rendered":"Market Review: May 22, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Friday, May 22, 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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-8.96<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.04%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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24,465<\/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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6.94<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.24%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2,955<\/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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39.71<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.43%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,324<\/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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7.97<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.59%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,355<\/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 finished the day mixed with the Nasdaq Composite pacing the gains ahead of the long 3-day holiday weekend, as all major averages finished the 5-day stretch higher by a little less than 3%. Vaccine hopes for COVID-19, more dovish and accommodative commentary by various Fed speakers, rising oil prices and solid earnings results this week all helped push stocks higher. Treasuries rallied ahead of the long weekend as rising geopolitical tensions between the U.S. and China, keeping yields lower. Stocks slipped on Friday against deteriorating U.S.-China relations over Beijing’s move to impose a national-security law in Hong Kong as the index dropped over 5%. Oil prices slid, snapping its 6-day winning streak, while gold gained. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Stocks had a late day bounce after Reuters reported that the U.S. plans a massive testing effort involving more than 100,000 volunteers and a half dozen or so of the most promising vaccine candidates in an effort to deliver a safe and effective one by the end of 2020. The project will compress what is typically 10 years of vaccine development and testing into a matter of months, testimony to the urgency to halt a pandemic that has infected more than 5 million people.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>U.S.-China tensions have ramped up over the last two weeks, with last night seeing sharp declines in the Hong Kong Hang Seng index (fell over 5%) on the controversial new security law in Hong Kong and no China GDP forecast fueled the concerns over U.S.-China relations. President Donald Trump told reporters on Thursday that the U.S. would react “strongly” toward those moves on Hong Kong. Recall last week the U.S. government moved to block global chip supplies to blacklisted telecoms equipment maker Huawei Technologies. Also this week, the U.S. Senate passed legislation that could ban some Chinese companies from being listed on U.S. stock exchange. China ADRs such as BABA (after earnings), as well as BIDU, NTES, JD were all weaker on the increased tensions and recent reports. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil prices end the day lower<\/b> by 67c or 1.98% to settle at $33.25 per barrel in a bout of profit taking and some concerns about the ramped up U.S.-China tensions, but posted another strong week of gains, rising 13%, amid signs of increased demand. Baker Hughes (BKR) reported a 10th straight weekly fall in the number of active U.S. oil rigs helping pare the losses on Friday. Prices found support for the week from global production cuts and expectations for further reductions.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Gold prices rose<\/b> $13.60 or 0.8% to settle at $1,735.50 an ounce, ending the week lower by a little over 1% as increasing U.S.-China tensions compounded fears of a slow recovery in a global economy already reeling from the coronavirus pandemic (pulling back from over 7-year highs earlier this week). The news yesterday regarding China’s aggressive stance on Hong Kong security pressured the Hang Seng index overnight (fell over 5%), and has likely exacerbated already tense relations with Washington. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>The U.S. dollar<\/b> with a strong finish to the week, moving higher vs. most currencies as fresh tension between the United States and China boosted demand for safe-haven currencies and caused the euro, offshore yuan, and commodity currencies to fall. The buck moved back above the 1.40 level vs. the Canadian dollar as oil pared weekly gains, while the euro dropped below the 1.09 level after topping 1.10 yesterday for the first time in a few weeks. Treasury markets<\/b> advanced as yields ended lower, back near Monday lows with the 10-year around the 0.65% level (weekly highs 0.74%). The Fed trimmed its Treasury purchases down to $5B per day, versus $6B previously and down from $75B per day at the height of the crisis in mid- to late March. <\/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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-0.67<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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33.25<\/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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-0.93<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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35.13<\/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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13.60<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,735.50<\/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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-0.0055<\/o:p><\/span><\/p>\n<\/td>\n

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1.00895<\/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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-0.04<\/o:p><\/span><\/p>\n<\/td>\n

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107.58<\/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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-0.017<\/o:p><\/span><\/p>\n<\/td>\n

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0.654%<\/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; FL <\/span><\/b>shares slip after the company reported 1Q results and said that as of May 2, its merchandise inventories were $1,458 million, 20.4% higher YoY and Q1 comparable sales -42.8% vs. +4.60% y\/y, estimate -34.5%; DECK <\/span><\/b>shares rose after topping estimates on both lines of its FQ4 report while sales were down 4.5% and gross margin slipped 10 bps to 51.5% of sales\/4Q20 results and quarter-to-date trends showed brand strength of HOKA and UGG (~88% of FY20 sales) are improving in the face of the current crisis; ROST<\/span><\/b> provided no color into traffic or sales at the 700 stores reopened since May 14 in its Q1 results which included non-cash inventory valuation charge of $313M as reports loss; ANF <\/span><\/b>suspended its dividend; earnings next week from AZO<\/span>, HIBB<\/span>, RL<\/span>, CTRN<\/span>, DG<\/span>, DLTRSHOO<\/span>, BURL<\/span>, COST<\/span>, ULTA<\/span><\/b><\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; USFD <\/span><\/b>active after KKR reports 9.5% stake which was acquired on April 21 via a $500M purchase of 500k shares of the company’s convertible preferred stock; ELF <\/span><\/b>Q4 net sales increased 13% to $74.7M topping the $67M estimate (on better earnings), helped by product launches and online demand and said is grabbing more shelf space at WMT<\/span><\/b>; COTY<\/span><\/b> announces launch of Kylie Skin at European premium beauty retailer Douglas, offering six products<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Home improvement, Housing & Building Products; BBBY<\/span><\/b> said that it plans to reopen 600 stores, including 500 across North America, and bring back about 11,000 furloughed workers by June 13; MLM <\/span><\/b>was upgraded to overweight at JPMorgan and increased estimates and tgts on building products across the board (VMC<\/span>, SUM<\/span>, EXP<\/span><\/b>) on the back of better than expected 1Q results as see attractive upside at least in the short-term as 2Q will likely not be as bad as previously expected and considering the attractive valuations for group<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks slipped as oil prices retreated from the highest level in more than two months with doubts emerging over the strength of China’s economic recovery and as tensions rose between Washington and Beijing. Beijing won’t set a target for economic growth this year due to “great uncertainty” over the coronavirus, although it did announce some new stimulus spending. Equity markets from Asia to Europe fell on expectations that tensions between the U.S. and China will escalate on concerns over a new Hong Kong security law. The weekly Baker Hughes (BKR<\/b>) said the weekly total U.S. rig count fell another 21 rigs to 318, with oil rigs down 21 to 237, gas rigs unchanged at 79, and miscellaneous rigs unchanged at 2.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; AMRN <\/span><\/b>shares slide after competitor Hikma Pharmaceuticals said its unit gained U.S. FDA approval for a generic version of Amarin’s fish-oil based heart drug Vascepa\/in March, AMRN lost a major U.S. patent battle for Vascepa that enabled the entry of generic competition and has said it plans to appeal the decision; TTPH<\/span><\/b> said its board has determined that a proposal by Melinta Therapeutics to acquire it for $27M in cash plus $12.5M based on certain milestones – is a superior offer from prior ACRX<\/span><\/b> and LJPC<\/span><\/b> offers prior; NAVB<\/span><\/b> rises after saying preliminary results from its Phase 2B study support the hypothesis that Tc99m tilmanocept imaging can provide an early indicator of treatment response in patients with active rheumatoid arthritis<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Cannabis sector; ACB<\/span><\/b> downgraded to Underperform at Jefferies despite a relatively positive Q3 with the re-rating seen post numbers neither justified nor sustainable in their view; some cannabis stocks gained after the New York Post reported late yesterday that CBD could help prevent coronavirus infections, citing a study done by Canadian researchers<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; SNDX<\/span><\/b> falls after announced disappointing results for its Phase 3 E2112 trial investigating Entinostat in HR \/HER2- breast cancer as the trial did not show an improvement in overall survival (OS) with the addition of Entinostat to exemestane; ICPT <\/span><\/b>drops after the FDA has requested additional information related to its new drug application for obeticholic acid, which it said will likely extend the review beyond the agency’s June 26 target action date; MRNA <\/span><\/b>shares higher early after the NIH’s Anthony Fauci said on NPR that he expects the full results of a Phase 1 study of the biotech’s experimental Covid-19 vaccine within weeks; DVAX<\/span><\/b> 14M share Spot Secondary priced at $5.00<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Medical equipment and devices; Agilent (A)<\/b> posted a Q2 profit beat with in-line revenue and said it is well-positioned to "face the challenges" of the COVID-19 pandemic and the company was poised to focus on "growth, a resilient business model, and strong balance sheet; ABT<\/span><\/b> said interim analysis of a study in urgent care clinics indicates its Covid-19 rapid test, ID NOW, performs best in patients tested earlier after their symptoms start to show; BSX<\/span><\/b> 25.55M share Spot Secondary priced at $34.25; NARI<\/span><\/b> 8.203M share IPO priced at $19.00<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Industrial & Machinery; DE<\/span><\/b> posted better than expected margins for the quarter on better earnings and revenues while sees FY net income $1.6B, below the $2.1B estimate and lowers shipment volumes in Agriculture and Turf; FLS<\/span><\/b> was upgraded at Morgan Stanley given underperformance during the pandemic as it has seen its relative multiple fall from a modest premium to both peers and the S&P 500<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; UAL<\/span>, AAL <\/span><\/b>airlines stocks lower after good gains this week despite data from the Transportation Security Administration (TSA) show the number of travelers that went through TSA checkpoints on Thursday topped 300,000 for the first time in two months, but was still down significantly from a year ago. The daily average per week through Saturday is on track to show improvement for the fourth-straight week. Total TSA traveler throughput reached 318,449 on May 21, down 88% from a year ago, but up 38% from Wednesday.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Internet; BABA<\/span><\/b> reported beat in quarter with revenues of CNY114.31B vs. est. CNY107.45B. Adj. EBITDA came in at CNY25.44B vs. cons CNY21.93B\/guides FY revs to CNY650bn vs. cons CNY658bn\/said although the pandemic negatively impacted most domestic core commerce business starting in late January, they have seen a steady recovery since March; NTES <\/span><\/b>said it seeks June 11th Hong Kong listing and JD<\/span><\/b> seeks June 18th<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Semiconductors; NVDA<\/span><\/b> reported better-than-expected Apr-Q on data center on strong contribution from new Ampere A100 GPUs and better-than-seasonal gaming demand (-10% qoq vs. Street -13%) driven by e-tail and 50% increase in gaming hours due to work and stay-from-home effect\/AprQ top line driven by strong Data Center, up 80% YoY and Gaming up 27% YoY<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; PANW<\/span><\/b> rises as Q3 results outperform Street estimates and raises FY adjusted profit forecast to $4.78-$4.81 vs previous projection of $4.55 to $4.65; SPLK<\/span><\/b> reported solid F1Q results with +52% y\/y ARR growth very strong, though 1Q revenue fell short of expectations, as shift to cloud bookings and shorter-term duration weighed; FSCT <\/span><\/b>gained after a Delaware judge set an evidentiary hearing for FSCT’s lawsuit against Advent for June 2-3<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Media & Telecom movers; tower stocks AMT<\/span>, CCI<\/span><\/b> were both upgraded to outperform from perform in at Oppenheimer as expect a strong rebound in tower activity from New TMUS this year, Dish buildouts, strong VZ<\/span><\/b> spend and rural fixed wireless (helped by Gov’t subsidies) and the massive spectrum auctions in 2H20 are also positive<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Hardware & Component news; ROKU<\/span><\/b> was downgraded to Equal Weight from Overweight at Stephens with a $105 price target, slashed from $155, citing concerns about its partnership with Chinese electronics maker TCL; HPE <\/span><\/b>shares slide as reports Q2 revenue and profit below Wall Street expectations while unveils a plan targeting gross savings of at least $1 bln by 2022; IBM<\/span><\/b> said it cut jobs across the US which follow HPE <\/span><\/b>and expected cuts at DELL<\/span><\/b><\/p>\n<\/div>\n

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