{"id":12753,"date":"2020-05-27T15:09:42","date_gmt":"2020-05-27T20:09:42","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/05\/27\/market-review-may-27-2020\/"},"modified":"2020-05-27T15:09:42","modified_gmt":"2020-05-27T20:09:42","slug":"market-review-may-27-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-may-27-2020\/","title":{"rendered":"Market Review: May 27, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Wednesday, May 27, 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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553.16<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.21%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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25,548<\/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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44.36<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.48%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3,036<\/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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72.14<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.77%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,412<\/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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43.28<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.11%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,436<\/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

·     <\/span><\/span><\/span>The resiliency of U.S. stocks continues to astound, as what appeared initially to be a day of profit taking, with the biggest YTD winners sinking sharply early (software, semi’s Internet, biotech, MedTech) taking the Nasdaq Composite up more than 250-points of its lows, saw a late day rebound following better guidance from chip maker Micron (MU). Casino and theme park stocks extend gains after WYNN, MGM, DIS, and SEAS all revealed timelines for them to reopen (sooner than expected), while airlines helped lift the Transport index to its best levels since late February (topping its 100-day MA resistance). Strength in the financial sector (GS, JPM, AXP) helped lead the Dow Jones Industrial Average higher, further past the 25K level (25,500), moving to its best levels late afternoon. Optimism has been growing that economic activity is gathering steam while expectations are rising that govt’ authorities may offer more stimulus as soon as June to bolster the recovery from the coronavirus impact. WTI crude prices fall over 4% after rising for seven of the past eight sessions. The stay-at-home selloff continues as the economy revs up with shares of ZM, WORK, AMZN, WMT, and PTON among those slipping. The S&P 500 index, after battling all afternoon, ended the day well above the 3,000 level (which also marked the 200-day MA). U.S. tensions with China have cast a cloud on markets as President Trump that Washington would announce its response to China’s planned national security legislation on Hong Kong before the end of the week, but no concern today. In the stat of the day, Investor Intelligence poll shows that newsletter writers considered bullish rises for the eighth time in the last nine weeks to 50.5% from 49.0%. Bulls remain below their February 19 high of 54.7%. Bearish sentiment falls for a 9th week (longest losing streak since 10 in a row in 1998) to 23.8% versus 24.1% last week<\/a>.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil futures stumble<\/b> with WTI crude down -$1.54 or 4.48% to settle at $32.81 per barrel after U.S. President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong. Also earlier today, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed during a telephone call on further "close coordination" on oil output restrictions, the Kremlin said. Inventory data was pushed out until tomorrow due to the Memorial Day Holiday on Monday. The bounce in the dollar also weighed on commodity prices.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>August Gold prices slipped<\/b> -$1.40 or 0.08% to $1,726.80 an ounce, well off the earlier lows of $1,701.60 an ounce as prices end near their best levels of the day. Gold prices continue to find support as tensions between the U.S. and China worsened after Secretary of State Mike Pompeo announced that Hong Kong is no longer autonomous from China. The announcement could lead the Trump Administration to revoke special treatment for the Hong Kong economy, which is exempt from tariffs levied on Chinese imports.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>The U.S. dollar steadied<\/b> against major currencies, little changed against the euro (holding below 1.10) and posted modest gains against the Japanese yen. The euro slipped after rising as high as $1.10315, its strongest since April 1. Both the U.S. government\/Fed and European Union have released stimulus measures to help prop up their economics that have been devastated by the coronavirus worldwide global business closures. The EU recently unveiled a 750 billion euro ($825.23 billion) plan. Note the euro has struggled since falling in March, when investors rushed for the safety of dollars amid increased volatility in global financial markets. Sterling retreated below $1.23 as investor focus shifted back to the possibility of negative interest rates in Britain and comments from government officials that not much progress had been made in Brexit talks. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Treasury prices gained<\/b> as yields slipped with the 10-year yield down 2 bps to 0.67% (off highs 0.72%), while the 2-year yield was flat at 0.175%. The U.S. Treasury sold $45B in 5-year notes at a yield of 0.334% vs. 0.321% when issued prior while the bid-to-cover stood at 2.28 vs. 2.74 prior auction and indirect bidders awarded 57.3% of the auction and directs 10.8%.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Richmond Fed’s May manufacturing index<\/b> survey at -27 vs -53 last month and better than the forecast for a drop to -40; Shipments rose to -26 after -70 the prior month; new order volume increased to -35 after -61 the prior month; order backlogs rose to -33 after -42 the prior month<\/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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-1.54<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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32.81<\/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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-1.43<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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34.74<\/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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-1.40<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,726.80<\/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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0.0009<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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1.0991<\/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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0.15<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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107.69<\/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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-0.026<\/o:p><\/span><\/p>\n<\/td>\n

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0.671%<\/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; big gains in retail today with rotation out of tech into beaten stocks M<\/span>, KSS<\/span>, JWN<\/span>, GPS<\/span>, PVH<\/span><\/b> reported wider-than-expected Q4 losses (adj EPS loss 68c vs. est. loss 26c) while revs fell to $1.27B from $1.51B last year but just ahead of the $1.26B estimate as revenue decline was attributed to the coronavirus pandemic and Hong Kong protests; TSCO <\/span><\/b>said it expects “record-breaking sales and earnings” for Q2, including comparable sales growth of 20%-25% and guides Q2 EPS $2.45-$2.65 vs. est. $1.77<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; Consumer Staples sector was downgraded at Wells Fargo in sector strategy call (upgraded small caps and consumer services); BF<\/span><\/b> was downgraded from Neutral to Sell at UBS as consensus estimates and valuation fail to reflect near, medium and long-term challenges posed by the pandemic and the recession to come; HSY<\/span><\/b> issued company update saying while they experienced a short-term increase in demand for some products at the onset of the pandemic, demand levels have since moderated<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Restaurants; JACK <\/span><\/b>upgraded to Neutral from Sell at Goldman Sachs and raised the price target to $66, up from $42 as they see evidence that SSS momentum and improving franchisee economics have the potential to re-accelerate unit growth; pizza chains active as DPZ<\/span><\/b> said store sales for the first 8 weeks of Q2 from U.S. stores rose 14% while PZZA’s<\/b> comparable sales up 33.5% in North America from April 27 to May 24; WING<\/span><\/b> was removed from Best Ideas, remain Outperform at Wedbush saying near term, they believe comp sales growth expectations have been appropriately reset post Q2 to-date commentary<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Housing & Building Products; after strong New Home Sales data yesterday helped the homebuilder sector (TOL<\/span>, PHM<\/span>, KBH<\/span>, MTH<\/span>, LEN<\/span><\/b>) , data today showed that U.S. applications for home mortgages jumped last week, in a sixth straight weekly increase. The Mortgage Bankers Association (MBA) said on Wednesday its seasonally adjusted Purchase Index increased 8.6% from a week earlier. On an unadjusted basis, the index rose 7.4% from the prior week and was 9% higher compared to the same week a year ago. It was the sixth consecutive weekly gain and a 54% surge since early April; in building products, FBHS<\/span>, BLD<\/span>, OC<\/span>, MHK<\/span>, IBP<\/span><\/b> tgts raised at Nomura saying construction activity fell -20% YoY, but May could mark the bottom<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; cruise lines opened sharply higher (CCL<\/span>, NCLH<\/span>, RCL<\/span><\/b>), adding to recent gains before slipping off the best levels in a bout of profit taking; DIS<\/span><\/b> announced a proposal to reopen with magic kingdom, animal kingdom on July 11th<\/sup> while asking for July 15th<\/sup> for EPCOT opening and Hollywood Studios; SEAS<\/span><\/b> says it’s planning to open June 10 for an employee appreciation night, and then open to the public on June 11th<\/sup>; WYNN<\/span><\/b> announces Las Vegas June 4th reopening date in casino sector<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank movers; for the second straight day, banks outperformed major averages as the Dow Jones Industrial Average gains were led by GS<\/span>, JPM<\/span><\/b> and AXP<\/span><\/b> as investors looked to sectors that have underperformed year-to-date; insurance stocks also extend recent gains (TRV<\/span>, CB<\/span><\/b>); ESNT<\/span><\/b> will replace PTEN<\/span><\/b> in the S&P MidCap 400 effective prior to the open of trading on Monday, June 1; in consumer finance and lending; STNE<\/span><\/b> shares surge after posting $37.6B total payment volume in Q1 despite COVID-19, up 42.1% in 2019 and Q11 revenue stands at $716.8M, a 33.8% increase year-over-year while warns it expects greatest impact from COVID-19 in Q2<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; IRWD<\/span><\/b> said it and partner ABBV <\/span><\/b>would stop working on developing a therapy aimed at patients experiencing pain tied to irritable-bowel syndrome as data from a Phase II trial evaluating a therapy called MD-7246 didn’t meet its primary or secondary endpoints; BMY<\/span><\/b> said the European Commission has approved Zeposia (Ozanimod) for the treatment of adult patients with relapsing remitting MS with active disease as defined by clinical or imaging features; ZYNE<\/span><\/b> reports positive data from mid-stage trial assessing Zygel (ZYN002) along with standard-of-care for treatment of behavioral symptoms associated with autism spectrum disorder in pediatric and adolescent patients; CHRS<\/span><\/b> to join the S&P SmallCap 600 effective on the close May 29th<\/sup>; LJPC<\/span><\/b> shares fall after privately held Amivas LLC receives U.S. FDA approval for IV artesunate product for treatment of severe malaria, the only drug approved for this indication in U.S.\/FDA will not approve another sponsor’s marketing application for same drug for same use or indication within 7 years of initial approval, co says, citing FDA regulations<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; REGN<\/span><\/b> 11.83M share Secondary priced at $515.00; RCUS<\/span><\/b> and GILD<\/span><\/b> entered into a 10-year partnership to co-develop and co-commercialize RCUS’s pipeline\/GILD’s $200M equity investment offers $33.54 per Arcus share, which is in-line with RCUS’s last close (RCUS eligible for up to $1.23B in milestones); MRNA<\/span><\/b> falls as STATNews reports that top five executives sold more than $89 million of stock so far this year, without saying how it obtained the information; MRSN<\/span><\/b> rises as reported interim data from its Phase 1 study of XMT-1536 in patients with ovarian cancer and non-small-cell lung adenocarcinoma<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Medical equipment and devices; TECH <\/span><\/b>was downgraded at Stifel as we believe the stocks 29% move over the last month captures the current enthusiasm around the company’s strong fundamental positioning and opportunity for Covid research and Dx; DXCM<\/span><\/b> shares extend recent losses and was one of the top decliners in the S&P along with RMD<\/span><\/b> in the MedTech sector<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; SDC <\/span><\/b>shares rose after joining Anthem Blue Cross and Blue Shield’s Ortho@Home, its teledentistry orthodontia program\/SDC is offering remote dental care and clear aligner therapy to members of Anthem Dental Prime and Complete networks; in dental, XRAY <\/span><\/b>was upgraded to outperform from in-line and raise tgt to $50 from $42 at Evercore\/ISI as sees less weakness in short term and even a better long term for company (Credit Suisse said they were cautiously optimistic on an improving landscape for dental names – HSIC<\/span>, NVST<\/span><\/b>)<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Industrial & Machinery; BWXT<\/span><\/b> was upgraded to outperform and $72 tgt at Credit Suisse saying the strength of the nuclear component maker’s core business, providing equipment for U.S. Navy nuclear vessels, was enough to overlook weakness elsewhere; MMM <\/span><\/b>CEO said today at Bernstein virtual conference that they have seen significant strengthening of personal protection business, while weakening of oral care, stationery and automotive businesses<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; Dow Transports touched highs of 9,162, but failed to hold after topping its 100-day MA of 9,123 (marked first move above the 100-day since late Feb); airlines and rails have outperformed while shares of CAR<\/span><\/b> rise after HTZ <\/span><\/b>bankruptcy news the day prior; AAL CEO said that bankruptcy talks are not on the table<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Internet; TWTR <\/span><\/b>and FB <\/span><\/b>shares focus after President Trump tweeted that “Republicans feel that Social Media Platforms totally silence conservative’s voices. We will strongly regulate, or close them down, before we can ever allow this to happen"; AMZN<\/span><\/b> is in advanced talks to acquire Zoox Inc. in a move that would expand the company’s reach in autonomous vehicle technology, WSJ reported overnight; VIPS<\/span><\/b> said Q1 revenue fell 12% to 18.79 billion Chinese yuan ($2.63 billion) but exceeds VIPS’ forecast of a decline of 15% to 20%\/expects Q2 revenue growth rate between 0% and 5%; PINS<\/span><\/b> was downgraded to hold from buy following 1Q20 results at Argus noting Pinterest reported slowing user growth during 1Q20<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Semiconductors; the Philly semi index (SOX) declined, erasing earlier gains led by selling pressure (for a 2nd day) in AMD<\/span><\/b> and NVDA<\/span><\/b> after recent outperformance; MU <\/span><\/b>shares spiked midday after issuing Q3 revs of $5.2B-$5.4B topping the $4.91B estimate on better earnings; PLAB<\/span><\/b> shares fell after lower earnings and guidance for the upcoming quarter; NXPI <\/span><\/b>announced a new CEO<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; earnings expected tonight for ADSK<\/span><\/b> in software, CRM<\/span>, ZS<\/span>, VEEV<\/span>, VMW<\/span>, WDAY<\/span><\/b> and OKTA<\/span><\/b> tomorrow night (5\/28); BILI <\/span><\/b>upgraded to Overweight at Morgan Stanley and raise PT to $40 from $27 as accelerated MAU growth in 1Q and expanding TAM could drive revenue estimate beats from 2Q onwards, and sustain the fastest growth among peers for longer; OOMA<\/span><\/b> posted a Q1 top\/bottom line beat and delivered 54% year-over-year subscription revenue growth for Ooma Business with guidance coming in above consensus as well<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Hardware & Component news; ST <\/span><\/b>upgraded to equal-weight at Morgan Stanley saying while a path to a recovery is uncertain, weak fundamentals now appear better reflected in estimates that have been reset harder than peers and a stock that has meaningfully underperformed; HPE <\/span><\/b>downgraded to hold from buy at Argus after posted a poor fiscal 2Q20 and announced another significant restructuring program; KEYS shares slipped early after its Q2 results fell short of consensus views (Q2 EPS 78c vs. est. $1.13 and revenue $895M vs. est. $1.01B); earnings tonight for HPQ<\/span>, NTNX<\/span>, BOX<\/span><\/b> and NTAP<\/span><\/b> tonight in hardware\/storage sector; AT<\/span><\/b> struck a last minute deal to bring HBO Max to CMCSA <\/span><\/b>customers<\/p>\n<\/div>\n

<\/p>\n