{"id":12778,"date":"2020-06-02T15:10:03","date_gmt":"2020-06-02T20:10:03","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/06\/02\/market-review-june-02-2020\/"},"modified":"2020-06-02T15:10:03","modified_gmt":"2020-06-02T20:10:03","slug":"market-review-june-02-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-june-02-2020\/","title":{"rendered":"Market Review: June 02, 2020"},"content":{"rendered":"
\n
\n

Closing Recap<\/o:p><\/span><\/b><\/p>\n

Tuesday, June 02, 2020<\/span><\/b><\/o:p><\/span><\/b><\/p>\n\n\n\n\n\n\n\n
\n

Index<\/o:p><\/span><\/p>\n<\/td>\n

\n

Up\/Down<\/o:p><\/span><\/p>\n<\/td>\n

\n

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

\n

Last<\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

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

\n

1.05%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

25,742<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

S&P 500<\/span><\/b><\/o:p><\/span><\/p>\n<\/td>\n

\n

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

\n

0.82%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

3,080<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

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

\n

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

\n

9,608<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

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

\n

0.91%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

1,418<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n


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

 <\/o:p><\/p>\n

Equity Market Recap<\/o:p><\/p>\n

·     <\/span><\/span><\/span>U.S. stocks extended gains, continuing to defy the experts with no pullback (a straight “V” shaped recovery thus far off the March lows), as the S&P 500 and the Dow Jones Industrial Average each touched three-month highs as growing optimism about the reopening of the economy after weeks of coronavirus lockdowns overshadowed more disruptions from the protests across the country (forcing companies to close businesses) and trade tensions with China. Biggest sector gainers were transports, financials and energy, some of the hardest hit sectors during the peak of the coronavirus lockdowns. However, improving (yet still very weak) economic data, along with trillions of dollars in stimulus (from the Fed and gov’t) and the restarting of businesses have helped major averages recover roughly 40% from the March lows (Nasdaq now about 3% from record highs and the S&P 500 10%). Stocks initially looked as if they were on track to give up some of the recent gains, but markets rallied late morning, pushing stocks higher across the board along with gains in energy. Stock markets fail to show any fear after demonstrators’ overnight set fire to a strip mall in Los Angeles, looted stores in New York City among other attacks after President Donald Trump vowed to deploy the U.S. military to regain control.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Note the S&P 500 has now risen for six out of the past seven sessions, boosted by data suggesting the downturn in the U.S. economy has bottomed. However, a US budget agency (CBO) said today that the U.S. economy could take the better part of a decade to fully recover from the pandemic and related shutdowns. European markets jumped overnight, extending a recent rally fueled by hopes of a rebound in the global economy, led by solid gains in Germany as the DAX index surged over 3% following a public holiday Monday. Treasuries weaker across the curve, the US dollar is firmer vs yen but lagging again vs both euro and sterling. Overall, China markets at 10-week highs, Japan 12-week highs, Europe 10-week highs and the U.S. trading at 12-week highs as investors continue to bet on the economic recovery. <\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil prices finish higher<\/b>, with WTI crude gaining $1.37 or 3.87% to settle at $36.81 per barrel rising ahead of inventory data later tonight (API) and tomorrow morning (EIA) and ahead of an expected OPEC+ meeting later this week as hopes remain that major crude producers will agree to extend output cuts during its video conference. Oil prices have spiked over the last few weeks as countries and U.S. states begin to reopen after coronavirus lockdowns, raising expectations that demand will begin to rise after months of oversupply and plunging prices. OPEC+ is considering extending their production cuts of 9.7 million barrels per day (bpd), or about 10% of global production, into July or August, at a meeting expected to be held on Thursday.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Gold prices reversed lower<\/b>, erasing earlier gains to settle at $1,734 an ounce, down -$16.30 or 0.9% as stocks rallied, though the dollar remained lower overall (August gold had traded as high as $1,757 initially as a safe haven play given the violent protests around the U.S.)<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>The U.S. dollar dropped broadly<\/b>, along with other perceived safe-haven currencies such as the Japanese yen, remaining out of favor vs. riskier rivals such as the euro and Pound while high beta currencies such as the Australian and Canadian dollars, jumped as risk appetite grew on optimism that the worst of the economic downturn from the spread of the coronavirus is behind us. Australia’s central bank held rates at all-time lows on Tuesday and sounded less gloomy which helped push its currency to the best levels since late January. The British Pound jumped to its highest in a month against the dollar on Tuesday. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Treasury market’s slipped as stocks rallied <\/b> as the 10-year yield inched higher by 2 bps to 0.68%, still in a narrow trading over the last week or so (about 8 bps range of 0.72% high and 0.64% low) as markets weigh the good (economies and states slowly reopening, Fed easing measures, stimulus packages) with the bad (trade news with China, riots\/store closures, and weak economic data due to pandemic closures – though has been improving).<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

Macro<\/o:p><\/span><\/p>\n<\/td>\n

\n

Up\/Down<\/o:p><\/span><\/p>\n<\/td>\n

\n

Last<\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

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

\n

36.81<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

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

\n

39.57<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

-16.30<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

1,734.00<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

EUR\/USD<\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

0.005<\/span><\/o:p><\/span><\/p>\n<\/td>\n

\n

1.1185<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n<\/tr>\n

\n

JPY\/USD<\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

0.99<\/span><\/o:p><\/span><\/p>\n<\/td>\n

\n

108.57<\/span><\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

10-Year Note<\/o:p><\/span><\/b><\/p>\n<\/td>\n

\n

0.022<\/span><\/o:p><\/span><\/p>\n<\/td>\n

\n

0.681%<\/span><\/o:p><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/o:p><\/span><\/p>\n

 <\/o:p><\/p>\n

Sector News Breakdown<\/o:p><\/span><\/p>\n

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

·     <\/span><\/span><\/span>Retailers; gun stocks, sporting goods retailers SWBI<\/span>, RGR<\/span>, VSTO<\/span>, SPWH <\/span><\/b>rise a second day as NICS background checks jumped to 3,091,455 in May, above last month’s 2,911,128 and well above the 2,349,309 figure the same time last year (NICS background checks for firearm purchases increased 75.2% in May following an 69.1% increase in April and 80.3% in March); DKS<\/span><\/b> Q1 sales fell 30.6% in FQ1 and same-store sales were down 29.5% for the period that ended on May 4\/E-commerce sales rose 110% and said its e-commerce penetration rose to 39% of sales vs. 13% a year ago; LULU<\/span><\/b> was downgraded at Wells Fargo following a significant rally since mid-March (LULU +125% vs. SPX +28%) with plenty of risk in the consumer environment still ahead; LE<\/span><\/b> prelim Q1 loss widens, revenue skids amid covid-19 pandemic, missing estimates; BBW <\/span><\/b>posted Q1 net retail sales decline (-43.7%) to $46.65M, while margin rate slipped 2800 bps to 17.3%; TIF <\/span><\/b>shares rolled more than 10% late day after Women’s Wear Daily (WWD) reported that the LVMH-Tiffany deal is seen as uncertain, saying the board of the luxury giant met in Paris specifically to discuss the proposed deal amid a deteriorating situation in the U.S. market (deal was for $135 per share)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Autos; German autos outperformed after Reuters reported Germany’s Ministry of Economics has proposed a 5 billion-euro ($5.6 billion) buyer bonus scheme as part of an impending stimulus package in an effort to boost car sales; TM<\/span><\/b> North America said May 2020 sales totaled 165,055 vehicles vs. revised plan of 125,000 vehicles; CVNA<\/span><\/b> shares surged over 17% midday helped after Vroom said to sell 18.75m shares at $15 to $17 a share in an IPO (valuation seen + for CVNA); CNBC reported that WFC<\/span><\/b>, one of the biggest lenders for new and used car purchases in the U.S., sent letters to hundreds of independent auto dealerships last month telling them that the San Francisco-based company was dropping them as a customer<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Restaurants; SBUX<\/span><\/b> said it expects lower sales at US stores at least until the Fall; company says employees will have a week to decide whether to take reduced hours or unpaid leave; CBRL<\/span><\/b> 3q restaurant comp sales -41.7% vs. est. -41.5% and 3q retail comp sales -45.5%, vs. est. -55.7%<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Housing & Building Products; Wayfair (W<\/b>) tgt raised to $225 from $220 at Piper as believe the last two months have improved Wayfair’s standings with suppliers, and allowed for significant new customer acquisition; RH <\/span><\/b>said that it continues to expect operating margins to expand in 2020, despite the current setbacks from COVID-19\/also sees a clear path to 20% operating margin over the next few years; shares of RH<\/span><\/b> and LOW <\/span><\/b>were both upgraded at Gordon Haskett<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; casino stocks take a breather with weakness in WYNN<\/span>, LVS<\/span>, PENN<\/span><\/b> as group retraces some of its strong rebound over the last month despite weak GGR data yesterday; HST<\/span><\/b> said it has reopened 4 hotel locations at limited capacity and expects 11 additional hotels to reopen in June, according to an updated investor presentation.<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks outperformed behind another near 4% gain in oil prices (to 3-month highs), helping lift shares of OXY, HES, HAL, BKR in the S&P 500 index; stocks movers in energy included; HES <\/span><\/b>receives its second analyst upgrade in as many days, raised to buy and raise at Citigroup today and target price to $60 as believe HES presents less downside risk given their strategically diversified asset portfolio, manageable debt load, and strong hedge position; LPI <\/span><\/b>falls after reverse stock split of 1 for 20 approved on May 14th<\/sup>; PUMP<\/span><\/b> reported Q1 Ebitda roughly $75M, in-line with ests while Q1 cash flow from ops rose 71% YoY to $61.7M<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank movers; banks have been slowly rebounding over the last few weeks (sharp rally last week), as the sector tries to play “catch-up”; Citigroup (C)<\/b> was upgraded to buy from hold by Dick Bove at Odeon Capital saying the bank is successfully building a new business on an old business model…it’s struggling to do so but it is succeeding; Wells Fargo downgraded shares of TBK<\/span>, NTB<\/span><\/b> and WAL<\/span><\/b> in banking sector as all three companies have had strong valuation expansion in recent weeks, and says given their expectation for credit to worsen and the group to trade around TBV, they believe the NT risk for all is to the downside; in exchanges, CBOE<\/span><\/b> was downgraded to neutral from overweight at JPMorgan as trading volumes and Open Interest as a leading indicator remain tepid and while the CBOE trading floors are scheduled to reopen next week, they don’t see the floor as a meaningful enough catalyst to drive volumes above current expectations.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>REITs; several companies providing monthly rent collections and occupancy totals: AVB<\/span><\/b> May average physical occupancy 94.4% vs. 95.3% in April and reports May Like-Term Effective Rent Change down 3.5% vs. down 0.2% in April; FRT<\/span><\/b> says ~54% of total May 2020 billed recurring rents have been collected to date, ahead of pace for the April 2020 collections at April month-end; HIW<\/span><\/b> said after collecting 99% of its contractually required rents for the month of April, the company has collected 99% of its contractually required rents for the month of May; QTS<\/span><\/b> 4.4M share Spot Secondary priced at $64.90; REG<\/span><\/b> collects 68% of April base rent and 58% of May base rent on pro-rata basis; as of May 31, 2020, ~75% of Regency’s tenants were open<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer finance and lending; Visa (V)<\/b> said total U.S. payments volume fell 5% in May from 18 % in April, while QTD payment volume was down by 11%\/May cross-border volume excluding intra-Europe transactions tumbles 45%, while global processed transactions fell 12% (Baird said the Visa update positive read-throughs to MA<\/span><\/b>); PYPL<\/span><\/b> tgt raised to $167 from $120 at UBS and raised to $183 at Deutsche Bank as they expect PYPL to sustain elevated TPV growth rates above its medium term guidance driven by higher eComm user adoption and engagement while expanding adj. operating margins; MGI<\/span><\/b> rises after Bloomberg reported that WU<\/span><\/b> recently made a takeover offer for the rival money transfer company. A deal would bring together two of the largest U.S. providers of money transfer services<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; ABBV<\/span><\/b> was upgraded to buy from hold with $115 tgt noting the Allergan acquisition adds strengths in medical aesthetics, neuroscience, eye care, and women’s health; BMY<\/span><\/b> said its treatment Zeposia, which it gained through its $74B buyout of Celgene last year, met the main goals of a late-stage study testing it in patients with an inflammatory bowel disease; TENX<\/span><\/b> reported Phase 2 results for levosimendan for the treatment of patients with pulmonary hypertension and heart failure with preserved ejection fraction<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; ADAP<\/span><\/b> 20M share Secondary priced at $11.00; ALLO<\/span><\/b> 11.7M share Secondary priced at $47.00; GH<\/span><\/b> 11.5M share Spot Secondary priced at $84.00; KLDO<\/span><\/b> 4.75M share Spot Secondary priced at $7.50; TRVN<\/span><\/b> rises after collaboration to test its investigational drug for covid-19 treatment; the U.S. Army planning to test vaccines from MRNA<\/span>, AZN<\/span>, JNJ<\/span><\/b> and SNY<\/span><\/b> according to U.S. army vaccine researcher, Reuters reported – says it will test its own vaccine candidate in human trials later this summer<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; Baird said they remain very bullish on distributors (ABC<\/span>, CAH<\/span>, MCK<\/span><\/b>) as 1Q results once again showed solid core performance and material EBIT\/EPS upside while COVID had huge top-line impact that did not flow through to profit<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Metals, Materials, Industrial & Machinery; DCI <\/span><\/b> shares rallied following its better earnings, topping its 200-day MA of $49.59; material stocks helped pace gains with copper prices rising, helping lift shares of copper producers (FCX<\/span><\/b>)<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; Dow Transports outperformed, rising more than 2% midday above the 9,150 level, topping its 100-day MA earlier of 9,050 as investors continue to put money to work in beaten up sectors amid hopes the economic rebound will continue as states reopen from the coronavirus lockdowns and more people travel and companies ship goods<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Aerospace & Defense; RTX <\/span><\/b>CFO said its Pratt and Collins units will have negative operating profit in Q2 as sees airline finances hurting, some bankruptcies, speaking at UBS conference; BA<\/span><\/b> among top leaders in the Dow early, rising for the 5th time in the last 6-sessions<\/o:p><\/p>\n

 <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Internet movers; online retailers continue their outperformance, helped today after Piper made a positive call on Wayfair (W),<\/b> raising its tgt to $225 despite the spike over the last 2-months – shares of other online retailer seeing strength again (APRN<\/span>, CHWY<\/span>, ETSY<\/span>, FTCH<\/span>, RVLV<\/span>, OSTK<\/span><\/b>); BZUN <\/span><\/b>rises as quarterly profit beats while revenue also exceeds expectations helped by 23% jump in services revenue\/CEO says believes adoption of online retail will continue to accelerate<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; ZM<\/span>, CRWD<\/span><\/b> earnings tonight in software (massive run in shares of each heading into results – both expected to have benefitted from the stay-at-home lockdowns); MSFT <\/span><\/b>tgt as raised to $250 from $205 at Wells Fargo as believe COVID-19 has created a Zeitgeist moment for the cloud as a whole changing CIOs’ cloud strategies forever from which they expect Microsoft Azure to disproportionately benefit as the enterprise cloud; WORK<\/span><\/b> rises again ahead of earnings this week with Cowen initiating coverage with an Outperform and $45 price target saying the shift to remote work has given Slack a major booster shot to its market opportunity that will accelerate adoption and lift the company’s total addressable market; MDB<\/span><\/b> tgt raised to $275 from $145 at Barclay’s and to $253 at Needham ahead of earnings Thursday as believe MDB is leveraged to strategic spend around digital transformations, which are accelerating in some cases<\/p>\n<\/div>\n

<\/p>\n