{"id":12800,"date":"2020-06-05T15:07:51","date_gmt":"2020-06-05T20:07:51","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/06\/05\/market-review-june-05-2020\/"},"modified":"2020-06-05T15:07:51","modified_gmt":"2020-06-05T20:07:51","slug":"market-review-june-05-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-june-05-2020\/","title":{"rendered":"Market Review: June 05, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Friday, June 05, 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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829.16<\/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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27,110<\/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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81.58<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.62%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3,193<\/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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198.27<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.06%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,814<\/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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55.09<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.79%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,507<\/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 ripped higher to end the week, as the Nasdaq Composite completed the round trip off the March lows (of 6,631), moving to a fresh record high on the day (hit 9,842) culminating another astounding week of stock market returns. The S&P now up about 47% off its March lows. Today’s gains were buoyed by an unexpectedly positive jobs report for May which showed a surprise 2.5 million jobs added in May, stunning markets which had been expecting a decline of -7.5 million jobs while private payrolls added over 3 million jobs vs. the estimate for a -6.75M job decline. While the 13.3% unemployment figure is nothing to jump up and down about, it certainly is reason for optimism given the estimate was closer to 19%. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>As investors took more risk, defensive and safe haven assets tumbled with gold falling over 2.6% to 1-month lows while Treasury prices dropped, sending yields higher with the 10-year hitting rising to 0.95%. The rally remains based solely on optimism that the economy will recover much quicker than anticipated after the coronavirus pandemic shut life down around the globe for about two months – but retailers, restaurants, theme parks, and travel have all started to get back on track, in turn boosting spending and improving sentiment. Markets have already chalked up the upcoming Q2 as a loser, with GDP estimates somewhere in the range of down over -50% as per Atlanta Fed tracker yesterday, but as long as businesses continue to open, cases of COVID-19 continue to fall and no second wave of cases appear (or a vaccine is created), then the recent rally could likely hold steady. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Sector movers included transports with airlines soaring the last two days behind UAL and AAL updates (announced they were adding flights for the summer), while energy stocks led as oil prices jumped on increasing demand expectations, and credit cards jump on spending increased optimism. Stay at home stocks sputtered given resurgence of economy (NFLX, ZM, PTON, and WORK) as well as food and consumer staples. Semiconductor stocks touched record highs behind AVGO earnings and seen as market leaders along with software. European markets also a big week as the German DAX on its 3rd 3%+ up day of the trading week and now up 51% off its closing low in March. Down just over 3% YTD. Big numbers hit this week with the Dow topping 27K today, S&P above 3,200, NASDAQ record highs and Russell above 1,500. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Interesting to see where some of the top Wall Street minds over the last few decades stand after just 2-months ago screamed concern: as the Oracle of Omaha Warren Buffett sold airlines essentially at the lows, David Tepper said this was the 2nd<\/sup> most overvalued stock he saw in his lifetime, Jeff Gundlach cautious as usual and Bill Ackman on CNBC 2-months ago sounded as cautious about the situation as one could imagine. Yet stocks have rallied more than 40-45% in a straight line up since the mid-March lows helped by stimulus measures from the Fed and out Washington for both individuals and businesses which were forced to stay home dealing with COVID-19 pandemic. Those measures, along with a slowing of coronavirus cases\/deaths across the globe\/U.S. has boosted confidence. Positive vaccines related comments also helping midday as infectious disease expert Fauci said phase 3 trial of Covid vaccine possible in July<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Jobs data massive surprise to upside<\/b>: Nonfarm payrolls data showed that payrolls unexpectedly rose 2.5M jobs in May vs. estimates for a decline of -7.5M jobs while private payroll jobs rose 3.09M vs. est. -6.75M jobs and manufacturing jobs added 275K vs. est. for a decline of -440K. The unemployment rate was 13.3%, better than the prior month of 14.7% and much better than the 19% estimate. Average hourly earnings fell -1.0% vs. an expected rise of up 1%<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil prices finish the week much higher<\/b>, as WTI crude gained $2.14, or 5.7% to settle at $39.55 per barrel (6th straight week of gains), nearing 4-month highs on the broad economic recovery trade play as businesses and travel continues to re-open from the pandemic and after OPEC+ said they decided to meet Saturday to discuss extending production cuts, indicating that some laggard countries may have agreed to align themselves with the deal. Group leaders Russia and Saudi Arabia reportedly clinched a tentative agreement with holdout member Iraq that will extend cuts of 9.7M bbl\/day for another month until the end of July. If OPEC+ fails to agree to roll over the curbs, the cut could drop back to 7.7M bbl\/day from July through December as previously agreed. The weekly Baker Hughes rig count showed another decline of -17 total rigs (16 oil for its 12th<\/sup> straight weekly decline in oil rigs and 1 gas), more supportive of energy prices with less supply out there. Brent prices to 3-month highs as well up above $42 per barrel.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Gold prices<\/b> a different story, with August gold falling -$44.40 or 2.6% to settle at $1,683 an ounce, its lowest levels since April 21st<\/sup> caught in the safe-haven asset downdraft as markets remain in all out buying mode for the week, looking to riskier high growth assets.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>The U.S. dollar<\/b> snapped its 4-day losing streak, bouncing back behind strong monthly jobs data which showed an unexpected rise in jobs compared to an economist estimate for a -7.5M job decline along with better unemployment readings (13% vs. est. 19%). The data temporarily helped alleviate dollar selling pressure which was evident all week. U.S. Treasury yields<\/b> spiked on the better jobs report as well, as the benchmark 10-year yield rose as much as 13 bps to 0.95%, best levels since March 20 and continuing a steady march higher in recent days as investors sold government bonds and took on riskier assets. On the week, the 10-year yield bounced over 25 bps from 0.63% lows with the 30yr yield up also about 25 bps to 1.67%. <\/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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2.14<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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39.55<\/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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42.30<\/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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-44.40<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,683.00<\/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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-0.0045<\/o:p><\/span><\/p>\n<\/td>\n

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1.1293<\/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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0.53<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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109.68<\/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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0.081<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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0.905%<\/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; massive rally in retail continues (LULU<\/span>, KSS<\/span>, DDS<\/span>, M<\/span>, JWN<\/span><\/b>) as economic data continues to show improvement and more retailer stores open; GME<\/span><\/b> said total global sales are expected to decrease in the range of 33% to 35% and comparable store sales to decrease in the range of ~30% to 31% in FQ1; GPS<\/span><\/b> Q2 EPS was materially impacted by slow sales and store closures due to COVID-19 as results missed expectations; KTB<\/span><\/b> upgraded at Susquehanna saying plans to establish global platforms for, and enhance the image of, Lee and Wrangler are well underway<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; PPC <\/span><\/b>CEO Jayson Penn has pleaded not guilty to federal charges that he conspired to fix chicken prices, WSJ reported https:\/\/on.wsj.com\/3cHi5fO<\/a> ; SYY<\/span><\/b> was upgraded to overweight from equal-weight at Wells Fargo and raising PT to $70 from $50 as confidence in the co’s ability to navigate the COVID-19 disruption and emerge even stronger is growing; stay at home beneficiaries like CLX <\/span><\/b>and food related names underperform<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Restaurants; the casual dining sector has been among the best performers of the week following several business updates\/re-openings for the likes of CAKE<\/span>, CBRL<\/span>, RRGB<\/span><\/b> this week (all surging); Guggenheim raised its tgt on CAKE <\/span><\/b>to 30 while reiterating buys on CAKE<\/span>, DNKN <\/span><\/b> as their recent updates all reflect sequential sales momentum and support or improve our 2021 EBITDA outlooks; at RBC Capital, firm says it remains cautiously optimistic on fast food while casual dining is more of a question mark, and we think there will be a greater focus on value from here. We shift MCD<\/span><\/b> to the top of our OP-rated ideas list, followed by DPZ<\/span>, QSR<\/span>, DRI <\/span><\/b><\/o:p><\/p>\n

·     <\/span><\/span><\/span>Housing & Building Products; RH<\/span><\/b> shares rose following better-than-feared Q1 results, which included commentary about demand continuing into the current period; homebuilders BLDR<\/span>, BMCH<\/span>, MDC<\/span>, MTH<\/span><\/b> all downgraded to in-line from outperform at Evercore\/ISI and upgraded TOL<\/span><\/b> to outperform from in-line; Zillow report showed following sustained growth since mid-April, newly pending home sales and new listings fell last week (said newly pending sales fell 5.2% from the previous week; month-over-month, newly pending sales are up 24.5% nationally\/new listings fell 7.2% W\/W but are up 19.3% M\/M. They remain down 17.2% from a year ago).<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; PENN <\/span><\/b>touches 52-week highs, rising above $40 (rallying from $3.75 low on 3\/18) while just only recently reopened some casinos after no revs for nearly 2-months, but shares pare gains, while other casinos also rise (WYNN<\/span>, MGM<\/span>, LVS<\/span><\/b>); cruise lines (CCL<\/span>, RCL<\/span>, NCLH<\/span><\/b>) and theme parks (SEAS<\/span>, SIX<\/span>, DIS<\/span><\/b>) also continue the momentum trade higher on economic reopening for some of them this week<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Autos; global auto trade rising with broader market with hefty size gains for F<\/span>, GM<\/span><\/b> and the likes as well as auto suppliers benefitting; at Guggenheim, raised the tgt on KMX <\/span><\/b>to $106 from $76 and LAD<\/span><\/b> to $162 from $122 saying they are incrementally more positive on the auto dealers based on recent business trends <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks remain one of the best spaces regarding the economic recovery optimism trade, with oil prices jumping again this week to fresh 4-month highs (XOM<\/span>, APA<\/span>, MRO<\/span>, HAL<\/span>, NBL<\/span><\/b>, and OXY<\/span><\/b> among some of the top gainers). OPEC+ decided to meet Saturday to discuss extending production cuts, indicating that some laggard countries may have agreed to align themselves with the deal. Group leaders Russia and Saudi Arabia reportedly clinched a tentative agreement with holdout member Iraq that will extend cuts of 9.7M bbl\/day for another month until the end of July. If OPEC+ fails to agree to roll over the curbs, the cut could drop back to 7.7M bbl\/day from July through December as previously agreed. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>E&P sector; Stifel noted that market forces that caused U.S. companies to shut-in more than 2 Mboepd during May are prompting some to reverse course on the heels of a 76% oil price increase over the past month – firm note PE<\/span><\/b> and WPX<\/span><\/b>, which are restoring curtailed volumes this month, XEC <\/span><\/b>and PDCE <\/span><\/b>appear well position to return wells to production, in light of their peer leading cash costs; QEP<\/span><\/b> announced it has entered into an amendment to its existing credit agreement with lenders which include: a reduction in aggregate commitments from $1.25B to $850mm; the Baker Hughes (BKR<\/span><\/b>) rig count slides again as oil rigs were down -16 to 206, gas rigs down -1 to 76 (overall rig count fell -17 to 284). In utilities; PCG<\/span><\/b> estimates lowered at RBC Capital to reflect the upcoming bankruptcy refinancing & reduced his PT to $15 from $19; ETR<\/span><\/b> was upgraded to buy at UBS<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank movers; online brokers SCHW<\/span>, AMTD<\/span>, ETFC<\/span><\/b> among others all reporting problems on the market open given increased trading activity after the jobs data; the banks befitting from Treasury yields breaking out of their three-month trading range (10-year hit as high as 0.95% from lows 0.65% earlier in the week), rising as safe-haven assets sold off, in turn lifting yields amid better lending margins; credit cards extend gains in what has been a stellar week for names like ADS<\/span>, COF<\/span>, DFS<\/span>, SYF<\/span><\/b> and AXP <\/span><\/b>as sentiment rises about the economy with stores and restaurants beginning to reopen, in turn boosting spending; AXP<\/span><\/b> positive mention at Wells Fargo today raising tgt to $130 saying remain constructive and see attractive risk\/reward; JPMorgan notes on June 01, our tracker of Chase consumer card spending rose from -19.1% to -16.3%; the tracker rose 4.3%-pt over the prior week, and it is 25.2%-pt above its low of -41.5% on March 31.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Medical equipment and devices; ABMD<\/span><\/b> said the FDA approved the company’s investigational device exemption application to start an early feasibility study with a first-in-human trial of the 9 French (Fr) Impella ECP™ heart pump; IDXX<\/span><\/b> said it received European Union approval for use of its COVID-19 test kit\/CE mark certification awarded to its subsidiary OPTI Medical Systems Inc.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; COO <\/span><\/b>reported 2Q results with a 10% and 30% shortfall on sales and EPS, respectively as CVI revenues came in 13% ($58M) lower than our Raymond James forecast, while CSI was largely in-line; EVH<\/span><\/b> was downgraded to neutral at Goldman Sachs saying the company’s recent track record and outlook through the end of 2021 lead us to move to the sidelines absent a clear consistent mid-teens growth profile; <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Aerospace, Industrial & Machinery; BA <\/span><\/b>the top gainer in the Dow again, surging another 15% trading above $210 per share (about 60% bounce off the lows), rising with airlines amid demand improvement expectations (5th straight day of gains); RTX<\/span><\/b> another top gainer in the Dow as machinery, equipment, multi industry names all rising on the economic recovery theme<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; Dow Transports top the 10,000 level, rising as high as 500 points (or 4.5%) on the day led by airlines (though all sub-segments were higher) on economic recovery optimism; the rebound the last 2-days in the airline sector is nothing short of astounding, getting a boost yesterday after AAL<\/span><\/b> and UAL <\/span><\/b>added more flights than anticipated back to their summer schedule, boosting optimism that the economy is recovering from the coronavirus pandemic (JBLU<\/span>, ALK<\/span>, LUV<\/span>, DAL<\/span><\/b> among names that are well off March lows); the TSA says most travelers thru checkpoints y’day since March 22 and +22% WoW but remains -85% YoY<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Metals & Materials; metals have been surging over the last 2-weeks, helped by better China data and recovery initially, but now getting progress in US as demand hopes rise; shares of metals X<\/span>, FCX<\/span>, NUE<\/span><\/b> among names moving; Paper & Forest Product estimates reduced at RBC Capital for 2020 and 2021 for NBSK and fluff pulp given the unfavorable demand outlook, large consumer inventories, & pulp buyers pushing back on pricing (also downgraded CFX<\/span><\/b>, and RFP<\/span><\/b> to Sector perform from Outperform); copper settles up 23% from low in March, enters bull market territory (FCX<\/span>, SCCO<\/span><\/b>); gold miners slide (AEM<\/span>, GOLD<\/span>, NEM<\/span><\/b>) given the drop in gold prices, with investors rotating out of defensive names into riskier ones<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Internet; NTES <\/span><\/b>progressed toward listings in Hong Kong amid recent tensions over U.S. listing requirements, saying it plans to sell stock at HK$123 ($15.87) a share, which could raise about 21.1B Hong Kong dollars ($2.7B) as shares are set to begin trading on June 11 while JD<\/span><\/b> filed a preliminary prospectus, though it didn’t say when it plans to list or how much it seeks to raise; large cap FAANG names also higher, but only modest gains compared to other sectors; GRUB<\/span><\/b> shares jumped early afternoon after CNBC reported the company has 2-new suitors in Just Eat Takeaway and Delivery hero<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Semiconductors; Philly semi index (SOX) rises nearly 4% above 2,025 (new record highs) and now up over 40% from the March lows 1,233 as all 30-components higher led by ON<\/span><\/b> following positive analyst comments (Rosenblatt), with SWKS<\/span>, ADI<\/span>, KLAC<\/span><\/b> hitting 52-week highs; AVGO<\/span><\/b> reported an in-line AprQ and guided to an in-line JulQ at $5.75B (consensus $5.8B) and noted JulQ strength from Cloud Data Center\/Infrastructure and Industrial seeing a rebound; <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Hardware & Software movers; AAPL <\/span><\/b>record highs today; the group has been a standout to the upside in the tech space, with strong results overnight and this week in many names (but seeing some profit taking); MDB <\/span><\/b>posted a $10.8M revenue beat and $15.6M billings beat and despite CV-19 headwinds, revenue growth improved slightly to 46% y\/y vs. 45% last quarter; DOCU<\/span><\/b> accelerating digital transformation drives strong results as subscription revs of $280.9M topped ests and billings grew 59% YoY; WORK<\/span><\/b> better quarterly earnings, revenue and raised revenue guidance couldn’t offset concern of pulling its billings forecast for the year as shares tumbled; DOMO<\/span><\/b> reported solid F1Q results, exceeding Street on all metrics, driven by solid execution while FY21 revenue guidance was only raised by the 1Q beat and remains conservative<\/p>\n<\/div>\n

<\/p>\n