{"id":12831,"date":"2020-06-12T15:07:47","date_gmt":"2020-06-12T20:07:47","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/06\/12\/market-review-june-12-2020\/"},"modified":"2020-06-12T15:07:47","modified_gmt":"2020-06-12T20:07:47","slug":"market-review-june-12-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-june-12-2020\/","title":{"rendered":"Market Review: June 12, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Friday, June 12, 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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477.37<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.90%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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25,605<\/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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39.21<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.31%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3,041<\/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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96.08<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.01%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,588<\/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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31.46<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.32%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,387<\/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 started the day higher, had a brief blip lower mid-afternoon before finding solid footing into the close as renewed coronavirus case concerns and profit taking following a massive 45% spike off the March lows for major averages pressured stocks on the week. States such as Texas, Florida, Arizona (record cases) and California all recently reported their highest daily tallies of new virus cases, a concerning sign as the U.S. continues reopening, though New York surprisingly continues to drop. Overall, U.S. major averages posted their worst week of returns in about 12-weeks as Europe’s Stoxx 600 was down about 5.8% for the week, its worst weekly loss since mid-March while the German DAX down 7% for the week, and the FTSE 100 down 6%. Oil prices slipped on the day and snapped its 6-week winning streak after recording a decline of over 8% since Monday. Bargain hunters returned to beaten up sectors (airlines, cruise, and energy) after a punishing session a day earlier. Taking a look at Monday’s trading, JPMorgan noted that yesterday was the 4th time this year the S&P 500 index fell 5% or more – in the other 3 cases the SPX was higher retracing on average 71% of its previous day’s losses (today’s move comes close to that) and then going lower in the following trading session. If that pattern holds, that would imply an approximate 4% up move today. Gold prices rise despite the bounce in stocks as safe haven names not pulling back to far after yesterday surge, while Treasury prices rose. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Import prices for May rose<\/b> +1.0% MoM vs. est. 0.6% and vs. April -2.6%, while May export prices rose +0.5%, vs. est. up 0.6% and vs. April -3.3%. U.S. May non-petroleum import prices +0.1% and YoY rose 0.6% and U.S. may petroleum import prices +21.7% vs. April -32.6%<\/o:p><\/p>\n

·     <\/span><\/span><\/span>University of Michigan surveys of consumers sentiment<\/b> prelim June 78.9 (consensus 75.0) vs. final May 72.3 while the current conditions index prelim June 87.8 (consensus 85.0) vs. final May 82.3 and consumers expectations index prelim June 73.1 (consensus 70.0) vs. final May 65.9<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil prices end slightly lower<\/b> as WTI crude dips 8c to $36.26 per barrel and notched its first weekly decline in seven weeks, sliding 8.3% the last 5-days on renewed demand concerns. A resurgence of COVID-19 cases boosted concerns over the outlook for the global economy and energy demand – a key factor that has lifted prices over the last few months. Bearish inventory data from the EIA this week, some profit taking after the run up in shares also pressured prices on the week. The weekly Baker Hughes rig count showed oil and gas rigs hit record lows for a 6th<\/sup> straight week (and oil rigs down a 13th<\/sup> straight week), but failed to boost prices. August gold prices fall<\/b> -$2.50 to settle at $1,737.30 an ounce, off highs of $1,753 but still rises about 3% on the week as stocks drop and investors added to safe-haven assets late week into the weekend.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>The U.S. dollar<\/b> saw its first day of meaningful gains in about two weeks, rising firmly against the euro after bottoming to 3-month lows mid-week. Overall, the dollar sunk vs. major rival counterparts on the week as investors fled the safety of the buck and as the Fed promised more stimulus and use any tools necessary to help the economy at its meeting this week. The euro dropped over 200 bps from its mid-week highs of 1.1422, while the Pound dropped around 1% today below 1.25, more than 300-bps off its weekly high 1.2813.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Treasury yields sunk all week,<\/b> though ended the day little changed as stocks wavered between gains and losses late day after yesterday’s stock market rout. The 10-year yield was up modestly around 0.68%, but well off last Friday’s highs above 0.95% after the strong jobs report. However as stocks slipped all week long, Treasury buying resumed. Treasury auctions can be described as “tepid” at best this week, while economic data continues to be “less-bad”. The FOMC meeting <\/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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-0.08<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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36.26<\/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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0.18<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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38.73<\/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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-2.50<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,737.30<\/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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-0.0053<\/o:p><\/span><\/p>\n<\/td>\n

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1.1246<\/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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0.56<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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107.43<\/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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0.011<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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0.680%<\/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; LULU<\/span><\/b> missed consensus estimates for quarterly revenue and profit for the first time in about three years due to coronavirus-led store closures; PVH<\/span><\/b> Q1 rev in-line but materially below the Street on EPS as overall sales were down -43% Y\/Y and the company reported a loss-per share of $3.03 as gross margin was down -560 bps Y\/Y and SG&A delevered significantly\/commented 2Q revenue declines will be larger than 1Q; PRTY<\/span><\/b> rises after saying it has fully re-opened over 85% of stores and expanded curbside pickup while posts wider-than-expected loss in the first quarter<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Restaurants; PLAY<\/span><\/b> reported a wider than expected Q1 EPS loss of ($1.37) on weaker sales $159.8M, missing views while comp sales fell (-58.6%) in-line with estimates and suspends buybacks and dividends – but shares rebounded following the dismal results in the restaurant sector the last few days following weaker outlooks form RRGB<\/span><\/b> and SBUX<\/span><\/b><\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; rebound off yesterday’s mass sell-off, with nice recovers in cruise lines (CCL<\/span>, NCLH<\/span>, RCL<\/span><\/b>) as well as gaming and hotels; CHDN<\/span><\/b> announced plans to resume operations at five casino properties in Florida, Pennsylvania, Louisiana, Maryland and Ohio from June 12 to June 19; casinos in general another sector bouncing after yesterday’s sell-off<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Auto movers; HTZ<\/span><\/b> said it wants to sell up to $1B in shares while the market cap Hertz is currently around $359M\/company is asking a bankruptcy judge to approve a deal with Jefferies to allow the potential sale of 246.8M unissued shares; GM<\/span><\/b> was upgraded to Buy from Neutral at Goldman Sachs and raise tgt to $36 from $25 saying the company is exposed to the solid position and improvement in U.S. and China, with opportunities to expand margins while the firm downgraded TSLA<\/span><\/b> to Neutral from Buy saying the recent outperformance in the stock is due to Tesla’s strong Q1 margins and increased investor awareness of the favorable long-term outlook for EVs, and the bar for Tesla’s fundamentals is higher than for other stocks; Morgan Stanley also downgraded TSLA<\/span><\/b> – to underweight at $650 tgt – due to concerns around China, competition, capital needs and near term demand<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks rebounded along with most of the market after plunging the day prior on rising coronavirus cases and fears of a second wave sapping energy demand further. The Baker Hughes (BKR<\/span><\/b>) weekly rig report showed the U.S. rig count was down -5 rigs from last week to 279 with oil rigs down -7 to 199, gas rigs up 2 to 78, and miscellaneous rigs unchanged at 2. The U.S. Rig Count is down 690 rigs from last year’s count of 969; utility stocks were stable; SRE<\/span><\/b> was upgraded at Bank America to buy saying shares offer upside potential as company’s EPS could rise and says SRE is among a few companies in its sector that have reaffirmed 2020 forecast at the top end<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank movers; in online brokers, ETFC<\/span><\/b> with strong monthly May metrics as Daily Average Revenue Trades (DARTs) for May were a record 982,000, and derivative DARTs were a record 252,000 while noting trading volume has continued to increase in June, with DARTs of 1,195,000 and derivative DARTs of 277,000 through June 10, 2020; SCHW<\/span><\/b> reported net new client assets for May of $97.5 billion vs. $17.3 billion YoY as May total client assets $4.01 trillion, +14% YoY and May new brokerage accounts 1.25 million vs. 123,000 YoY; Sandy Weill on CNBC noted the financial industry is in very good shape at this time and financials are selling well below book value – noted names like SCHW<\/span>, MS<\/span><\/b> are really good buys for the long term; BHLB <\/span><\/b>was upgraded to overweight at Piper as feel credit picture was bit brighter along with underperformance<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; SELB<\/span><\/b> and Swedish Orphan Biovitrum AB entered into a strategic licensing agreement for the product candidate SEL-212 to allow for repeated monthly dosing for the treatment of chronic refractory gout (shares were downgraded at Stifel on news); PCVX <\/span><\/b>15.6M share IPO priced at $16.00; MRK<\/span><\/b> was among top decliners in the Dow as healthcare and biotech names generally underperformed the markets today<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; APLS <\/span><\/b>gave results for its Phase 3 PEGASUS study of pegcetacoplan in PNH (vs. ALXN’s<\/b> Soliris), with new data showing pegcetacoplan’s effect was seen consistently across the study population; VIE <\/span><\/b>said the FDA approved Uplizna (inebilizumab) to treat neuromyelitis optica spectrum disorder (NMOSD) in adults who are anti-aquaporin-4 (AQP4) antibody positive (Morgan Stanley notes the approval was largely expected, and the label was fairly clean without a black box warning); EDIT<\/span><\/b> announced results from a pre-clinical, proof-of-concept study of EDIT-301, which is being developed to treat sickle cell disease; BNR<\/span><\/b> 13.5M share IPO opens at $22.80 after priced at $16.50; RNA<\/span><\/b> opens $26.50 after 14.4M share IPO priced at $18.00<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; CNC<\/span><\/b> raised its full-year earnings guidance to reflect its current expectations for membership, revenue and medical utilization trends during the coronavirus pandemic; ALGN<\/span><\/b> tgt raised to $300 from $275 at Stifel saying diligence has repeatedly called out how COVID-19 may actually act as a tailwind for Invisalign as more new Orthodontic cases start in clear aligners relative to wires & brackets due to aligners’ superior workflow<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Industrial & Machinery; CAT<\/span><\/b> reported total retail machines sales were down 23% on a three month rolling basis in May vs. retail sales of machines were down 22% in the period ending in April and down 17% in the period ending in March; CAT <\/span><\/b>was also downgraded to Market Perform at BMO saying they believe any near-term recovery for its end markets will be somewhat challenged by customers’ budgetary constraints and government finances stretched; in other research Oppenheimer downgraded AME<\/span><\/b> to perform saying the decline in organic growth in the first quarter reflects a broad softening across automation, power, and other industrial end markets; ROP<\/span><\/b> also downgraded to perform from outperform at Oppenheimer<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; a bounce for transports after sharp roll the last few sessions (Dow Transports touched highs around 10,100 on Monday and below 9,000 yesterday); AAL<\/span><\/b> forecasts Q2 revenue will be down around 90% on a 75% reduction in capacity while noting since the middle of May, it has seen positive net bookings in each of the seven advanced purchase windows that it regularly monitors as believes the trends are an indication of improving passenger demand\/also said is targeting a zero cash burn rate by the end of 2020; in research, Credit Suisse downgraded shares of UAL<\/span><\/b> and SAVE <\/span><\/b>while upgrade shares of LUV<\/span><\/b> on its strong balance sheet; more on airlines, the average number of passengers screened at TSA checkpoints for the past week was 410,274 vs. 2,544,076 one year ago, down 84% year-over-year, but the absolute number of travelers screened was up 31% week-over-week <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Semiconductors; AVGO<\/span><\/b> CFO Krause sold 40K shares on 6\/9 according to Form 4 filing; Citigroup said while all equipment makers have some exposure to 5G theme indirectly, they view KLAC<\/span><\/b> (10% of sales), TER<\/span><\/b> (12% of sales), and AEIS<\/span><\/b> (12% of sales) as best positioned in U.S. with ASML<\/span><\/b>, Advantest, Chroma & ASMPT globally<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; ADBE <\/span><\/b>reported mixed results, with its Digital Media business largely outperforming but offset by the Digital Experience business coming up short due to an Advertising Cloud transactional shortfall. While DX growth of 5% fell short of the expectation for 12% growth, it is notable that Digital Media ARR grew by 23% y\/y, adding $443M in ARR vs. its $385M estimate; TTWO<\/span><\/b> was upgraded from Neutral to Buy with $160 tgt at MKM noting Take-Two’s Rockstar Studio announced at last night’s PS5 reveal event that a remastered version of GTA V would be released on Sony’s new console system in 2021; SNE <\/span><\/b>unveiled the next PlayStation, still expected for holiday ’20, including a version without an optical disc drive (neither ATVI <\/span><\/b>or EA<\/span><\/b> – though EA, which previously unveiled Madden NFL for Microsoft’s new Xbox, will host its own showcase event 6\/18); BITA<\/span><\/b> agreed to be taken private by an investor group backed by Tencent Holdings Ltd for $16.00 per share or for $1.1 billion in cash<\/p>\n<\/div>\n

<\/p>\n