{"id":12879,"date":"2020-06-22T15:09:40","date_gmt":"2020-06-22T20:09:40","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/06\/22\/market-review-june-22-2020\/"},"modified":"2020-06-22T15:09:40","modified_gmt":"2020-06-22T20:09:40","slug":"market-review-june-22-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-june-22-2020\/","title":{"rendered":"Market Review: June 22, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Monday, June 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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151.99<\/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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26,023<\/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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20.43<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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0.66%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3,118<\/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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110.35<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1.11%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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10,056<\/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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14.86<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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

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1,433<\/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. stock advance once again, paced by strong gains in the technology sector as the Nasdaq Composite advanced for a 7th<\/sup> straight session and registered its 18th<\/sup> day of gains in the last 21 trading days (hitting new highs today were MSFT, NFLX, ADBE, NVDA, AAPL, EA, ATVI). Biotech space also touching new 52-week highs (IBB). Markets continue to push higher as more and more states reopen their economies, despite a few “hot spots” of cases that has added a bid of caution to trading over the last week. The U.S. reported 30,000 additional cases of COVID-19 on Friday (highest confirmed cases in nearly 2-months), but the slowing death rate has eased some of the market fears. Investors continue to monitor the developments in Texas, Florida, South Carolina, Arizona and California which have seen a rise in cases in recent weeks, but cases in New York and New Jersey have slowed. Despite the concerns, many states have rolled through their reopening phases (NYC phase two today) with the unlikelihood of returning to lockdowns. Shares of airlines, casinos, restaurants and cruise lines were are among the top decliners on the day while some of the “stay-at-home” beneficiaries such as food, some software related tech names saw strength. Commodity prices advance with both oil and gold prices rising amid a decline in the dollar. According to a CNBC tweet earlier today, "with less than 2 weeks to go until the end of the 2nd quarter, the Dow is on track for its largest quarterly gain since Q1 1987, the S&P 500 since Q4 1998, and the NASDAQ since Q4 2001." The move this quarter comes amid improving economic data the last few weeks, additional stimulus measures by the Fed and Government and as states continue to reopen their economies after the massive coronavirus pandemic lockdown in March. <\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Existing-Home Sales for May fell<\/b> (-9.7%) to 3.91M rate vs. the est. of 4.09M; April unrevised from 4.33M; existing-home sales fell 9.7% after falling 17.8% prior month and 4.8 months’ supply in May vs. 4.0 in April; Median home price rose 2.3% from last year to $284,600<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Oil prices end higher<\/b>, rising along with broader stock markets as WTI crude gains 71c or 1.8% to settle at $40.46 per barrel, its first close above $40 since early March, adding to last week’s momentum (prices rose roughly 10% last week) as major producers cut crude output. Prices had pulled back recently amid worries that a rise in coronavirus infections worldwide might stall a recovery in fuel demand, but prices have since found solid footing and moved higher. Gold prices gained<\/b> $13.40, or 0.8% to settle at $1,766.40 an ounce, down from earlier highs around $1,779 an ounce, picking up steam today given the pullback in the U.S. dollar.<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>The U.S. dollar slumped<\/b> on Monday, erasing most of the small gains from last week as the euro recovered after falling over 200-bps the last 2-weeks. Treasury yields were little changed<\/b> as the 10-year yield was steady with last Friday’s closing price around 0.7% despite gains in equities and a week of heavy supply coming up. Markets expected to see $134B in supply this week with 2, 5 and 7-year note auctions, beginning with Tuesday’s $46B 2-year sale, followed by $47B in 5-year notes on Wednesday, and $41B 7-year notes Thursday. The 2-year was little changed as well.<\/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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0.71<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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40.46<\/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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0.89<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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43.08<\/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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13.40<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,766.40<\/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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0.08<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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1.1258<\/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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0.06<\/o:p><\/span><\/p>\n<\/td>\n

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106.93<\/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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0.008<\/o:p><\/span><\/p>\n<\/td>\n

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0.702%<\/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; WMT<\/span><\/b> was upgraded to buy from neutral and raise tgt to $135 from $130 at UBS saying thesis is that WMT is entering an era of amplified earnings growth driven by an enhanced productivity loop, increased eCommerce scale, and accelerated technology deployment; NKE<\/span><\/b> estimates tweaked at Piper and raise tgt from $96 to $112 ahead of FQ4 (May) earnings results slated for Thursday; GPS<\/span><\/b> among top gainers in the S&P 500 after being upgraded to overweight from underweight at Wells Fargo (the lone "Overweight" rating on the Street as of today), as believe the company’s fundamental struggles are now well-appreciated by the market, but there are two compelling value unlocks we see as under-appreciated; BBBY <\/span><\/b> boosts liquidity position with a new credit facility worth $850M and plans to tighten capital expenses and working capital, other costs\/expects nearly all stores to reopen by July<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; TSN<\/span><\/b> shares slipped after China suspended imports its U.S. poultry plant after a cluster of coronavirus cases; KHC<\/span><\/b> downgraded from Neutral to Sell with $30 tgt at Goldman Sachs as expect the company to suffer outsized sales and earnings declines over the next year as recent sales gains recede, private label share pressure resumes and commodities pressure margins; HLF<\/span><\/b> ests and tgt raised at Citigroup and open a 90-day catalyst watch as believe there is an increased likelihood that HLF will resume its share repo program in earnest this year; food stocks CAG<\/span><\/b> and CPB<\/span><\/b> upgraded to buy and MKC<\/span><\/b> upgraded to hold from underperform at Jefferies and raise tgts saying revenue growth will remain elevated longer than expected for packaged food makers given potential macroeconomic pressures, an unknown new-normal restaurant experience, and the savings from eating more food at home.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; DKNG <\/span><\/b>shares rise after being initiated with a buy and $55 tgt at Jefferies, but said upside bull-case for shares stands at $175; hotels MAR<\/span>, HLT<\/span><\/b> both upgraded to Overweight from Equal Weight at Barclay’s and raised tgt to $105 from $92 for Marriott and to $90 from $82 for Hilton saying in the near term, these companies should benefit from improving demand trends for U.S. select-service hotels and resort destinations; next year, the companies should more fully price in a return of corporate and group travel; cruise lines slide (RCL<\/span>, NCLH<\/span><\/b>) after CCL<\/span><\/b> cancels all cruises through Sept. 30, days after the cruise industry suspended operations from U.S. ports until Sept. 15<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Auto sector; NIO <\/span><\/b>shares active after China internet giant Tencent Holdings said it beneficially owned 15.1% of the company, according to an SEC filing on Friday; TM<\/span><\/b> said it expects domestic output to be down 10% in July from an estimated 40% drop this month as it continues to recover from the pandemic\/said plans to halt six production lines at three vehicle plants for a total of 16 days in July vs. estimated suspension of 25 production lines at 14 plants<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks were mixed to higher given the bounce in oil prices as stocks pushed higher; in utilities, PCG<\/span><\/b> completes the initial stage in company’s bankruptcy exit plan after receiving approval on Saturday; Goldman Sachs downgrades FANG<\/span><\/b> and MUR <\/span><\/b>to Neutral from Buy and MRO<\/span><\/b> to Sell from Neutral; E<\/span><\/b> acquires 3 Italy wind-farm projects and is reportedly considering selling assets in Pakistan due to coronavirus uncertainty according to reports; tankers STNG<\/span>, NAT<\/span><\/b> hit lowest levels since April, DHT<\/span><\/b> lowest since March as WTI Crude futures top $40 in consecutive trading sessions for first time since early March; CXO<\/span>, XEC<\/span><\/b> both upgraded at Bank America<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Bank movers; pockets of strength in regional banks FITB<\/span>, CME<\/span>, RF<\/span><\/b>, while large cap banks remain pressured as C<\/span>, BAC<\/span>, JPM<\/span><\/b> weak FinTech space strong with SQ<\/span><\/b> and PYPL<\/span><\/b> rising; in consumer finance and lending; UBS downgraded AXP<\/span><\/b> to sell from neutral, while upgraded DFS<\/span><\/b> ($72 tgt) and COF<\/span><\/b> (tgt to $80 from $50) to buy from neutral after changing their stock preferences in consumer finance to reflect three factors (capture the recent modest improvements in card and auto loss expectations, migrate valuations and upside\/downside risk analysis to our 2022E EPS and estimated the level of embedded NCOs that are being priced into current stock valuations relative to our and consensus estimates<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma movers; EVOK<\/span><\/b> shares surge after saying the FDA approved its New Drug Application for Gimoti nasal spray, the “first and only nasally administered product indicated for the relief of symptoms in adults with acute and recurrent diabetic gastroparesis"; NBRV<\/span><\/b> slides as the FDA again declined to approve co’s antibiotic for complicated urinary tract infections; PFE<\/span><\/b> said it has initiated Phase 3 clinical trials on vaccine candidates for preventing pneumonia, RSV and meningitis; MRK<\/span><\/b> announced that results of two (out of 16 total) Phase 3 studies evaluating the safety, tolerability and immunogenicity of its investigation pneumococcal conjugate vaccine V114 met safety and immunogenicity objectives<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Biotech movers; BIIB<\/span><\/b> was downgraded to underweight at Barclay’s and cut tgt to $280 after the District Court decision invalidated a key Tecfidera patent (‘514) raising the likely prospect of generics launching ~2021 in the U.S., threatening ~1\/3 of Biogen’s FCF and notably shifting the valuation discussion before consideration of aducanumab optionality; EVLO<\/span><\/b> said that EDP1815 will be included in a clinical trial that will evaluate the safety and efficacy of certain experimental therapies in the prevention and treatment of life-threatening complications associated with Covid-19 in hospitalized patients at early stages of the disease; FPRX <\/span><\/b>shares jump after Wedbush upgraded to outperform and raised tgt to $9 from $5 ahead of two key potential value drivers for the company in 2H:20\/early-21; the Biotech ETF (IBB<\/span><\/b>) trades 52-week highs<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; NVTA <\/span><\/b>announced plans to buy ArcherDX, a private maker of cancer tests that had planned to go public, consisting of 30M shares of its stock and $325M in cash, plus up to an additional 27M shares of Invitae stock; SDC<\/span><\/b> slips as William Blair lowers estimates saying they expect SmileDirectClub to incur higher incremental costs as it restarts its selling and marketing activities and gradually reopens the SmileShop network<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Industrial & Machinery; JCI<\/span><\/b> was upgraded to buy from neutral and raise tgt to $39 from $30 at UBS as we believe the stock will re-rate to its historical avg. relative to the S&P500 citing its strong B\/S & liquidity position, 38% exposure to the relatively resilient Fire & Security market in a recessionary environment, and high Healthcare exposure in their Comm’l HVAC portfolio<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; AAL <\/span><\/b>raises liquidity by issuing $750M each of shares and convertibles due in 2025 and will offer $1.5B in senior secured notes and will enter into a $500M term loan facility; ALK<\/span><\/b> said it sees June traffic down 80%-85% and expect to moderate our capacity cuts into July and August to approximately down 60% and down 50% from prior-year levels; CPA<\/span><\/b> downgraded at Raymond James reflecting a longer demand recovery, with Latin America now the epicenter for the COVID-19 pandemic; The Baltic dry index, which tracks rates for ships ferrying dry bulk commodities and reflects rates for capesize, panamax and supramax vessels, rose 3 points to 1,558, its highest since Dec. 6. The index on Friday posted its biggest weekly gain ever<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Chemicals; SHW <\/span><\/b>boosted its Q2 net sales guidance view to decrease by a mid-single-digit percentage compared to the second quarter of 2019 vs. prior view of net sales to decrease by a low to mid-teens percentage compared to Q1 a year ago; LTHM<\/span><\/b> launched a $225M convertible -5-year senior notes offering; ALB<\/span><\/b> was downgraded to Underweight at KeyBanc citing view of long-term overinvestment and commoditization of the lithium industry driven by China-based players—new supply can come online quickly at low capital cost among other factors<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Aerospace & Defense; SPCE<\/span><\/b> announced the signing of a Space Act Agreement with NASA’s Johnson Space Center to encourage commercial participation in orbital human spaceflight to the International Space Station<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Apple (AAPL)<\/b> held its annual developers conference today which included new system to unlock and start cars with their iPhones which will work with BMW 5 Series vehicles that will ship next month; unveils sleep tracking in Watch OS 7; announces new in-house chip for Mac’s which will replace INTC chips announces tvOS 14 with Home app, audio sharing, multiple user support for Apple Arcade – among other updates<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Internet; TRIP<\/span><\/b> reports May monthly unique users increased ~38% sequentially and expects June monthly unique user performance to improve vs. May\/said April and May consolidated revenue performance was ~10% of last year’s comparable period and expects June revenue to approach 20% of year ago comparable period; VNET<\/span><\/b> shares rise following the $150M investment announced from Blackstone; GOOGL<\/span><\/b> to see its first drop in ad revs this year as industry site eMarketer says Alphabet’s Google net U.S. ad revenue may fall for the first time in 2020 since its coverage of company – says co’s ad rev may drop by 5.3% to $39.58 bln in 2020, hurt by a pullback from travel advertisers – Reuters<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Semiconductors; AAPL <\/span><\/b>confirmed at its WWDC product conference today that it is switching from INTC<\/span><\/b> chips to own custom processors for Macs (which came among many other product headlines form AAPL today); Stifel downgraded the Semi Cap group to neutral and downgraded shares of (ACLS<\/span>, ACMR<\/span>, BRKS<\/span>, ICHR<\/span>, KLAC<\/span>, LRCX<\/span>, NVMI<\/span>, PLAB<\/span><\/b> to hold from buy) as believe the recent rally in the markets and the group has led to a less attractive valuation that has risen “too high” and “too fast” and says estimates for CY-2H20 and 2021 are generally below consensus; CRUS<\/span><\/b> downgraded from Equal-weight to Underweight at Barclay’s as while acknowledge the new content at AAPL, they believe the stock is more than reflecting those gains and we see downside to estimates; WDC<\/span><\/b> upgraded to Speculative Buy from Hold at Benchmark after mgmt call saying the company is ramping 18 TB EAMR hard drives and gaining share in the enterprise SSD market<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; ZS<\/span><\/b> tgt raised to $130 from $110 at Needham saying even as the COVID-driven pop to demand abates, there is no slowdown in the pipeline and "execution is key to driving the quarter; EA <\/span><\/b>tgt raised to $151 from $143 at Benchmark citing continued elevated player engagement" that will drive financial momentum; TWLO<\/span><\/b> tgt raised to $225 from $170 at Northland given multiple expansion and Twilio’s unique market position <\/p>\n<\/div>\n

<\/p>\n