{"id":12893,"date":"2020-06-24T15:09:57","date_gmt":"2020-06-24T20:09:57","guid":{"rendered":"https:\/\/www.eoption.com\/2020\/06\/24\/market-review-june-24-2020\/"},"modified":"2020-06-24T15:09:57","modified_gmt":"2020-06-24T20:09:57","slug":"market-review-june-24-2020","status":"publish","type":"post","link":"https:\/\/www.eoption.com\/market-review-june-24-2020\/","title":{"rendered":"Market Review: June 24, 2020"},"content":{"rendered":"
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Closing Recap<\/o:p><\/span><\/b><\/p>\n

Wednesday, June 24, 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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-708.79<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.71%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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25,447<\/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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-80.82<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.58%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3,050<\/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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-222.20<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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2.19%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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9,909<\/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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-49.59<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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3.45%<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,389<\/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 end the day lower (but off their worst levels) with major averages finishing down a little over 2.5%, snapping the 8-day win streak for the Nasdaq Composite, but the weakness was broad based. Another day of surging coronavirus cases in several US states (details below), coupled with tariff headlines overnight and a downbeat economic outlook from the IMF was too much for stocks to overcome on the day, prompting profit taking after the massive run higher for major averages. Stocks tried to mount a small bounce late day on more relief package\/stimulus talk, but couldn’t muster enough steam. Overnight reports that the U.S. was weighing new tariffs on $3.1B of exports from France, Germany, Spain and the UK, targeting exports, while increasing duties on products including aircrafts and other items hit futures. In another downbeat report, the International Monetary Fund (IMF) downgraded its outlook for the world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago. The IMF said it now expected global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, the fund forecast growth of 5.4%, down from 5.8%. Regarding the virus, another day of disappointing coronavirus cases as California registered 7,149 new cases, its biggest one day daily jump while Texas COVID-19 hospitalizations rise over 7% to 4,389 from 4,092 Tuesday while Florida reports COVID cases rise 5.3% vs. prior 7-day average of up 3.7% as fears arise that states may have to re-think or adjust the openings of stores or large gatherings. Yesterday, NJ Governor Murphy warned that COVID-19 cases are “beginning to creep up” while NY Governor Cuomo told NBC he is “seriously considering a quarantine” for out-of-state visitors (echoed by NJ this morning). Apple (AAPL) this afternoon said it was closing seven stores in Houston due to the COVID-19 spike (in addition to 11-store closures last week in 4-states). Recall yesterday, infectious disease expert Dr. Anthony Fauci told lawmakers that recent COVID-19 trends were "disturbing" as the U.S. recorded a 25% surge in new infections for the week ending June 21, with 10 states recording increases of 50%. Stocks most leveraged to the pandemic such as leisure, cruise lines, travel, hotels, retail, restaurants and energy saw the biggest declines today as the increase of cases threatens the pace of the economic recovery.<\/o:p><\/a><\/p>\n

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Commodities, Treasuries, Currencies<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Oil prices dropped<\/b> with broader market declines amid renewed lower energy demand given the resurgence of COVID-19 cases. WTI crude fell $2.36 or 5.9% to settle at $38.01 per barrel, the biggest one-day decline in more than two weeks as investors fretted as crude inventories climbed to another record high, and new coronavirus infections rose, potentially impeding what has been a steady recovery of oil demand. Energy hits lowest levels since May 15 on renewed lockdown fears, highlighted by TX Governor Abbott recommending citizens stay home as much possible. <\/o:p><\/p>\n

·     <\/span><\/span><\/span>The U.S. dollar rebounded<\/b> vs. major currency rivals as virus cases soared and the U.S considers new tariffs on some European counties. The euro dropped along with the Canadian dollar after Fitch slashed Canada’s rating, citing the deterioration of the nation’s public finances resulting from the pandemic. Increasing U.S. trade tensions with rest of the world also boosted the flight into safe-haven currencies. Treasury prices rose as yields slipped.<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Gold prices pulled back<\/b> from 8-year closing highs on Tuesday as August gold fell -$6.90 or 0.4% to settle at $1,775.10 an ounce, its first decline in 4-trading days as the dollar recovered as investors looked to safe-haven instruments given the sharp stock market downturn. <\/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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-2.36<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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38.01<\/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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-2.32<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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40.31<\/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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-6.90<\/span><\/o:p><\/span><\/b><\/p>\n<\/td>\n

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1,775.10<\/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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-0.0052<\/o:p><\/span><\/p>\n<\/td>\n

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1.1256<\/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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0.42<\/span><\/o:p><\/span><\/p>\n<\/td>\n

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106.94<\/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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-0.029<\/o:p><\/span><\/p>\n<\/td>\n

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0.682%<\/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; DKS<\/span><\/b> was upgraded from Market Perform to Outperform at Cowen and raised its tgt to $50 from $36 saying the co is seeing accelerating share gain, improving allocations, and adoption of its e-commerce platform with e-commerce revenue modeled +150% in Q2:20; COLM<\/span><\/b> was upgraded to buy at Davidson and raise tgt to $100 from $71 as the inventory situation appears to be getting back in shape; PTON<\/span><\/b> tgt raised to $70 from $55 at KeyBanc saying delivery times are still quoted at 7-11 weeks, and trends remain very soft at physical boutique competitors; GNC <\/span><\/b>files for Chapter 11 bankruptcy\/to pursue dual-path process to restructure balance sheet<\/o:p><\/a><\/p>\n

·     <\/span><\/span><\/span>Consumer Staples; BYND<\/span><\/b> shares active as the founder and CEO of meat substitute maker Impossible Foods, Patrick Brown, said in an interview with CNBC’s Jim Cramer that "this is why I think people are increasingly aware plant-based products are going to completely replace the animal-based products in the food world within the next 15 years. That’s our mission. That transformation is inevitable."<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Restaurants; in research, TXRH<\/span><\/b> was upgraded to neutral at JPMorgan while the firm downgraded CAKE<\/span><\/b> to underweight as updates casual dining outlook saying COVID-19 winners DPZ<\/span>, CMG<\/span><\/b> will likely remain so due to strong digital and relatively low cost delivery platforms, but think both will see declines in their digital business in 2021 vs 2020 – said remain comfortable with global QSR <\/span><\/b>exposure, specifically MCD <\/span><\/b>but also WEN<\/span><\/b>, while saying YUM<\/span><\/b> and DNKN<\/span><\/b> are not over-priced on a FCF basis – said BLMN <\/span><\/b>remains the “risk on” name in casual dining, but 48% non-Outback US exposure and ~10% international (mostly Brazil) exposure but the recent decline in EAT<\/span><\/b> shares makes this a tactical add in an otherwise volatile space – said use CAKE<\/span>, SHAK<\/span>, SBUX<\/span><\/b> as source of funds; in other news, TACO<\/span><\/b> prelim Q2 revs $104.5M and comp sales -10.1% as franchised restaurants saw positive comp sales growth during last five weeks of the quarter<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Casino & Leisure movers; cruise industry cautious analyst comments as Barclays downgraded both RCL<\/span><\/b> and NCLH<\/span><\/b> to equal-weight from overweight citing ongoing uncertainty related to the pandemic while Argus downgraded its long-term rating to hold on NCLH<\/span><\/b>; in gaming, DKNG <\/span><\/b>shares active after to accelerate the launch of online casino gambling and sports betting from early 2021 to late 2020; in the RV space, WGO <\/span><\/b>shares fall on mixed results as posts quarterly loss (on higher sales) but noted Ebitda was down around 93% on a YoY basis<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Energy stocks broadly lower as recent Covid-19 outbreaks in warm-weather states have renewed lockdown\/demand fears, highlighted by TX Governor Abbott recommending citizens stay home as much possible. WTI Crude futures fall on fears and a 3rd-straight weekly record for EIA inventory data (over 540M barrels this week); PBF<\/span><\/b> shares fall after Goldman downgrades to sell; REGI<\/span><\/b> shares also stumble after updating a calculation error in its Q2 EBIDTA guidance, which is now projected to be a loss of $2-$12M (previous range was positive $20-$35M); NOG announces a reverse stock split; PCG<\/span><\/b> experienced a small, localized power outage yesterday that affected more than 7,000 customers and the company warns Californians that power shutoffs may occur again this summer, although outages will decrease and be shorter than last year’s; U.S. lender Wells Fargo said it had signed multi-year purchase agreements for renewable energy with RDSA’ units, as it progresses toward its clean energy goals<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Inventory data; the weekly API inventory report showed a build of 1.75M barrels of oil for the week ending June 19, gasoline inventories showed a draw of 325K barrels, distillate inventories show a draw of 3.85M barrels, and Cushing inventories show a draw of 2.6M barrels<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Consumer finance and lending; PYPL<\/span><\/b> coming off all-time record highs yesterday was downgraded to neutral from buy at BTIG after doubling of share price from pandemic driven March lows – says acceleration of account growth and engagement resulting from crisis appears baked into valuation at current levels<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Exchanges & Services; INFO<\/span><\/b> was upgraded by two analysts today following recent Q2 results and updated guidance (Stifel and UBS raised) saying the valuation discount between INFO shares and the comp group doesn’t make sense given the company’s prospects; JPMorgan was cautious on CME <\/span><\/b>shares saying Open Interest and Volume declines putting further pressure on CME’s stock price, leading it to further underperform<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Pharma & Biotech movers; ALXN<\/span><\/b> announces phase 3 study of weekly subcutaneous Ultomiris (ravulizumab-cwvz) met primary endpoint; EDIT<\/span><\/b> 6M share secondary priced at $31.25per share; BHVN<\/span><\/b> shares slipped after its experimental drug, Troriluzole, failed to meet primary goal of statistically significant improvement in patients with obsessive-compulsive disorder (OCD) at week 12 compared to placebo\/while co maintains the study showed consistent and clinically meaningful drug effect; REGN<\/span><\/b> tgt raised to $700 at Credit Suisse saying while Eylea and Dupixent remain important near-term commercial driver, they think that the oncology business (anchored by Libtayo) will likely drive the next leg of growth<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Healthcare services and providers; in the dental sector, PDCO<\/span><\/b> posted adj EPS of 43c, topping the 18c estimate while sales fell to $1.286B from $1.437B but topped estimates of $1.24B while said is not providing FY21 outlook due to COVID-19 uncertainty; STAA<\/span><\/b> was downgraded to Neutral from Buy and removing our PT at BTIG as shares have appreciated ~131% from their low in March while noting sales saw the worst of the pandemic in 1Q20 and came out the other side with expectations for 20% unit growth in 2H20; APT<\/span>, LAKE<\/span><\/b> safety equipment\/clothing makers rise as more governors announce required precautions including mandatory mask\/face coverings; LAKE<\/span><\/b> also announced that it will be included in the Russell 3000 starting next week<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Industrial & Machinery; in the waste sector, ADSW<\/span><\/b> shares fall after WM<\/span><\/b> amends merger agreement, to buy the company for $30.30 per share representing a total enterprise value of $4.6B including $1.8B of debt. GFL Environmental will acquire assets from the two companies for $835M to address substantially all of the divestitures expected to be required by the DoJ for approval<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Aerospace & Defense; AVAV <\/span><\/b>shares rise as reported April quarter results with revenues and EPS well above consensus estimates, while Piper raised its tgt to $93 from $76 as large contracts and record backlog drive upbeat outlook, reiterate overweight; BA <\/span><\/b>shares active after the FAA said wiring near the Boeing Max engines need better protection; LMT<\/span><\/b> shares active after reports that deliveries of its F-35 jets were halted in June due to design flaw around fuel tanks<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Transports; Dow Transports sunk to around the 8,900 level, down over 2.5% as strength in some truckers (CHRW<\/span><\/b>) helped offset the weakness in airlines (AAL<\/span>, UAL<\/span>, DAL<\/span>, LUV<\/span><\/b>) as rising COVID-19 cases sparks renewed fears of slowing travel demand. Note several airlines over the last 2-weeks have also issued stock and debt in order to raise cash during this difficult time<\/o:p><\/p>\n

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

·     <\/span><\/span><\/span>Internet; AMZN<\/span><\/b> tgt raised to $3,050 from $2,750 at Wedbush saying notwithstanding limited near term visibility, Amazon can deliver substantial earnings over the long term by growing spending more slowly than revenues; GOOGL <\/span><\/b>tgt was raised to $1,775 and $1,425 at Goldman Sachs following higher multiples for tech companies<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Software movers; DELL<\/span><\/b> is examining options including a spinoff for its roughly $50 billion stake in VMW<\/span><\/b> as the PC maker seeks to boost the value of its shares the WSJ reported late yesterday noting Dell recently kicked off a process to explore the possibility of unloading the stake or taking other steps that could include buying the rest of VMWare https:\/\/on.mktw.net\/3fTyoIk<\/a> ; NTDOY<\/span><\/b> was downgraded to Neutral from Buy at Wedbush on valuation as well as a relatively unclear catalyst path <\/o:p><\/p>\n

·     <\/span><\/span><\/span>Media & Telecom movers; TMUS<\/span><\/b> 198M share Secondary priced at $103.00; CRTO<\/span><\/b> was downgraded from Outperform to Market Perform at BMO Capital saying AAPL<\/span><\/b> will make changes to IDFA that they think present a headwind for ad tech companies; CMCSA<\/span><\/b> tgt was raised at two firms (Wells Fargo and Morgan Stanley) saying broadband momentum in Q2 is continuing while media headwinds are proving to be better than feared<\/o:p><\/p>\n

·     <\/span><\/span><\/span>Hardware & Component news; AAPL<\/span><\/b> coming off all-time record highs on Tuesday, while CNBC noted today that Apple sold 3.6 million iPhones in China in May, down from 3.9 million in April, according to Shanghai-based CINNO Research https:\/\/cnb.cx\/37VAtk0<\/a><\/p>\n<\/div>\n

<\/p>\n