Morning Preview: April 17, 2020

Darwin SarazaDaily Market Report

Early Look

Friday, April 17, 2020

Futures

Up/Down

%

Last

DJ Industrials

778.00

3.32%

24,185

S&P 500

84.50

3.04%

2,872

Nasdaq

197.50

2.26%

8,931

 

 

U.S. stock futures surge overnight, helped by prelim results from a study in Chicago evaluating Gilead’s (GILD) Remdesivir in severely ill COVID-19 patients are positive with rapid recoveries in fever and respiratory symptoms observed and almost all patients discharged in less than a week. Following the news and bounce in stocks, President Trump announced in a White House conference new federal “Opening Up America Again” as guidelines detailed three phases aimed at guiding parts of the U.S. to move incrementally toward loosening restrictions. As many as 29 states could open up relatively quickly – “literally tomorrow” in some instances – the President said in his conference. There is no direct timetable assigned to the guidelines, but under the first phase, movie theaters, restaurants, sports venues, places of worship, gyms and other venues could reopen. Meanwhile, nonessential travel, bars, and schools could be restarted with limitations in the second phase. The bounce in futures comes after stocks wavered between gains and losses yesterday before closing higher after Trump told U.S. governors that it is essentially their call on the timetable for reopening their states for business-as-usual, and they will get all the Federal help they need. Investors are looking past abysmal economic data the last few sessions, as millions more unemployment claims (now total raised to 21MM jobless claims in the last month), lackluster earnings, and an extension of the New York state lockdown until May 15. U.S. Treasury prices are little changed despite the surge in stock, as the 10-year yield remains depressed at around 0.63% while gold drops sharply and oil continues to tumble. In Asian markets, The Nikkei Index jumped 607 points to 19,897, the Shanghai Index rose 18 points to 2,838 and the Hang Seng Index gained 373 points to settle at 24,380. In Europe, the German DAX is higher by 375 points (3.7%) to 10,680, while the FTSE 100 is higher by 170 points (3%) above the 5,800 level.

Market Closing Prices Yesterday

·     The S&P 500 Index advanced 16.19 points, or 0.58%, to 2,799.55

·     The Dow Jones Industrial Average rose 33.33 points, or 0.14%, to 23,537.68

·     The Nasdaq Composite spiked 139.19 points, or 1.66%, to 8,532.36

·     The Russell 2000 Index declined -5.89 points, or 0.50% to 1,178.09

 

Economic Calendar for Today

·     10:00 AM EST    Leading Index for March

·     1:00 PM EST       Baker Hughes Weekly Rig Count

 

Earnings Calendar:

·     Earnings Before the Open: DHR, HON, IBKC, KSU, MUSA, RF, SLB, STT

 

 

Macro

Up/Down

Last

WTI Crude

-1.12

18.76

Brent

0.61

28.43

Gold

-30.40

1,701.30

EUR/USD

-0.0017

1.0823

JPY/USD

-0.06

107.86

10-Year Note

+0.005

0.632%

 

 

World News

·     China revised its coronavirus death toll upward by 40% and recorded its steepest quarterly economic slide on record

·     China’s economy plummeted 6.8% in the first three months of the year compared with a year earlier, the country’s first such drop since Beijing began reporting quarterly gross domestic product in 1992. China’s 6.8% year-over-year pullback follows a 6% gain in the last three months of 2019 but is better than the 8.3% decline predicted by economists

·     European passenger car market recorded a “dramatic drop” of 55.1% in registrations of new vehicles in March as a result of the COVID-19 outbreak, reported the European Automobile Manufacturers Association

 

Sector News Breakdown

Consumer

·     AMC Entertainment (AMC) says it will offer $500M in first-lien five-year debt; the notes due 2025 will come via a private offering exempt from registration requirements

·     Cedar Fair (FUN) said it expects Q1 revenue $10M-$15M lower YoY – prior to the mid-March disruption in operations, revenues were higher than the prior-year period and in line with current-year expectations, primarily driven by a record start to the year at Knott’s Berry Farm; suspends quarterly distribution and withdraws guidance

·     Columbia Sportswear (COLM) temporarily suspends qtrly dividend, withdraws 1H, FY guidance; says most stores in China, Korea have reopened

·     Nordstrom (JWN) amended its $800M revolving line of credit and the closing of its 8.75% secured debt offering of $600M in order to provide extra liquidity amid the pandemic.

·     Planet Fitness (PLNT) shares gain and stay at home exercise machine makers Nautilus (NLS) and Pelaton (PTON) shares fall as President Trump allows gyms to re-open in the first phase, if gyms adhere to strict physical distancing and sanitation protocols

·     Uber (UBER) said it expects to take GAAP revenue hits of $17-22M in Q1 and $60-80M in Q2 due to its financial initiatives and is pulling its FY20 guidance, including gross bookings, adjusted EBITDA, and adjusted revenue due to the coronavirus impact

·     VICI Properties (VICI) update on its liquidity position and real estate portfolio saying as of April 16, the company has approximately $310M in unrestricted cash and cash equivalents and $1.0B of availability under its undrawn revolving credit facility

 

Energy

·     Callon Petroleum (CPE) receives continued listing standard notice from NYSE and provides response and operational update; said plans to further reduce capital and cost structure; Q1 expectations include operational capital spending of approximately $275M; sees Q1 production between 100 and 102 mboepd with an oil cut of 63% (three-stream basis)

 

Financials

·     Regions Financial (RF) Q1 adj EPS 15c on revs $1.41B vs. est. 23c/$1.46B; Q1 net interest margin (NIM) was 3.44% vs. 3.53% YoY; 1Q common equity Tier 1 ratio 9.4% vs. 9.80% YoY and 1Q net charge-offs $123M

·     Western Alliance (WAL) Q1 EPS 83c vs. est. 71c; Q1 revs $285.4M vs. est. $286.6M; Q1 results were affected by current economic environment resulting from covid-19, contributing to $51.2 mln provision for credit losses; Q1 net interest income was $269M, down $3.0M YoY

 

Healthcare

·     Gilead (GILD) shares rise 6% overnight; STAT News reported the University of Chicago Medicine recruited 125 people with Covid-19 into Gilead’s two Phase 3 clinical trials. Of those people, 113 had severe disease. All the patients have been treated with daily infusions of remdesivir. “The best news is that most of our patients have already been discharged, which is great. We’ve only had two patients perish” https://bit.ly/2KnOmwJ

·     Moderna (MRNA) rises 16%; as company gets $483M funding from U.S. govt. agency to accelerate development of its potential coronavirus vaccine; the vaccine being tested in early-stage trial by National Institutes of Health and Moderna expects to begin mid-stage trial in Q2

·     Intuitive Surgical (ISRG) Q1 EPS $2.69 on revs $1.1 billion vs. est. $2.54 and $1.03B; said Q1 worldwide procedure growth +10% vs. +18% YoY and Q1 surgical system placements 237, +0.9% YoY; noted significant decline in procedure volume in March; notes ended Q1 with $5.9 billion in cash

·     SCWorx (WORX) announced that it has accepted a purchase order from Rethink My Healthcare for 2M COVID-19 rapid test kits at $17.50 per unit. The order has a provision for additional weekly orders of 2M units for 23 weeks.

·     Cutera (CUTR) prices its secondary offering of 2.385M common shares at $10.50 per share, for expected gross proceeds of $25M

 

Industrials & Materials

·     Boeing (BA) shares jump after announced plans to resume production of all commercial airplanes in a phased approach at its Seattle-area facilities next week.; said 27K employees in the Puget Sound area will return to production of the 747, 767, 777 and 787 programs, and the 737 program will resume working toward restarting production of the 737 MAX

·     Intrepid Potash (IPI) cut its full-year capital spending plans by ~50% to $15M-20M from previous guidance, in response to COVID-19 and its impact on the economy.

·     Marten Transport (MRTN) Q1 EPS 25c on revs $218.6M vs. est. 24c and $208.25M; said added 101 Dedicated and 73 Truckload tractors during the first quarter on top of our growth of 329 Dedicated and 101 Truckload tractors throughout 2019

·     Turquoise Hill Resources (TRQ) reported Q1 gold production plunged 78% Y/Y to 26,154 oz. and copper output slid 23% to 35,203 metric tons, but said it remains on track to achieve 2020 production guidance

·     Gold miners Newmont (NEM), Barrick (GOLD), Harmony (HMY) are lower amid U.S. President Donald Trump’s plans to revive the country’s economy and investors opting for riskier assets; as gold prices tumble from 7-year highs

 

Technology, Media & Telecom

·     Apple (AAPL) was downgraded to sell at Goldman Sachs and cut its price target to $233 from $250, as it reduced its earnings estimates for a third time since Feb. 17 saying they are modeling a far deeper reduction in unit demand through mid-2020 followed by a shallower recovery heading into 2021

·     CarGurus (CARG) said it will reduce its global workforce by approximately 13%, ceasing operation of its Germany, Italy and Spain marketplaces, and halt expansion efforts in any new international markets.

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Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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