Mid-Morning Look: August 18, 2020

Darwin SarazaDaily Market Report

***This will be the last “Mid-Morning” report of the week.

***Service will resume normally Monday August 24th.

 

 

 

 

 

 

Mid-Morning Look

Tuesday, August 18, 2020

Index

Up/Down

%

Last

 

DJ Industrials

-111.35

0.40%

27,733

S&P 500

-0.63

0.02%

3,381

Nasdaq

25.18

0.23%

11,154

Russell 2000

-9.03

0.57%

1,576

 

 

U.S. equities open mostly higher, led by another jump in large cap technology as the Nasdaq Composite touches another all-time intraday record high as investors continue to pile money into the space. The S&P 500 index finally tops the intraday February record high of 3,393.52 after failing to breach that level the last week (though has reached new all-time closing highs). However, after each topped respective all-time intraday highs, stocks came for sale with a quick roll on profit taking. The U.S. dollar falls again despite stronger housing data (beat for housing starts and building permits for July) as the dollar index (DXY) falls back at 2-year lows again 92.12. Retailers this morning with strong quarterly results from Dow components WMT and HD as well as other retailers AAP, KSS, though shares have slipped for some given massive rally heading into expected good numbers and comments that business stabilizing. The news today generally good, though no progress made on stimulus bill in Washington with extended unemployment benefits, while no word on China-U.S. trade talks. Gold benefit again amid the plunge in the dollar while natural gas prices resume upward momentum, up nearly 3% to $2.40 mln btus – 8 month highs. Oil prices pull back after touching 5-month highs on Monday.

 

Economic Data

·     Housing Starts for July expected rose a stronger 22.6% to 1.496M units vs. estimate at 1.24M (up 5%) and up from June at 1.22M units; Building permits for July were up 18.8% to 1.495M units vs. est. at 1.32M (up 5.4%) and above June permits 1.258M; July single-family starts rose +8.2% to 940,000 unit rate but multifamily soars +58.4% to 556,000 unit rate

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.46

42.43

Brent

-0.26

45.11

Gold

10.30

2,009.00

EUR/USD

0.007

1.1941

JPY/USD

-0.62

105.39

10-Year Note

-0.008

0.68%

 

 

Sector Movers Today

·     Semiconductors; NVDA touches another record all-time high, leading semis initially ahead of expected strong earnings tomorrow night after the close; MU tgt cut to $58 from $63 at Mizuho and lowered NovQ (F1Q) estimates on much weaker Enterprise demand, even with Cloud remaining healthy and handsets a tailwind, and 2H20E NAND/DRAM pricing headwinds and modestly softer GM

·     Retailers; WMT posted 2Q adj EPS $1.56 topping the $1.25 estimate as comps ex fuel rose +9.9% (and Sam’s comps 13.3%), with e-comm sales +97%, total revs $137.7B above est. $135.5B – all better, but shares slipped after pointing to normalizing trends and a slower back-to-school; KSS top and bottom line results beat (Q2 EPS loss (25c) on sales $3.41B (down 23.1% YoY) vs. est. loss (83c) and $3.09B) but did not report comp sales due to store closures – overall retailers giving back some of last week gains with JWN, DDS, M pulling back

·     Housing & Building Products; HD a stellar quarter, beating on all levels as EPS, sales, comp all well ahead – Q2 EPS $4.02 beat est. of $3.68 on better revs while comp sales jumped +23.4% (US was +25%) vs +12% on better margins at 34% – the results come ahead of earnings from peer LOW tomorrow morning which is also expected to have benefitted from the pandemic; home builders get another strong economic report as housing starts and building permits for July both came in well above economist views (DHI, LEN, TOL, MTH)

·     Metals & Materials; gold miners have been soaring of late on surging gold prices (back above $2,000 an ounce today), with miners getting an additional boost yesterday after Warren Buffet’s Berkshire Hathaway revealed a stake in GOLD shares in latest 13F filing; NEM and Canada’s Kirkland Lake Gold to jointly assess exploration opportunities for NEM’s Timmins properties and KL’s Holt Complex in Ontario, Canada

·     Pharma movers; LLY and China alliance partner Innovent Biologics have agreed to expand their partnership in cancer, initiated in March 2015; VNDA said interim analysis of late-stage trial of its potential treatment showed hospitalized patients with COVID-19 pneumonia improved faster than those on placebo as study showed 14-day treatment with its drug accelerated clinical improvement by day 7; AMAG was downgraded at Barclay’s following the strong run in shares

 

Stock GAINERS

·     AAP +1%; Q2 comp store sales rose 7.5% in Q2 well above the estimate for a rise of 2.6%, driven by strength in the company’s DIY omnichannel business while GM and op margin above views

·     HD ; Q2 EPS $4.02 on sales $38.05B vs. est. $3.66 and $34.47B; Q2 comp sales soared 23.4% vs. est. 11.4% and up from 3% YoY; 2Q average ticket sales $74.12, +10% YoY and 2Q customer transactions +12.3% vs. 0% YoY

·     IMBI +13%; after reports Q2 adjusted EBITDA of $10.7M vs. $0.2M YoY helped by lower operating expenses and growth in active customers during the coronavirus crisis – says expects Q3 and Q4 adjusted EBITDA in “mid-to-high single digit millions”

·     ORCL +3%; has entered the picture as a potential buyer of TikTok, the Financial Times reported, working with a group of investors that already holds a stake in the Chinese company https://on.mktw.net/317DwE2

·     ROKU +3%; two positive analyst mentions as William Blair sees 44% upside in the next 12 months, taking up revenue estimates $102M and $187M in 2020 and 2021, while Berenberg raised its tgt to $181 from $145 saying it has the potential to attract more than just linear TV ad dollars

·     SE +10%; Q2 revenue growth of 94% Y/Y to $1.29B while did post a slightly wider than expected loss per share of $0.68 – digital revenue totaled $716.2M (+62% Y/Y) and e-commerce grew 189% to $510.6M and GMV was up 110% to $8B

 

Stock LAGGARDS

·     ICPT -5%; as 1.25M share Block Trade priced at $47.25

·     KDP -3%; priced its 45M share secondary at $29.15

·     KSS -13%; plunges despite better beat on top and bottom line as issues no forward guidance

·     PSTX -25%; shares decline after the FDA put a clinical hold on its Phase 1 clinical trial for P-PSMA-101 in prostate cancer following a death of a patient

·     UBX -10%; falls further after negative news yesterday – downgraded by at least three analysts (Citi, MS, Mizuho) as UBX0101 did not meet its primary endpoint in a Phase II trial in knee OA; ICPT 1.25M share Block Trade priced at $47.25

·     ZI -5% after offers to sell 12M shares of common stock for holders

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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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