Morning Preview: August 24, 2020

Darwin SarazaDaily Market Report

Early Look

Monday, August 24, 2020

Futures

Up/Down

%

Last

DJ Industrials

267.00

0.96%

28,126

S&P 500

27.50

0.81%

3,420

Nasdaq

105.50

0.91%

11,667

 

 

U.S. stocks are building on last week record gains for the S&P 500 and Nasdaq Composite, getting a boost after President Trump’s announcement that the U.S. FDA issued emergency use authorization for convalescent plasma to treat COVID-19. Also boosting sentiment, Trump’s team is privately reassuring U.S. companies that they can still do business with the WeChat messaging app in China, according to reports. On Sunday, the FDA issued an emergency use authorization (EUA) for convalescent plasma gathered from people who have recovered by COVID-19 as a treatment for hospitalized coronavirus patients, raising market hopes and boosting pandemic related sectors such as airlines, cruise lines, gaming and restaurants. In energy news, Hurricane Marco and Tropical Storm Laura tore through the Caribbean and Gulf of Mexico, forcing thousands of coastal residents to evacuate. After a modest bounce late last week, the U.S. dollar holds slightly above a 27-month low touched recently after another record rally in stocks. The dollar index has lost more than 5% since the end of June and marked its biggest monthly loss in a decade in July, as investors bet that other economies will strengthen more than the U.S. In Asian markets, The Nikkei Index rose 65 points to 22,985, the Shanghai Index was up a few points to 3,385 and the Hang Seng Index gained 437 points (1.74%) to settle at 25,551. In Europe, the German DAX is higher by 280 points to 13,045, while the FTSE 100 is up over 100 points to 6,100.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 11.65 points, or 0.34%, to 3,397.16

·     The Dow Jones Industrial Average rose 190.60 points, or 0.69%, to 27,930.33

·     The Nasdaq Composite climbed 46.85 points, or 0.42%, to 11,311.80

·     The Russell 2000 Index declined -11.83 points, or 0.76% to 1,552.48

 

Economic Calendar for Today

·     8:30 AM EST      Chicago Fed Nat Activity Index for July

 

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: FLXS, PANW, SXI

 

 

Macro

Up/Down

Last

WTI Crude

0.28

42.62

Brent

0.29

44.64

Gold

8.00

1,955.00

EUR/USD

0.0037

1.1834

JPY/USD

-0.04

105.76

10-Year Note

+0.013

0.64%

 

 

World News

·     The Democratic-led House on Saturday passed legislation by a vote of 257-150 preventing U.S. Postal Service cutbacks at least through January and providing it with $25 billion in additional funding, reflecting Democrats’ concerns that delivery delays affecting basic mail service would spill over into an election being held during the coronavirus pandemic

·     White House chief of staff Mark Meadows rejected the legislation the House passed late Saturday to provide $25 billion and block operational changes by Postmaster General Louis DeJoy. Meadows called it a “political statement,” stressing that President Donald Trump would consider additional money only as part of a broader coronavirus relief package

·     For the second straight week, investors were overall net redeemers of fund assets, pulling $10.2B during Refinitiv Lipper’s fund-flows week ended Aug. 19. Fund investors were net purchasers of taxable income funds (+$5.9B) and municipal bond funds (+1.8B) while being net redeemers of equity funds (-$6.6B) and money market funds (-$11.4B) last week

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) announced updates to the time, format and location of its 2020 annual meeting and information regarding its separate Battery Day event. The 2020 Annual Meeting will be held on Tuesday, September 22, 2020, at 1:30 p.m. Pacific Time. Tesla’s separate Battery Day event will follow immediately after the conclusion of the 2020 Annual Meeting

·     Wyndham Hotels & Resorts (WH) mentioned positively in Barron’s saying it is well positioned during the pandemic with its focus on budget hotels and leisure customers, noting nearly all of its hotels have been able to remain open during the pandemic, and although occupancy fell sharply, the company said in late July that 70% of its U.S. hotel system had occupancy above 40%

·     Retailers include Nike (NKE), Walmart (WMT), Target (TGT) and TJX (TJX) are four stocks that Barron’s plays on strange back-to-school season saying back-to-school spending is expected to end up about flat with last year’s $28.1B, or $529 per student, and large retailers already have taken a bigger slice of the pie during the pandemic

·     Scientific Games (SGMS) has successfully launched its sports betting product suite with the National Lottery in Netherlands

·     Flowers Foods (FLO) files automatic mixed securities shelf

·     Wayfair (W) to repurchase up to $700M in common stock

 

Energy, Industrials & Materials

·     Tropical Storm Laura and Tropical Storm Marco are both expected to impact the Gulf of Mexico in the next few days, with the latter storm tracking closer to oil platforms.

·     Energy firms shut 57.6%, or 1.07 million barrels per day (bpd), of offshore crude oil production in the U.S. Gulf of Mexico because of the twin threat from Hurricane Marco and Tropical Storm Laura, the U.S. government said on Sunday. Also, 44.6%, or 1,205 million cubic feet per day (mmcfe), of natural gas output was shut ahead of the storms

·     Two clusters of wildfires ringing the San Francisco Bay Area exploded in size Friday night to become the second and third largest in recorded state history. One complex of fires east of San Jose and another north of San Francisco have each spread to around 300,000 acres

·     KBR (KBR) has won two contracts by Ningxia Baofeng Energy Group for its 500KTA coal to olefins project and 500KTA C2-C5 comprehensive utilization project to be built in China

 

Financials

·     Brighthouse Financial (BHF) to resume its stock repurchase program, beginning August 24, 2020

 

Healthcare

·     The FDA issued an emergency use authorization (EUA) for convalescent plasma gathered from people who have recovered by COVID-19 as a treatment for hospitalized coronavirus patients. More than 70,000 COVID-19 patients in the U.S. have received plasma through a government-funded program during the pandemic (shares of KMDA, GRFS, ZXBIT, CERS, ADMA rising)

·     AstraZeneca (AZN) rises following reports President Donald Trump is considering fast-tracking the drugmaker’s coronavirus vaccine candidate, in a bid to make it available to Americans before the November election.

·     Kazia Therapeutics’ (KZIA) received FDA Orphan Drug Designation for paxalisib (formerly GDC-0084) for the treatment of malignant glioma

 

Technology, Media & Telecom

·     Microsoft (MSFT) is inking deals with foreign governments to offer cloud-infrastructure packages similar to the package it assembled for the U.S. Defense Department, CNBC reported. The Joint Enterprise Defense Infrastructure, or JEDI, cloud offering for the Pentagon provides cloud-based computing and storage resources at all government security classification levels

·     Synaptics (SYNA) mentioned positively in Barron’s noting shares are up 150% in the past 12 months but says more gains could lie ahead as its CEO continues to restructure and grow the business. Notes Synaptics trades for just over two times estimated revenue and less than 13x expected profit for the June 2021 FY while competitors like Texas Instruments (TXN), Analog Devices (ADI), and Microchip Technology (MCHP) fetch five to 10x times current-year revenue

·     Global DRAM revenue increased 15% sequentially in Q2 to $17.1B, according to new DRAMeXchange data, driven by bit shipments and average selling price improvements compared to Q1, when the pandemic was battering supply chains. DRAMeXchange says Q3 DRAM prices will likely be flat or down Q/Q due to high inventory at server OEMS and slowing demand in enterprise servers. IC Insights says DRAM suppliers will cut capex by 20% Y/Y in 2020 to $15.1B.

·     Microsoft Corp (MSFT) on Sunday said in a court filing that Apple Inc’s (AAPL) threat to cut off the creator of “Fortnite” from Apple’s developer tools would hurt Microsoft’s gaming business, as well as other game developers.

·     ByteDance investors are in talks to use their stakes in the Chinese tech company to help finance their bid for its short-video app TikTok, Reuters reports

·     Quotient Limited (QTNT) has filed a prospectus for a $200M mixed shelf offering

_________________________________________________________________

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.

Live Trading

Open an Account

Paper Trading

Register