Market Review: April 29, 2020

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Closing Recap

Wednesday, April 29, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks posted solid gains once again on Wednesday buoyed by better earnings out of some large cap names (GOOGL), reports of a positive drug data for GILD’s COVID-19 potential treatment, and headlines out of the Fed that though risks to the economy remain due to the virus impact, the Fed signaled a willingness to provide substantial support as necessary, keeping measures in place until the economy is on the road to recovery. The comments/news helped offset another disappointing economic data point as U.S. GDP for Q1 fell a greater (-4.8%). Dow component Boeing (BA) also lifting markets on cost cutting and liquidity comments, offsetting an ugly Q1 earnings loss and drop in revenue. WTI crude oil jumps over 20% despite mixed weekly inventory data/gasoline futures rise after EIA data shows surprise draw in inventories (helped lift energy related stocks). But gains were led in tech ahead of more big earnings (MSFT, FB) tonight, as well as further advances in beaten up sectors from the pandemic impact such as cruise lines, casinos, theme parks, retailers and airlines. Restaurants got a boost after “better-than-feared” results from EAT and DIN, helping lift sentiment for the group. Stocks continue to benefit as well as many U.S. states and countries around the world begin to open their economies in small steps. The Nasdaq outperformed rising over 4% while the SmallCap Russell 2000 rose over 5% as they are seen to reap more benefits from the state-by-state easing of shutdown restrictions.

·     Stocks got a boost this morning after Gilead said the government trial of its remdesivir for the treatment of COVID-19 had met its primary endpoint, with more details to soon come from the National Institute of Allergy and Infectious Diseases. The news helped offset disappointing economic data after GDP Q1 actual showed a drop of (-4.8%) for the economy, worse than the (-4%) estimate as personal consumption plunged by a (-7.6%) figure, also worse than the (-3.6%) estimate. The Fed did not make any significant new policy maneuvers at the April meeting. Officials emphasized sizeable downside economic risks over an extended time period and signaled a willingness to provide substantial support as necessary.

·     The Fed said at the conclusion of its two-day FOMC meeting that the U.S. economy has deteriorated due to the coronavirus pandemic and pledged to take aggressive action to support an eventual recovery. The central bank "is committed to using its full range of tools to support the U.S. economy in this challenging time." "The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the statement said. The Fed cut interest rates to near zero at two unscheduled meetings in mid-March and began purchasing massive quantities of bonds to repair financial markets. Since mid-March, the Fed has bought nearly $2 trillion in Treasury and mortgage securities. Meanwhile, the central bank is preparing a second wave of lending programs in partnership with the Treasury Department to backstop more debt markets and to get loans directly to companies and state and local governments.

Economic Data

·     GDP data for Q1 in the U.S. misses estimates, falling (-4.8%), worse than the (-4%) estimate as personal consumption plunged by a (-7.6%) figure, also worse than the (-3.6%) estimate. Inflation readings also rose with Core PCE QoQ up 1.8% vs. est. 1.7% and GDP Price index rose 1.3% vs. est. 1.0% – sharply lower readings for GDP

·     March pending home sales falls (-20.8%) vs. est. (-13.6%) and down over (-16%) YoY, posting the sharpest monthly decline since May 2010



·     Oil prices closed higher on Wednesday, rising $2.72 or 22% to settle at $15.06 per barrel though off earlier highs of $16.78 as weekly inventory data was better than expected, helped by a surprise weekly drawdown in gasoline stockpiles which fell 3.67M barrels, the biggest draw since mid-March, and crude production dropped fourth straight week. Hopes for some return of demand as various local economies head out of virus related lock down has helped prices the last few sessions. However, the sustainability of further gains come into question as current production far outstrips demand, and as global storage capacity availability approaches it limits. Gold prices slip -$8.80 or 0.5% to settle at $1,713.40 an ounce, falling a 4th straight day as safe haven demand lessens given the ongoing surge in equity markets.


Currencies & Treasuries

·     Treasury prices were little changed as the 10-year yield holds steady around 0.615% (off earlier lows 0.579%, while the 30-year ticked higher by 2 bps to 1.22% as stocks extended gains, and the U.S. dollar edged lower vs. most currencies. The Canadian dollar rose to 2-weke highs vs. the buck as oil prices recovered while economic data in the U.S. remains weak given the impact of the coronavirus on businesses around the country. Note the Fed’s balance sheet has ballooned to $6.4 trillion, growing more than $200 billion as of April 22 as the central bank buys Treasury’s and mortgage-backed securities at clips that far outpace asset purchases in 2008 and 2014.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; WW shares rise after smaller-than-expected Q1 EPS loss (4c vs. 23c est.) on in-line revs driven by strong product sales and Q1 total subscribers rose to 5M and a 16% rise in digital subscribers to 3.6M from a year ago; IRBT shares drop after reports quarterly loss from year ago profit saying it saw disruptions to its sales and manufacturing supply chain activities from the spread of the coronavirus (revs fell -19% YoY); TUP reports revenue fell in Q1 as the impact of COVID-19 was pronounced in Europe (-24%) and Asia Pacific (-23%) and due to lower sales volume, a net loss of $7.8M was recorded as fixed costs couldn’t be leverage down; ELY announced a $200M convertible debt deal weighing on shares; HAS scrapped its 2020 outlook, sees weakness in Q2 earnings as coronavirus outbreak hurts sales after swinging to a Q1 loss

·     Auto movers; Ford (F) Q1 EPS loss (23c)/$31.3B vs. est. loss (12c)/$32.54B; drew over $15B in existing credit lines, suspended dividend during Q1; sees Q2 adj Ebit loss of over $5B; says sees significant drop in Q2 industry volumes for all regions; CARG said it plans a comprehensive 20% rate reduction for the month of June for its subscribing dealerships in the U.S; CAR said it expects a cash burn of ~400M in April, ~$250M in May and ~$150M in June while cash burn is expected to sequentially improve due to aggressive cost mitigation and fleet reduction actions; HTZ shares slipped after a report the company had failed to make lease payments in a bid to preserve cash.

·     Consumer Staples; HRL was downgraded to Neutral at Piper saying as restaurant headwinds now look likely to persist, they expect foodservice declines to more than offset stronger retail sales growth in 2020; TSN also cut at Piper to Neutral saying it is likely to face headwinds from foodservice (~40% of sales), plant closures, and higher costs due to COVID-19; meal kit delivery provider’s shares APRN shares fall as Q1 revenue slumps 28% to $101.9M and misses estimate of $107.5M, even as sales surged sequentially as stay-at-home consumers ordered more meal kits; MDLZ shares little changed after top/bottom lie beat and suspended guidance

·     Restaurants; EAT shares jumped over 20% after easily topping EPS for Q1 on in-line revs of $860M, helping boost sentiment in restaurant stocks on the day (DRI, CAKE, RRGB, BJRI); SBUX reports a 10% drop in Q2 comp store sales (in-line with ests) and forecasts a 25%-35% drop for current qtr same-store sales in China – its biggest growth market – due to the impact of the coronavirus pandemic/sees China markets recovering by September-end, but expects impact on U.S. business to be significantly greater in Q3 and extend to Q4: LK said it would take advantage of U.S. SEC regulatory relief and not file its annual report by April 30; YUM and YUMC shares both active after quarterly results released; DIN another sharp gainer on earnings as posted Q1 profit beat but co temporarily suspends dividend as the pandemic squeezes business

·     Casino & Leisure movers; BYD shares bounced off overnight losses despite swinging to a Q1 EPS loss and revenue dropped over 17% YoY; AMC said his chain would refuse to book any of the CMCSA owned studio’s movies in his theaters following a Wall Street Journal report on the studio’s plan to release forthcoming titles in theaters and on digital platforms; cruise lines explode higher as beaten up sectors still recovering (CCL, RCL, NCLH) on hopes of cure (GILD news today on COVID drug) and economies reopening



·     Energy stocks outperform, helped by the spike in oil prices and hopes that the reopening of the economy will help improve demand while production has been cut in the form of cuts by OPEC + and other world producers, along plunging oil rigs as reported by Baker Hughes over the last few weeks. Inventory data: the EIA said crude stockpiles rose +8,991k Bbl, vs. Est. build +11,900k Bbl; gasoline -3,669k vs est. +2,492k, distillates +5,092k vs est. +4,100k and Cushing crude +3,637k; overnight the API said weekly crude oil inventories rose 9.98M barrels last week; gasoline stocks were down 1.11M barrels, and distillates up 5.46M barrels

·     Stock movers; LBRT posts surprise Q1 EPS beat on better revs of $472M as fleet profitability rebounded much stronger than expected according to one analyst; EPD Q1 EPS topped estimates and says Q1 cash flow from operations was $2B, compared with $1.2B a year earlier while reduced its guidance for 2020 growth capital investments by ~$1B to a range of $2.5B-$3B; VLO posted a $1.85B net loss compared with net income of $141M in the year-ago quarter, taking a $2B hit to the value of its refining inventory/lowers its planned 2020 capital spending by $400M from prior guidance to ~$2.1B; MRC jumps after posted Q1 profit of 4c vs. est. loss of (8C) and the bottom line helped by tight lid on costs, SG&A expenses fall nearly 10%



·     Bank movers; bank earnings, at least large caps and major regionals, are behind us so industry trading on yields, broader stock market action; in consumer finance and lending; MA reported a 10c EPS beat for Q1 though income fell to $1.7B from $1.9B a year earlier as costs such as rebates and incentives rose and said it has seen early signs that spending levels are stabilizing; shares of consumer finance names ADS, COF, DFS, SYF all outperform again as group extends gains off March lows; in services and info services; ADP lowers year rev view to up 3% form prior 6% and EPS well below at up 4%-7% from prior 12%-14%



·     Biotech movers; GILD shares after saying it’s aware of positive data emerging from the National Institute of Allergy and Infectious Diseases’ study of the investigational antiviral remdesivir for the treatment of COVID-19 and that the trial has met its primary endpoint; INO rises after interim data (through week 16) from a Phase 1/2a clinical trial evaluating its MERS-CoV DNA vaccine candidate INO-4700 in healthy volunteers; CMRX rises as received clearance from the FDA for a rolling submission of its NDA for the approval of brincidofovir as a countermeasure for smallpox

·     Medical equipment and devices; DXCM shares rise and tgts raised by analysts (Citi to $361 from $330) as delivered 1Q20 results that surpassed expectations and suspended 2020 guidance (revenue of $405.1M was up 44% and topped $358.5M estimate on record new patient adds); BSX 1Q revenues in-line with preannounced guide of “flat to up slightly”, though worse EPS vs. expectations ($0.28 vs. $0.33 est.)/FY 20 guidance remains withdrawn

·     Healthcare services and providers; LH shares fell after turning in a Q1 loss as demand for testing fell declined 50% to 55% from the LabCorp Diagnostics’ normal daily levels; CERN reported a relatively solid 1Q’20 given the circumstances and lowered 2020 guidance primarily due to expected COVID-19 impact in 2Q’20; in managed care, HUM posts better-than-expected profit and revenue for first quarter, helped by strength in its government-backed Medicare business while backs its 2020 profit forecast range; ANTM reported lower first-quarter profit and higher revenue as it responds to a membership battling the Covid-19 pandemic


Industrials & Materials

·     Aerospace & Defense; BA said it is confident of getting sufficient liquidity to fund ops amid coronavirus crisis and is targeting 10% reduction in staffing levels after reporting negative operating cash flow for the first quarter of $-4.30 billion vs -$2.22b in 4Q on a core EPS loss of (-$1.70), in-line with estimates and revs falling -26% YoY to $16.91B (shares of suppliers SPR, HXL were also active on the BA report); MRCY posted adjusted Q3/20 EBITDA and EPS of $47.7M (22.6% margin) and $0.60, respectively. The strong quarter was highlighted by organic growth of 11%; NOC missed profit estimates for Q1 as earnings were reduced by $56M due to negative returns on securities relating to non-qualified benefit plans and other non-operating assets/company also issued slightly lower sales outlook for the year; GD said declines YoY in Q1 revs as sales sink for its aerospace division, which makes Gulfstream business jets as Covid-19 disrupts travel/revenue for the division falls by 24.5% in the three-month period…but the company pulls in significant new defense contracts

·     Industrial & Machinery; GE reported an EPS miss as COVID-19 whacked $1B off free cash flow but beating on revenues, while expecting Q2 results will decline sequentially under pressure from the effects of COVID-19/free cash flow from industrial operations was negative $2.21B in the quarter, below negative $1.22B in the prior-year quarter and analyst estimates of negative $2B

·     Transports; Dow Transports strong, though pared gains as airlines again pacing gains with UAL, AAL, JBLU up notably early, while trucker CHRW top decliner after earnings, and UPS weak after BMO downgraded (follows weak earnings the day prior); LUV 70M share Spot Secondary priced at $28.50; in rails, NSC operating revenues fell 8% in Q1 to $2.6B as an 11% decline in total volume impacted the top line while adjusted operating ratio was 63.7% vs. 66.0% a year ago as the efforts to take advantage of structural cost opportunities continues/said Q2 volume is declining across all of Norfolk Southern’s commodity segments and is down 30% QTD; SAIA shares surge following its better earnings results

·     Chemicals; ALB was downgraded to sell at Loop Capital seeing pressure on catalyst segment results on dramatically lower demand for refined products; at Wells Fargo, CE was downgraded saying the remainder of 2020E will likely be under significant pressure from the Covid-19 pandemic where volumes declines are expected to be daunting and upgraded IFF as believe IFF’s portfolio should hold up better than most in our chemical universe; SHW said it anticipates consolidated net sales to fall in 2020 if the economic conditions don’t improve until early 2021, and revised its full-year sales and profit guidance lower


Technology, Media & Telecom

·     Internet; GOOGL Q1 total revs (both gross and net) beat, while ad revenues slowed significantly in late March, although YouTube’s y/y ad revenue growth accelerated from Q4 (quarter was characterized by several analysts as “better-than-feared); SPOT added 130M paid subscribers globally topping analysts’ estimates of 128.6M subs while total monthly active users grew 31% YoY and revenue jumped 22%/but lowers FY revenue forecast to reflect the impact of a slowdown in advertising and significant changes in currency rates; TCOM rises after Beijing said it will relax quarantine requirements for domestic travelers from low-risk areas beginning Thursday, prompting a surge in plane-ticket sales; AMZN extended an agreement with the NFL that will give its members the opportunity to stream football games for the next three years; AKAM falls despite strong earnings beat after withdrawing its outlook for the year; FB next on deck with earnings after the close tonight

·     Semiconductors; The Philly semi index (SOX) rises nearly 3% early above 1,760 – topping its 100-day MA earlier of 1,735, with AMD the only decliner in the space after earnings, while MKSI outperforms after earnings results; AMD reported MarQ in line and guided JunQ revenue to an in-line $1.85B (cons $1.88B), with modestly softer 44% GMs reflecting gaming console ramps; MPWR 1Q revenue of $166M was higher than consensus while EPS missed with 2Q revenue guidance at the midpoint was $170M, higher than the consensus estimate of $164M; MXIM reported a solid Q1 with results in line with guidance/negatively, Q2 is seeing notable declines q/q due to Automotive & Consumer which are expected to be "Strongly Down" q/q in June

·     Software movers; MSFT earnings tonight; FEYE cut its full-year revenue forecast after in-line total billings for Q1, citing uncertainty related to the pandemic while also announced plans to cut its workforce by 6%; ZM falls after GOOGL announced will make Meet free, as well as further pullback in “stay-at-home” stock winners over the last month as more states reopen; PAYC reported Q1 results above consensus expectations but given the strong headwinds from the rise in unemployment due to COVID-19, the company rescinded any further guidance for 2020


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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