Market Review: December 16, 2020

Auto PostDaily Market Report

Closing Recap

Wednesday, December 16, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     Stocks popped again on Wednesday with the Nasdaq Composite touching another all-time high as the same market drivers including FOMC actions (see Powell commentary below), vaccine hopes (which now in inoculation stages around the globe), and ongoing talks about stimulus relief measures out of Washington (again both sides saying they appear “close”) remain key catalysts in the face of slowing economic data (retail sales today was a big miss). Fed Chairman Powell did everything in his power to assuage markets by noting the Fed will continue to use tools to support the economy for as long as it takes until well and truly done. The Fed predicted a faster decline in unemployment in 2021 but stuck to its cautious forecast for the U.S. economy. Oil prices ended higher on stimulus hopes, inventory supply decline but demand remains dim.

·     Stocks markets opened strong and just continued to march higher as stimulus relief talks dominated headlines with Senate Majority Leader Mitch McConnel saying last night “We’re making significant progress and I’m optimistic that we are going to be able to complete an understanding sometime soon.” Those comments followed meetings with both sides in Washington, while Politico reported this morning that “Hill negotiators are on the brink of a $900bn coronavirus rescue package that would include a new round of direct payments, but would leave out state and local aid, and a liability shield”. The “hopes” helped stocks after a disappointing November monthly retail sales report fell well short of expectations. Bitcoin (BTC) prices topped the $20,000 mark this morning – highs above $20,800 (ironically it was nearly three years ago to the day when Bitcoin first approached $20K – before crashing to $4K just a few months after). Ongoing vaccine rollout also a boost for major averages.

·     Final FOMC meeting of the year: Federal Reserve keeps interest rate benchmark unchanged at 0%-0.25% (expected). The Federal Reserve provided updated plans for its purchases of large amounts of government debt to support the economy but didn’t change the program to provide more stimulus. Fed officials also released new projections showing most of them expected interest rates would remain near zero at least through 2023. Since June, the Fed had been buying $80 billion in Treasuries and $40 billion in mortgage bonds per month and pledged to buy assets at least at that pace for "the coming months." The language does for the first time however link its $120 billion in monthly purchases of U.S. Treasury bonds and government-backed securities to a set of economic condition.

Economic Data

·     Retail sales data disappoints as November Retail Sales fell -1.1% MoM, worse than the expected (-0.3%) consensus and (-0.1%) prior while Core Retail Sales unexpectedly fell (-0.9%) MoM vs. +0.1% consensus and -0.1% prior

·     U.S. business activity slowed in the first half of December as renewed restrictions to slow a resurgence in new COVID-19 infections hurt the services sector. IHS Markit said its flash U.S. Composite PMI Output Index fell to a reading of 55.7 early this month from 58.6 in November. The survey’s flash composite new orders index fell to 55.1 this month from a reading of 57.5 in November. Its flash services sector PMI dropped to a reading of 55.3 this month from 58.4.

·     Business Inventories for October rise 0.7% MoM vs. est. 0.6%; U.S. Oct. business sales up 0.9%

·     The NAHB Housing market index for December reported at 86, below consensus of 88 and down from the 90 reading in November: current single-family home sales 92 versus 96 in Nov, index of home sales over next six months 85 versus 89 in Nov


Commodities, Currencies, Treasuries

·     Oil prices held steady as WTI crude rose 20c or 0.42% to settle at $47.82 per barrel following mixed inventory data (API showed a build in crude inventories and EIA showed a larger than expected drawdown). February gold prices rose $3.80 or 0.2% to settle at $1,859.10 an ounce on expectations for more support for the U.S. economy and a dovish stance from the U.S. Federal Reserve. Gold has risen more than 22% so far this year, banking on its appeal as a hedge against inflation likely due to the unprecedented stimulus unleashed in 2020. The 10-yr yield was little changed most of the morning around 0.91% but rose above 0.94% after the FOMC meeting statement (only to slip back to prior levels late afternoon). The dollar index (DXY) was near 2-year lows of 90.40 most of the morning before paring losses. The Japanese yen climbed off one-month lows of 103.26 against the U.S. dollar as earlier risk-on conditions saw the Yen lose ground against most major currencies.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; gun makers AOUT reported strong second-quarter results above expectations driven by broad-based product demand and raised guidance for the remainder of the year; JAKK announces the extension of its global toy rights with Nintendo; Bank America this morning raise our tgts by $7/$10/$15 to $80/$140/$275 for TJX, ROST, and BURL respectively, while are increasingly cautious on the bargain retail space given view that tax refunds will be down 12% YoY (says BIG is most at risk while OLLI, AAN, AZO, and PRG are also exposed); RL tgt raised to $132 from $85 at Wells Fargo saying it remains one of the least respected "recovery" stocks under their coverage

·     Auto sector; LEA was upgraded at Argus to Buy from Hold due to the expectations that its products and services will be in high demand after the pandemic; AZO authorizes additional $1.5B stock repurchase; Hedge fund manager Louis Bacon declared a passive stake of 6.5% in FSR as of Oct. 29 per filing; Barclays initiated HYLN at overweight with a $20 target after the company said its focus next year is to position itself for long-term sustainable growth by capturing market share opportunity in EVs in its recent Q3 earnings report; LAZR was upgraded to Outperform from Market Perform at Northland, saying it isn’t likely that Mobileye will have its lidar in vehicles by the 2025 target as the partnership suggests Mobileye does not have an in-house product ready to go and that its parent company (INTC) has other priorities; NKLA was initiated by Evercore at In-Line with a $20 pt, saying they are cautiously optimistic that the company’s hydrogen ambitions offer unique investment opportunities in a nascent industry; HMC recalled over 1.4M vehicles in the U.S. and 1.8M worldwide due to issues that include software flaws, drive shafts that can break, and overheating window switches; LYFT and Motional, who have been working in a partnership to develop autonomous vehicles in Las Vegas since 2018, set a 2023 target to deploy a fully driverless robotaxi service across the U.S.

·     Auto suppliers: KeyBanc sees ample opportunity tied to EV acceleration and cyclical earnings as volumes should return to 2019 levels in 2023. They raised their pt on DAN to $25 from $20 as a Focus Idea due to full end market inflection in 2022 and the Bronco program launches a key upside force to estimates, named BWA as the stock with the greatest upside to PT with its $51 target as the current depressed valuation conveys market is pricing in a failed electrification strategy and DLPH integration mishaps, though the analyst is bullish on both accounts and expect investor skepticism to wane, and remain OW on ADNT (pt raised to $43 from $36), GNTX ($39 PT), LEA (pt raised to $185 from $148), and MGA ($72 PT from $68), and downgraded APTV

·     Housing & Building Products; OC was upgraded to Buy at Truist and raise tgt to $95 from $68 saying all the company’s segments will grow in 2021; SWK raised its Q4 organic growth assumption to 10% from 3%-5% and full year FCF is assumed to be greater than $1B versus the prior assumption of $800M-$900M; Wells Fargo said in builder space, DHI and MDC believe are best positioned with respect to lot availability, MTH like long term, but expect difficult next couple qtrs due to community gap outs, KBH remains a creditable recovery story – investor expectations remain low and highlight MDC and KBH ’21 BV multiples trade at the greatest relative discounts to ROE (~40%) in the group

·     Consumer Staples; HAIN upgraded to overweight with $43 tgt at JPMorgan on increased optimism that Hain’s organic sales growth will start to accelerate and that its margin opportunity is far from over; TSN downgraded to neutral at JPMorgan citing increased concerns about the company’s EBITDA growth; DTEA rises as Q3 EPS C$.09 versus C$(34c) in same quarter last year; a COVID-19 vaccine being developed by BTI from tobacco leaves has been approved for human trials by the FDA; GIS earnings expected Thursday morning

·     Restaurants; EAT withdrew guidance for its second quarter of fiscal 2021 as its Chilli’s Grill & Bar and Maggiano’s Little Italy restaurants are impacted by dining room closures and capacity limits; CMG upgraded to buy from hold with a 12-month target price of $1,500 at Stifel as believe the brand should benefit in 2021 from increased consumer mobility and several sales-building initiatives; GTIM rises after reports Q4 net profit vs net loss a year earlier, in part helped by financial support under the CARES Act though quarterly net revenue dips

·     Leisure and Gaming; DASH remains neutral at BTIG as revisit estimates with data from Opendoor showing a drop-off in the % of restaurants taking reservations (70%+ to mid-60% over the last few weeks) and widening declines in seated diners (Oct. -41%, Nov. -52% Dec. to date -64%); in gaming, DKNG announces an agreement with InComm Payments to launch an industry-first retail gift card ahead of the holiday’s; GMBL said its gaming licensed subsidiary, Esports Entertainment to acquire the business of an established Malta licensed online casino operator Lucky Dino Gaming Limited for $30M, financed through a debt facility.



·     Energy stock analyst research: Wells Fargo still sees value in shale despite the XOP +40% since 9/11 as oil and gas supply growth recovers to pre-Covid levels and an energy transition is a near-term tailwind as infrastructure expansion could boost demand above current outlooks. They named DVN, CNX, and PDCE as their Top Picks in the sector with PDCE replacing XEC on valuation, upgraded MRO, RRC, and ESTE to OW as commodity price tailwinds make prior balance sheet concerns less relevant, favor FANG, XEC, and BCEI for "quality" oil exposure and EQT for gas exposure, list MRO, SM, RRC and ESTE are higher beta picks for E&P alpha generation, and downgraded BRY, CDEV, CPE, and AR to Underweight; Goldman upgraded XOM (pt raised to $52 from $42) and XEC (pt raised to $48 from $46) to Buy from Neutral, added DVN added to conviction buy list with a $20 pt and removed EOG from the list, and downgraded PARR to Neutral from Buy with $14 pt; Raymond James initiates CVI at Market Perform with upside potential as a recovery trade with an improved macro outlook potentially improving margins, though uncertainty surrounding macro recovery and strategy (DK stake, other potential M&A) combined with current valuation limits upside

·     Energy news; MPC is facing a potential strike that would shut down its St. Paul refinery at the end of the year after 200 workers voted to authorize a strike if they cannot come to an agreement on a new contract; BP increased its investment in Finite Carbon, the largest U.S. developer of forest carbon offsets, after last year’s $5M investment and has now acquired a majority stake in the company

·     Inventory data; the API showed an unexpected build of 1.97M barrels of oil for the week ending Dec. 11, gasoline inventories show a build of 828K barrels, distillate inventories show a build of 4.76M barrels and Cushing inventories show a draw of 165K barrels. The EIA said crude fell -3.1M barrels vs. -1.9M consensus, +15.2M last week; gasoline +1.0M barrels vs. +1.6M consensus, and Distillates +0.2M barrels vs. +0.9M consensus

·     Utilities & Solar; Dominion (D) was upgraded to Buy with an $83 pt from Neutral at Bank of America as the current slight premium to its peers is well off earlier gaps and Q4 updates should be substantive and quell execution concerns; JKS files for offering of up to $100M of shares



·     Pharma movers; PFE downgraded to Sector Perform & lowers his tgt to $42 at RBC Capital as believe the "stock" reflects the vaccine DCF opportunity, making it harder to argue for more meaningful upside to our price target; BNTX active as Shanghai Fosun Pharmaceutical Group Co Ltd says it will buy 100 mln doses of BNTX-Pfizer Inc’s PFE.N COVID-19 vaccine for use in mainland China next year; SAGE appoints former ALNY chief operating officer Barry Greene as CEO; SIOX announces positive six-month follow-up data from low-dose cohort of phase 1/2 trial of axo-aav-gm1 for gm1 gangliosidosis; REPL and HARP removed from the Best Ideas List at Wedbush

·     Cannabis sector; TLRY will merge with APHA in the cannabis sector, as APHA holders to get 0.8381 shares of Tilray for each Aphria share owned, while Tilray owners will continue to hold their shares. Aphria will own about 62% of the combined company; GRWG reiterate buy and $40 tgt while estimates raised at Lakestreet following the acquisition of Grassroots Hydroponics, a three-store chain based in Southern California.

·     Biotech movers; GLPG and partner GILD announced a significant restructuring for filgotinib following disclosure that GILD will no longer pursue the drug’s approval in the US in RA; in research, ACAD init buy and $69 tgt, bullish on its flagship product Nuplazid at Mizuho and also initiated AXSM buy and $120 tgt as positive on the company’s AXS-05 for major depressive disorder and AXS-07 for acute migraine treatment; VTVT falls as announced that the Phase 2 Elevage study of azeliragon in people with mild Alzheimer’s disease and type 2 diabetes did not meet its primary objective

·     Healthcare services and providers; AMWL, TDOC, GDRX, ONEM shares pressured early after reports AMZN wants to offer its medical service to workers at other large companies across the US, Business Insider has learned; VZ will deploy their Network as a Service, an all-encompassing solution to deliver an enhanced customer experience to more than 9,000 WBA and Duane Reade retail locations across the U.S.

·     MedTech and Equipment; DGX raises its year diluted EPS view to be at least $9.98 vs. previous outlook of $8.22-$9.22; Adjusted diluted EPS to be at least $10.75 vs. prior outlook of $9-$10 and consensus of $9.90 on higher sales; PEN falls as announced that it is voluntarily recalling all configurations of the Penumbra JET® 7 Reperfusion Catheter with Xtra Flex technology because the catheter may become susceptible to distal tip damage during use; Citigroup upgraded GKOS to neutral and NUVA to Buy with top pick ZBH and downgraded shares of EW and PODD, updating financial models accounting for the second wave in 4Q20/1Q21 and introducing 2023E; IART said it is buying ACell Inc. for an upfront cash payment of $300 million at closing and cash payments of up to an additional $100 million upon the achievement of certain milestones.

·     Life Science Tools; Citigroup with several changes as they said AVTR, IQV and GH as our top picks in Tools/CROs/Specialty Tools/Dx and recommend BIO and DHR as other preferred names while they upgraded WAT to Neutral as view expectations as more appropriately set at the current valuation and downgraded TMO to Neutral as margin headwinds over the next 2-3 years could result in negative EPS revisions. Also downgraded CRL to Neutral as view premium multiple as warranted, but struggle to see upside to multiple/consensus estimates


Industrials & Materials

·     Transports; SAVE, UAL and JBLU all downgraded in airline sector at JPMorgan to underweight from overweight saying the recent rally in airline equities has significantly diminished the implied potential upside in 2021, with some having already passed through year-end 2021 price targets; LUV said November load factor came in below previous expectations and raised its Q4 estimate for average daily cash burn, as the recent spike in COVID-19 cases has led to lower demand and renewed travel restrictions (said November load factor fell to 48% from 55% in October)


Technology, Media & Telecom

·     Internet; WISH priced its IPO at $24 to raise $1.1B, giving an initial valuation of $17B; WISH had planned to sell 46M shares in the range of $22-$24 per share (shares opened at $22.75, below the IPO price); AMZN urged a U.S. judge to set aside the U.S. Department of Defense’s $10B JEDI cloud computing contract award, saying the Pentagon wrongfully awarded the lucrative deal to MSFT even after it proposed a cheaper and technically superior bid; TWTR upgraded to Overweight from Neutral at JPMorgan with $65 tgt; SABR upgraded to Neutral from Underperform at Mizuho, and raising our price target to $11, representing a ~50% discount to their travel software peer group for 2022; ETSY downgraded to hold from buy with $170 tgt at Stifel as sees a more challenging setup for 2021 in a recovery scenario after the company has been one of the largest beneficiaries of the COVID-19 pandemic; SHOP new all-time highs

·     Semiconductors; PANW upgraded to OP and increasing our target to $380 from $292 at RBC Capital saying COVID changes everything and positions Palo Alto with the broadest portfolio of solutions to enable security transformations, and new segment disclosures provide a view on a durable firewall business and high-growth cloud biz with an improving margin structure; in video games, JPMorgan downgraded EA and SCPL to Neutral from Overweight, and upgraded ZNGA to Overweight, while ATVI stays at Overweight and remains top console/PC pick (and initiates TTWO neutral) saying following a pandemic-charged 2020, publishers face difficult comps, as consumers are likely to re-allocate time and budget to areas previously and still partly closed

·     Media & Telecom movers; FUBO initiated Outperform and $40 tgt at Wedbush saying they expect cord-cutting and cord-shaving to continue for the foreseeable future, and think that a sizeable portion of the population will grow up as "cord-nevers", preferring customizable bundles of content to pre-determined MVPD programming; DISH falls after announcing $2B convertible notes offering

·     Hardware & Component news; HPQ was upgraded to Overweight at Morgan Stanley saying it stands to benefit in pandemic scenarios with diverse exposure to both consumer markets that benefit from social distancing and commercial markets that benefit as economies re-open; Morgan also upgraded NTAP to Overweight from EW with $76 tgt saying it demonstrates meaningful operating leverage in economic recoveries and historically outperforms the rest of our coverage post a trough in IT spending intentions; ANET was upgraded to Outperform w/ $350 tgt at Wolfe as believe Arista will return to its classic beat-and-raise ways through 2021


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