Market Review: July 13, 2020

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Closing Recap

Monday, July 13, 2020





DJ Industrials




S&P 500








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Equity Market Recap

·     U.S. stocks end the trading day lower, sliding late day as the Dow Jones Industrials erased gains briefly in the final minutes of trading while the tech heavy Nasdaq Comp posted its worst loss in over 2-weeks in a bout of profit taking, pulling off record highs earlier. Stocks slipped after the Fed’s Kaplan said emergency facilities to be pulled back as economy improves, while very late day, the state of California closes indoor activities (gyms, salons) in bars, restaurants as virus positivity rate reported at 7.4%, up 21% in 2-weeks – ramping the selling pressure for stocks. In a positive, Senator McConnell said a draft of the new virus aid bill will be ready next week, keeping a slight bid to the overall market. High flying tech stocks, which have grabbed all the attention over the past 3-weeks (TSLA, AAPL, AMZN, FB, NVDA) started the day with new record highs, but pulled back off their best levels as the stock surge began to fade, rotating into the beaten-up sectors. Casinos saw a sharp rebound, led by gains in WYNN after Chinese province Guangdong agrees to lift mandatory quarantine requirements for starting July 15, where people coming from Macau will no longer have to undergo 14-day quarantine. There was more positive vaccine data news as PFE/BNTX vaccine candidates were given fast-track status, GILD remdesivir shows benefits in 1 in 3 patients in South Korea and MRNA surged after being added to the Nasdaq-100 index (as of 7/20) and also received a positive mention by Jefferies on its COVID treatment. Attention turns to earnings tomorrow as banks JPM, Wells and Citi kick off what is expected to be sharply lower earnings YoY while PEP was the first major consumer staple with earnings this morning, beating on the top and bottom line. The U.S. dollar resumes selling pressure, falling vs. most rival currencies today (no major economic data today to move markets), while gold prices rise, benefitting from the weaker buck but oil prices slide. CNBC reported that coronavirus case averages reach record highs in more than a third of U.S. states as deaths climb which again does not help sentiment.



·     Oil prices settled lower, with WTI crude dipping 45c or 1.11% to settle at $40.10 per barrel weighed down on reports that OPEC+ is set to ease output cuts and increase supply by roughly 2M barrels a day, a concerning development for investors with production from other nations also set to hit the market in response to the week-long recovery in crude prices. Increased supply from US companies and out of Libya could also boost global output at the same time that rising coronavirus cases in many states dent the rebound in fuel demand. Gold prices advanced for the first time in three-sessions, gaining $12.20 or 0.7% to settle at $1,812.20 an ounce, getting another boost as the dollar fell and investors hedged against the rising coronavirus cases.






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10-Year Note





Sector News Breakdown


·     Consumer Retailers & Staples; YETI, JWN, REAL are among the companies successfully connecting with customers in the virtual realm, according to Barron’s this weekend; PEP reported a top and bottom line quarterly beat though reports organic revenue declined 0.3% in Q2 as very strong growth in the snacks business offset a decline in beverages

·     Restaurants; DRI upgraded to overweight from neutral at JPMorgan as thinks Darden has taken an approach of restructuring menus and back-of-house store operations as a "once in a lifetime opportunity" when changes can be made holistically and at-once vs. the incrementalism required when stores were previously operating well within historical parameters; DENN was downgraded at Stephens noting shares have languished due to the impact on dine-in traffic amid higher COVID-19 cases and hospitalizations in parts of the U.S; shares of DPZ, PZZA both touched 52-week highs as take-out delivery names continue to excel

·     Housing & Building Products; Seaport Global upgraded KBH to buy and downgraded LEN to Neutral, while raising PT for DHI saying homebuilding activity has seen extreme volatility this year, and so have the stocks with variability by name

·     Electric auto/vehicle sector; TSLA did it again, making another all-time high as upward buying momentum continues in the name with sell-side analysts still raising tgt prices to play catch-up (on Friday TSLA announced its “Battery Day” event will be held on Sept 22nd); WKHS said its C-Series all-electric delivery trucks have received an executive order from the California Air Resources Board/the executive order is one of the preliminary requirements needed to be considered for the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project

·     Leisure sector; casinos were strong after Guangdong Province ending quarantine for Macau arrivals beginning July 15 (shares of WYNN, LVS, MGM among movers on headlines); at the same point, cruise lines (CCL, RCL, NCLH) pared earlier losses to turn higher midday amid a broader gain in pandemic related sectors hit the hardest



·     Energy stocks again failed to rally with major stock averages, weighed down on slowing global demand fears as rising coronavirus case tallies continue in the U.S., sending oil prices lower by over 1% on the day. Energy stocks were lower with MRO, FANG, NOV, DVN, OXY all among top decliners in the S&P; HCR voluntarily filed petitions for reorganization under chapter 11 of U.S. bankruptcy code in U.S. bankruptcy court for southern district of Texas

·     Saudi Arabia’s crude reserves depleted last year, just as the US found more oil than it extracted, a report by OPEC showed Monday, the latest evidence of America’s global clout in the oil market. U.S. crude reserves-oil that has yet to be extracted-rose by 18% to 57.9B barrels last year. By contrast, much bigger Saudi reserves fell by 3.2% to 258.6B barrels. OPEC members still hold 79% of the world’s largest crude-oil reserves



·     Bank movers; earnings for the quarter start tomorrow with JPM, C, WFC followed by heavy dose of results later this week in other large cap and regional names (MS, GS, USB, BK); SSSS shares jump after Barron’s noted the co’s large stake Palantir, a software data company that has widely been reported to be considering going public in the near term; in insurance, BFYT to be acquired by Madison Dearborn Partners for $31 per share; Robinhood Markets Inc., said it raised another $320 million in latest funding from new and existing investors at a valuation of $8.6 billion.

·     Asset Managers; TROW reported assets under management of $1.22 trillion, +8% YoY; June client transfers from mutual funds to other portfolios $1.1 billion, -66% YoY; APAM reported that its assets under management as of June 30, 2020 totaled $120.6 billion; MC was downgraded to neutral at Goldman Sachs as it faces long-term margin pressure as it continues to reinvest through the cycle; LM prelim June AUM $783.4 billion, included long-term net outflows of $3.6 billion, driven by equity and fixed income net outflows of $2.5 billion and $1.3 billion, respectively; BEN reported assets under management of $622.8 billion, -13% YoY

·     Consumer finance and lending; RDFN downgraded from Neutral to Underperform at Bank America as see current valuations leaving little room for multiple expansion or upward estimate revisions and believe continued COVID outbreaks skew risks heavily to the downside.



·     Pharma movers; PFE and BNTX four investigational vaccine candidates from their BNT162 mRNA-based vaccine program being developed for Covid-19 received fast track designation from the FDA; ALT said preclinical studies of its Covid-19 vaccine candidate, AdCOVID, were successful and set the company up to start a Phase 1 trial later this year; LCI said it will cut 80 positions, about 8.5% of its total workforce, over concerns that its generic fluphenazine product will face competition from AMRX; BSGM said it started enrolling adult patients for its Phase II trial for merimepodib, a broad-spectrum, orally administered antiviral drug candidate for the treatment of Covid-19,

·     Biotech movers; AMGN invests an additional amount of ~$421M in BGNE’s registered direct offering of ordinary shares, which maintains Amgen’s current pro rata ownership at ~20.3%; EQ surges after partner Biocon announced that a clinical trial conducted in India demonstrated that itolizumab significantly reduced mortality in patients hospitalized with Covid-19; MRNA was initiated buy and $90 tgt at Jefferies saying believe the vaccine will get approved and could do $5B+ in orders over the next few years and the stock will head higher; ECOR spikes after the FDA signed off on emergency use of its gammaCore Sapphire CV non-invasive vagus nerve stimulation device for the acute treatment of adults with known or suspected COVID-19 who are experiencing asthma-related dyspnea (difficulty breathing) and reduced airflow; also announced that MRNA will be added to the Nasdaq 100 index effective July 20th

·     Medical equipment and devices; DGX warned of a roughly 6% fall in Q2 revs and squeezed earnings but said it had seen a stronger-than-forecast recovery in base testing volumes and growing demand for Covid-19 testing services/said testing volumes in Quest’s base business, excluding Covid-19 molecular and antibody testing, declined about 34%

·     Healthcare services and providers; in telehealth, TDOC initiated buy and street high $280 tgt at Argus saying the company is well positioned for the future of health-care delivery; HCA was downgraded to market perform at BMO Capital in the hospital sector reflecting view of a build-up of risks not adequately offset by valuation


Industrials & Materials

·     Transports; in airlines, LUV said they need passenger numbers to triple by year end from today -and need significant recovery to help avoid furloughs while warns rising Covid cases affecting already weak demand; the overall Dow Transport index ended higher by over 1%, moving back above the 9,400 level as industrials and materials were among the day’s top gainers; gains were most prominent in rails (KSU, NSC, CSX, UNP)

·     Metals & Materials; CTVA, CF, NTR were all upgraded to Buy from Underperform at Bank America saying after only months from firm downgrade, the Ag landscape changed significantly as several positive catalysts emerged including catalyst China, where concerns of a corn deficit are growing (coupled with relatively cheap US corn prices and efforts to complete Phase 1 trade agreements, this suggests that the Chinese government is highly incentivized to purchase US corn); metal stocks seeing more strength given recent resurgence in China economy and stock markets, helping lift copper, aluminum, steel names


Technology, Media & Telecom

·     Internet; tgt prices for Internet names continue to rise about the spike in prices over the last few weeks, as analysts playing catch-up; NFLX tgt raised to $625 at BMO ahead of earnings as estimate 2Q20 6.506mm paid additions (est. 6.445mm), leading to 126.39mm paid subs; AMZN tgt raised to $3,700 from $2,750 and modestly increased estimates at Cowen as expect a strong quarter and expect revenue slightly above the high end of guidance

·     Semiconductors; group continues to make record highs on a near daily basis – helped today by M&A news after ADI agreed to acquire MXIM where ADI shareholders will own 69% of the new entity, while Maxim shareholders own the remaining 31%/combined entity is expected to have revenue of $8.2B and free cash flow of $2.7B. ; the overall Philly semiconductor index touched another record high (SOX – 2,121 before fading back below 2,100) with 10-names in the index reaching 52-week highs (KLAC, LRCX, ASML, MPWR, TER, CREE, TSM, NVDA, MRVL, MXIM)

·     Media & Telecom movers; tower stocks AMT and SBAC were both downgraded to Sector-weight at KeyBanc as believe 2021 consensus U.S. new leasing assumptions are too high by 60-70 bps for the industry and are likely to reset lower in the next three to six months; Goldman Sachs initiates in the media sector, highlighting that cord-cutting is rapidly accelerating (US paid-TV subscribers declining 10% y/y by 4Q20) and pivoting from legacy linear business models to DTC strategies will be difficult – DIS and VIAC initiated buy, LGF and DISCA Neutral, and FOXA, AMCX at Sell; AMC confirmed an agreement to secure $300M in new funding and reduce its debt by $460M-$630M.

·     Hardware & Component news; AAPL tgt upped to $419 at Morgan Stanley as expanding iPhone trade-in programs highlighted by AlphaWise consumer survey can unlock $147B of value and fund one-third of iPhone purchases over the next three years; HPE to buy Silver Peak for about $925 million in cash as HPE expects deal to be neutral to adj. EPS in FY22


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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