Market Review: June 18, 2020

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Closing Recap

Thursday, June 18, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks took a small breather, with the Dow Jones Industrial Average slipping and the Nasdaq Comp turning negative late day before a sharp recovery in the final 30-minutes of trading as investors weigh the latest reports about fresh outbreaks of the coronavirus in China and America. Stocks had trended higher in recent sessions amid optimism about the economic recovery, but recent COVID-19 case flare ups in some parts of the U.S. has caused some concerns. Florida this morning said Covid-19 cases rise 3.9% vs. previous 7-day avg. 3%, while the number of new Covid cases in California climbs by 4,084, its single largest single day increase of cases. Given the recent spike in cases in California, the state ordered for residents to wear face masks in most settings outside the home. More than a dozen states have seen confirmed cases rise in the past week at a faster pace than the week prior.

·     Outside of the coronavirus world, economic data was mixed as initial jobless claims for regular state programs totaled 1.51M in the latest week, down slightly from an upwardly revised 1.57M but above estimates for around 1.3M. On the flip side, the Philadelphia Fed index for June bounced back to +27.5, crushing expectations of -23 (and after a -43.1 reading the month prior). Oil prices jumped after Iraq said it will fully meet OPEC’s output-cut agreements. European stocks fall as a rise in coronavirus infections in the US and China raise worries about a second wave derailing the global economic recovery. The Stoxx Europe 600 declines 0.7%, the FTSE 100 drops 0.5%, the DAX slips 0.8% and the CAC-40 sheds 0.8%. Defensive stay at home names such as CLX and PG advanced while large cap tech again rallied and energy name benefit from a rise in oil.

Economic Data

·     Weekly jobless claims fell to 1.508M which was higher than the est of 1.3M filing for first time unemployment benefits and was down slightly from the prior week of 1.566M; the 4-week moving averages fell to 1.773M from 2.008M prior week; US insured unemployment rate unchanged at 14.1% in latest week; continued claims fell to 20.544M vs. est. 19.8M

·     The Philly Fed Business outlook rises 27.5 vs. est. decline of -21.4; June prices paid rose to 11.1 vs 3.2 while New orders a big jump as rises to 16.7 vs -25.7; employment rose to -4.3 vs -15.3, shipments rose to 25.3 vs -30.3 and the 6-month outlook rose to 66.3 vs 49.7

·     Leading Index for May rises 2.8% vs. est. 2.4% and was better than the prior month of a downwardly revised -6.1% from -4.4%)



·     Oil prices reversed morning losses to trade higher, as WTI crude advanced 88c or 2.32% to settle at $38.84 per barrel following reports that Iraq will fully meet OPEC’s output-cut agreements as it will compensate for falling short of its targets in May. Last month OPEC and allies missed their 9.7M barrel a day cuts by 1.26M. Gold prices slip, down -$4.50 or 0.3% to settle at $1.731.10 an ounce adding to the weekly decline but still holding up relatively well despite the resilience of equities. Gold futures have been trading in a $1,670 to $1,770 range for about two months.


Currencies & Treasuries

·     The U.S. dollar was generally higher, as the euro was down -0.35% just above the 1.12 level (hit 2-week lows of 1.1186 – and more than 200 bps off last week highs above 1.14); the USD-Canadian dollar rallied from pre-open lows of 1.3521 to above 1.36 midday with the highs coming following the sharper than expected drop in Canada April wholesale trade. The dollar remained lower against the Japanese yen, but overall a nice bounce today for the greenback.

·     Treasury prices were higher as yields fell following data that showed the number of Americans who filed for unemployment last week was higher than economists expected. The yield on the benchmark 10-year note fell as low as 0.69% in early trading, and held that level throughout, down from 0.732% at Wednesday’s close. The 30-year bond yield also fell. The recent uptick in prices and subsequent drop in yields (10-yr down from 0.95% high 2-weeks ago) comes on fears that increasing coronavirus cases in the U.S. will undermine efforts to restore the economy.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; RGS reports same-store sales declined 7.9% in FQ3, as a result of 10.5% reduction in Y/Y transactions, partially offset by a 2.6% rise in ticket; FLWS shares rise as boosts its FY 2020 guidance citing solid results through the first three quarters combined with increased e-commerce demand through the first 10 weeks of Q4 (sees FY20 consolidated revenue growth of 16%-18%, up from prior range of 8%-9%); FRAN preliminary Q1 revenue $43.75M vs. $87.13M last year; FOXF 2.4M share Secondary priced at $76.00; SWBI shares rise ahead of earnings tonight – shares have surged over 75% from the beginning of the month along with gains in other gun, sporting good names

·     Consumer Staples; grocer KR reported strong results as Q1 EPS of $1.22 topped the $1.09 est and sales were $42B vs. est. $40.7B and said Q1 identical sales, without fuel, up 19% and Q1 digital sales up 92% – but guidance outlook comments hit shares; CHD was upgraded to outperform at Credit Suisse saying a value-oriented portfolio with a clean balance sheet and favorable M&A prospects meets a history of stability through difficult periods; CLX traded record highs today

·     Casino & Leisure movers; the cruise industry gets second piece of bad news in as many days as CCL reported disappointing Q2 results with a larger EPS loss and weaker revs amid the negative effects of the COVID-19 pandemic; Bank America notes that State Gaming data supports the pent-up demand narrative, with over 70% of all casinos now open. Company comments suggest meaningfully higher margins in post-reopening months, while Sports Betting and iGaming trends continue to build momentum, with May GGR in NJ and PA coming in at +7% (m/m), and +30% respectively (shares of PENN, DKNG, BYD, GAN among movers)

·     Autos; TSLA tgt raised to $1,200 from $650 saying see Covid-19 as an accelerator of the transition to EVs and renewables, from consumers and public policy. N-T, EV friendly incentives in the EU and lower priced Model 3 support H2 volume, making Tesla more resilient than peers



·     Energy stocks were among the big winners in the S&P 500 index as crude oil prices jumped after initially trading lower as major producers at a an OPEC-led meeting of the Joint Ministerial Monitoring Committee (JMMC) were reportedly are planning to make up for failing to fully meet their production cut targets last month. Iraq told the committee that it plans to stick to its output cut pledge this month and agreed to terms to make up for missing its target last month (as per headlines on Bloomberg, Reuters). Refiners HFC, VLO, MPC were among top gainers in the S&P as Mizuho raised tgts and ests saying "refiners have been disciplined, and we find that production has matched demand, causing crack spreads to improve recently.



·     Bank movers; quiet in banking space specifically, with a few analyst making rating changes after moves in names; Citigroup downgraded VLY to Sell, OZK and WAL to Neutral saying at-risk categories include high risk CRE, consumer services/ entertainment, retail, energy, and transportation – says in SMID space, VLY, WAL, and CIT have the highest levels of at-risk commercial loan exposure while HOMB, FRC, and NTB have the lowest; FBNC downgraded to neutral at Piper and lowering our EPS estimates as they incorporate the company’s updates around its 2Q LLP, NIM, and total expected PPP fees

·     Insurance; ALL said announced estimated catastrophe losses for month of May is $350M as catastrophe losses comprised eight events at estimated cost of $273M, after-tax, plus unfavorable prior period reserve re-estimates; Goldman Sach’s said it expects more differentiated returns after a bad run for life insurance stocks, which were all hit during the pandemic by low interest rates and credit concerns, as upgraded CNO and cut BHF, PFG; ATH buys a minority stake in insurer Prudential Plc’s (PUK) U.S. business, Jackson National Life Insurance Co, for $500M

·     Consumer finance and lending; PYPL rises to record high as its tgt was raised at Citi (to $186) and Susquehanna ($190) citing recent payments data and new functionality



·     Pharma movers; ADMS shares fall after stopping development of its drug, ADS-5102, to treat walking impairment in patients with multiple sclerosis (MS) as research shows limited commercial opportunity; CBIO 4.6M share Spot Secondary priced at $6.50; ELOX shares rise after saying enrollment in its Phase 2 clinical trial for ELX-02 in cystic fibrosis has resumed in Israel and Europe after being temporarily paused in response to the coronavirus pandemic; OVID rises after hosted a teach-in on OV935 (TAK-935; Soticlestat) ahead of a big 3Q for the asset, with multiple important trial readouts as William Blair noted mgmt. provided an overview of the Soticlestat development program and reviewed the mkt landscape and oppty

·     Biotech movers; BIIB shares tumble after losing a patent dispute over Tecfidera against MYL, a judge in a West Virginia court has ruled; ALPN enters into an exclusive global option and license agreement with ABBV for lead candidate ALPN-101, where Alpine will receive $60M upfront, up to $805M for the exercise of the option and subsequent milestones and tiered royalties; SRPT and SELB entered into a research license and option agreement granting Sarepta an option to license the rights to develop and commercialize Selecta’s immune tolerance platform, ImmTOR; SGMO slumps more than 10% after latest update with PFE on Phase 1/2 trial of their hemophilia A gene therapy – dosing of the first patient in the pivotal Phase 3 study is anticipated in second half of 2020 (BMRN shares have edged higher in reaction – has its own gene therapy)

·     Medical equipment and devices; KIDS 1.6M share Spot Secondary priced at $47.00; TNDM tgt raised by a few analysts after announced an expanded indication for Control-IQ to include pediatric patients (6-14) and suggested Q2 results would likely be better than guidance; WAT shares were higher on no specific news, among top gainers in the S&P early


Industrials & Materials

·     Materials, Industrial & Machinery; ABM reports Q2 revenue decrease of 6.3% Y/Y to $1.49B, reflecting ongoing impact of COVID-19 operating environment, but was above consensus while earnings handily beat and said new bookings were ~$541M in annualized revenue for the 1H; USCR, VMC, MLM, EXP, SUM all remain strong as infrastructure-related outperforms as House Democrats unveil $1.5 trillion infrastructure plan

·     Transports; The Baltic exchange’s main sea freight index rises 23% to 1,527 points; tankers DHT and TNP were both downgraded to hold from buy at Stifel saying tankers are still earnings better than breakeven levels thanks in large part to the continued need for floating storage. However, the market has softened, and, it will likely soften further as ships used from storage come back into the market while consumption and OPEC+ production is still below normalized levels; Dow Transports roll to afternoon lows, back below the 9,200 level (AAL top decliner)

·     Metals & Materials; busy news in the steel sector after NUE guides Q2 EPS in range 10c-15c vs. est. 1c in steel sector (above views); U.S. Steel (X) shares slide after 50M share Spot Secondary priced at $8.58; CMC said its Q3 profit and sales fell as the Covid-19 pandemic weighed on its overall business (sales down to $1.34B from $1.61B YoY as it faced lower shipments and decreasing average selling prices, hurting its recycling segment.


Technology, Media & Telecom

·     Internet; SPOT shares rise after company lands exclusive deal for podcasts featuring DC universe characters/under the multi-year deal, SPOT and Warner Brothers will produce and distribute original and scripted podcasts based on the DC universe; WEX shares jumped midday on report mentioned as Motley Fool selection

·     Semiconductors; MKSI upgraded to buy from neutral at DA Davidson and raise tgt to $150 from $100 as sees the company’s near-term risks as modest while noting its ongoing market share gains, leverage to industry inflection points, significant operating leverage, and a below-peer valuation; QUIK 2.5M share Secondary priced at $3.50

·     Software movers; ZS and NET both upgraded to Equal-weight from Underweight at Morgan Stanley in security software saying more distributed users and ramping Cloud use accelerate the shift to a modern Zero Trust approach to security, as the center of gravity moves to Public Cloud, away from the corp network (says sees OKTA, ZS and NET as notable beneficiaries, while PANW is better positioned than many investors believe); PCTY was upgraded to outperform at RBC and raise tgt to $155 from $120 as believe F4Q will be the trough, with acceleration back above 20% over a year, and see upside to estimates; ADBE traded record highs again today

·     Media & Telecom movers; TMUS raised its forecast for customer additions, pointing to a quicker recovery in its retail business than expected as now says it expects postpaid net additions for Q2 of 800,000-900,000, up from previous guidance for 0-150,000; Variety reported that LYV to reduce payments to artists in 2021

·     Hardware & Component news; ACN was downgraded to Equal Weight from Overweight at Wells Fargo based on expectation that the recovery in discretionary IT spending could take 4-6 or more quarters, and see downside risks to Street revenue estimates; IT said since reporting results for qtr ended march 31, continued to experience negative impacts on all segments due to covid-19; ANET with a cautious mention at Cleveland Research saying May/June appear directionally worse


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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