Market Review: November 19, 2020

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Closing Recap

Thursday, November 19, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks were firmly higher, helping erase the late day swoon Wednesday as investors focus on economic rebound optimism amid positive vaccine news (PFE, MRNA earlier this week/last week and AZN today) and ignore rising restrictions imposed by several countries and U.S. states to curb rising coronavirus infection levels into the Thanksgiving Day holiday. Stocks took another leg higher late day after CNBC reported Senate Majority Leader Mitch McConnell has agreed to resume negotiations with Democrats over a potential new Covid-19 bill as cases continue to surge around the country, Senate Minority Leader Chuck Schumer said. Important to note that as of a few weeks ago, the two sides were extremely far apart (Dems wanting $3 trillion and the Senate/McConnell was offering $500B).

·     Tech outperformed led by software and semiconductors (Nasdaq rises around 1%), while the Dow and S&P bounced off earlier weakness. The vaccine news is categorically positive, but it will play out over several months and several quarters – that has not dented the rotation back into economic sensitive names (travel, cruise, casino, theme parks, hotels, energy, restaurants and retailers). Another sector that remains on fire is electric vehicles (EV) as TSLA trades to new record highs, along with big gains in NIO, BLNK, SOLO, LI, and volatility in NKLA. Retailers saw strength after earnings from L Brands and Macy’s.

·     The U.S. logged more than 170,000 newly reported Covid-19 cases for the second time on Wednesday, and the death toll crossed the quarter-million mark prompting several states to adopt measures including extended mask mandates, bar and restaurant closures and limits on private gatherings. Economic data today a mixed bag as jobless claims climbed above last week levels and above estimates but existing home sales data soared to a new 14-year highs, up 26% YoY (on record median home prices), boosting market sentiment.

·     In the crazy stat of the day, as per Bespoke, If a trader bought the SPY ETF at the open and sold it at the close every day beginning in 1993, they’d be down 10% over the 27 year period. At the same time, if a trader bought the close and sold it the next open, they would be up 812%.

Economic Data

·     Initial Jobless Claims rose to 742K vs. 710K consensus, while prior week edged up to 711K from 709K; continuing jobless claims of 6.372M is down from 6.801M prior and below the 6.470M consensus; the 4-week moving average fell to 742K from 755,750 prior week; US insured unemployment rate fell to 4.3% from 4.6% prior week

·     Philadelphia Fed business conditions index for November at +26.3 (above consensus 22.0) vs 32.3 in October as new orders index 37.9 in November down from 42.6 in October, prices paid index 38.9 in November vs 28.5 MoM, employment index 27.2 in November vs 12.7 in October; the 6-month business conditions index 44.3 in November vs 62.7 in October

·     Existing Home Sales for October +4.3% to 6.85M topping the 6.47M consensus (and revised higher to 6.57M from 6.54M pervious month); U.S. oct inventory of homes for sale 1.42 mln units, 2.5 months’ worth and the Oct national median home price for existing homes $313,000, +15.5%



·     Oil prices slip off a two-month high, as WTI crude settles at $41.74 per barrel, down a modest 8c on the day as coronavirus restrictions tightened in the U.S., threatening the economic recovery theme. New York City said it would shut schools to stem rising infections, while also issued warnings about indoor dining, following suit of other states the last few weeks. Markets also weighed signs of rising tensions within OPEC+ after Bloomberg reported that officials from the United Arab Emirates questioned the benefits of being in the alliance of oil producers.

·     Gold prices dropped -$12.40 or 0.7% to settle at $1,861.50 an ounce as continued progress in COVID-19 vaccine development boosted hopes of a faster economic rebound and tempered bets for an immediate U.S. coronavirus relief package. The dollar was little changed after trading near weekly highs earlier, after strong housing data.


Currencies & Treasuries

·     The U.S. dollar was mixed overall, gaining ground against the British Pound after the EU’s chief Brexit negotiator Michel Barnier said trade deal talks with the U.K. will be suspended after one of his colleagues tested positive for coronavirus. The buck rose after Oct existing home sales touched its highest since 2005, edging above the euro (1.184), while the USD-JPY dipped below the 104 level. Treasury prices advanced as yields fell to their lowest levels of the week, with the 10-year slipping mor than 3 bps to below 0.85% (after touching highs around 1% last week). Fed’s Kaplan indicated he could support an extension of QE duration, though not more purchases, which helped push yields lower midday.






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10-Year Note





Sector News Breakdown


·     Retailers; LB trades to more than 2-year highs as handily beats Q3 sales and profit estimates, helped by record sales growth at Bath & Body Works, higher demand for Victoria’s Secret lingerie (first time VS posted consecutive positive quarterly comps in 4 years), and gross margins 870bps expansion; Macy’s (M) reported 3Q adj EPS ($0.19) vs. est. ($0.79) on sales $3.99B vs. est. $3.86B, comps -21% on owned basis, -20.2% owned & licensed, digital sales +27%; BJ 3Q adj EPS $0.92 vs. est. $0.64 on net sales $3.65B vs. est. $3.68B, comp club sales ex gas +18.5% vs est. +16.7%, digitally-enabled sales +200%; PLCE Q3 EPS $1.44 on revs $425.6M, both surpassing estimates (26c, $388M); CATO posted Q3 EPS (15c) on revs $150.8M; SCVL reported Q3 EPS $1.03, topping est. $0.70, on revs $274.6M, just shy of est. $275.58M, an comp sales +0.9% and digital sales up over 150% YoY; TGT touched another record high as investors and analysts continue to take in the strong Q3 earnings report from yesterday

·     Housing & Building Products; Homebuilders DHI, TOL, PHM all upgraded at Truist; in building products, EXP upgraded to a BUY with a $108 PT at Loop Capital as have increased confidence in earnings upside following our latest wallboard survey which indicated price increases are beginning to gain traction, demand is strong, lead times are out 2x our September survey, and there’s instances of select allocation

·     Consumer Staples; YSG 58.75M share IPO priced at $10.50; KO placed too much of its profit in its foreign operations instead of its higher-taxed domestic parent company according to a U.S. tax judge, backing the Internal Revenue Service, which has been seeking more than $3.3B from the company for the 2007-09 tax years; COTY was upgraded to Buy with a $10 target from $4.50 at Citi who sees more room for the stock to run despite doubling off its 2020 lows; TTCF shares fall after Kerrisdale Corp names as a short report

·     Restaurants; JACK F4Q20 adjusted EPS was $1.61, significantly above consensus of $1.13, largely driven by better than expected systemwide comp store sales SSS growth of 12.2% (est. 8.4%), company restaurant margins of 27% (est. 23.7%), and franchise margins of 41.3% (est. 40.3%); YUM tgt up from $108 to $114 at UBS after mgmt meeting saying tone was generally positive despite industry uncertainties & challenges, believing brands are well positioned for growth given a value, digital and off-premise focus

·     Leisure and Gaming; IGT upgraded to Neutral from Underperform at Credit Suisse and up tgt to $14, increasingly positive noting Street estimates in 2022 are well below pre-COVID19 expectations; in lodging, MAR upgraded to buy with $140 tgt at Argus as see further upside and believe that the lodging industry is in the early stages of another multiyear upturn; PLYA 13.6M share Secondary priced at $4.10; electrical vehicle space big gains today and week led by TSLA after S&P 500 inclusion announcement earlier in week (BLNK, NKLA, NIO, SOLO all higher); GM said will start new internal group called EV growth operations, says is adding to its 20K software and EV engineers



·     Oil markets slip from recent multi-week highs as fears of expanding lockdowns stoke worries that demand for fuel will remain weak for a long period of time. That’s a reversal from the bullish mood seen earlier this week; in stock movers; RIG said PBR has exercised a 680-day pre-existing, fixed-price option for the Deepwater Corcovado, and a 815-day pre-existing option for the Deepwater Mykonos drilling rigs – together, these contract extensions add about $297 mln to Transocean’s backlog, and will continue to operate in Brazil

·     Utilities & Solar; Mizuho downgraded POR to Neutral from Buy, reversing their Sept 21 upgrade after the stock has outperformed the broader S&P500 utilities group by 8% since; Piper initiated BEP at Neutral with a $55 target, saying the company is well positioned to benefit from global decarbonization but the share price growth this year limits potential return, and NEP at OW with a $81 target, saying the company provides lesser risk than other renewable energy companies and is well positioned to take advantage of disruptions in the energy industry; UGI posted Q4 EPS 5c (est. (31c) loss) on revs $1.12B (est. $1.12B) and guided FY21 adj EPS $2.65-2.95 (est. $2.82)

·     Solar stocks; sector rallied (ENPH, SPWR, FSLR, SEDG) after a judge upheld a recent proclamation by President Donald Trump to allow reimposition of tariffs on some imported solar panels; CSIQ Q3 EPS 15c on revs $914.36M vs. est. loss (5c) and $861.93M, Q3 solar module shipments of 3.2 GW (exceeding guidance of 2.9-3.1 GW), and reiterates 2021 module shipment guidance of 18-20 GW; FCEL was downgraded to Neutral on valuation at JPM after gaining about 135% over the last month (S&P 500 up 3.4%) on regional clean energy initiatives and a Biden victory, and about 80% over the past 3 days absent any news;



·     Bank movers; banks have been solid of late, with big moves on higher yields and growing optimism of an economic rebound due to vaccine news; in research, Citi (C) was upgraded to outperform along with STT at KBW Inc. while downgraded JPM, BK to market perform and also downgraded mid-tier banks CFG, TFC, SSB, UBSI to MP; in insurance; ALL estimates October catastrophe losses at $345M pretax or $273M after-tax – said catastrophe losses in October comprised 10 events at an estimated cost of $324M pretax ($256M after-tax), plus increased estimated catastrophe losses for prior quarter events

·     Consumer Finance; FISV announces 60M share repurchase authorization while Moffett also upgraded today to buy and $145 tgt and Susquehanna said the co is growing much faster than SQ, (cites Clover growth after getting it with FDC purchase few years ago); SQ rises after KBW said it’s too early to tell if Google Pay’s redesign to turn it into a financial super app will pose a threat to Square’s Cash App and PYPL’s Venmo

·     Exchanges; NDAQ buys Verafin for $2.75B to bolster financial crime-fighting tech, to add its anti-money laundering and fraud platform to Nasdaq’s established regulatory technology business (says Verafin’s cloud products deliver ~30% compound annual recurring revenue growth within a $13B addressable market) ; ICE upgraded to Strong Buy with a price target of $125 at Raymond James as expects the recently completed Ellie Mae acquisition to sustainably boost its organic revenue growth profile, and feels that an upcoming segment realignment will better highlight the value of its mortgage franchise as well as its FI business



·     Pharma movers; University of Oxford, which is working in collaboration with AZN, was shown to have generated a healthy immune response in adults in their 60s and 70s – prelim results revealed that the vaccine, ChAdOx1 nCoV-19, prompted what’s known as a "T-cell response" within 14 days of the first dose, as well as an antibody response within 28 days of a booster dose; CORT rises after U.S. Patent and Trademark Office issued a decision upholding the validity of Corcept’s claims for its approved drug for Cushing’s syndrome, Korlym; APVO jumps as investment fund Tang Capital Partners LP submitted a bid letter to APVO’s board, offering to acquire co’s remaining stock it doesn’t own for $50.00 in $240M deal ; SAGE tgt raised to $94 from $65 at OpCo after analyzing the potential value of earlier-stage pipeline assets

·     Biotech movers; KTRA announces interim data from its two Phase 2 trials of VAL-083, the Company’s lead compound for the treatment of glioblastoma multiforme; RDHL enrollment completed in the U.S. Phase 2 study evaluating opaganib’ s safety and initial efficacy signal in 40 hospitalized patients with severe COVID-19 pneumonia; AQST provided a preliminary summary of the 11/12/20 meeting with FDA to discuss the potential resubmission of the Libervant NDA; MGTX 5M share Spot Secondary priced at $12.85; LNTH announced the FDA has approved the supplemental new drug application for DEFINITY Room Temperature Injectable Suspension

·     Medical devices, healthcare services and providers; GDRX upgraded to Outperform at RBC Capital as believes the 28% pullback on the news of the Amazon Pharmacy launch is an overreaction; XENT upgraded to Buy with $32 tgt at BTIG saying the combination of easy comps through FY21, the launch of VenSure and the behind-the-scenes work related to SINUVA’s revenue cycle altogether set up XENT for improved growth in FY21; MDGS rises after the medical technology company announces its plan to enter electric vehicle and charging market.


Industrials & Materials

·     Transports; Dow Transports underperform after touching record highs the day prior; UAL said in last week, ending November 18, there has been an uptick in cancellations as a result of recent spike in covid-19 cases; ZTO reported 3Q2020 results as revenue beat consensus slightly by 6.3% but posted lower profit; ALK expects Nov rev to be down 60-65%, capacity to be down about 40%, RPM down 65-70% YoY, cash burn to be $125-150M (was $97M in Oct); CPA had earnings and Brazilian airline GOL avg capacity in Oct of 363 flights/day is +34% from Sept; LUV said that about 25% of its customers have indicated that they are not comfortable flying on the Boeing 737 MAX, which has been approved for flight following safety updates and training.

·     Metals & Materials; OSB to be acquired by West Fraser Timber Co. Ltd. for about 4 billion Canadian dollars (US$3.1 billion), in an all-stock deal combining the wood-products companies as the transaction values Norbord at C$49.35 a share (watch other timber names LPX, BCC, WY, UFPI); BERY reports Q4 adj EPS of $1.59 above est. $1.22 and net sales of $3 bln, with 4% organic volume growth


Technology, Media & Telecom

·     Internet; SHOP upgraded to buy from hold at Jefferies with $1,250 tgt saying it see its future prospects being as bright as ever; YELP tgt raised to $34 from $29 at RBC Capital as came away with greater appreciation for Yelp’s product improvements, sales efficiency driving margin expansion, and the overall return of ad budgets under a vaccine world; PINS tgt raised to $80 from $44 at Loop as believes that the break-out monetization momentum, along with continued strength in the company’s user growth, will sustain a high multiple for the stock; BILI posted a beat and raise quarter; NTES revs grew 27.5% to RMB18.7M (about $2.7B), with core online game services boosted by heavy growth at Youdao and its other businesses.

·     Semiconductors; NVDA strong results as posts both Q3 rev and profit above analysts’ est., driven by strength in gaming business, where revenue jumped 37% to $2.27 bln from a year earlier and sees Q4 rev of $4.80 bln, plus or minus 2%, while analysts expect $4.42 bln but did warn it sees a decline in data center chip sales in Q4; CREE was upgraded to OW and its pt was raised to street-high $90 from $85 at JPM, who does not change estimates but adjusts their valuation approach to reflect growing momentum around the EV transition as the stock provides a way to invest in renewables and electrification outside of the more obvious wind, solar and storage themes; Citi moved LRCX and MRVL to their Top Picks and SWKS and QRVO to their Bottom Picks in semis, generally preferring equipment makers over semiconductors on memory bottom and de-risking of domestic China equipment spend risk post Biden Win going into next year; KLIC Q3 EPS 29c misses estimates by 2c on revenue $177.69M which beats estimates by $.67M;

·     Software movers; ZI upgraded from Equal-weight to Overweight with $53 pt at Morgan Stanley saying shares have yet to fully digest Q3 strength; NUAN rises as Q3 total revenue of $352.9M beat the Street’s $345.9M estimate driven by Healthcare strength on better margins and guidance; PAYC and CDAY both upgraded to neutral at Credit Suisse as they think the worst-case scenarios are off the table, view consensus estimates as more achievable, and lean more constructive in light of sequentially stabilizing macro; WDAY earnings tonight; in cyber-security, TLS opens its first day of trading up nearly 29% to $21.90 after having priced 14.9M shares (upsized from 12.35M) at $17, the midpoint of its initial range

·     Media & Telecom movers; A blank-check company backed by FWONA is looking to raise $500 million in a U.S. initial public offering, a regulatory filing showed – Liberty Media Acquisition Corporation (LMAC) said it was aiming to sell 50 million units at $10 apiece, and that the special acquisition purpose company (SPAC); SBGI said it had partnered with sports betting company and casino operator BALY and was rebranding its 21 Fox regional sports networks under Bally name; VIAC renewed syndication rights for TV series Friends for its Nick at Nite nighttime block; BuzzFeed Inc. has agreed to acquire VZ’s HuffPost in a stock deal, the companies said Thursday

·     Hardware & Component news; SONO shares rise after Q4 EPS 33c on revs $339.8M topped the consensus for 0c and $298.8M on better revs as sees FY21 revs $1.44B-$1.5B vs. est. $1.38B and announces $50 million stock repurchase program; GPRO announces $100M convertible senior notes offering; ROKU active after reports it is close to reaching a deal with AT) to bring HBO Max to its platform, according to “The Desk”; KEYS October results & January outlook were better than expected as after 2 quarters of negative orders growth the company was able to see positive orders of +3% YoY


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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