Market Review: October 21, 2020

Auto PostDaily Market Report

Closing Recap

Wednesday, October 21, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished down in a volatile and choppy session as investors tracked Washington negotiations for a fresh coronavirus stimulus package and appeared skeptical a deal would be reached before the Nov. 3 U.S. elections. On again, off again talks between U.S. House Speaker Pelosi and Treasury Secretary Steven Mnuchin have failed to generate a deal with the two sides apart in the broader figure (White House at $1.9 trillion aid and Dems wanting $2.2T) but its non Covid related items that the President has called the Democrats on for failure of a deal (of course Republican Senators don’t want a high figure and could likely shoot down the bill). Outside of the stimulus aid talks (though seems impossible), earnings moved several names as energy stocks sank with oil prices falling 4%, social media stocks outperform behind better SNAP results, lifting shares of TWTR, FB and PINS, while NFLX missed on earnings and subs. Medical equipment names outperform on earnings (TMO, ABT) helped by increased Covid testing and auto retailers rise on better results (LAD, AN) with Tesla earnings tonight. Gold prices jumped as the dollar sunk again and treasury yields hit fresh 4-month highs.

·     Rising Covid cases in Europe still worth mentioning as Italy 15,199 new Covid cases vs 10,874 yesterday, UK new Covid cases +26,688 vs +21,331 prior day. European stocks fall as concerns over a resurgence in coronavirus cases in the region and uncertainty over prospects for further US fiscal stimulus measures weigh on market sentiment. The Stoxx Europe 600 drops 1.3%, the DAX declines 1.4%, the FTSE 100 sheds 1.9% and the CAC-40 decreases 1.5%. Spain’s coronavirus tally rises to 1,005,295 on Wednesday from 988,322 on Tuesday, health ministry data show. In the U.S., New York reported its first move above 2,000 COVID cases since May at 2,026. Oil prices drop 3% after a surprise build-up in U.S. crude stockpiles stoked concerns about a supply glut.



·     Oil prices ended lower, as WTI crude slid $1.67 or 4% to settle at $40.03 per barrel a day after jumping to 7-week highs amid mixed inventory data as API showed a surprise increase in American crude stockpiles, countering optimism over a potential U.S. stimulus agreement. Natural gas rises 3.8% to settle at 21-month highs of $3.023 mln btus. Prices got a boost recently due to all the production disruption from Hurricanes in the Gulf region over the last month.

·     Gold prices climbed $14.10 or 0.7% to settle at $1,929.50 an ounce, its 3rd straight day of gains and highest settlement in roughly a month as the dollar tumbled again. Silver for December delivery rose 26c, or 1%, to $25.241 an ounce. December copper rose 1.6% to $3.1985 a pound, scoring another finish at its highest since June 2018. Also helping prices, investor optimism that a U.S. coronavirus aid package will be announced before the Nov. 3 presidential elections and bolstered its appeal as an inflation hedge. Gold has gained more than 26% this year, driven mainly by several levels of global stimulus.


Currencies & Treasuries

·     The U.S. dollar extends its recent declines, falling vs. all major counterpart currencies as Sterling extends gains to 6-week high of $1.3177, rising roughly 1.7% after reports that the trade talks between the U.K. and European Union are on the verge of resuming. A decision could come in the next 24 hours with negotiators ready to begin talks immediately in hopes of reaching a deal by mid-November. The U.S. dollar hit a one month low against the Japanese yen, falling to 104.35 (1% move). Treasury yields held higher, but pared gains as the 10-year yield stayed above the 0.8% level after topping it for the first time in 4-months yesterday (traded above 0.83%). The U.S. Treasury sold $22B in 20-year notes at a yield of 1.37% vs. 1.371% when issued prior, with a bid-to-cover (demand) at 2.43 and indirect bidders awarded 62.95% of the auction and directs 15.6%.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; IRBT shares fell despite beat and raise quarter as some analysts note that the profit guidance doesn’t imply an encore of 3Q; Cowen with a preview in retail for holiday as positive earnings revisions in Q2 fueled a rally in the sector and improvement in sentiment that they suspect continues as raise tgts and ests for SKX ($36 from $31), UAA ($15 from $12), HBI, DECK ($270 from $265), and COLM ($100 from $85), as Q3 consensus ests/guidance feels conservative; BGFV initiated buy and $15 tgt at Lake Street calling it an undervalued sporting goods retailer experiencing strong current results

·     Auto sector; TSLA highlights sector ahead of earnings tonight after the close; NKLA rises after GM President on CNBC said in interview he is totally excited about opportunity when talking about relations ship with EV maker though notes deal isn’t finalized yet; GM unveiled its first all-electric Hummer – the 2022 GMC Hummer EV, on Tuesday night saying the "Edition 1" of the Hummer EV pickup will be available next fall and will start at $112,595.

·     Auto retail strong after AN revenue $5.4B beat the $5.2B estimate as beat on both new/used while op income $308M vs. $240M on better revs and new $500m buyback (no outlook); LAD with better-than-expected Q3 revenue and profit, helped by a strong rebound in demand for used vehicles and Q3 same store used-vehicle retail sales jump 11.2% (watch ABG, GPI, SAH); AAP was upgraded to outperform at Raymond James now four years into a restructuring effort that they are increasingly optimistic will begin to drive incrementally better results going forward

·     Consumer Staples; in grocers, AMZN is launching a free, one-hour grocery pickup for Prime members at Whole Foods locations nationwide (orders must cost $35 or more) – there are 474 stores in the US (competition KR, etc.); NSRGY reported sales at 61.91 billion Swiss francs ($68.24 billion) in the period, down from CHF68.37 billion in the previous year while raised its full-year guidance, saying it now expects organic sales growth at around 3% vs. prior view 2%-3%

·     Restaurants; PZZA weak early after Papa John’s founder late yesterday, in post as a Seeking Alpha contributor, laid out a bearish view on the company saying Papa John’s has had a ‘revenue problem’ since 2018, and is showing few signs of being able to pull itself out of its sales doldrums; PLAY receives its second analyst upgrade in as many days ass Raymond James upgraded

·     Leisure and Gaming; in RV space, WGO reported easy Q4 beat of $1.45 vs. est. 92c on a 51% YoY Ebitda increase to $76.5M and op income up 53% YoY to $68.4M; in education, GSX fell after being downgraded to Underperform from Neutral at Credit Suisse with a price target of $71, down from $85 as sees competition in China’s online education sector intensifying



·     Energy stock movers; PXD has agreed to buy PE for $4.5 billion, in an all-stock deal would solidify Pioneer’s place as one of the largest producers in the Permian Basin of Texas and New Mexico, the top American oil field (confirms reports the day prior); TUWOY rises after saying it received Uganda government approvals for $575 million sale of Uganda assets to TOT; in services, BKR Q3 revs of $5.05B beat the $4.78B estimate on in-line EPS and said total costs and expenses declined 8.7% to $5.10B while Q3 orders rose 4% sequentially as a result of higher intake in its turbo

·     Energy research calls; OXY was downgraded to hold from buy at Truist citing concerns around valuation, production missing, and debt; Raymond James upgraded AR, BSM, RRC, SWN, XEC in E&P and downgraded CXO as they see a much improved risk/reward setup for many of the leveraged gassy E&Ps; Mizuho upgraded WPX to buy as we believe the merger with DVN is of great benefit to both sides, while top picks remain EQT and CRK in gas, and continue to like XEC into 3Q results on the oil side as they raise their gas price assumptions for 2021

·     Inventory data; the API shows a build of 584K barrels of oil for the week ending Oct. 16; gasoline inventories show a draw of 1.62M barrels, distillate inventories show a draw of 5.98M barrels and Cushing inventories show a build of 1.17M barrels. The EIA showed weekly crude stocks fell – 1.0M barrels to 488.11 mln in-line with forecasts, EIA Gasoline +1.9M barrels vs. -1.6M last week and Distillates -3.8M barrels vs. -7.2M last week.

·     Solar sector; RUN 8M share Block Trade priced at $60.00; Jefferies upgrades Utilities sector to Market Weight from Underweight; JP Morgan still sees favorable risk-reward in alternative energy even after the recent outperformance, highlighting ENPH as their favorite name ahead of earnings and the election, and also naming ENPH, RUN, NOVA, SPWR as the biggest potential beneficiaries of a Democratic sweep in November, but they do not forecast downside to estimates or fundamentals even if a sweep does not occur; CSIQ, JKS shares fall after last night, Chinese solar power cell makers and U.S. importers must pay the anti-subsidy duties established by the Commerce Department. DQ shares fell after Roth Capital said it sees potential for increased U.S. regulatory scrutiny of companies conducting business in China’s Xinjiang province due to concerns about the Uyghurs being used as forced labor in the region – Roth believes Daqo could be most at risk as it is based entirely in Xinjiang while JKS, CSIQ could have to adjust supply chains – says RUN, NOVA, SPWR could see higher module prices if shortages arise



·     Bank movers; banks outperformed on Tuesday following strong bank earnings in the regional space and Treasury yields touching best levels in 4-months, but more mixed today; CBSH upgraded to Market Perform from Underperform at Raymond James following its release of impressive 3Q results that led us to increase our EPS and pretax pre-provision income; BXS upgraded to overweight at Stephens as Q3 results were highlighted by solid fees, excellent cost controls and lower-than-expected LLP expense; TBK downgraded at Stephens on valuation

·     Consumer Finance; PYPL shares jumped (along with Bitcoin) after saying it will host cryptocurrency payments, debuting its service due to rising interest in digital currencies from central banks and consumers amid the Covid-19 pandemic. Users would be able to buy, hold and sell cryptocurrency from their PayPal accounts; NAVI posted Q3 EPS beat led by revenue out performance in all three segments; NIM continues to be better than we expected. Credit was slightly better as well in FFELP

·     REITs; REXR reported Q3 core FFO 33c, beating the 25c estimates and last year’s 31c, on revs $83.9M, which also topped the estimated $81.9M and increasing from last year’s $68.1M in Q3. The company also raised its FY20 core FFO guidance to $1.29-1.31 per share from the previous range of $1.26-1.29; Wells Fargo initiated CPT at OW with a $104 target, EQR at EW with a $54 target, ESS at EW with a $210 target, AVB at EW with a $160 target, UDR at OW with a $37 target; STOR announced that as of yesterday, it has received 90% of October rent and that nearly 100% of its locations are open for business with deferrals primarily limited to movie theaters and early childhood education locations; CXW, GEO fell over 8% – private prisons one of the sectors seen hurt by a Biden victory as he has committed to ending federal government’s use of private prisons (down 60% YTD and 44% respectively)



·     Pharma movers; Brazil’s health authority Anvisa said a volunteer taking part in clinical trials for the Covid-19 vaccine being developed by AZN and Oxford University has died; GLPG was downgraded to sell at Goldman Sachs as lower filgotinib outlook and see risk with the remaining pipeline; PTGX said the European Medicines Agency granted orphan drug designation for PTG-300 in the treatment of polycythemia vera; ZSAN slid as the FDA declined to approve Qtrypta, its experimental treatment to relieve pain in migraine headaches; XERS gets U.S. FDA’s fast track designation for its experimental drug XP-0863 to treat acute repetitive seizures

·     Biotech movers; BIIB Q3 EPS & revs beat but FY EPS & rev guidance light vs consensus as revs for Tecfidera/Vumerity & Spinraza missed while Tysabri & Avonex beat while cuts year guidance (which somewhat expected due to the multiple generic Tecfidera entries in Q4); CRSP slides after saying a patient died 52 days after taking its experimental CAR-T cell therapy, CTX110, in an early-stage trial to treat B-cell malignancies (at dose level 4) – trial, however, met main goal of safety at dose level 3, company says

·     Healthcare services and providers; PHR 5M share Secondary priced at $32.00; in hospitals, THC reported 3Q results with adjusted EPS and revenue beat as adjusted EBITDA was $551mm (-13% y/y) and was $621mm (-2% y/y) if excluding $70mm CARES fund reversal; USNA boosted its forecast for the year – though

·     MedTech and Equipment; ABT posts Q3 adj profit of 98c, beating estimates by 7c helped by strong sales of its COVID-19 tests and said global COVID-19 testing-related sales were $881m in the quarter – raises FY20 adj EPS to at least $3.55 from prior view $3.25; DGX upgraded to buy from hold ahead of the company’s third-quarter results at Argus saying the company is playing a key role in responding to the COVID-19 pandemic, introducing a range of new tests along with new testing methods that can increase capacity and shorten the time needed to obtain results; TMO Q3 profit and rev top estimates, helped by strong sales of COVID-19-related products and performance in its life sciences unit (Q3 EPS $5.63/$8.52B vs. est. $4.31/$7.65B)


Industrials & Materials

·     Industrial & Machinery; CAT touches another fresh all-time high; PWR was downgraded to neutral at Davidson with $58 tgt as shares have risen +55% since our Dec. upgrade & markedly outperforming the S&P 500 (+7% during same period); OSK was downgraded to hold from buy at Jefferies saying despite the company continuing to execute well, they lower top line outlook for F&E and Defense based on potential federal/state/local budget constraints heading into 2021 driven by the reduction in tax revenue as a result of COVID; JCI upgraded to outperform at Oppenheimer saying while shares have recovered, it has opportunities to narrow its valuation discount to HVAC and other multi-industrial peers through a reacceleration of organic growth; CWST 2.35M share Spot Secondary priced at $56.00

·     Transports; USX upgraded to buy at Stifel as expect the company to disproportionately benefit in the near term from higher spot rates and then also benefit from the rising contract rate environment; in rails, CNI posted an EPS miss and withdrew its guidance; in truckers, KNW posted a top and bottom line beat; in tankers, EURN, FRO, and INSW downgraded to Neutral at BTIG under a backdrop of continued production cuts from OPEC and the potential for more, declining asset prices, and tanker stock estimates already baking in a strong 4Q20 and 1Q21

·     Metals & Materials; Copper prices rise to 28-month highs on stimulus hope, strikes at mines in Chile, expectations of healthy demand in China and a strengthening yuan. Benchmark copper on the LME earlier reached highs of $6,985; MOS was downgraded to neutral from buy and cuts PT to $20.5 from $23 at Citigroup following petitions filed by co, U.S. Commerce Department in July opened investigation into whether producers of phosphate fertilizers in Morocco and Russia are receiving unfair subsidies


Technology, Media & Telecom

·     Internet; NFLX shares slide as misses expectations for paid subscriber additions in Q3, hit by rising streaming competition and the return of live sports to television – EPS also missed while adding 2.2M paid subscribers globally, vs. analysts’ estimates for 3.4M; SPOT said its Spotify listeners can now play podcasts on google assistant devices; PINS was upgraded at both Goldman Sachs and bank America following strong results from SNAP overnight, as sees strong user growth continuing through 3Q, based on current app download data, and expectations for continued monetization improvement; SNAP surges as beats analysts’ estimates for user growth and revenue and said Q3 daily active users (DAU) rose 18% YoY to 249M vs. est. 244M while revs of $679M, up 52% YoY vs. est. of $555.9M and sees Q4 rev to grow between 47% and 50% YoY

·     Semiconductors; another round of strong results as TXN reported a solid beat-and-raise highlighted 75% q/q improvement in automotive revenue, continued demand for personal electronics and solid gross margins of 64.3%, flat q/q; TER Q3 beats featuring 41% Y/Y revenue growth to $819M, 53% EPS growth to $1.18, and a recovery for the Industrial Automation segment; while sees Q4 revenue of $680-740M (vs. est. $522.18M)

·     Software movers; WORK downgraded to Underweight with a $27 PT at Morgan Stanley as CIO survey showing a fading positioning versus an intensifying competitive landscape, Slack remains challenged in proving its differentiation for information worker use cases; MSP 22M share IPO priced at $27.00; PAYC upgraded to outperform and tgt raised to $450 from $305 at RBC citing continued improvement in economy-wide employment, app and website data that show good trends for the company in 3Q and upgraded CDAY to outperform as checks suggest a significantly stronger 2021 and 3rd party data that show good trends

·     Media & Telecom movers; Dow component VZ posted Q3 EPS $1.25 vs. est. $1.22 on in-line revs of $31.5B while raises year EPS growth view to 0%-2% from prior down 2% to up 2%; in advertising, IPG posted a beat on top/bottom line (EPS 53c/$2.13B vs. est. 33c/$1.88B) while announces CEO succession

·     Hardware & Component news; APH posted higher Q3 earnings and revenue after sales of its digital infrastructure equipment increased as the coronavirus pandemic continued; ERIC posted a net profit attributable to shareholders of 5.35 billion Swedish kronor ($608.7 million), compared with a loss of SEK6.23 billion in the year-earlier period (est. SEK4.15B); ADTN rises after saying it was picked by ATC Communications to modernize its existing residential fiber broadband network and expand into new markets.


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