Market Review: September 11, 2020

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Closing Recap

Friday, September 11, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks tumbled on this holiday shortened week as major averages failed to extend Wednesday’s U.S. stock bounce, falling sharply late week as nearly every rally was met with additional selling pressure heading into the weekend (though stocks managed a late day bounce to pare losses as the Dow and S&P finish the day higher while tech and SmallCaps end lower). The tech-led rout that pushed the Nasdaq into correction territory earlier this week (down 10% from record highs) carried into today while the S&P 500 index took out its intraday lows from earlier in the week and broke below its 50-day moving average for the first time since April 24th. The tech sell-off intensity is likely a combo of massively crowded positioning and a confluence of technical failures happening at historically extreme valuations given the meteoric rise from March lows. While monetary policy is set to remain supportive for several more quarters from the Fed, valuations are high across assets and volatility is resurfacing. With today’s declines, markets slipped back-to-back weeks for the first time since May.

·     Increasing tensions between the U.S. and China are coming to a head, with President Trump not budging on his September 17th deadline to have the popular TikTok app owned by ByteDance to be sold in the U.S., while Reuters reported today that Beijing opposes a forced sale of TikTok’s U.S. operations by its Chinese owner, and would prefer to see the short video app shut down in the United States. In other geopolitical news, Beijing said it has imposed restrictions on American diplomats in China to retaliate against Washington’s recent move to curb activities of Chinese diplomats in the U.S. Market weakness.

·     Market weakness yesterday was partly tied to the inability of U.S. politicians to agree on a new coronavirus rescue package after Democrats blocked a Republican bill on the Senate floor, leaving the way forward unclear (raising fears of a possible double-dip recession which rolled into today). With today’s declines, major averages post their first back-to-back weekly drop since May. Political concerns ranging from November’s U.S. elections to Brexit are also impacting markets and sentiment. Fears over a messy no-deal Brexit dragged the British Pound to new 5-1/2-month lows after the European Union told Britain it should urgently scrap a plan to break their divorce treaty. Oil bounces off lows, while gold slides and the dollar bounces.

Economic Data

·     Consumer Price index (CPI) MoM for August rose 0.4% vs. est. 0.3% and core prices rose 0.4% topping the 0.2% estimate; YOY, CPI overall rose 1.3% vs. est. 1.2% and core CPI YoY 1.7% vs. est. 1.6%; CPI energy +0.9%, gasoline +2.0%, new vehicles 0.0%



·     Oil prices managed a late day rally to finish higher by 3c to $37.33 per barrel, though still closed the week lower after U.S. stock markets tumbled and U.S. stockpiles rose unexpectedly this week. For the week, both Brent and WTI crude declined over -6%. Also dampening the market mood, the U.S. Senate killed a Republican bill that would have provided around $300 billion in new coronavirus aid. Fears about an oversupply also added to the general feeling of uncertainty.

·     December gold futures fell slumped on Friday, falling -$16.40 or 0.8% to settle at $1,947.90 an ounce, snapping its 3-day win streak but still advanced 0.7% for the week. Gold prices have been supported by low government bond yields, and a sliding dollar (though the buck did end the week higher). At the same time, the Fed has recently said they would let inflation rise without fear of raising rates which has helped provide gold with a tailwind.


Currencies & Treasuries

·     The U.S. dollar index (DXY) managed its 2nd straight week of gains, recovering from 2-year lows at the end of August but slipped against the euro for a third straight session. The Euro rose after the ECB yesterday showed no sign of stemming the single currency’s appreciation in its monetary policy meeting as ECB President Lagarde said the bank is not targeting exchange rates. Today however, ECB chief economist Philip Lane warned against complacency over low inflation and highlighted risks from a strong euro. The euro is down from 52-week highs above 1.20 last week (down from 1.1917 yesterday, a 1-wek high) at 1.184 today. Treasury yields slipped late week as the 10-year yield fell to 0.66%, as investors rotated back into safe-haven instruments and out of riskier stocks and commodity related assets.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; PTON rises as posted its first-ever quarterly profit as revenue nearly tripled, beating analysts’ estimates due to a surge in subscribers and higher demand for its fitness products during the COVID-19 pandemic and sees FY21 revenue $3.5B-$3.65B above $2.72B and sees 2.05M-2.1M ending Connected Fitness Subscriptions, growth of 90% at the midpoint; CROX sees Q3 revenue growth of 10% y/y to ~$344.1M vs. a consensus of $305.25M; ZUMZ Q2 results beat and same-store sales growth of 37% and said upbeat Q2 sales due to more full-price sales and higher online demand across categories, particularly skateboards

·     Auto sector; NKLA refuted allegations of fraud made by short-seller Hindenburg Research in report published Thursday saying they retained a law firm to evaluate possibility of legal recourse (shares were still pressured); TSLA tgt doubled to $325 from $160 at UBS on the expectation that the Battery Day event will feature significant announcement

·     Consumer Staples; KHC positive mention at Wells Fargo ahead of 9/15’s Investor Day saying the first event of the 3G era, the Street is poised to better understand the magnitude of reinvestment, sources of new savings, and gain a better grasp of CEO’s vision for category mgmt/innovation; grocer KR reported a top and bottom line Q2 beat and said Q2 identical sales, without fuel, up 14.6% while Q2 digital sales grew 127%, but shares dipped; the Labor Dept fined Smithfield Foods over a Covid-19 outbreak that infected nearly 1,300 workers at a South Dakota plant and killed four

·     Restaurants; CMG said late yesterday it sees mobile orders doubling to $2.4 billion this year, as per Bloomberg headlines; DPZ was upgraded to Outperform at Cowen saying its long-term story has been enhanced by actions taken during COVID-19; CMG tgt was raised to $1,425 from $1,250 at Goldman Sachs as expect menu innovation, including CMG’s new beverage program, can serve to further build both comp sales and margin momentum in 2H20 and beyond; PLAY reported an 85% fall in Q2 comp sales while revs were $50.8M, missing the $80.9M estimate

·     Leisure and Gaming; STAY announced a new CFO in lodging space; CLUB shares fell after Bloomberg reported it is planning to file for bankruptcy as soon as Friday, noting CLUB was negotiating a potential $80M capital injection from Kennedy Lewis Investment Management, who backed away after Town Sports realized it would need more money and asked for $200M; WWE tgt cut to street low $35 at Wells Fargo saying that higher costs will hit the SmackDown producer’s profit; LAUR rises after striking a deal to sell Walden University to ATGE in a transaction valued at $1.48B in cash – Walden University will remain part of the Laureate International Universities network until the closing of the transaction



·     Energy stock movers; oil prices with first back-to-back weekly losses since April’s price rout, driven by a sharp slump in risk sentiment earlier in the week and a patchy demand recovery. U.S. crude inventories rose data yesterday showed, with stockpiles at the Cushing storage hub reaching the highest since May, according to EIA data on Thursday. While the recovery in road-fuel demand is gaining speed in Asia and Europe, American figures continue to lag; the Baker Hughes (BKR) weekly rig count fell -2 to 254, with oil rigs down 1 to 180, gas rigs down 1 to 71 and miscellaneous steady at 3

·     E&P sector; group got smashed yesterday (EOG, PDCE, APA, PXD) after Colorado’s oil and gas regulator voted to support extended setbacks for new drilling. After five days of hearings, all but one member of the Colorado Oil and Gas Conservation Commission voiced support yesterday for 2,000-ft. setbacks, significantly larger than those proposed by Commission staff. Wells Fargo said today that PDCE maintains the greatest exposure to setback of Colorado regulatory drilling risk

·     Utilities & Solar; Guggenheim noted on POR that wildfire uncertainty is weighing heavily following commentary regarding unconfirmed reports of electrical equipment involvement in a fire to the south of the company’s distribution service territory – but the firm said they believe share price reaction is likely an overreaction; SPWR was upgraded to outperform and $17 tgt at Baird which sees a significant opportunity for multiple expansion after the Maxeon Solar spinoff leaves the company with a simpler, cleaner business model.



·     Asset managers; out with monthly assets under management data for August: 1) WDR reported preliminary assets under management of $70.3 billion for the month ended August 31, 2020, compared to $67.8 billion on July 31, 2020; 2) AB prelim AUM increased to $643 billion during August 2020 from $623 billion at the end of July (3.2% increase was due to market appreciation and firmwide net inflows); 3) APAM Aug AUM totaled $136.5 billion; 4) BEN prelim AUM of $1,441.3 billion at August 31, 2020, compared to $1,428.2 billion at July 31, 2020; 5) LAZ reports August AUM of ~$232.3B as month’s AUM included market appreciation of $8.2B, net inflows of $0.5B and foreign exchange appreciation of $1.1B); 6) IVZ prelim AUM of $1,245.8 billion, an increase of 4.2% versus previous month-end; 7) VRTS reported preliminary long-term and total assets under management (AUM) as of August 31, 2020 of $116.8 billion and $118.2 billion (including $1.4 billion of liquidity assets), respectively

·     Banks & Insurance; TRV was upgraded to Equal Weight from Underweight at Wells Fargo and raise price target to $115 from $112 as believe that TRV will benefit from one of the hardest commercial pricing environment since 2003; WFC was upgraded to neutral at UBS with $24 tgt citing a "more balanced" risk-reward profile after underperforming bank stocks by a wide margin; TPRE announces it has come to an agreement with SG preferred shareholders (Bain, Carlyle, Centerbridge, Gallatin) for them to remain invested after the 2 companies complete their proposed merger

·     Consumer Finance; IIIV 3.25M share Secondary priced at $23.50; FOUR 10M share Secondary priced at $48.50; Citigroup (C) and Wayfair Inc. (W) said they will partner on Wayfair-branded credit cards; generally quiet in credit card space today; in auto loans (ALLY, CACC), Fitch says U.S. says while U.S. auto loan credit performance decoupled from economic conditions caused by coronavirus in 1h20, expect delinquencies to rise meaningfully in 2H

·     REITs; in mortgage finance, RBC Capital recaps Q2 earnings and provides updated thoughts into 2H20 saying the macro backdrop remains favorable for agency-skewed mortgage REITs so continue to prefer AGNC (portfolio is virtually all composed of agencies) and NLY (93% of portfolio is composed of agencies) most and next favor TWO and CIM; RWT ups its quarterly dividend 12% to $0.14/share; AMT raises its quarterly dividend to $1.14 from $1.10; AVB has collected 97% of billed residential revenue from established communities for the three-month period ended June 30 as of Sept. 9



·     Pharma movers; GLPG announced positive top line results in the Phase 2a NOVESA trial with investigational ziritaxestat (GLPG1690) in patients with diffuse cutaneous systemic sclerosis (dcSSc), a severe autoimmune disease. The trial enrolled 33 patients; SPRO 8M share Secondary priced at $10.00; MNOV said says BioComo, with whom is it co-developing a coronavirus vaccine, reported high levels of virus-neutralizing antibodies in mice given the experimental intranasal vaccine; ATRA reports early-stage study data of ATA188 for treatment of progressive forms of multiple sclerosis; STSA downgraded by at least two analysts after top-line data from EMERGE Phase 3 trials showed that STS101 failed to meet either of its primary endpoints; AMRS slides after late yesterday, LAVVAN, Inc. files $881 million federal lawsuit against the company for patent infringement and trade secret misappropriation

·     Biotech movers; ITCI 11.667M share Secondary priced at $30.00; TRIL 10M share Secondary priced at $13.00; QTNT 17.65M share Secondary priced at $4.25; VIR was upgraded to neutral from underweight at JPMorgan saying over the next ~12-15 months see a series of important catalysts, including initial / early data from the phase 2/3 study of VIR-7831 SARS-CoV-2 antibody; SAGE adds to yesterday gains after Wedbush upgrade and analyst up tgt after the co presented an overview of their R&D pipeline yesterday, highlighting their work in depression, executive function, and essential tremor; EDIT says U.S. Patent and Trademark Office (USPTO) granted its partner Broad Institute Inc priority benefit in patent battle over CRISPR

·     Healthcare services and providers; MedTech and Equipment; NTRA 4.16M share Secondary priced at $60.00; TXG 4M share Secondary priced at $110.00; PKI was upgraded to buy at Needham with $139 tgt; HOLX rises following upward revision of Q4 guidance driven by strong sales of COVID-19 tests and Panther instruments as sees revenue of $1,225B-$1,275B, up 54 – 60% from a year ago and up from its outlook of $925M-$1.025B provided in July; XENT signs distribution pact with AllianceRx Walgreens Prime for its sinus implant


Industrials & Materials

·     Transports; FDX reit outperform, tgt raised to 264 from 167 at Cowen ahead of earnings next week; ALK was downgraded at Wolfe Research; AZUL reported a 26.4% increase in August traffic on capacity growth of 33.3%, said the total capacity for October is expected to be 55% of the same period last year; Dow Transports held up well throughout the day

·     Metals & Materials; in chemicals, LYB was upgraded to overweight from neutral at JPMorgan and raise tgt to $88 from $62 and up tgt on DOW to $45 from $39 saying domestic polyethylene (PE) demand has been growing in 2020 despite the recession and the quarantines, and the US producers have been successfully addressing the export markets. In the timber sector, Bank America downgraded BCC, OSB and PCH to neutral from buy saying wood stock rallied about 36% relative to S&P 500 since the end of Q1 as lumber prices rose 147% over that period, and a deceleration is likely as repair-and-replace activity slows after a very strong 2020; gold mining stocks outperform on the week with a bounce in the precious metal (GOLD, AEM, GFI, FNV)


Technology, Media & Telecom

·     Internet; EBAY founder Pierre Omidyar stepped down from the company’s board as part of a broader overhaul that also has Elliott Management partner Jesse Cohn leaving the board; EXPE downgraded to neutral from buy at UBS but raise tgt to $116 from $84 while reiterate Neutral rating on BKNG but raise tgt from $1,850 to $1,950 saying they don’t find the risk/reward for both as compelling at current stock price levels as it was in the March to May timeframe; CHWY reported better-than-expected Q2 profit and revenue, helped by new customer additions but said it expects potential H2 cost headwinds in the form of media costs, higher logistics expenses and short-term costs related to COVID-19; RVLV 4M share Block Trade priced at $19.50

·     Semiconductors: Stifel defended shares of ACMR and PLAB, upgrading both to outperform saying the recent overdone pullback in the group on concerns over the potential entity listing of leading Chinese foundry Semiconductor Manufacturing International makes the valuation attractive; MU outperformed in the semi sector; SWKS gains a new bull as Rosenblatt initiated with a buy and $160 tgt as thinks SWKS could achieve above semiconductor industry revenue growth of 10% over the next two years

·     Software movers; ORCL rises as posts Q1 adj. profit 93c topping the 86c estimate and better revs of $9.37B topping the $9.19B view as revenue from its largest unit, which includes cloud services, rose 2.1% to $6.95B and also signaled a recovery in client spending as remote work lifted demand for cloud; ADBE was upgraded to Outperform at Cowen and raises tgt to $555 from $400 as continue to see a good amount of upside to our numbers ahead of 3Q print; LSPD 11.65M share IPO priced at $30.50

·     Hardware & Component news; KODK active after Bloomberg noted holder Southeastern reports 15.8% stake in amended 13G; CTSH was upgraded to buy from neutral at Bank America as seeing signs of building momentum and raises the price target from $67 to $76; JNPR estimates lowered at Raymond James following CIEN’s recent report and our industry checks but stay OP rated; ERIC hit a milestone by demonstrating a live C-band network in the United States with 16-layer downlink multi-user MIMO tech (company hit 5.4 Gbps peak cell capacity)


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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