Market Review: September 21, 2020

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Closing Recap

Monday, September 21, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     It was a rough day on Wall Street as the S&P 500 and Nasdaq Composite extended declines, falling to their lowest levels since late July and down for a 4th consecutive session amid a handful of worries that prompted selling pressure across all 11-S&P sectors (though markets rallied into the close, led by a bounce in tech to finish well off the lows). At the same point, the Cboe Volatility Index (VIX) jumped to its highest level in almost two weeks. The S&P neared correction territory from record highs early this month on continued pressure from last week’s European lockdowns amid a resurgence in Covid cases and skepticism surrounding new fiscal stimulus, in addition to US-China tensions highlighted by pending TikTok merger.

·     Several factors weighed on global stock markets today including: 1) increasing COVID-19 virus fears as Europe steps up its efforts to stunt the recent surge in cases with lockdowns (fears of a second wave) dragging down travel, leisure and restaurant related names, 2) financials fall amid reports major banks moved $2 trillion of allegedly illicit funds from 1999-2017 despite questions over their origin, 3) inability of Congress to agree on more fiscal stimulus raised fears about another hit to the domestic economy, 4) managed care and hospital stocks pressured (CNC, HUM, UNH, HCA, UHS) as Supreme Court Justice Ginsburg’s death this weekend and the potential appointment of a more conservative judge raises further fears for the repeal of Obamacare which has been a tailwind for healthcare; 5) energy stocks tumble on oil plunge

·     Major averages tumble: the Dow Jones Industrial Average was trading over 900 points lower earlier, the worst decline for the blue-chip benchmark since April 1 when the index dropped 4.4%, or 973 points, according to FactSet data. With today’s sharp slump in global equities (big hits in Europe) the S&P 500 index was on the verge of sinking back into correction territory – the S&P 500 index hit an intraday low of 3,229.10, holding just above the 3,222.76 level which represents a 10% drop from its Sept. 2 record peak. With a decline of about 7%, the S&P is on track for its steepest decline in a September, since 2002 when it fell over 11%

·     Stay at home beneficiaries (ZM, PTON, NFLX, WORK, EA, ROKU) were among the top gainers today while those most impacted from another potential global shutdown due to increased cases of the virus such as travel (transports fall over 3%), leisure, lodging, restaurants and retailers were among the hardest hit sectors today. Energy stocks tumbled with oil prices and banks down on money-laundering allegations for some of the biggest banks in Europe and the U.S.

·     European markets tumbled as new coronavirus mandated lockdowns loom around the world, especially in Europe which sunk shares of their travel names while Europe’s banking index leads sectoral declines with 5.7% fall as the FTSE 100 has wiped out all its gains from early September in the space of three days.

·     A resurgent stock market and fiscal stimulus propelled the net worth of U.S. households to the highest level ever in the second quarter as the net worth of American households and nonprofit organizations jumped 6.8% in the second quarter from the first, to $118.96 trillion. That is about $380 billion more than at the end of 2019. Total domestic nonfinancial debt rose at a record seasonally adjusted annual rate of 25.3% in the April-June quarter to $59.3 trillion. That is above the prior record of 19.25% during 1985.



·     It was another rough day for oil prices, as WTI crude traded down as much as 5% to below $39 per barrel before settling at $39.31 (down 4.38%) and was well off the overnight highs above $41 per barrel as strength in the dollar, rising COVID cases globally (raising demand fears) and news that with Libya started production again have all weighed on prices.

·     Precious metals were sharply lower as gold tumbled -$51.50 or 2.6% to settle at $1,910.60 an ounce (lowest in more than a month) with big declines in precious metals across the board, as silver prices fell over 8%. Spot palladium and platinum both declined amid a jump in the dollar and selling pressure in commodity prices on slowing growth fears given the pickup in COVID-19 cases in Europe. Uncertainty over more U.S. fiscal stimulus also pressured the precious complex along with a stronger dollar. Gold prices are down nearly 10% from all-time highs in August.


Currencies & Treasuries

·     The U.S. dollar was broadly higher as the euro drops to 6-week lows vs. the buck, dropping to lows around 1.1732 as investors piled into safe-haven assets. The dollar bounced off more than 6-month lows vs. the Japanese yen off lows of around 104 (ended near highs 104.70, up 16 bps) as the risk-sensitive Yen rallied as equities fell. A combination of issues, including rising global COVID rates (especially in Europe), U.S. political uncertainty, the lack of new U.S. fiscal stimulus, China tensions, etc. all helped boost safe-haven assets on Monday. The battle between Democrats and Republicans over who replaces the late Supreme Court Justice Ruth Bader Ginsburg "will likely derail" efforts for further fiscal support. The Canadian dollar weakens to a 5-week low at to the U.S. dollar amid another slide in oil prices on slowing demand fears.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; luxury retailers with positive analyst comments as TPR was upgraded from Neutral to Overweight ($26 PT from $29) at Piper as see it as a value recovery name into 2021 with current valuation as a compelling entry point; CPRI was upgraded to overweight at Morgan Stanley saying faster than expected global retail recovery suggests revenue and earnings beats are coming; BJ was upgraded from Buy to Conviction Buy at Goldman Sachs saying new member acquisition should drive higher comps going forward and BJ’s unit growth story is accelerating

·     Auto sector; NKLA shares tumble after founder Trevor Milton steps down with immediate effect in the wake of allegations from a short seller that he and the company had made false statements to investors. The company said Mr. Milton would be replaced by Stephen Girsky, a former GM executive who already sits on the truck company’s board (shares of GM, which recently took an 11% stake for $2B in the company was also down in reaction); TSLA hosts its highly anticipated battery technology day Tuesday as CEO Elon Musk added to the hype recently, tweeting, “Many exciting things will be unveiled.” It will shape investor opinions about the future of electric vehicles and Tesla’s technological lead

·     Consumer Staples; stay at home related names such as food (SJM, CPB) and cleaning product names (CLX) among leaders early on fears of second wave virus concern; ACI mentioned positively in Barron’s this weekend, noting with Americans eating more meals at home, supermarkets are among the few traditional retailers to thrive, and Albertsons is no exception, as the supermarket chain has had sales growth of more than 20% since the pandemic started

·     Restaurants; PLAY falls amid broad weakness in restaurant and casual dining names on virus fears – recall PLAY plunged last week on WSJ report on fears of bankruptcy; DNKN was upgraded to Overweight with raised tgt of $89 at Piper citing low ticket/high frequency, franchise business model, and geographic exposure; DRI downgraded to neutral from outperform at Wedbush but raise tgt to $95 from $88 as believe DRI’s current valuation appropriately reflects the potential for accelerating organic growth in the medium-to longer-term as market share gains accelerate

·     Leisure and Gaming; cruise line stocks tumble (CCL, NCLH, RCL) amid COVID-19 pandemic related concerns following increasing lockdowns in parts of Europe given surging coronavirus cases; gaming names (WYNN, MGM, LVS) and theme parks (DIS, SIX, SEAS) among decliners as well amid similar fears; travel stocks down in Europe on worries over the region locking down in response to a new wave of coronavirus case; SGMS was upgraded at Jefferies; hotels and lodging another suffering sector with MAR, HLT lower; RV Industry Association said it sees RV unit sales hitting 507.2K units next year to top the 504.6K units shipped in 2017. The new projection for 2020 is for 424.K units, up 4.5% from the level seen last year (CWH, LCII, WGO, THO).



·     Energy stock movers: a unit of Libya’s National Oil Corp. has restarted some production in the east of the country after a deal was struck between warring parties. The NOC said over the weekend that it was lifting force majeure over production and exports. It is set to pump an additional 220,000 barrels a day from Aug. 24, they said. Oil stocks slide on news; in other news, RDSA is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets

·     Utilities & Solar; Barclays downgrades AEE to UW, CMS and LNT to EW and upgrades POR to EW, NWE and SO to OW, saying that with historically low U.S. Treasury bond yields and corporate bond yields being suppressed by Federal Reserve action, the dividend yield for utilities continues to screen attractively on a relative basis; POR was also upgraded at Mizuho to Buy from Neutral, albeit with a lower pt ($38 from $42) on valuation as they believe shares have been unfairly hit on recent Oregon wildfires



·     Bank movers; large U.S. banks as well as several European banks were weak after BuzzFeed and other media reported they and other banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money. Major banks moved $2 trillion of allegedly illicit funds from 1999-2017 despite questions over their origin, according to U.S. government documents reported HSBC (HBC), JPMorgan Chase (JPM), Deutsche Bank (DB), Standard Chartered and Bank of New York Mellon (BK) were among the banks cited; Europe’s banking index .leads sectoral declines with 5.7% fall; hits over four-month low

·     Consumer Finance; COF announces that its subsidiary Capital One Bank (USA) starts a cash tender offer to purchase any or all of $327.25M notes issued by Cabela’s Credit Card Master Note Trust; in Barron’s this weekend, Visa (V) and MA positive mention saying they may have more upside over the next few months, noting their stocks are up less than 15% this year, while says PYPL is the clearest winner in the digital shift and that payment-processing stocks FIS and GPN are bargains in the industry, due to the retail slowdown. But they remain a key technology backbone for banks and merchants, generating steady processing revenue, and the merchant-acquiring business should pick up with a revival of retail

·     REITs; ACC downgraded to Neutral from OW at Piper after the stock’s outperformance since the COVID trough and reduced outlook driven by this year’s preleasing (ACC is +73% vs SNL Apartment Index +28%, RMZ +42%, and S&P 500 +53% since 3/23); PSA upgraded to EW from UW at Morgan Stanley with a 15% increase in their price target to $203 on improving move-in volumes and rent collection that is now in-line with historical trends; Morgan Stanley also ups its targets on NSA to $33 from $28 (maintains EW rating) and EXR to $94 from $83 (maintains UW); SKT was upgraded to Sector Weight from Underweight despite near-term challenges after Tanger’s recent ops update, expected continued improvements across the company’s open-air retail outlet portfolio, and recent underperformance (-54% YTD); GTY announces its CFO will resign by the end of the year due to personal reasons



·     Pharma movers; BMY and EXEL announced the first presentation of results from the pivotal Phase 3 CheckMate -9ER trial, in which Opdivo in combination with CABOMETYX demonstrated "significant improvements" across all efficacy endpoints, including overall survival, in previously untreated advanced renal cell carcinoma. Opdivo in combination with CABOMETYX reduced the risk of death by 40% vs. sunitinib; in cannabis space, TLRY was upgraded to hold at Jefferies and also upgraded ACB to hold saying while progress on costs has been impressive, NT liquidly risks remain; AGIO that its bile duct cancer candidate, Tibsovo, showed improved overall survival compared with a placebo, but it wasn’t statistically significant

·     Biotech movers; LEGN shares fall after saying CEO and Chairman Zhang steps down amid residential surveillance by Chinese law enforcement, in connection with an investigation over suspected trade violations under Chinese law; AXSM announces expedited development of axs-12 for the treatment of narcolepsy based on FDA breakthrough therapy meeting; AMPE receives U.S. FDA approval to begin an early-stage trial for its experimental lead drug, Ampion, as an inhalation therapy for respiratory distress due to COVID-19 infection

·     Healthcare services and providers; hospitals HCA downgraded to Neutral, THC, UHS downgraded to Underweight at JPMorgan as reviewed universe and are compelled to rebalance our ratings distribution – says while HCA remains the best-in-class hospital operator, skeptical shares will outperform coverage universe; hospitals and managed care names (ANTM, UNH, HUM CNC) also down as Supreme Court Justice Ginsburg’s death this weekend and the potential appointment of a more conservative judge – raises further fears for the appeal of Obamacare; DRIO and 40-year veteran healthcare management company HMC HealthWorks entered into a sales and distribution partnership

·     MedTech and Equipment; ILMN confirms recent reports as it acquires Grail Inc. for $7.1B in cash and stock for the part it doesn’t already own to move deeper into the application of its gene-sequencing technology to the diagnosis & treatment of patients ; Guggenheim raised its tgt on ILMN to $345 and TXG to $137 from $114 saying while omics companies will face plenty of near-term macro headwinds because of reduced lab capacity, they estimate conditions will normalize by next year (maybe H1); QDEL extends gains after rising +10% on Friday after improving sediment and CDC walking back its position on asymptomatic testing


Industrials & Materials

·     Industrial & Machinery; RCII raised FY sales, profit forecast as sees FY revenue of $2.78B-$2.83B vs. est. of $2.77B and forecasts adj. profit between $3.15-$3.45, also above estimates; GE said it will stop making new coal-fired power plants and focus more on renewable sources of power generation (though industrials were broadly lower – MMM, HON, UTX); FRTA was upgraded to Outperform at RBC Capital as view the recent favorable arbitration ruling as a positive and believe the secondary related sell-off creates a compelling longer-term buying opportunity; KRNT was upgraded to Buy from Neutral at Citi with a $70 pt from $55 after recent pullback, customers searching for localized custom printing; GEF was upgraded to Buy from Neutral with a $46pt at Bank America

·     Transports; airlines pressured, especially global carriers AAL, DAL, UAL (and European names) amid rising coronavirus cases in Europe and fears of a second wave potentially hitting; UPS was upgraded to outperform from neutral and raise tgt to street high $192 from $147 at Credit Suisse as sees domestic pricing power shifting towards carriers as a growth catalyst, and a fall in capital expenditure from a multi-year high as opportunities to reduce capital intensity

·     Aerospace & Defense; Goldman Sachs added Boeing (BA) and Raytheon (RTX) to the Conviction buy list and removed L3Harris (LHX) and Lockheed Martin (LMT) from the Conviction list; Rolls-Royce shares hit their lowest level since 2004 after the British aero engine maker confirmed it was considering a rights issue of up to 2.5 billion pounds ($3.23 billion); CUB rises after Elliott Management confirmed that it had acquired a 15% economic interest in the defense and transportation systems company


Technology, Media & Telecom

·     Battle for TikTok: U.S. President Donald Trump said on Saturday he supported a deal that would allow TikTok to continue to operate in the U.S. even as it appeared to conflict with his earlier order for China’s ByteDance to divest the video app. Oracle (ORCL) will take a 12.5% stake in TikTok Global and store all its U.S. user data on its cloud to comply with U.S. national security requirements. Retail giant Walmart (WMT) said it would take a 7.5% stake in TikTok Global. President Trump said ByteDance will have no ownership in TikTok Global.

·     Semiconductors; Stifel upgraded semi-equipment stocks ACLS, BRKS, ICHR, KLAC and UCTT to buy saying recent weakness in the sector, which can be attributed to several factors including concerns on worsening China trade tensions and potential memory capex cuts, has brought shares to more attractive valuations; WDC a catalyst call buy at Deutsche banks as believe that WDC’s flash memory business is being undervalued by the market and the upcoming IPO of its flash memory joint venture partner Kioxia (formerly Toshiba Memory Corp.) could help identify the valuation mismatch between WDC’s and Kioxia’s flash memory businesses

·     Software movers; MSFT will acquire ZeniMax Media for $7.5 billion in cash – With the addition of Bethesda, Microsoft will grow from 15 to 23 creative studio teams and will be adding Bethesda’s iconic franchises to Xbox Game Pass ; ORCL was upgraded to outperform from sector perform at RBC Capital and raise tgt to $68 from $60 as believes the minority investment and addition of TikTok Global as a customer would lead to share appreciation for ORCL; SNOW was downgraded to sell at Summer Insights with $175 tgt based on the belief its the most expensive name in all tech, with limited differentiation with respect to Redshift, Big Query, and Azure SQL Database; PD said it agreed to buy Rundeck Inc., a provider of development-operations automation for enterprise, for about $100 million in cash and stock.

·     Media & Telecom movers; ROKU rises as Peacock app is now available nationwide on ROKU platform for access to everything peacock has to offer, peacock premium is available for $4.99 per month; LBTYA upgraded at Barclay’s and raise tgt to $30 from $18 saying they have announced two transformational deals, and both look set to improve its free cash flow materially over time; HBO (T) once again held off Netflix (NFLX) in this year’s Emmy race, taking home 30 trophies including 11 for Watchmen, which was the night’s biggest winner.


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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