Market Review: September 28, 2020

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Closing Recap

Monday, September 28, 2020





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. equities rise across the board heading into both month/quarter end, as all major U.S. averages posted gains of more than 1.5% with investors taking advantage of the September sell-off, particularly in technology shares. Positive vaccine headlines late last week as well as growing optimism of a fiscal policy relief bill out of Washington helped boost stocks Friday which carried over into today. The Nasdaq Comp and S&P both traded around its 50-day moving averages most of the day before ending above. Gains in European and Asian stocks also helped the market’s mood. All eleven S&P sectors were higher with cyclicals such as financials, energy, industrials, and materials leading and Comm Services and healthcare up the least. U.S. House Speaker Nancy Pelosi said this weekend that she thinks a deal can be reached with the White House on a coronavirus relief package and that talks were continuing, lifting sentiment. There were also M&A headlines that boosted the energy sector as WPX and DVN announced a merger of equals. The Russell 2000 Smallcaps outperformed helped by the bounce in financials and energy. Travel names rose on analyst upgrades (FDX, UPS) and hopes for additional aid for airlines hurt by the pandemic. Dow component Boeing (BA) rallied over 7% on positive analyst comments following news last week that European regulators now expect to approve the 737 MAX’s return to service by November. With the first U.S. presidential debate scheduled tomorrow night between trump and Biden, Brexit negotiations over the week and the monthly non-farm payroll data due on Friday, markets may turn overly cautious over the next few days.


·     Oil prices advanced as WTI crude rose 35c or 0.87% to settle at $40.60 per barrel, tracking higher along with stocks as hopes for another U.S. stimulus package helped buoy sentiment, though increasing COVID-19 virus cases keeps demand concerns in check. Russian Energy Minister Alexander Novak said the global oil market had been stable for the past few months but warned of the risks of a second wave of COVID-19 cases. Brent crude rose 51c or 1.22% to settle at $42.43 per barrel. Oil reversed an earlier decline following a weaker dollar.

·     Gold prices rose by $16.00 or 0.9% to settle at $1,882.30 an ounce, getting a boost after slipping around 5% last week. Prices got a bump as the U.S. dollar pulled back from two-month highs last week in a bout of profit taking, helping precious metals edge higher ahead of some key potential catalysts this week including the first U.S. presidential debate and jobs data on Friday.


Currencies & Treasuries

·     The U.S. dollar slips after strong gains last week, falling the most against the British Pound (which rose about 0.8% vs. to 1.2845) on rising hopes that the UK could secure a Brexit trade deal with the EU by October or at least avoid a cliff-edge exit from the bloc. The euro also posted a slight bounce vs. the buck after sliding last week on weaker data and rising COVID-19 cases. The dollar was little changed vs. the Japanese yen around the 105.50 level. As has been the case for the last few weeks, Treasury yields remain in a very narrow tight trading range with the 10-year again holding under 0.7% and the 2-yr around 0.14%. Renewed optimism that the economy is improving, as well as the potential for more fiscal stimulus helping sentiment.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; AMZN to host its delayed Prime Day shopping event Oct 13 and 14th; VSTO said it will buy some parts of U.S. gunmaker Remington Outdoor Co Inc’s ammunition and accessories businesses for about $81M; WMT has selected the founders of UK petrol station operator EG Group and private equity firm TDR Capital as the preferred bidders for its Asda supermarket chain, valued at $8.39B, Sky News reported; Wells Fargo was positive on some retail names after survey saying they believe that the Street’s comp estimates have been appropriately rebased and believe now is a good time to get more constructive on the off-price sector (BURL, TJX, ROST)

·     Auto sector; UBER won its legal fight in London to keep its license after a judge ruled in its favor today – introduced a new system in April to verify drivers’ identities through a mix of facial recognition and human reviewers in an effort to allay concerns of the city’s transport regulator; KMX resumed its share buyback program after suspending it in April due to the coronavirus pandemic/said it has $1.51 billion left in its share buyback authorization; NKLA slides again, adding to last week losses after short-seller Hindenburg Research’s recent report alleged NKLA misled investors and founder Trevor Milton stepped down as Exec chairman

·     Consumer Staples; DEO said its U.S. business performance since the start of fiscal 2021 has exceeded management expectations and that the group’s outlook for the year’s first half has improved (good for other spirits makers BF); CALM said Q1 sales rose 21% on a better earnings loss as consumers continued preparing their meals at home during the coronavirus pandemic, though it noted that egg prices were volatile; PEP reports Thursday

·     Leisure and Gaming CZR confirmed late last week reports saying it is in advanced takeover talks with William Hill (WIMHY) that value the British bookmaker at 2.9 billion pounds and Caesars was considering offering 272 pence per share; In leisure space, THO reports better-than-expected Q4 revenue and profit on rising retail demand for its products (shares rose late last week on better RV shipment data)



·     Energy stock movers; M&A deal in the E&P sector as DVN and WPX agree to combine in an all-stock merger of equals with an enterprise value of about $12B where WPX shareholders will receive 0.5165 shares of DVN stock (Devon holders will own about 57% of the new entity and WPX about 43%) – energy stocks were mostly higher on hopes for further consolidation in the energy sector

·     Refiners: Credit Suisse downgraded PBF to underperform from OP and PARR to underperform from neutral citing news last week that California Governor Newsom signed an executive order mandating all new cars sold by 2035 be emission-free. Firm said they believe this executive order highlights the challenges of operating in California where the regulatory environment is getting even more unfavorable and believe on the West Coast, EV and Renewables will continue to take market share from petroleum products

·     Utilities & Solar; CPK to replace MNTA in S&P 600 at open on 10/1; PLUG was upgraded from Equal weight to Overweight with $14 tgt at Morgan Stanley-saying its investor day highlighted several areas of upside: fuel cell vehicle sales to Linde, Apex partnership to secure cheap US renewable power, several avenues of growth in Europe; SOL and Germany-based solar park developer Vodasun to form a 50/50 joint venture with starting project portfolio of 50 to 100 MW; ITRI was upgraded to strong buy at Raymond James calling it a tactical, valuation-driven upgrade, because the underlying fundamentals have changed only minimally due to COVID, while shares are down 33% YTD; solar stocks have risen this year (SEDG, SPWR, FSLR, JKS), with investors in favor of late cleaner’ sources of energy, while depressed crude prices and a crash in demand due to the coronavirus have seen many oil companies plans to reduce their focus on oil and gas and transition more to renewable energy and power markets



·     Bank movers; overall financials outperformed broader markets; HSBC rose after China’s Ping An Insurance nudged higher its stake to 8% from 7.95%; CZNC upgraded to overweight at Piper calling it an attractive entry point for a high-quality bank noting the shares are down 20% vs. the Nasdaq Bank Index down 7% over the last month; TFC positive mention in Barron’s saying it is now the sixth largest commercial bank in the U.S. by assets following the BBT/SunTrust merger, with a strong presence in the fast-growing Southeast and Goldman Sachs analyst said given that Truist can earn $5 a share annually when interest rates eventually rise, and its stock could be worth closer to $60 at that point

·     Online brokers; (SCHW, ETFC, IBKR) shares were active after Piper reported that Robinhood App download growth slows for the week ending 9/25 are up 23% Y/Y (151K vs. 122.5K), which compares with a prior 5- week average of 75% Y/Y and a 2020 average of 158% Y/Y

·     REITs; REIT industry rent collections in free-standing retail improved nearly 5% from August to ~95% in September while shopping centers saw a modest increase to over 81%, according to Nareit’s monthly survey of FTSE Nareit All REITs Index’ components.



·     Pharma movers; there is a two-day House-Committee drug pricing hearing (Sept 30) with CEOs of AMGN, BMY, former Celgene, MNK, NVS, TEVA scheduled to testify; MNK slides after a report that the company nears bankruptcy filing over opioid lawsuits ; HUGE active after FDA approval of phase 2 clinical trial of FSD201; HRTX said the European Commission grants marketing authorization for its ZYNRELEF, a postoperative pain treatment for small-to medium-sized surgical wounds in adults

·     Biotech movers; INO shares tumble after saying the FDA places a planned mid-to-late-stage trial of its COVID-19 vaccine candidate, INO-4800, on partial clinical hold, citing additional questions with the trial including about the vaccine delivery device, CELLECTRA 2000, to be used in the trial; BBIO hosting its virtual R&D Day tomorrow (9/29) at 8:30am EST; BIIB rises as the U.S. FDA sets a meeting of a panel of its independent experts to discuss the marketing application for BIIB’s experimental Alzheimer’s disease drug aducanumab

·     Healthcare services and providers; several analysts weigh in on Managed Care space with Leerink saying Obamacare (ACA) unlikely to go away, remains bullish on healthcare providers as in the next few months, the "biggest overhang" on stocks, the 2020 U.S. election, would be over. Says odds of Democrats holding majorities in House and Senate after election are higher, likely the best case for the Affordable Care Act (ACA)- and by extension – for healthcare providers such as CNC and MOH that have the highest earnings contribution from ACA

·     MedTech and Equipment; MMSI upgraded to Equal-Weight at Wells Fargo as appears to be making operational improvements to address the issues the company encountered in 2019 and sense is Q3 is on track and will likely exceed consensus estimates; MTD downgraded to underweight at JPMorgan as see a meaningful disconnect between current valuation (27x 2021E EBITDA) and the long-term fundamental outlook and find it increasingly hard to justify the current valuation premium vs. peers, especially over TMO (20x 2021E EBITDA) and DHR (26x 2021E EBITDA); OGEN announces several advantages of Co’s Unyvero HPN panel (diagnostic tool) to help with early detection and antimicrobial stewardship in a study with Karolinska Institute in Sweden; QTNT rises following news its U.S. emergency use authorization for its COVID-19 antibody test, to detect antibodies in response to the SARS-CoV-2 virus using its MosaiQ blood testing microarray technology; MASI announces FDA clearance of the Rad-G™ Pulse Oximeter; HOLX gets U.S. FDA’s emergency use authorization (EUA) for its asymptomatic COVID-19 test; ABT said it received European clearance to market the smallest version of its low-cost diabetes monitoring product, FreeStyle Libre 3 (shares of DXCM slipped on headlines)


Industrials & Materials

·     Transports; two upgrades in package delivery sector as UPS upgraded from Sector Weight to Overweight with $190 tgt at KeyBanc calling it their preferred way to have parcel/e-commerce exposure, while FDX was raised to buy with $318 tgt at Deutsche Bank, implying 30% further upside after the already impressive move year-to-date

·     Airline sector; AAL rises after closing a $5.48 billion loan with the U.S. Treasury, increasing its pool of cash to help fund operations until travel demand begins to return. Separately, CEO Doug Parker said there’s sufficient time for U.S. Congress to agree on extending $25 billion in federal aid that would prevent layoffs for tens of thousands of airline workers on Oct. 1; UAL shares move higher after pilots accept deal to avoid imminent furloughs

·     Aerospace & Defense; LMT announces additional $1.3B share repurchase program and raises its quarterly dividend to $2.60 from $2.40 per share; SPCE was initiated with a new buy and $35 tgt at bank America as believe SPCE’s growth potential is unparalleled vs. their coverage and the current nascent stages of the company provide investors with a unique entry point into the stock; BA was upgraded to overweight and $184 tgt at Alembic citing news last week that European regulators now expect to approve the 737 MAX’s return to service by November

·     Metals & Materials; MT said that CLF would acquire all the shares of ArcelorMittal USA LLC for a consideration of approximately $1.4 billion and added that it would begin a share-buyback program. ; PLL shares jumped after news it will supply spodumene concentrate from Piedmont’s North Carolina deposit to TSLA in an initial five-year term; VALE said it suspended operations and the disposal of tailings at the B7 dam at Jeceaba, in Brazil’s Minas Gerais state, after a court ruling on a public civil action suit filed by the municipality; copper prices edged higher as global stock markets rise following four consecutive weeks of declines – came despite a 41% jump in LME inventories, which had last week dropped to a 15-year low (shares of FCX leveraged to data)


Technology, Media & Telecom

·     Internet; BABA is hosting its annual Investor Day on September 28-30, with Day 1 covering strategic updates on commerce related businesses; Guggenheim upgraded SPOT to neutral from sell and SNAP to buy from neutral in digital media space as revised valuation to better reflect comparability with peer companies; in online travel, EXPE downgraded to Sector Perform at RBC based on recent OTA survey results and on less attractive risk/reward with shares trading roughly in line with our price target; SINA rises after to go private through holding company New Wave Holdings Ltd, which is led by its CEO Charles Chao, in a $2.6 billion deal with per share price $43.30 ; WB shares rise following earnings beat while advertising and marketing revenue down 8% to $340.6M and VAS revenue fell 23% to $46.8M; MELI upgraded to buy at Jefferies and raise tgt to $1,350 saying they see faster growth in MELI’s high-margin Fintech business offerings leading to gross margin expansion and upside to consensus EBITDA – also says valuation is also more compelling following a ~15% drop in the stock since early August

·     Semiconductors; semi-equipment makers (LRCX, KLAC) active after media reports said the U.S. Commerce Department will force domestic chip companies to apply for a license to supply to SMIC (SMICY), China’s top chipmaker. KeyBanc says the news suggests "additional risk to semiconductor equipment companies and materials providers if trade war policies continue to escalate; QCOM tgt raised to $132 from $108 at Citigroup saying QCOM will see profit growth from its ramped up 5G chip production; WDC mixed news as Nikkei Asian Review reported that Kioxia (formerly Toshiba Memory) would be postponing their IPO plans, while Barron’s was positive this weekend on the hard-disk drive maker

·     Software movers; on the IPO front this week, the highly anticipated debut of software/analytics company Palantir Technologies (PLTR) is expected in a direct listing on the NYSE on September 30; re ORCL a federal judge postponed a Trump administration order that would have banned the video sharing app TikTok from U.S. smartphone app stores around midnight. A more comprehensive ban remains scheduled for November; TENB initiated overweight and $45 tgt at Piper as view it as a play on modernization of enterprise cybersecurity risk management

·     Hardware & Component news; MOBL agreed to be acquired by Ivanti Inc. in an all-cash deal valued at about $872M with holders to receive $7.05 in cash per share, a 27% premium ; RXT announced it is working with DELL to "create new modernized solutions for multi cloud.


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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