Mid-Morning Look: April 02, 2020

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Mid-Morning Look

Thursday, April 02, 2020

Index

Up/Down

%

Last

 

DJ Industrials

294.13

1.40%

21,237

S&P 500

33.42

1.35%

2,503

Nasdaq

76.80

1.03%

7,437

Russell 2000

30.16

2.82%

1,102

 

 

U.S. equities are sharply higher, led by the energy sector following a tweet from President Trump saying “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”. That comment helped push WTI crude prices up more than 30% on the day, alleviating stress temporarily to one of the hardest hit sectors over the last few weeks given the reduced demand due to the coronavirus impact on business and travel. The news helped offset a shockingly bad weekly jobless claims report which soared to new record highs, as 6.648M people filed for unemployment, a steep spike from last week upwardly revised 3.3M people as the coronavirus widened its reach and closed more businesses. Meanwhile, the number of COVID-19 cases world-wide rose to 922,00o on Wednesday, while the number of deaths rose to at least 46,000, according to data from Johns Hopkins University as the US topped 200K cases.

 

Economic Data

·     Weekly jobless claims soared to new record highs, as 6.648M people filed for unemployment, a steep spike from last week upwardly revised 3.3M people (which had been a record at that point) as the shutdown from the COVID-19 impacts the economy; continuing claims rose to 3.029M from 1.784M last week, but below the est. 4.882M; US insured unemployment rate rose to 2.1% from 1.2% the prior week

·     Trade Deficit narrowed by 12% to (-$39.9B) in February from (-$45.5B) in prior month, but was in-line with consensus as imports fell 2.5% in Feb. to $247.48b from $253.79b in January and exports fell 0.4% in Feb. to $207.54b from $208.31b in January

·     Factory Goods Orders for February were unchanged compared to est. up 0.2% while Factory orders for Jan. unrevised at -0.5%; new orders ex-trans fell 0.9% in Feb. after falling 0.4% the prior month and new orders ex-defense for Feb. fell 0.6% after rising 1.1% in Jan; capital goods non-defense ex aircraft new orders for Feb. fell 0.9% after rising 1% in January

 

 

Macro

Up/Down

Last

 

WTI Crude

6.03

26.34

Brent

7.28

32.02

Gold

39.50

1,630.90

EUR/USD

-0.0096

1.0867

JPY/USD

0.63

107.80

10-Year Note

0.02

0.603%

 

 

Sector Movers Today

·     Medical equipment and devices; BSX sees Q1 revenue flat to up slightly which compares to estimate for a 7.9% increase; says is reducing work week schedules and cutting discretionary spending; NVRO guides Q1 rev $86.4M-$86.9M below est. $96.6M and withdraws year guidance saying it cannot predict extent or duration of impact of covid-19 virus on its financial and operating results; CRY cuts Q1 revenue guidance to $65M from prior view $67M-$69M and with draws guidance for the year; BMRA rises after signing two deals with Mount Sinai’s Icahn School of Medicine in NY to license technologies related to a lab version serological test for COVID-19

·     Restaurants; LK shares plunged over 70% after saying its board informed about fabricated transactions as committee to oversee probe on audit issues/said probe indicates fabricated sales about RMB2.2B (SBUX shares bounced in sympathy); TACO withdraws FY2020 guidance and increased its cash position by drawing down $50M under its revolving credit facility; Raymond James upgraded DRI to Strong Buy and CHUY to Outperform, as well as highlighting OP rated (BLMN), each as stocks where liquidity concerns seem overdone and continue to recommend Strong Buy-rated TXRH to investors looking for a best-in-class operator with a strong balance sheet; EAT suspends share repurchases and dividend, said Q3 owned comp sales fell (-5.9%) and withdraws guidance

·     Energy stocks rebound on a bounce in oil prices (up over 10% earlier) after President Trump said he expected Saudi Arabia and Russia would reach a deal soon to end their oil price war and Russia’s President Putin called for cooperation among producers. “I have confidence in both that they’ll be able to work it out,” Trump said at the White House press briefing yesterday afternoon, also confirming reports that he would meet Friday with oil industry executives. Natural gas prices slide 2.1% to fresh 25-year-low $1.55 as pandemic reduces demand

·     Utilities & Solar; CNP cuts quarterly dividend by 48%, to cut capex spending by $300M as targets expense reduction of $40M; AES was upgraded to outperform at RBC Capital as believe that AES’s weakness year-to-date is unwarranted given its strong cash flows and limited exposure to COVID-19/balance sheet continues to improve; Citigroup transfer coverage on space as they are buy rated on PCG, EIX, DTE (upgraded), and NRG, and Neutral on AEP, CMS, ED, ES, ETR (downgraded), and PPL – are positive on gas prices, midstream, and RNG

·     Media & Telecom movers; DIS was downgraded to neutral from buy with $100 tgt at Guggenheim while they upgraded FOXA to a buy with $29 tgt as view the company’s exposure to live news and late-season sports content (primarily the NFL, college football and post-season baseball) as relatively attractive compared to media peer; CRTO was upgraded to buy from neutral at Citigroup saying while env’t is likely to challenge Criteo’s already challenged business, its share price is too low today due to the company’s financial profile, liquidity position

 

Stock GAINERS

·     APA +8%; and Total report discovery at Sapakara West-1 well drilled offshore Suriname on Block 58; says well was drilled using Noble Sam Croft with Apache as operator holding a 50% working interest and Total holding a 50% working interest

·     APOG +22%; after Q4 EPS of 51c topped estimates of 35c on a slight beat in sales

·     ARNC +10%; to replace bankrupt WLL in the S&P SmallCap 600 index on April 6th

·     BBBY +5%; shares active after an SEC filing showed Legion Partners Asset Mgmt reports 5.41% stake in the company based on belief that such securities, were “undervalued”

·     BMRA +26%; after signing two deals with Mount Sinai’s Icahn School of Medicine in NY to license technologies related to a lab version serological test for COVID-19

·     FANG +14%; amid rebound in energy stocks after President Trump said he expected Saudi Arabia and Russia would reach a deal soon to end their oil price war and Russia’s President Putin called for cooperation among producers

·     PVH +4%; reported a 7c EPS beat for Q4 while suspends its cash dividend and stock repurchase plan and said all China stores have reopened but with shorter business hours

 

Stock LAGGARDS

·     CCL -4%; priced 62.5M share secondary at $8 per share, 9% lower than the share closing price on Wednesday as size of offering was decreased to $500 million from the earlier stated $1.25B

·     LK 83%; after saying its board informed about fabricated transactions as committee to oversee probe on audit issues/said probe indicates fabricated sales about RMB2.2B

·     WBA -6%; reported Q2 EPS and sales above views though share slipped as U.S. retail pharmacy comp sales rose 2.7% vs. est. 3.1%/warned that strong sales have slowed and are now declining

·     WDFC -3%; named as short idea with 55%-60% downside risk by short seller Spruce Point

·     ZM -5%; down for a 4th straight day following recent privacy concerns raised and new competition as RNG unveiled RingCentral Video, a new videoconferencing offering that will be included in its communications suite, which also includes messaging and voice features

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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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