Mid-Morning Look: April 14, 2020

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Mid-Morning Look

Tuesday, April 14, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities are very strong to start the day, as investors grow more optimistic about the coronavirus outlook, with major averages all surging in the early going. The Nasdaq Composite spikes well above its 200-day MA resistance of 8,397 and 50-day MA at 8,415 (hasn’t been above the 200-day MA in about 5-weeks), led by gains in big tech (AMZN, AAPL, NFLX) and semiconductors (AMD, INTC, NVDA). The actions by the Fed over the last few weeks (rate cuts, added QE, liquidity back stops, buying of muni’s and high yield) have all supported market buying activity, and helped ease investors’ fears about liquidity or credit being frozen, hoping to stem bankruptcies. Meanwhile, the U.S. government’s “relief stimulus” actions for small businesses and individual citizens suffering from lost jobs have also boosted sentiment…but it remains a while before we see if it will have the positive impact many are hopeful for. Today gainers include airlines, casinos, cruise lines and hotels despite many of these industries remaining closed, with zero to little revenue in some cases for the foreseeable future. Right now, it appears the rally in markets is based on hopes, Fed action and value buying given the 35% drop from record highs in March. President Trump said Monday that he hopes to reopen the country “ahead of schedule,” and is poised to announce a new working group to analyze options for exiting the lockdown, while some governors also are starting to look at how to gradually ease guidelines on social distancing. Earnings season kicked off today with banks JPM, WFC both reporting tough quarters (as expected) while JNJ beat on the topo and bottom line while lowering its year profit and sales guidance due to COVID-19 impact. U.S. Treasury prices are little changed despite the bullish bias in stocks, while oil prices decline. Pockets of strength remain with WMT an AMZN among names trading at all-time highs (along with DG, NFLX, LLY, REGN, and NEM as well 52-week highs).


Treasuries, Currencies and Commodities

·     In currency markets, the dollar is broadly lower vs. all currencies as the dollar index slips -0.35% to the 99 level. Commodity prices are mixed as oil prices slide back toward an 18-year low with inventories set to continue rising despite recent supply cuts U.S. crude futures on track for a third consecutive drop as prices remain down about 65% this year. Prices have fallen despite a weekend agreement by OPEC+ and allies including Russia to curb output by about 10M barrels per day, along with coordinated efforts to cut from the U.S., Mexico and Canada (but may not be enough given some estimates for the demand drop are roughly 25 million to 35 million barrels a day). Treasury market’s higher despite the bounce in stocks, Treasury prices really haven’t moved very much, as the 10-year yield down 2 bps to 0.745%, while the 2-yr down 1 bps to 0.235%.


Economic Data

·     Import prices for March fell (-2.3%) MoM, slightly better than the (-3.2%) forecast and after falling (-0.7%) in the prior month; Import prices ex-fuels unchanged m/m after rising 0.3% in Feb; capital goods prices rose 0.1% m/m after rising 0.1% in Feb; export prices fell (-1.6%) MoM after falling (-1.1%) in February







WTI Crude















10-Year Note





Sector Movers Today

·     Bank movers; JPM reports Q1 EPS 78c vs. $2.65 YoY (and missed ests of around $1.84) while Q1 revs fell -2.6% YoY to $29.07B; Q1 provision for credit losses $8.29B vs. $1.5B YoY, which includes $6.8B of reserve builds largely as a result of COVID-19 – JPM also said they provided $25B+ new credit extensions for companies in crisis and lent over $500M to small businesses in March; WFC posted a Q1 provision for credit losses of $4B (reserve build $3.1B) vs. $845M YoY while NII fell -8.2% YoY to $11.3B (slightly above ests), said maintained strong liquidity – posted revs $17.7B, down 18% YoY and misses the $19.4B est. and profit was $653M vs. $5.86B a year ago

·     Casino & Leisure movers; in lodging, MAR said it expects global systemwide RevPAR down 23% in Q1 while roughly 25% of over 7,300 hotels are temporarily closed and expects Q1 RevPAR in North America down roughly 20% (also said booking trends in Greater China improving steadily in April, with occupancy rising to about 20% in the first week of the month); GOLF was downgraded to underweight at Wells Fargo given relatively high valuation, likely sharp downward Street estimate revisions, limited visibility into how the 2020 golf season unfolds including potential weather headwinds; cruise lines saw early bounce (CCL, RCL, NCLH)

·     Software movers; Morgan Stanley with several rating changes as they upgraded COUP and WDAY to overweight (joins ADBE, CRM, MSFT) while downgraded APPN, NET, ZUO to underweight and NEWR to equal-weight; WORK CEO Butterfield said in an interview that the week of March 9 was “the most productive” in the company’s history, Marketwatch reported and that the platform added 9,000 new paid customers from Feb. 1 to March 25, as more employees were forced to work remotely because of the COVID-19 pandemic (noted MSFT “Teams” had 44M DAU’s but notes is only about a 20% adoption rate, out of the 200 million Office 365 customers)

·     Industrial & Machinery; ALSN was upgraded to strong buy at Raymond James on a relative basis (to the group) uniquely positioned to weather this storm given its outsized, leading EBITDA margins/FCF profile (by a sizable gap), strong core pricing power; FAST Q1 EPS 35c on sales $1.37B vs. est. 34c/$1.36B and said adjusting for the one additional selling day in the current period, our daily sales increased 2.8% in the Q1 when compared to the Q1 of FY19; DE was cut to neutral at Citigroup citing potential for further near-term downside in cash corn prices; ITT downgraded to hold at Stifel based on our view that the majority of ITT’s revenues face possibly severe near term demand headwinds (automotive, oil & gas, commercial aerospace); GE tgt cut to $5 from $6 at JPMorgan calling it the most expensive value trap they’ve seen

·     MLPs; Wells Fargo upgraded PSXP to OW and DKL to EW, and downgraded ENBL to EW and OMP to UW saying top picks remain defensive names with steady cash flows, low counterparty risk, and conservative balance sheets including: ENB, EPD, KMI, MMP, PSXP, and TRP; Jefferies upgraded shares of MMP, OKE and SUN to buy from hold upgraded (while cutting midstream estimates due to anticipated COVID-19 demand destruction, forced US crude shut-ins), though expect a return to more normal conditions in 2021



·     AMZN +4%; rises to record all-time high levels, eclipsing the $2,200 per share level amid strength of its Amazon Prime video and shipping of essential items

·     JNJ +4%; beat analysts’ estimates for Q1 profit on higher sales of cancer drugs and consumer products while sales in medical device unit down 8.2% to $5.93B, due to estimated negative impact of COVID-19 pandemic and deferral of medical procedures/also cut year profit and sales view to $7.50-$7.90 vs. prior view $8.95-$9.10 and operational sales down 3% to up 0.5% from prior view up 5%-6%

·     MDGL +10%; phase III NASH trials continue without protocol modifications/new data demonstrate that reductions in liver fat achieved by resmetirom predict NASH resolution and fibrosis reduction

·     MEIP +68%; will receive $100M upfront payment from Kyowa Kirin Co as part of a licensing deal for its drug candidate ME-401 and is also eligible for an additional $582.5M based on certain milestones

·     OSTK +8%; announced that its digital securities protocol now supports open-source blockchain player Tezos

·     ROKU +9%; after issuing prelim Q1 revenue that beats Street estimates as more people used its video streaming devices during the coronavirus lockdown/said it expects viewers to stream 13.2 bln hours of content in Q1, 49% jump YoY

·     TSLA +13%; was upgraded to neutral from underperform at Credit Suisse while upping its tgt to $580 from $415 saying Tesla now “competitively has more edge in the transition to EV as coronavirus disruption will make it more difficult for legacy automakers to balance the long-term shift to EV in the face of near-term cycle disruption”

·     YETI +14% to replace LHCG in the S&P SmallCap 600 index; LHCG to replace CY in the S&P MidCap 400 index (CY being acquired by Infineon)



·     APA -2%; oil related names the biggest drags on the market early as oil pulls back off from recent rally after OPEC+ deal to cut production by about 10M barrels next few months

·     BTI -1%; after The Times reports the company is the subject of a U.S. criminal investigation over suspected sanctions-busting/co says it is cooperating with the U.S. DoJ and Office of Foreign Assets Control

·     DKS ; after modifying its capital allocation plan for 2020, including significantly reducing its planned capital expenditures and temporarily suspending its stock buybacks and dividends


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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