Mid-Morning Look: April 27, 2020

Auto PostDaily Market Report

Mid-Morning Look

Monday, April 27, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities open higher as more states prepared to ease the coronavirus-induced curbs and investors awaited quarterly earnings reports from heavy-weight tech companies this week including Alphabet (4/28), Amazon (4/30), Apple (4/30), Facebook (4/29), Microsoft (4/29) and Tesla (4/29). The Dow Jones Industrial Average looks to make it a 4th straight day of gains into a busy week of earnings (over 140 S&P companies expected to report). The move today once again based on hopes…hopes that the recent state by state reopening’s, which included “soft” openings for Georgia, Oklahoma, Tennessee and South Carolina last week will lead to a bounce back for an economy that has been decimated by the coronavirus related forced closures. Some of the re-openings include hair salons, gyms, and bowling alleys while the list expands to sit-down restaurants, movie theaters shortly. The Texas governor has suggested he could announce rules Friday or Monday that would allow some businesses to reopen. The reopening of hard-hit New York State could begin in mid-May, according to Governor Andrew Cuomo. Italy’s Prime Minister Giuseppe Conte said in an interview its lockdown will be eased from May 4. The headlines providing a boost to sentiment but it is yet to be seen if people will flock to stores and events in droves like they had prior and quarterly results for companies in the upcoming quarter should remain bleak. Treasury yields remain depressed, while oil prices plunge on over supply fears. Major averages are trading back above some key technical levels, while oil prices resume downward plunge, off over 25% to trade below $13 per barrel and risk averse assets gold/Treasuries slide with the jump in stocks.







WTI Crude















10-Year Note





Sector Movers Today

·     Autos; GM suspends its dividend and share buybacks and extended $3.6 billion under its three-year revolving credit agreement to April 2022; NSANY to slash Japan production by 70% in May, 43% in June according to Reuters report; HOG mentioned cautiously in Barron’s saying the stock could be headed for a serious decline this coming week, with the motorcycle maker expected to report earnings on Tuesday; in research, Credit Suisse upgraded LEA and MGA to Outperform given strong balance sheets, FCF generation, and defensive product positions and downgraded AXL to Neutral as elevated leverage may remain an overhang; ALV upgraded to outperform at RBC Capital citing its strong liquidity profile and cost control in 1Q; HTZ was downgraded to underweight at Barclay’s saying the risk/return skews to the downside/can never rule out a rescue package, but don’t see the equity at $4/share fully reflecting the risks to shareholders

·     E&C sector; Citigroup upgraded KBR to Buy and downgraded FLR to Neutral, while saying their favorites are now PWR, J, KBR, and ACM in that order as E&C earnings season will also likely be unlike anything we have seen, with little investor regard for pre-COVID results and most of the focus on end market resiliency/balance sheet/self-help; FLR was also downgraded at UBS to neutral from buy and cut tgt to $11 from $29 saying oil price weakness, the ongoing impact from COVID-19, potential for more charges on two specific projects, and a now challenging outlook for state and local budgets, may lead to “continued complex quarters”

·     MLPs; HEP was upgraded to outperform at Raymond James after distribution cut and shift to more conservative model; Wells Fargo upgraded EQM, ETRN, WMB upgraded to overweight and CNXM to equal-weight with shift for gas levered names to a more positive tilt. With WTI prices weak and associated gas from oil plays set to decline, natural gas supply/demand dynamics have improved supporting our E&P team’s $2.75/Mcf gas price forecast for 2021. Higher gas prices reduce midstream counterparty credit risk and could potentially lead to a resumption of Northeast gas volume growth; DCP was downgraded to sell at UBS saying another distribution cut from the natural gas processor is possible and the stock is over-valued

·     Oil stock news; in oil drillers, DO filed for Chapter 11 bankruptcy after having skipped an interest payment on senior debt (note Loews ($L) is the majority owner of the company at 53%) – also, Diamond Offshore had disclosed that HES was its biggest customer in 2019, accounting for 28.9% of its annual revenue, while OXY was its second biggest customer at 20.6%; RRC reports Q1 production totaled 2.29B cfe/day, and continues to expect full-year production to average 2.3B cfe/day, including an expected exit rate of 2.3B cfe/day and affirms production view

·     Casino & Leisure movers; MCRI was upgraded to Buy from Hold at Stifel saying although the COVID-19 outbreak has led to the temporary closure of MCRI’s resort operations, they believe the current dislocation in MCRI’s share price/valuation ignores the company’s superior leverage profile, strong end markets and outright real estate ownership; Nomura said regional casino operators, BYD and PENN should be able to restart operations gradually in May, with EBITDAR recovering to ~50% of 2019 peak in 2021 and to ~80% in 2022 and see upside to $22 in BYD in the next 12-18 months and to $19 for PENN (casinos in general jump – LVS, WYNN, MGM); cruise lines (RCL, CCL, NCLH) and hotels (HLT, MAR) also rise on re-open hopes



·     AVDL +29%; after saying its FT218, its treatment for excessive daytime sleepiness and cataplexy in patients with narcolepsy, a type of sleep disorder, meets main goals in late-stage study

·     AXSM +21%; announces positive results from a Phase 2/3 clinical trial, ADVANCE-1, evaluating lead drug AXS-05 for the treatment of Alzheimer’s disease agitation/study met primary endpoint of a statistically significant average reduction compared to placebo

·     DGX +7%; lab companies DGX, LH were both upgraded to buy from hold at Citigroup as consider the potential for a new lab testing paradigm coupled with improving l-t fundamental/industry dynamics

·     NAT +14%; CEO spoke Friday in an interview yesterday with Mad Money’s Jim Cramer saying “we are making a lot of money at this time, improving our balance sheet tremendously, and I have never seen such a strong market” (oil tankers have risen as world looks for places to store oil)

·     PENN +6%; Nomura said regional casino operators, BYD, PENN should be able to restart ops gradually in May, with EBITDAR recovering to ~50% of 2019 peak in 2021 and to ~80% in 2022

·     TSLA +10%; as shares jump ahead of earnings this week – approaching $800 per share – hasn’t been above that level since early March (and well off the 3/18 lows of $350.51)



·     APA -8%; as energy related stocks (OXY, FANG, MRO, HAL, SLB, HP) fall on declining oil prices; group not being helped by oil driller DO filing for Chapter 11 bankruptcy

·     BA -3%; holding its virtual shareholder meeting today – earnings on Wednesday 4/29; over the weekend, walks away from its proposed $4.2B combination with ERJ’s commercial-jet business

·     CLVS -7%; was downgraded to underperform with a $5 tgt at Leerink

·     COTY -8%; downgraded at Davidson to neutral on valuation noting the stock is +68% from its March 18th low of $3.74 per share, when the dividend yield was 13%

·     EGOV -8%; said it sees for 2020, to come in near low end of previously issued guidance for total revenues, adjusted ebitda and EPS and previous guidance for capital expenditures and capitalized software development costs for 2020 remains unchanged

·     NEM -3%; as gold miners fall with the decline in gold prices

·     REGN -3%; and SNY said preliminary data from a Phase 2/3 clinical trial evaluating IL-6 receptor inhibitor Kevzara (sarilumab) in hospitalized severely and critically ill COVID-19 patients showed no notable clinical benefit in the combined groups

·     VSTM -43%; as announces results from the ongoing investigator-initiated Phase 1 study investigating VS-6766, its RAF/MEK inhibitor, in combination with defactinib, its FAK inhibitor, in patients with KRAS mutant advanced solid tumors.


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.

Live Trading

Open an Account

Paper Trading