Mid-Morning Look: August 26, 2020

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Mid-Morning Look

Wednesday, August 26, 2020






DJ Industrials




S&P 500








Russell 2000






New day, same results as technology stocks outperform, led by gains in software after strong quarterly results from Salesforce.com (CRM) overnight, while large cap tech (FB, AMZN, NFLX, TSLA) again trend higher as momentum names continue to push major averages to fresh record highs. With yesterday’s close, the S&P 500 finished in record territory for the 17th time this year while the Nasdaq Composite logged its 38th new closing high for the year. A strong durable goods reading for July (jumped over 11%) easily topped estimates (5%) this morning, giving another boost to sentiment on the improving economy after the pandemic shutdown. The U.S. dollar index hit morning highs immediately following the durable goods data. Hurricane Laura, which is poised to become a Category 4 storm, is bearing down on Texas and Louisiana, bringing a life-threatening storm surge, flash flooding and destructive winds that could crush refinery production, cause catastrophic claims to insurers and impact retail, restaurants and other businesses. Stocks turn to clues on monetary policy tomorrow when await Fed Chair Jerome Powell speaks virtually at Jackson Hole tomorrow in a meeting of global central bankers.


Economic Data

·     Durable goods orders for long-lasting factory goods jumped 11.2% in July, topping the 5% estimate as manufacturers boosted output and the economy continued its climb back; new orders for transportation equipment jumped 35.6%, ex-volatile transportation category, orders rose 2.4%; new orders for nondefense capital goods excluding aircraft climbed 1.9%.







WTI Crude















10-Year Note





Sector Movers Today

·     Consumer Staples; HAIN was upgraded to outperform from in-line at Evercore/Isi after earnings and upped tgt to $38 from $35; SJM was raised to neutral from sell at Guggenheim following the company’s 1Q “beat and raise” that benefited from higher rates of at-home consumption and lower SD&A spending and think the incremental EPS flexibility in 2Q and beyond presents a significant risk to being short the stock; KDP was upgraded to overweight and raise tgt to 434 at Morgan Stanley on strong near-term trends with increased at-home coffee consumption and heritage DPS share gains, as well as longer-term household penetration gains in coffee

·     Auto sector; TSLA tgt raised to $2,500 at Jefferies saying they assume Tesla will set new benchmarks and ambitions for battery density, materials and industrial processes leading to pack costs <$100 in coming years; BWA M&A deal one-step closer to finish line as the European Union assigns a provisional deadline of September 30 to rule on BorgWarner’s purchase; NIO receives second analyst upgrade in as many days as Morgan Stanley upgraded; LAD to move from the S&P 600 to the S&P Midcap 400 effective opening of trading on 9/1 replacing LOGM

·     Insurance; Goldman Sachs said a Houston landfall for Hurricane Laura (RE, RNR most exposed) will likely prove far more costly than a landfall in the Western Louisiana-Eastern Texas area (TRV, CB most exposed), but we caution against comparisons to 2017’s Harvey — a slower moving storm which resulted in massive rainfall and flood losses

·     Pipelines; NBLX was upgraded to Overweight from Neutral at Piper saying assuming CVX closes on the NBL acquisition, believes this could serve as a catalyst for CVX to acquire the remaining 37% of NBLX that is not currently owned by NBL Citigroup downgrading CQP to Neutral, while maintaining Buy on LNG though target price decreases to $74 from $80. We believe LNG remains a key C-Corp holding and don’t buy into some of the bear arguments



·     CRM +25%; a day after news it will be added to the Dow Jones Industrial Average (takes effect this upcoming Monday), the company with strong Q2 performance which well exceeded modest expectations amid strong top line performance (revs +18%, billings +17%, cRPO bookings +34%)

·     DKS +11%; Q2 comps of over 20%, more than doubling the estimate while Q2 EPS and sales beat easily ($2.71B vs. $2.46B) – said favorable shifts in consumer demand have continued into 3Q

·     FLDM +30%; after its saliva-based COVID-19 test received emergency approval from the FDA; the test is a less invasive method to detect the novel coronavirus compared with the commonly available nasal swab method (Citron research also positive saying sees shares going to $35)

·     HPE +5%; handily beat revenues ($6.8B vs. $6.1B) and EPS ($0.32 vs. $0.23) while FCF was strong, buoyed by an improvement in cash conversion and provided guidance for Q4 above consensus

·     INTU +2%; price tgt raised by several analysts after reported strong FQ4 results above consensus and delivered Consumer segment (tax) revenue growth of 13% growth (vs. 10% consensus), driven by DIY share gains and TurboTax Live adoption

·     PLAN +22%; as Q2 revenue rises ~26% to $106.5M, topping the $103.4M estimate and posts a smaller than expected Q2 loss of (4c) while also forecasts Q3 and FY sales above expectations

·     TSLA +4%; as tgt raised to $2,500 at Jefferies saying they assume Tesla will set new benchmarks and ambitions for battery density, materials and industrial processes leading to pack costs <$100 in coming years

·     URBN +20%; bright spot in retail after better-than-expected quarterly results, including net sales that topped the highest sell-side est. and said Q3 sales could decline by only mid-single digits



·     ADSK -5%; price tgt raised by several analysts as reported good F2Q results, with upside to revenue, billings, and EPS as COVID-19 impacted new business activity, although renewal rates were strong, and FY revenue guidance was raised at the midpoint

·     CCL -3%; as cruise lines slide; Princess Cruises is cancelling its early 2021 World Cruises and Circle South America cruises on two ships

·     HEI -6%; revs/EPS beat expectations although core organic flight support revenues sunk -44.3% organically YOY while the bottom line was boosted by lower taxes and lower interest

·     JWN -7%; after Q3 sales dropped over 53% amid low exposure to athleisure and casual clothing, as well as home-goods and the shift in its anniversary sale to August from July

·     LRN -11%; after planned $300m convertible debt offering

·     PSTG -6%; fell after a report that included a beat without official “guidance”; however, a suggestion that sales might be flat q/q vs. consensus above 10% sunk shares


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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