Mid-Morning Look
Wednesday, February 05, 2020
Index |
Up/Down |
% |
Last |
|
||
DJ Industrials |
221.06 |
0.77% |
29,028 |
|||
S&P 500 |
19.59 |
0.59% |
3,317 |
|||
Nasdaq |
13.51 |
0.14% |
9,482 |
|||
Russell 2000 |
17.32 |
1.05% |
1,674 |
|||
U.S. equities surging, recovering all of the coronavirus induced gains that sank stocks last week, with the Nasdaq Composite setting a new all-time high for a second straight day while the S&P 500 index remains only a few points from its January 22nd intraday record highs above 3,337 as a strong private payroll report and easing fears over the virus have catapulted global stocks higher. A Chinese TV media report overnight that a research team at Zhejiang University had found an effective drug to treat people with the coronavirus lifted global markets – but note the WHO to this point has said there are no known treatments against the virus. Stocks also got a boost after ADP reported U.S. private payrolls rose by 291K in January for the biggest monthly payrolls gain in nearly five years. The State of the Union address was also well received by stock markets as President Trump highlighted successes (trade deals, economy surging) while the Iowa fumbled caucuses but a damper on the Democratic hopes. The virus remains a concern as the death toll rose to around 500 in mainland China and the number of new cases increased to 24,324, but investors have turned their attention to corporate earnings and economic data. Rate sensitive sectors sliding as Treasury yields rebound, and energy stocks getting its first meaningful bounce this week on the easing virus concerns – WTI crude bouncing back after falling 20% from its recent peak.
Economic Data
· Private payroll data crushes expectations as ADP said private employment change rose 291K vs. est. 157K while prior month revised to 199K from 201K (ahead of nonfarm payroll data Friday)
· December trade deficit widened to (-$48.9B) from (-$43.7B) in the prior month and compared to the (-$48.2B) estimate; imports rose 2.7% in Dec. to $258.52B while exports rose 0.8% in Dec. to $209.64B from $208.06B. The annual trade deficit fell from $627.7B in 2018 to $616.8B in 2019, first decline in six years
· ISM Non-Manufacturing index reported at 55.1, mostly in-line with est. 55.1 and prior month 54.9; Business activity rose to 60.9 vs 57.0 prior month while new orders rose to 56.2 vs. 55.3 MoM, employment fell to 53.1 vs. 54.8, inventory change fell to 46.5 vs. 51.0 from prior month and prices paid fell to 55.5 vs. 59.3
Macro |
Up/Down |
Last |
|
||
WTI Crude |
1.99 |
51.60 |
|||
Brent |
2.21 |
56.17 |
|||
Gold |
1.50 |
1,557.00 |
|||
EUR/USD |
-0.0041 |
1.1003 |
|||
JPY/USD |
0.25 |
109.78 |
|||
10-Year Note |
0.048 |
1.647% |
|||
Sector Movers Today
· Retailers; CPRI rises despite lowered profit guidance despite a strong Q3 beat as guidance is related to the coronavirus outbreak/sees Q4 revenue of $1.3B vs. $1.5B consensus and EPS of $0.68 to $0.73 vs. $1.18 consensus and lower year; BOOT shares slipped as missed qtrly EPS estimate by a cent, after 4 straight quarters of profit beat on slightly lower than expected Q4 EPS and sales; Macy’s (M) to cut roughly 2,000 positions, plans to close approximately 125 of its least productive stores over the next three years
· Software movers; TTWO shares slide after Dan Houser, vice president, creative, at Rockstar Games will be leaving on March 11 (Rockstar Games has published popular titles like “Grand Theft Auto” and “Red Dead Redemption 2”); PCTY delivered F2Q20 revenues above consensus and raised FY20 revenue targets, but there was no change to annual EBITDA guide/recurring revenue increased 25% Y/Y and continue to trend modestly ahead of FY19 levels; NEWR posted a billings and revenue beat, but reduced profitability and lower-than-expected net expansion due to an uptick in churn weighed on results/Wedbush downgraded to neutral; MANH reported solid beat-and-raise dynamics across cloud subscription revenue, combined license/cloud software revenue, professional services and total revenue
· Insurance; very busy sector after earnings: AFL posts Q4 EPS/revs beat and raises dividend; ALL rises on EPS beat ($3.13 vs. est. $3.24), announces $3B share buyback and said Q4 catastrophe losses $295M, down -69% YoY; CB jumps on better operating EPS $2.28 v. est. $2.12 as 4Q net premiums written up 8.8% YoY to $8.00B; UNM jumps as its Q4 operating EPS of $1.44 beat by a nickel on better revs; PRU also rises as EPS beat ($2.33 vs. estimate $2.02) while Q4 AUM was $1.55 trillion, +13%
· Media & Telecom movers; Dow component DIS overall revs and EPS for Q4 topped views helped as its Disney+ streaming service had 26.5M subscribers at the end of first quarter, beating estimates at three brokerages of 20M subscribers; MTCH slips as misses Q4 revenue estimates and forecasts Q1 revenue below estimates as sequential subscriber growth on its popular dating app, Tinder, fell to its lowest in at least a year (added about 200K average subscribers in Q4)
· Pharma movers; MRK said it was planning to spin off its women’s health, biosimilar drugs and legacy products into a new publicly traded company and expects to receive $8B-$9B through special tax-free dividend from spinoff/also posted Q4 EPS above and sales below views; GSK announces that it will separate its consumer healthcare business into a standalone company and says the split, to occur over a two-year timeframe; AIMT rises in reaction to its announcement that Nestlé Health Science will invest an additional $200M in the company, raising its stake to $473M (25.6% stake); VVUS said the FDA approved an improved formulation of its Pancreaze delayed-release capsules that extends the shelf life to 36 months across all dosages; ZIOP prices 27.8M share secondary at $3.25 per share
· Chemicals and Materials; OLN reported Q4 net loss of $77.2M vs. a profit of $53.3M a year earlier saying lower demand pressured pricing in two of its chemical businesses/Q4 sales fell to $1.39B vs. $1.64B YoY; OI missed on adjusted EBIT in 4Q19 (beat on adjusted EPS on lower interest expense and lower net income to minority interests) and guided below consensus for 1Q20; CCK reported a roughly in-line 4Q19 (slightly missed on adj. EBIT) and guided below consensus for 1Q20 adj. EPS and roughly in line for 2020 adj. EPS.
Stock GAINERS
· ABUS +13%; after JMP Sec upgraded to outperform as sees favorable risk/reward heading into the first human data of RNAi agent AB-729, used to treat hepatitis B virus (HBV), in late 1Q
· AIMT +4%; rises in reaction to its announcement that Nestlé Health Science will invest an additional $200M in the company, raising its stake to $473M (25.6% stake)
· BTU +26%; as reached a deal with activist Elliott mgmt to add four new members to its board – erasing pre-mkt declines after reported a larger than expected Q4 loss and a 20% Y/Y decline in revenues, with further weakness expected in early 2020
· CERN +7%; Q4 revenue was in line with estimates and adjusted EPS 1c beat while exceeded its 4Q19 operating margin target 4and Q bookings were $1.665 billion, which was ahead of guidance
· COTY +14%; after posts Q2 beat, fueled by demand for haircare and nail products by beauty professionals while revs were mostly in-line with views
· USNA +19%; after posting Q4 net sales in line with estimates while the mid-point of year earnings was above estimates ($4.10-$4.90 vs. est. $4.37)
· VVUS +24% after saying the FDA approved an improved formulation of its Pancreaze delayed-release capsules that extends the shelf life to 36 months across all dosages
Stock LAGGARDS
· BOOT -7%; as missed qtrly EPS estimate by a cent, after 4 straight quarters of profit beat on slightly lower than expected Q4 EPS and sales
· F -8%; Ford recorded a wider Q4 loss and a weaker-than-expected 2020 forecast due to higher warranty costs, lower vehicle volumes and sees 2020 Ebitda $5.6B-$6.6B below $7.37B estimate
· GILD -4%; posts lower-than-expected quarterly profit, as it takes a variety of charges and guides year earnings of $6.05-$6.45 per share, below consensus of $7.01 per share
· MTCH -6%; as misses Q4 revenue estimates and forecasts Q1 revenue below estimates as sequential subscriber growth on its popular dating app, Tinder, fell to its lowest in at least a year
· NEWR -8%; posted a billings and revenue beat, but reduced profitability and lower-than-expected net expansion due to an uptick in churn weighed on results/Wedbush downgraded to neutral
· OLN -2% reported Q4 net loss of $77.2M vs. a profit of $53.3M a year earlier saying lower demand pressured pricing in two of its chemical businesses/Q4 sales fell to $1.39B vs. $1.64B YoY
· PLT -31%; as posts Q3 revenue below estimates for the fourth straight quarter and issued Q4 earnings loss and a lower view for next quarter revs
· SNAP -8%; missed Q4 revenue estimates amid tough competition from GOOGL and FB as its DAUs rose 4% to 218M topping the 215M est but guided Q1 revs $450M-$470M vs. est. $461.6M
· SPOT -4%; Q4 misses on EPS/revs and said op expenses grew 80% Y/Y to €551M/inline Q1 revenue guidance of €1.71-1.91B and said for Q1 sees total MAUs of 279-289M and total premium subscribers totaling 143-153M
· TSLA -9%; downgraded at Canaccord following massive rally in shares that topped out Tuesday at highs of $968.99 before sliding late yesterday
· TTWO -4%; after Dan Houser, vice president, creative, at Rockstar Games will be leaving on March 11 (Rockstar Games has published popular titles like “Grand Theft Auto” and “Red Dead Redemption 2”)
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.