Mid-Morning Look: February 24, 2020

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Mid-Morning Look

Monday, February 24, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities in sell-mode, with major averages falling in the U.S., Europe and Asia, along with sharp declines in oil prices as the number of new coronavirus cases flares outside China, with the disease now spreading to nearly 30-countries. In Europe, Italian markets fall over 6% after they confirmed over 200 cases of the virus over the weekend, with officials verifying at least six deaths nationwide, while those diagnosed in South Korea are nearing 800. The number of confirmed cases in China rose past 79,000, taking the death toll above 2,600 while China’s Ministry of Culture and Tourism warned Chinese tourists not to travel to the U.S. because of excessive quarantine measures. The Dow Jones Industrial Average fell over 900 points on the open (down as much as 997 points), while the Nasdaq Composite declined more, falling over 3% as investors bail on stocks early given the uncertainty of the virus. Gold rises to fresh seven-year highs while the 10-year Treasury yield is 10 bps lower to 1.36% as safe haven assets rise. Stocks leveraged to travel, retail, energy, or have deep presence in China have been hit the hardest to start the day (cruise lines, hotels, airlines). While stocks have held up well the last few weeks on virus reports (S&P 500 and Nasdaq touched all-time highs last week), the news that the cases are expanding to other countries, and in some cases in large numbers, is creating near-term panic selling.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar was mostly higher vs. rival currencies though the euro spikes vs. the buck to trade flat on the day now at 1.085 (overnight low 1.0805 – lowest since April 2017); the dollar fell vs. the safe haven yen, back under the 111 level. Commodity prices are mixed with precious metals jumping as gold at fresh 7-year highs, though industrial metals, along with oil prices are falling sharply on slowing demand concerns amid the virus outbreak. Treasury market’s firmly higher as the 30-year yield touched a fresh intraday lows at 1.8109% while the 10-year falls to 1.357% lows (not far off the 1.32% intraday lows from the summer of 2016).







WTI Crude















10-Year Note





Sector Movers Today

·     Bank movers; sector slammed with weakness in large cap (MS, C, JPM, WFC, GS) and regional banks (PNC, RF, KEY, CFG) as Treasury yields plunge (10-year below 1.4%) making lending margins more difficult, while coronavirus fears also compound weakness along with Democratic Presidential nominee Bernie Sanders winning in Nevada (not seen as market friendly candidate); highlights this week include JPM holding an investor day on Tuesday, while many banks will speak at Credit Suisse conference this week and WFC which announced late Friday it will pay $3 billion to settle U.S. investigations into consumer abuses

·     Energy stocks tank on lower oil; 52-week lows in the S&P 500 include XOM, DVN, MRO, NBL in the energy sector as oil tumbles as spreading virus sparks demand concerns. Crude oil futures plunge as worries about the impact of the coronavirus spike, with the number of infections rising outside of China raises slower demand needs. Note China’s promise of stimulus to help cushion the economic blow from the coronavirus has helped the commodity last week

·     Pharma movers; GLPG downgraded to underperform at Bank America on valuation; in the cannabis sector, Cowen downgraded ACB, SNDL and TLRY to market perform from outperform on slower-than-expected growth of Canadian cannabis industry and cuts forecast for 2020 legal market cannabis sales by 32% to C$3.5B; CRON said it will delay its 2019 fourth quarter and full-year earnings release and conference call; PRGO reached a definitive agreement to acquire the oral care assets of High Ridge Brands for $113 million in cash.

·     Semiconductors; among the hardest hit sectors in technology today as the market worries about the geographically spreading coronavirus outbreak, raising concerns about production of chips in China (AMD, NVDA, SWKS, QRVO, STM all weak); XPER said a company led by former CEO Tom Lacey has made a non-binding proposal to acquire the company for $23.30 a share in cash, but that it is sticking with its all-stock deal to merge with TIVO



·     GILD +5%; rises after its experimental drug Remdesivir, which is being tested for coronavirus, may be the only one that will work against the new pathogen, according to Bruce Aylward, an assistant director-general at the World Health Organization

·     NEM +2%; gold miners outperform given the flight to safety trade that has seen gold prices surge over the last few weeks on the virus scare as it spreads outside China

·     NGM +31%; announces preliminary topline liver histology and biomarker data from 24-week Phase 2 study of aldafermin in NASH patients

·     O +1%; as REITS among top gainers in the S&P given the plunge in Treasury yields

·     VHC +11%; after Bloomberg reported Supreme Court rejects Apple appeal of $1B VirnetX decision

·     XPER +3%; said a company led by former CEO Tom Lacey has made a non-binding proposal to acquire the company for $23.30 a share in cash, but that it is sticking with its all-stock deal to merge with TIVO



·     AAL -8%; as airlines deeply impacted from some travel restrictions and rising coronavirus cases in new countries

·     APH -3%; said it doesn’t expect to meet its Q1 sales and EPS guidance due to the coronavirus outbreak/says it’s currently unable to quantify the full impact

·     CNC -8%; after Bernie Sanders won decisively in the Nevada caucuses on Saturday and strengthened his front-runner position for the Democratic presidential nomination

·     CRI -16%; after Q4 EPS missed by 8c on in-line sales of $1.1B saying lower profitability was due to continued investments in its business and higher inventory-related costs and guided year EPS growth 4%-6% below the est. up 9%

·     NCLH -7%; as cruise lines (RCL, CCL as well) trade to 52-week lows on virus fears; NCLH was downgraded to hold at Argus research

·     XEC -7%; as oil stocks pummeled on lower oil prices; 52-week lows in the S&P 500 include XOM, DVN, MRO, NBL on lower energy demand fears


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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