Mid-Morning Look: February 25, 2020

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Mid-Morning Look

Tuesday, February 25, 2020

Index

Up/Down

%

Last

 

DJ Industrials

-143.50

0.51%

27,817

S&P 500

-21.11

0.65%

3,204

Nasdaq

-44.09

0.48%

9,176

Russell 2000

-9.61

0.59%

1,618

 

 

U.S. equities with a modest bounce initially after yesterday’s sharp declines that saw the Dow Jones Industrial Average fall over 1,000 points (its 3rd largest decline ever), while all three major averages ended Monday with declines of over 3% as rising coronavirus cases outside of China continued to grow. However, stocks in the U.S. are unable to hold gains, trading below yesterday’s lows as fear once again grips the market, putting pressure on travel, leisure, energy and commodity names. South Korea, Italy and Iran among the countries with rising cases raises concerns, while more and more companies continue to warn about the potential impact of the virus on operations and financials (just today, MA, JBL, EXFO, UAL, TUP among them). Positive earnings results and guidance from Dow component Home Depot helping the index early as well as investors scooping up stocks after yesterday’s drubbing. Economic data in the U.S. mixed with slightly better housing data and mixed confidence data while Richmond Manufacturing showed a surprise decline, and big drop from the prior month. Financial stocks again pressured given the plunge in treasury yields.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar mixed, holding gains vs. most currencies in flight to strength, while the safe-haven Japanese yen gains vs. the buck; commodity prices sliding with gold prices giving back some of its recent gains (pulling back of March 2013 recent highs), while oil prices slump further on waning demand fears. Treasury market’s rally further, sending yields down across the board as the 2-year yield down 2.6 bps to below 1.22% (lowest since April 2017); the 10-year yield down 3 bps to 1.34% and the 30-yr yield down 2.6 bps to 1.80% (new record lows)

 

Economic Data

·     Consumer Confidence for Feb reported lower at 130.7 vs. est. 132.2 (prior month revised to 130.4 from 131.6), while the present situation index at 165.1 vs. Jan revised 173.9 (previous 175.3) and the consumer expectations index 107.8 vs. Jan revised 101.4 (previous 102.5)

·     Richmond Fed’s Feb. Manufacturing Survey at -2, well below the est. reading of up 10 and compared to up 20 last month; shipments fell to 1 after 29 the prior month while new order volume slowed to -10 after 13 the prior month and order backlogs fell to -6 after 9 prior

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.52

50.91

Brent

-0.48

55.82

Gold

-23.30

1,653.30

EUR/USD

-0.0008

1.08.45

JPY/USD

-0.55

110.17

10-Year Note

-0.029

1.340%

 

 

Sector Movers Today

·     Biotech movers; MRNA rises as announced shipment of the first vials of coronavirus vaccine mRNA-1273 to the NIH for use in a clinical study only 42 days since sequence identification; ICPT posted a wider than expected Q4 EPS loss of ($2.99) vs. est. ($2.66) but revenue of $71.5M rose 34% YoY and topped consensus; REGN was upgraded to buy at Jefferies given the recent adverse events that have arisen with Novartis’ Beovu, which will likely dampen its uptake and minimizes competitive risk to REGN’s Eylea franchise; GH shares slip after Q4 top and bottom line beat but issued mixed 2020 outlook with expected higher spending; CLVS shares drop after Rubraca sales for the quarter rise YoY but fell short of consensus estimates

·     Retailers; Macy’s (M) posted a Q4 earnings beat and reiterated its full-year profit guidance citing a meaningful sales uptick in pre-Christmas period, while notes its guidance does not take into account any coronavirus impact; TUP shares plunge as sees FY19 adj. EPS $1.35-$1.70 well below consensus $2.78 and sees FY19 revenue in line with previously provided outlook ranges while guides FY20 revenue $1.58B-$1.62B vs. est. $1.67B; NLS a top mover in retail after its quarterly results; DDS reports comparable sales fell 3% during the holiday quarter while total merchandise sales were down 4% during the quarter

·     Auto movers; NIO shares surge after saying it had signed framework agreements with Hefei’s city government on a fundraising of more than 10 billion yuan ($1.42 billion) and new manufacturing facilities; TSLA was downgraded to hold at Jefferies saying still need valuation to be grounded into some visibility on market size and potential profitability; ADNT warns that FY20 adjusted EBITDA could land toward the low end of the prior guidance range of $870M to $910M due to the coronavirus outbreak.

·     Hardware & Component news; HPQ met consensus revenues, while beat EPS by 10 cents (18%) due to record PC margins, driven mainly by continued favorable DRAM pricing though printer supplies were down -7% again (shares upgraded at Loop Capital); EXFO cuts Q2 revenue view to approximately $55M from $66M-$71M (est. $68.74M) due to the coronavirus impact on its supply chain and manufacturing operations in China; EXTR estimates that supply chain disruptions could result in negative impact of $10m-$15m revenue and 6c-8c adj. EPS in 3Q citing the impact of the coronavirus; JBL another to warn that Q2 results will miss due to virus saying factories are running at 65%-70% capacity

 

Stock GAINERS

·     HD +3%; Q4 comparable sales increased 5.2%, topping the consensus mark of 4.8% while comp sales were up 5.3% in the U.S. during the quarter after posting and EPS and sales beat

·     JMEI +24%; after saying it has signed a going-private agreement, under which its wholly-owned subsidiary Jumei Investment Holding and Super ROI Global Holding will acquire all the outstanding class A ordinary shares

·     KEYS +7%; jumps as reported January ended quarter results and provided an April quarter outlook that were upbeat

·     LL + 20%; after Q4 EPS of 56c tops the 23c est and Q4 comps in-line at +0.4% and net sales $273.9M beats the $272.5M est while expects full-year revenue growth at a low to mid-single-digit rate vs. +3.3% consensus

·     MNK +58%; after announced a settlement that would resolve all opioid-related claims (while also posted Q4 EPS beat) – said on deal, the plaintiffs would receive $1.6B in structured payments

·     MRNA +15%; after the company sent a batch of mRNA-1273, a vaccine against the novel coronavirus, to the U.S. National Institute of Allergy and Infectious Disease for study. U.S. government researchers are expected to start the first clinical trial by the end of April.

·     NIO +33%; said it had signed framework agreements with Hefei’s city government on a fundraising of more than 10 billion yuan ($1.42 billion) and new manufacturing facilities

·     PRGO +5% after saying the U.S. FDA approved its first generic drug to TEVA’s respiratory drug ProAir; PRGO says is launching limited quantity of the drug, and collaborating with its manufacturing partner CTLT to ramp up production in order to meet future demand

·     ZYNE +15%; receives U.S patent for methods of treating autism spectrum disorder by using cannabidiol via a gel or cream

 

Stock LAGGARDS

·     EXAS -8%; as it offers $1B (upside from $850M) of 0.3750% convertible senior notes due 2028 for general corp purposes, including repayment or repurchase of debt, working capital and possible acquisitions

·     EXFO -5%; cuts Q2 revenue view to approximately $55M from $66M-$71M (est. $68.74M) due to the coronavirus impact on its supply chain and manufacturing operations in China

·     MA -1%; cuts Q1 revenue growth to high end of high single digits, down from prior forecast of low double digits saying cross-border travel, and to a lesser extent cross-border e-commerce growth, is being impacted by the Coronavirus

·     PANW -15%; issued its third straight quarter of missed product revenue that further erodes confidence in the company’s ability to execute (guides 3Q revs $835-805M vs. est. $872.7M and EPS $0.96-$1.08 vs. est. $1.25)

·     SHAK -14%; as reports same-shack sales fell (-3.6%) in Q4 to miss to the consensus estimate for a decline of (-2.8%) and comp traffic was down 5.4% from a year ago and guides year sales $712M-$720M vs. est $737M

·     TUP -23%; sees FY19 adj. EPS $1.35-$1.70 well below consensus $2.78 and sees FY19 revenue in line with previously provided outlook ranges while guides FY20 revenue $1.58B-$1.62B vs. est. $1.67B

_________________________________________________________________

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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