Mid-Morning Look: February 26, 2020

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Mid-Morning Look

Wednesday, February 26, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities are on track for their first day of gains in over a week, as major averages look to rebound from one of the worst two-day declines in the markets history (S&P down over 3% back to back sessions) following outbreak coronavirus concerns and its impact on companies and economies. President Trump said this morning that he will hold a press conference on the subject at 6 p.m. Washington time to discuss. Also helping markets this morning, a standout new home sales data point out of Washington, easily topping consensus (helping offset a weak earnings/outlook from homebuilder TOL). It’s a broad rebound thus far, with all sectors partaking in the recovery. Oil prices are bouncing modestly (helped by bullish inventory data), while gold slides a second day but Treasury prices remain steady. Deaths and confirmed cases of the coronavirus have continued to climb outside China, notably in Italy, Iran, Japan and South Korea which has raised concerns among investors that the virus will spread further, disrupting the global economy (as noted by many companies over the last 2-weeks about the virus impact to production, financials and sentiment).


Treasuries, Currencies and Commodities

·     In currency markets, the dollar bouncing after yesterday’s brief pullback while commodity prices are mixed as gold prices extend yesterday declines, falling below $1,637 an ounce as stocks rebound, while oil rises on bullish inventory data and a rebound in riskier assets after the two-day plunge. Treasury markets are steady, with the yield on the 10-year and 30-year not far off their record low prints yesterday in flight to safety trades.


Economic Data

·     January new home sales rose 7.9% to 764,000 annual rate, strongest pace since July 2007 and above estimates for 718,000 while the previous three months’ new home sales data revised up by 11,000. The median new home price rose 14% y/y to $348,200; average selling price at $402,300; 21% of new homes sold in Jan. cost more than $500,000, up from 18% prior month







WTI Crude















10-Year Note





Sector Movers Today

·     Restaurants; PZZA reported Q4 EPS, sales and comp sales all above consensus views , but shares slipped early after guiding 2020 EPS to $1.35-$1.55 vs. est. $1.53; WEN guided 2020 EPS below views (60c-62c vs. est. 65c) and also forecasts bigger-than-expended capital costs for 2020 after lower YoY operating profit and adj EBITDA in Q4 mainly due to the investments to support the U.S. system ahead of its breakfast launch; PBPB mixed results as EPS missed views but sales beat and comp sales fell less than expected; RRGB falls a 4th straight session Q4 adj EPS loss of (36c) on in-line revs of $302.9M missed the est. loss (17c)

·     Housing, Home Retail & Building Products; LOW reported Q4 comp sales of 2.5%, below the 3.7% consensus as comp sales for the U.S. home improvement business were up 2.6%, while EPS beat and sales were just short of ests on slightly lower margins; in housing, TOL was cut at Raymond James following Q1 results that not only missed key expectations on several fronts, but also included guidance for the remainder of FY20 that, in their view, raises serious questions about 1) internal cost controls and 2) management’s financial visibility; SunTrust downgraded builders DHI, KBH and PHM to hold from buy saying their thesis has played out better than anticipated, and see a more balanced risk/return profile over the next 6-9 months

·     Semiconductors; Needham lowered estimates across the board in the Smartphone handset supply chains (NXPI, QRVO, SLAB, SIMO, CRUS, MCHP, SWKS, SYNA) to account for the worsening effects of the Coronavirus on the near-term demand environment as see manufacturing production challenges for those semiconductor companies that have back-end/front-end facilities in China and customer order push outs possibly leading to demand destruction; TER ests and tgt lowered at Citigroup to reflect the negative impact of the Coronavirus on China’s industrial and global smartphone supply chain

·     Pharma movers; ENDP Q4 profit beat analysts’ estimate helped by higher sales in its sterile injectables unit while Q4 revenue of $764.8M was above consensus est of $731.43M; TNXP rises on collaboration to develop vaccine for coronavirus; SUPN shares dropped after quarterly sales missed consensus estimates; MRNA reported weaker earnings, but shares rise after saying its third CMV vaccine cohort is rapidly enrolling; NVAX said it has produced and is currently assessing multiple nanoparticle vaccine candidates for COVID-19 in animal models



·     BYND +5%; after SBUX to sell BYND’s plant-based breakfast sandwich in its Canadian stores, starting next week (BYND already has partnerships with DNKN and MCD)

·     CME +5%; upgraded to buy at UBS and raise tgt to $233 from $214 as heightened levels of volume and volatility are driving our near-term estimates higher

·     MRNA +16%; reported weaker earnings, but shares rise after saying its third CMV vaccine cohort is rapidly enrolling

·     NVRO +10%; after Canaccord upgraded to buy with $153 tgt from $120 saying NVRO’s Q4 print – in line with the firm’s preannouncement – capped off a remarkable turnaround year

·     REGN +1%; upgraded at Canaccord and Bernstein noting its competition decreased when the ASRS warned about 14 cases of vasculitis in patients that received NVS’ Beovu

·     TJX +8%; Q4 same-store sales of 6% beat est of 3%, helped by Marmaxx business, with rise in customer traffic across stores, though EPS guidance was below views



·     DY -23%; as Q4 EPS miss entirely attributable to profitability, as revenues were in line with estimates, driven by a slow start with a customer whose activity is expected to increase in F21

·     MATX -11%; a drag on the Dow Transport index, falling after quarterly earnings missed views and warns of COVID-19 impact on its business as sees 2020 net flat with 2019

·     MNLO -15%; falls as its mid-stage study to evaluate Serlopitant as a treatment of chronic pruritus (itch) of unknown origin failed to meet its main goal

·     RVLV -15%; after guided for full-year revenue of $679M to $703M vs. $734M consensus and adjusted EBITDA of $56M to $61M vs. $75M consensus.

·     SABR -15%; Q4 revs missed and notes negative impact of coronavirus while Q4 operating income was $97.6M, down from $157.9M in last year’s quarter due to increased tech and acquisition expenses

·     SDC 28%; as posted sequential decline in 4Q profitability/cash flow, a lower revenue outlook than anticipated, and guidance for another year of negative adj. EBITDA in 2020 and also provided a 5-year revenue outlook for 20-30% growth that fell short of consensus of ~35%

·     SINA -7%; posts Q4 loss vs year-earlier profit as total operating expenses jump 37%; said ad rev falls 5% primarily due to weakness in Weibo and portal advertising revenue; in a positive, Q4 adj. profit, rev beat estimates on higher non-advertising revenue

·     TOL -11%; cut at Raymond James following Q1 results that not only missed key expectations on several fronts, but also included guidance for the remainder of FY20 that, in their view, raises serious questions about 1) internal cost controls and 2) management’s financial visibility


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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