Mid-Morning Look: July 09, 2020

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Mid-Morning Look

Thursday, July 09, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities same story/new day as technology and Chinese stocks outperform on a daily basis, trading at best levels in over a year for Asian markets, while the tech heavy Nasdaq continues to push to daily record highs led behind software names (SAP good guidance) and Internet names (AAPL, AMZN, FB, GOOGL, NFLX – Nasdaq 100 true outperformance). Asian markets have seen a massive resurgence in their markets, with Chinese equities rising for the 8th straight day (up 16.5% during that stretch). Stocks pared gains/slipped briefly following headlines that the U.S. Supreme Court upheld a New York grand jury subpoena for President Donald Trump’s tax returns and other financial records, rejecting his call to give presidents complete immunity from criminal investigation while in office. Reuters also reported the U.S. to bar companies from government contracts that use products or services from china’s Huawei, ZTE, Hytera Communications, among others. Neither headline weighed on tech though the Dow and S&P fall as energy stocks slide amid a decline in oil prices and consumer discretionary/retail stocks falter. Defensive/safe-haven assets saw gains early as the dollar rebounded from recent losses while Treasury prices rise and gold holds around 9-year highs at $1,820 an ounce. Weekly jobless claims still a massive number, but coming in “less-bad” helping market sentiment. Again, markets unphased by the rising case of COVID-19 cases in the US which saw more than 60,000 new daily COVID-19 infections recorded in the U.S. yesterday to mark the single-largest total of any country since the coronavirus outbreak. Attention may turn to earnings next week, when the quarter results start Tuesday with JPM and other banks.


Economic Data

·     Weekly jobless claims fell to 1.314M from downwardly revised 1.413M from 1.427M prior week and compared to the 1.375M estimate; continuing claims drop to 18.062M vs. est 18.75M and compared to last week 19.29M; 4-week avg fell to 1,437,250 July 4 week from 1,500,250 prior week (previous 1,503,750); insured unemployment rate fell to 12.4% from 12.9%

·     U.S. May wholesale inventories unrevised at down (-1.2%) in-line with estimates; May wholesale sales +5.4% vs. April (-16.4%); Wholesale inventories excluding oil fell 1.5% in May







WTI Crude















10-Year Note





Sector Movers Today

·     Casino & Leisure movers; SIX was upgraded, and SEAS and FUN downgraded at Janney in the theme park sector saying short-term stock performance for the theme parks will depend on the spread of Covid-19 and government reaction; NCLH files to sell 46,577,947 share on behalf of a selling shareholder in a new offering; also, the company’s auditor no longer has a going concern warning tagged on the cruise line operator; CCL said it will resume its German cruise line AIDA Cruises in August – cruise operators have suspended voyages till August due to travel restrictions amid the COVID-19 pandemic; ERI received approval from Nevada casino regulators to buy Las Vegas-based CZR in a $17.3 billion deal; HOG upgraded to buy at Northcoast after most recent checks uncovered: (a) better than expected July shipments into the U.S., (b) incremental contraction in the used vs. new pricing gap and (c) signs of new riders entering the industry

·     Restaurants; JACK was added to the Best Ideas list with $95 tgt at Wedbush and increasing our FQ3 SSS growth estimate on continued near-term SSS growth momentum; CMG tgt to $1,450 from $1,100 and WING to $158 from $143 and publishing domestic checks for June which highlight sequentially improving trends across the industry. More specifically, brands that have made digital investments are seeing the benefits through greater traction with guests, leveraging the off-premise and delivery channels (positive for WING, CMG, EAT); WING was downgraded to neutral at BTIG following a historic rise in same-store sales, as the concept’s investments in digital, delivery and advertising resonated with consumers during the pandemic

·     Software movers; SAP said business activity “gradually improved” in Q2, based on preliminary results/said during Q2, revenue grew 2% YoY to €6.74 billion, led by a 21% improvement in cloud-related sales; Citigroup with a few ratings changes as they downgraded FSLY to sell from neutral on lower margins and semi-recurring revenue leaving revenue to do heavy lifting to maintain multiples, upgraded CRWD to neutral from sell and raised tgt to $116 as expects continued end-point security share gains to keep growth above street, and upgraded NICE to buy from neutral as expects cloud can continue to benefit while on-prem estimates are de-risked

·     Hardware & Component news; CSCO upgraded to overweight from equal-weight and raise tgt to $54 from $46 at Morgan Stanley saying recent survey suggests overall networking spend in CY20 to fall 2.5%, but expects earnings recovery in long-term; FFIV was upgraded to overweight at Morgan Stanley, saying there was uncaptured value in the company’s software business and an opportunity to attract renewed attention to FFIV from a more software focused investor base



·     BGFV +55%; after saying it expects Q2 net sales to be about $228M vs. $241M YoY saying sales and margin momentum has continued and for the 2H of Q2, same store sales increased by 15.5%with very strong merchandise margins

·     COST +2%; said comparable sales jumped 11.5% in June, well ahead of consensus, which called for just over 4% growth. Costco’s total adjusted comparable sales, excluding gasoline and foreign exchange, climbed 14.4%. Costco’s e-commerce business jumped 86.7%.

·     OPTN +6%; signed an agreement with pharmaceutical firm Kaleo to co-promote its XHANCE exhalation nasal spray for the treatment of nasal polyps in adult patients.

·     PNR +4%; double upgraded to buy from underperform at Bank America saying co should post a solid earnings beat in Q2 thanks to the upside from its pools business

·     SAP +5%; said business activity “gradually improved” in Q2, based on preliminary results for the period ended June 30/said during Q2, revenue grew 2% YoY to €6.74 billion, led by a 21% improvement in cloud-related sales

·     VERI +25%; raises Q2 revenue view to $13.1M-$13.3M from $11.8M-$12.2M (est. $11.95M) while ups its Q2 net view to ($6.0M)-($5.8M) from prior loss ($6.5M)-($6.1M)



·     BBBY -19%; after plans to close 200 stores over the next two years and as Q1 sales plunged 49% due to the Covid-19 pandemic

·     MHK -13%; recall Deutsche Bank cited recent fraud allegations in a note yesterday against the company that has prompted numerous investors to raise concerns about its guidance

·     SNAP -2%; slipped on headlines TikTok distancing from China (shares had been higher in recent days on reports US may look to ban TikTok in US)

·     SPG -5%; broad weakness in retailers (KSS, PVH, TPR) as well as mall based REITs

·     WBA -8%; after posting quarterly loss vs. profit a year earlier over non-cash impairment charges of $2B as COVID-19 disrupted business, while adjusted EPS of 83c fell short of the $1.19 estimate


·     HealthEquity (HQY) 4.6M share Secondary priced at $56.00

·     Otonomy Inc. (OTIC) 14.5M shares secondary priced at $3.25

·     Ping Identity (PING) 8.98M share Secondary priced at $32.00

·     Revolution Medicines (RVMD) 6M share Secondary priced at $26.00

·     Turning Point Brands (TPB) 2M share Spot Secondary priced at $23.50


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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