Mid-Morning Look: July 21, 2020

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Mid-Morning Look

Tuesday, July 21, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities remain on cruise control higher, led today by underperforming energy stocks with oil prices surging on rising global demand hopes, as DVN, OXY, FANG, and HAL among the leaders in the S&P 500. After massive outperformance yesterday (up over 2.5%), the Nasdaq Comp lags other averages though not before briefly trading to new intraday record highs of 10,839 (closed at all-time closing high yesterday) as software names slip. U.S. stocks opened higher, with investor confidence spurred by positive earnings reports and the increasing likelihood of additional government stimulus despite the economy showing strength. Stocks in Europe climb on news of the new recovery plan as the EU reached an economic recovery deal after four days of negotiations, agreeing to a EU750 billion ($860 billion) coronavirus rescue fund which will see EU390 billion offered in grants to individual countries, with the rest coming in the form of loans. Stimulus and vaccine optimism are cited as the main drivers in the push higher early along with new found optimism as earnings results, while down YoY (as expected), are beating lowered analyst expectations. Precious metal stocks spike further as silver prices hit 4-year highs and gold fresh 9-year highs (and nearing all-time bests – which is up around the $1,900 an ounce level). The Dow Jones Industrial Average rising amid strength in XOM, CVX in energy with oil rising, KO and IBM after earnings beats, while BA leads the gains. The euro hits 4 ½ month highs vs. the dollar.







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10-Year Note





Sector Movers Today

·     Energy stocks paced stock market gains, as oil prices surge amid EU stimulus plan and signs that coronavirus cases in some of the “hot-spots” are slowing, easing global demand fears; gains were across the E&P, equipment, services and integrated names with CVX, XOM among the top gainers in the Dow and OXY, MRO, FANG, DVN among top gainers in the S&P 500; Piper upgraded shares of DVN, FANG and PE to Overweight

·     Metals & Materials; CCK reported year EPS guidance that topped views (helps other can makers BLL early); precious metal miners powering higher (NEM, AEM, GOLD, HL, RLGD) as silver prices touched best levels since 2016 and gold at 9-year highs – closing in on record highs. This morning, Stifel said high inflation and broad weakness in the U.S. economy likely will to drive real rates further into negative territory, as they boosted gold and silver tgts; steel stocks benefit early after STLD reported Q2 results above consensus

·     Consumer Staples; in beverage space, Dow component KO reported Q2 EPS beat of 42c (est. 40c) while unit case volume fell -16% vs. +3% YoY and organic revenue fell -26% vs. +6% YoY while operating margin decreased to 27.7% from 29.9%, citing pressure on revenue and the negative impact of currency translation; in tobacco, PM reports a beat for 2Q on the top and bottom line (EPS $1.29 and revs $6.65B) while guides FY adj EPS $4.92-5.07 vs. est. $4.92, says not facing significant business continuity issues with key suppliers; NDLS says ordering and pickup options have sales approaching pre-Covid levels; says Q2 digital sales are up 138% vs. Q1

·     Housing & Building Products; Homebuilders DHI, PHM downgraded to neutral from positive at Susquehanna on valuation saying the bar is much higher for the industry now as shares are pricing in a strong V-shaped recovery, while order comps get a lot tougher from here; Building products JELD, OC and TREX downgraded to hold from buy at Benchmark; at BTIG, homebuilders MTH and TMHC upgraded to buy from neutral and LGIH to neutral from sell, while downgraded TOL to sell from neutral and raise tgt prices on DHI from $63 to $78, GRBK from $14 to $16 and LEN from $75 to $88 saying they are more positive on the homebuilder space

·     Hardware & Component news; IBM reported Q2 beat and said software trends improved in June but did not provide full year guidance and said recovery could take longer/collectively, YOY bookings were down 20%, while Q-Q RHT’s growth decelerated; CDNS delivered a beat and raise for Q2 despite ongoing disruption due to COVID-19, while noting it was continuing to see customer demand, underpinned by strong design activity in verticals such as 5G, AI, Hyperscale and Auto; HEAR active after positive data points as LOGI reported a strong June Q with strength across the business, with Gaming sales up 35% and improved guidance; TEL was upgraded to buy at Jefferies as believe the auto recovery and inflecting industrial indicators suggest more auto and industrial exposed connector cos could close the performance gap to peers



·     GES +14%; after CEO bought 100K shares at $10.17 according to filing

·     HIBB +21%; after preannounces 70%+ F2Q same-store sales growth, 1H comp store sales are expected to increase approximately and digital comp sales are forecasted to increase approximately 200% in Q2

·     IBM +2%; reported Q2 beat and said software trends improved in June but did not provide full year guidance and said recovery could take longer/collectively, YOY bookings were down 20%, while Q-Q RHT’s growth decelerated

·     KO +3%; reported Q2 EPS beat of 42c (est. 40c) while unit case volume fell -16% vs. +3% YoY and organic revenue fell -26% vs. +6% YoY while operating margin decreased to 27.7% from 29.9%

·     LMT +3%; posted a Q2 EPS beat of $5.79 vs. est. $5.72 as sales of $16.2B topped the est. $15.2B as qtr-end backlog $150.3B

·     LXRX +23%; after saying all four Phase 3 sotagliflozin studies – SOTA-MONO, SOTA-SU, SOTA-GLIM and SOTA-INS – met primary objectives of lowering A1C in patients with type 2 diabetes

·     NUVA +2%; positively preannounced as said it sees Q2 revenue $202M-$205M which is down -30% YoY but came in well above ests $151.58M

·     OMI +79%; as raises year view to $1.00-$1.20 from 50c-60c prior (est. 50c) saying it expects foreign currency will have a minimal impact on adjusted net income per share for the full year

·     OXY +10%; as energy stocks leading the S&P gains as oil prices jump

·     SYNA +10%; acquiring DisplayLink, an enterprise docking supplier, for ~$305M in cash saying the transaction is expected to be immediately accretive to non-GAAP GMs and EPS (upgraded to positive from neutral and raise tgt to $100 at Susquehanna on news)



·     ACAD -18%; tgt cut by several analysts as the combined MDD pivotal Phase 3 CLARITY-2 US and CLARITY-3 EU trials missed the primary endpoint of HAMD-17 at 5 weeks – ACAD now will no longer pursue adjunctive treatment of MDD with pimavanserin

·     ADSK -2%; software names take a breather after outperformance on Monday with NOW, ADBE, CRM among top S&P decliners early

·     EBAY -2%; sells classified ads unit in $9.2B cash and stock deal to Norway’s Adevinta (ADEVF)

·     LLNW -12%; despite better results – stocks had risen to near 52-week highs ahead of results

·     TSCO -1%; downgraded at Oppenheimer to perform as increasingly believe that shares are now largely priced for perfection


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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