Mid-Morning Look: June 11, 2020

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Mid-Morning Look

Thursday, June 11, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities under pressure, seeing the worst sell-off in over a month in broad based pullback as a recent bounce in COVID-19 cases in some U.S. states that have reopened are renewing fears of a potential “second-wave” of cases that could further curtail the economic recovery. Cautious comments from Fed Chairman Powell late yesterday on the job market (which was seen as a reason for the late day pull Wednesday), also causing concern, especially with no real improvement in the weekly jobless claims and continuing claims reports earlier today (see below). Technology falling after the Nasdaq closed above the 10,000 level yesterday for the first time ever, while among the hardest hit sectors were travel (airlines) and leisure (theme parks, cruise), falling for a third consecutive session as a second wave of coronavirus cases has emerged in the U.S. with the number of confirmed cases pushing past two million, according to data from John Hopkins University. With today’s sell-off, the CBOE Volatility index (VIX) rises to highest levels in 2-weeks while stocks drop broadly. Energy names extend losses as oil prices tumble on slowing demand fears now if second wave hits. Financials/banks dropped sharply on Wednesday, erasing a good part of the recent rally, and extend those losses this morning as the reality of Fed keeping rates low through at least 2022 combines with likely high default rates, anemic loan growth, and low net interest income sunk shares of WFC, USB, C, and JPM. Regarding the COVID-19 outlook, former FDA commissioner Scott Gottlieb explained today the problem with Texas’ response (“It’s not a second wave, they never really got rid of the first wave,” while it is notable regarding the outbreaks in Arizona, Texas, South Carolina and North Carolina. Safe-haven assets such as gold and Treasuries (rising for a 4th day) rally while the dollar with modest gains after 2-weeks of selling.


Economic Data

·     Weekly jobless claims reported at 1.542M vs. est. 1.55M (last week revised to 1.897M from 1.877M), while continuing claims were 20.929M vs. est. 20.0M (last week revised to 21.268M from 21.487M); the 4-week moving average fell to 2.002M from 2.228M prior week

·     Producer price index (PPI) for May MoM rises 0.4% vs. est. up 0.1% while the core PPI (ex: food and energy) falls -0.1%, in-line with estimates. The PPI for May YoY fell -0.8% vs. est. decline -1.2% and core PPI YoY rose 0.3% vs. est. 0.4%







WTI Crude















10-Year Note





Sector Movers Today

·     Consumer Staples; as second wave of coronavirus fears play out in markets, stay at home beneficiary stocks such as grocers, food names seeing some gains (KR, CHD, CLX, CL, TGT); food stocks CPB, GIS, K, and SJM all downgraded to underperform at Bernstein as market recovers & sales growth slows/believe that estimates are simply too high for these names in FY21 as they lap the meaningful COVID benefits; in tobacco, PM said it is on-track to deliver Q2 reported diluted EPS toward the upper end of its previously communicated range of $1.00 to $1.10; KDP upgraded to buy from hold at Jefferies citing compelling valuation and calls it a structural winner from COVID-19 mega-trends

·     Restaurants; JACK reported quarter-to-date comparable sales trends that have topped Wall Street expectations, and have been better than peers, saying comps for the first eight weeks of its fiscal third-quarter rose about 5%; BLMN said as of June 7, 2020, over 760 company-operated U.S. restaurants (approximately 74% of U.S. restaurants) have reopened with limited in-restaurant dining capacity in accordance with local mandates; SBUX downgraded from Overweight to Sector Weight at KeyBanc as current sales trends remain challenged and believe NT upside is limited due to its elevated valuation and the prospect of a more gradual SSS/ EPS recovery than previously expected

·     Pharma movers; EBS signs agreement to be U.S. manufacturing partner for AZN’s Covid-19 vaccine candidate; in cannabis, HEXO Q3 net revenue jumps 70% to C$22.1M and gross revenue of adult-use cannabis rose to C$29.8M from C$14.6M a year earlier saying primary driver was increase in sales from co’s Original Stash brand during the quarter; SRNE rises following its announcement that an application for Emergency Use Authorization (EUA) is under FDA review for company’s COVI-TRACK in vitro diagnostic test kit

·     Chemicals; busy sector related to analyst research as WLK was upgraded to overweight and tgt raised to $70 from $57 at Wells Fargo saying based on recent checks, they believe caustic soda prices are moving up while PVC prices are falling less than expected, which are positives for both OLN and WLK; AXTA was upgraded to buy at Citigroup after hosted virtual Paints Day with SHW, AXTA, PPG and TZMI (TiO2 consultants) and firm is raising multiples on paints as the business models have proven resiliency; AkzoNobel April/May revenues were down around 25% slightly worse than analysts expecting around a 17% decline overall in Q2; decorative paint demand is back in China and EU but industrial coatings continue to drag



·     GRUB +3%; reached an agreement to be acquired by Just Eat Takeaway.com in an all stock deal valued at $75.15 a share, or a total of $7.3 billion https://on.mktw.net/2AUbAZR

·     KR +1%; as second wave of coronavirus fears play out in markets, stay at home beneficiary stocks such as grocers, food names seeing some gains (CHD, CLX, CL, TGT)

·     MRNA +8%; after confirming plans to begin late-stage trial of its experimental coronavirus vaccine in July which will test vaccine in 30,000 volunteers with main goal of preventing symptomatic COVID-19

·     REGN +2%; shares hit record highs as begins human trials of its potential COVID-19 treatment and said expects to go into second phase of testing within a week or two

·     RETA +25%; after securing $350M investment for drug development



·     AAL -10%; airlines among top decliners in the S&P and transport index amid renewed fears of second wave of COVID-19 after cases starting to increase in some states

·     MGTA -6%; said it made a strategic decision to discontinue enrollment in Phase 2 study of MGTA-456 in inherited metabolic disorders and prioritize resources toward stem cell mobilization

·     NCLH -9%; as cruise lines also among top decliners in the S&P on second wave fears

·     OKE -10%; as files to sell 26M shares in offering while also downgraded at Bank America to neutral as view OKE’s risk/reward profile as balanced

·     SPR -7%; after the Boeing 737 Max supplier said that it expects a reduction in 737 Max production, the magnitude of which remains to be seen (other suppliers include HXL, TGI)


·     Bill.com (BILL) 7.2M share Secondary priced at $74.25

·     Cannae Holdings (CNNE) 11M share Spot Secondary priced at $37.50

·     CareDx (CDNA) 3.91M share Secondary priced at $32.00

·     Catalent (CTLT) 7.75M share Spot Secondary priced at $71.25

·     ChemoCentryx (CCXI) 5.2M share Spot Secondary priced at $58.00

·     Construction Partners (ROAD) 5.75M share Spot Secondary priced at $16.50

·     NIO Inc. (NIO) 72M share Secondary priced at $5.95

·     Vicor (VICR) 1.54M share spot secondary priced at $65.00


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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