Mid-Morning Look: June 22, 2020

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Mid-Morning Look

Monday, June 22, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities are wavering between gains and losses early, pulling back from strong advances overnight, but now off the morning lows. Market volatility appears to be based on headlines related to COVID-19 cases with signs of increased activity in some parts of the country (FL, AZ, CA, TX, SC), while other areas have been showing improvement (NY). Investors appear spooked by increasing signs the virus is continuing to spread rapidly even as governments work to reopen their economies as airlines, casinos, restaurants and cruise lines are among the early top decliners as the recent one-month rally in most oversold sectors continues to lose steam. At the same point, stay at home beneficiaries such as food, some software related tech names are seeing gains early. Commodity prices jump as gold move back near multi-year highs as the dollar slides, while Treasury prices edge higher. Economic data for the housing sector was a little light of views, but continues to show improvement MoM. Headlines related to trade with China, earnings and other geopolitical stories all quiet on the day.


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar slides to lows after solid gains the week prior, dropping sharply vs. the euro; commodity prices are higher, as gold prices jump to highs above $1,775 an ounce (up over 1.3%) as nears the April intraday highs around $1,789). Oil prices with modest gains as WTI crude hovers around the $40 per barrel level. Treasury market’s rally slightly as stocks waver between gains and losses to start the week.


Economic Data

·     Existing-Home Sales for May fell (-9.7%) to 3.91M rate vs. the est. of 4.09M; April unrevised from 4.33M; existing-home sales fell 9.7% after falling 17.8% prior month and 4.8 months’ supply in May vs. 4.0 in April; Median home price rose 2.3% from last year to $284,600







WTI Crude















10-Year Note





Sector Movers Today

·     Chemicals; SHW boosted its Q2 net sales guidance view to decrease by a mid-single-digit percentage compared to the second quarter of 2019 vs. prior view of net sales to decrease by a low to mid-teens percentage compared to Q1 a year ago; LTHM launched a $225M convertible -5-year senior notes offering; ALB was downgraded to Underweight at KeyBanc citing view of long-term overinvestment and commoditization of the lithium industry driven by China-based players—new supply can come online quickly at low capital cost among other factors

·     Consumer Staples; TSN shares slipped after China suspended imports its U.S. poultry plant after a cluster of coronavirus cases; KHC downgraded from Neutral to Sell with $30 tgt at Goldman Sachs as expect the company to suffer outsized sales and earnings declines over the next year as recent sales gains recede, private label share pressure resumes and commodities pressure margins; HLF ests and tgt raised at Citigroup and open a 90-day catalyst watch as believe there is an increased likelihood that HLF will resume its share repo program in earnest this year; food stocks CAG and CPB upgraded to buy and MKC upgraded to hold from underperform at Jefferies and raise tgts saying revenue growth will remain elevated longer than expected for packaged food makers given potential macroeconomic pressures, an unknown new-normal restaurant experience, and the savings from eating more food at home

·     Consumer finance and lending; UBS downgraded AXP to sell from neutral, while upgraded DFS ($72 tgt) and COF (tgt to $80 from $50) to buy from neutral after changing their stock preferences in consumer finance to reflect three factors (capture the recent modest improvements in card and auto loss expectations, migrate valuations and upside/downside risk analysis to our 2022E EPS and estimated the level of embedded NCOs that are being priced into current stock valuations relative to our and consensus estimates

·     Semiconductors; Stifel downgraded the Semi Cap group to neutral and downgraded shares of (ACLS, ACMR, BRKS, ICHR, KLAC, LRCX, NVMI, PLAB to hold from buy) as believe the recent rally in the markets and the group has led to a less attractive valuation that has risen “too high” and “too fast” and says estimates for CY-2H20 and 2021 are generally below consensus; CRUS downgraded from Equal-weight to Underweight at Barclay’s as while acknowledge the new content at AAPL, they believe the stock is more than reflecting those gains and we see downside to estimates; WDC upgraded to Speculative Buy from Hold at Benchmark after mgmt call saying the company is ramping 18 TB EAMR hard drives and gaining share in the enterprise SSD market

·     Software movers; ZS tgt raised to $130 from $110 at Needham saying even as the COVID-driven pop to demand abates, there is no slowdown in the pipeline and “execution is key to driving the quarter; EA tgt raised to $151 from $143 at Benchmark citing continued elevated player engagement” that will drive financial momentum; TWLO tgt raised to $225 from $170 at Northland given multiple expansion and Twilio’s unique market position



·     CAG +2%; upgraded along with CPB and MKC at Jefferies in food sector, while overall group benefits from rising COVID-19 cases

·     EVOK +65%; after saying the FDA approved its New Drug Application for Gimoti nasal spray

·     GPS +7%; top gainer in the S&P 500 early after being upgraded to overweight from underweight at Wells Fargo as believe the company’s fundamental struggles are now well-appreciated by the market

·     NEM, AEM +4%; as gold prices jump – gold prices to highs above $1,775 an ounce (up over 1.3%) as nears the April intraday highs around $1,789)

·     NIO +4%; after China internet giant Tencent Holdings said it beneficially owned 15.1% of the company, according to an SEC filing on Friday

·     NVTA +32%; announced plans to buy ArcherDX, a private maker of cancer tests that had planned to go public, consisting of 30M shares of its stock and $325M in cash, plus up to an additional 27M shares of Invitae stock

·     SPCE +13%; announced the signing of a Space Act Agreement with NASA’s Johnson Space Center to encourage commercial participation in orbital human spaceflight to the International Space Station

·     VNET +13%; following the $150M investment announced from Blackstone

·     ZM, PTON, ROKU higher as stay at home beneficiaries seeing early strength



·     AAL -8%; raises liquidity by issuing $750M each of shares and convertibles due in 2025 and will offer $1.5B in senior secured notes and will enter into a $500M term loan facility

·     ALB -3%; downgraded to underweight at KeyBanc in lithium sector

·     BIIB -2%; downgraded to underweight at Barclay’s and cut tgt to $280 after the District Court decision invalidated a key Tecfidera patent (‘514) raising the likely prospect of generics launching ~2021 in the U.S

·     CCL -5%; cruise lines among top decliners in the S&P 500 index (NCLH, RCL) along with weakness in casinos (WYNN, LVS) and airlines amid rising COVID-19 hotspot cases (TX, FL, AZ)

·     SDC -7%; as William Blair lowers estimates saying they expect SmileDirectClub to incur higher incremental costs as it restarts its selling and marketing activities and gradually reopens the SmileShop network

·     TSN -2%; shares slipped after China suspended imports its U.S. poultry plant after a cluster of coronavirus cases


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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