Mid-Morning Look: June 23, 2020

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Mid-Morning Look

Tuesday, June 23, 2020

Index

Up/Down

%

Last

 

DJ Industrials

201.28

0.77%

26,226

S&P 500

26.96

0.86%

3,144

Nasdaq

103.53

1.04%

10,160

Russell 2000

14.93

1.04%

1,448

 

 

U.S. equities are firmly higher across the board, though technology shares again outperform in what has been a common occurrence on a daily basis. Shares of ADBE, NOW, MSFT, FB, PYPL, EA, AMZN, NFLX, NVDA, CDNS, SNPS and AAPL all touching 52-week highs (in many cases record highs) in the S&P as tech again pacing the gains (Nasdaq on track for 8th straight day of gains and up for the 19th time in last 22 days as comp at new all-time highs). At the same point, other sectors still enjoying gains as well as defensive plays (gold surges to 8-year highs and Treasury prices remain well bid), while the dollar drops broadly vs. rival currencies. There was a bit of a roller-coaster ride in U.S. futures overnight after White House Advisor Peter Navarro said that the China trade deal was over. However he quickly walked those remarks back to the WSJ and said they were taken out of context. Trump quickly tweeted: “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!” Between the correction on trade talk comments and strong European PMI data points overnight (lifting those markets), stocks found themselves sharply higher again this morning. Also helping markets, another round of better economic data as New Home Sales for May jumped over 16%, well above ests for a rise of about 3%, while manufacturing data came in slightly better.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar is sliding vs. other currencies, as the dollar index down over -0.5% to lows 96.50 in 2nd day of weakness, with the euro recovering back to the 1.135 level from below 1.12 last week as investors buying stocks and selling perceived safe-have currencies. Commodity prices rise as gold prices breaking to new 8-year highs, trading above $1,780 an ounce while oil prices also extend recent bounce after closing above the $40 per barrel level yesterday for the first time since March. Treasury prices steady as the 10-year yield holds around 0.7%.

 

Economic Data

·     Markit US Manufacturing PMI, June-P reported at 49.6 vs. est. 50.0 (prior 39.8) and Markit US Services PMI for same period reported at 46.7 vs. est. 48.0 (prior 37.5); Markit June flash composite PMI at 46.8 (vs 37.0 in May)

·     New Home Sales for May jump 16.6% to 676K vs. est. up +2.7% to 640K (was 623K prior month); new home supply 5.6 months’ worth at current pace vs April 6.7 months and the May median sale price $317,900, up 1.7% from May

·     Richmond Fed index reported at 0 vs. est. -2 (after -27 prior month); Shipments rose to -1 after -26 the prior month and new order volume increased to 5 after -35 the prior month

·     European markets were buoyed by strong flash PMI data which came in well above the prior month and showed continued improvement. The flash EuroZone composite PMI rose to a 4-month high of 47.5 in June from 31.9 in May, Markit said

 

 

Macro

Up/Down

Last

 

WTI Crude

0.26

40.99

Brent

0.26

43.34

Gold

17.70

1,784.10

EUR/USD

0.0087

1.1347

JPY/USD

-0.75

106.17

10-Year Note

0.001

0.71%

 

 

Sector Movers Today

·     Restaurants; LK shares fell after it received a de-listing notice from Nasdaq last week after it failed to file its annual report; RUTH said as of June 21 for company-owned and managed restaurants, 50 dining rooms were open, 18 were operating take-out and delivery only, and 18 were closed, with plans to open an additional 10 to 15 dining rooms by the end of June; CAKE registered 11.9M shares for selling holders; GO will replace EAT in the S&P MidCap 400 and EAT will replace AXE in the S&P SmallCap 600, effective prior to the opening of trading on Thursday

·     Transports; AAL 74.1M share Secondary priced at $13.50 (down from $14.40 close); in rails, KSU said sees Q2 revs pacing to $550M (street est. $586.8M); said carloads improved 31% since bottoming in early May but remains 8% below pre-COVID levels; said Q2 QTD volume down 23% and revs down 24%; in trucking, KeyBanc said its proprietary Ship-to-Shore data projects a notable sequential uptick in June container import volumes at the Port of Los Angeles, which they expect to translate into improved truckload and intermodal volumes through late summer (upgraded JBHT to overweight and maintains OW on KNX, MRTN, WERN, HTLD)

·     Cannabis names were higher (ACB, CGC, TLRY) as CGC said sees the addressable legal cannabis market expanding to nearly $70 billion globally by 2023, up from almost $10 billion today. Bank America noted while CGC management expects to provide more specific financial targets later this year (once COVID-19 impacts dissipate), Monday’s message exuded confidence in the opportunity ahead given the size of the addressable market, Canopy’s focus on three markets and its competitive advantages in R&D, consumer insights, supply chain and capitalization

·     Semiconductors; AMBA received two positive initiations at Rosenblatt ($60 tgt) and Imperial ($58 tgt) citing the chipmaker’s long-term growth prospects as it adds data-processing services to its products; MU was downgraded from Outperform to Market perform at BMO Capital and cut tgt to $55 from $60 as now see the risk/reward as a lot more balanced; ON was upgraded to overweight at Piper and raise tgt to $24 from $17 as believe the cost reductions ON has put into place, the return to revenue growth and improved visibility into its end-markets provide a strong combination

 

Stock GAINERS

·     GO +7%; as will replace EAT in the S&P MidCap 400 and EAT will replace AXE in the S&P SmallCap 600, effective prior to the opening of trading on Thursday

·     GRPN +3%; after filing showed Chairman Lefkofsky buys 250,000 on 6/18

·     INO +10%; as receives $71M from the U.S. Department of Defense to scale up production of its devices used to administer its experimental COVID-19 vaccine into the skin

·     MHK +9%: after Cleveland Research said Q2 revenue decline might not be as bad as guided

·     MYOV +8%; as reports positive results from a late-stage study of its combination therapy for women with endometriosis-associated pain

·     PENN +8%; tgt raised to $39 from $23 at Stifel based on a stronger margin profile than we were previously assuming, while company also spoke on CNBC’s Mad Money overnight as well

·     PTON +5%; as Cowen ups tgt to $70 from $54 calling the stock his best small-to-mid cap idea despite the shares being up by greater than 75% year-to-date

·     SCVL +10%; said Q2 -to-date comp sales up 28.1%, with online sales surging 470%; Brick-and-mortar comp sales 4% higher; though said it expects pressure on Q2 profit margin due to higher shipping charges accompanying more e-commerce sales

·     TBIO +53%; as expands vaccines collaboration partnership with SNY to develop a wide range of mRNA vaccines for infectious diseases; TBIO gets upfront payment of $425M, comprising $300M in cash and a common stock investment of $125M through a private placement at $25.59

 

Stock LAGGARDS

·     AAL -6%; after 74.1M share Secondary priced at $13.50 (down from $14.40 close)

·     CBOE -2%; downgraded from Neutral to Sell at Goldman Sachs as see the recent announcement by CS to discontinue TVIX (2x levered VIX ETN) as an incremental headwind to an already challenged VIX franchise

·     KSU ; said sees Q2 revs pacing to $550M (street est. $586.8M); said carloads improved 31% since bottoming in early May but remains 8% below pre-COVID levels

·     LK -12%; after it received a de-listing notice from Nasdaq last week after it failed to file its annual report

·     MU -2%; downgraded from Outperform to Market perform at BMO Capital and cut tgt to $55 from $60 as now see the risk/reward as a lot more balanced

·     SPR -10%; disclosed it received a letter from BA which directed the company to further reduce its 2020 737 production plans due to the impact of COVID-19 and accumulated inventory of Spirit’s 737 products (now expects to deliver only 72 shipsets to Boeing, compared with 125 prior)

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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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