Mid-Morning Look: March 10, 2020

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Mid-Morning Look

Tuesday, March 10, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. markets with a nice bounce on the open as major averages are up across the board, with futures trading actually halted earlier this morning due to limit up pause (opposite of yesterday’s limit down trading halt for overnight futures and a 15-minute drop after the open Monday due to a 7% decline). Stocks got a boost on market optimism after President Trump said in a White House news conference that he would seek payroll tax relief and other measures to help businesses amid the coronavirus outbreak. The comment by Trump, coupled with hopes for the Fed and other governments to deliver additional stimulus (in form of rate cuts, asset purchases) to combat effects of the spreading coronavirus, has lifted markets early. Related to virus, cases are still popping up, while Italy became the first nation to attempt a countrywide lockdown through April 3rd to stop the spreading of the virus. Treasury markets pare some recent gains as stocks rise, oil prices bounce after the 24% plunge yesterday given the price war between Saudi Arabia and Russia and the dollar recovers broadly. Markets in Europe are higher while Asia posted good returns as Japan’s Nikkei 225 Index closed up 0.9%, Hong Kong’s Hang Seng Index gained 1.4%, and the Shanghai Composite Index rose 1.8%. Several airlines withdrew guidance today given the impact of the virus on operations, which continues to take its toll on the leisure, travel and lodging sector.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar rises vs. nearly all rival currencies after sliding yesterday, up over 200 bps vs. the safe have Japanese yen, which is lower across the board given the risk on trade today in stocks. The euro slips while the Canadian dollar is flat given the bounce in oil. Commodity prices are mixed as oil prices bounce partially rebound after yesterday’s 24% decline, as prices make back about a quarter of those losses with hopes Russia comes back to the table with OPEC on production and pricing for oil, while gold prices fall as the dollar and stocks also partially recover after yesterday’s sell-off. Treasury yields also up after yesterday’s sharp decline that saw the benchmark 10-year hit a record low of 0.31%, though is up about 9 bps to 0.63%.








WTI Crude















10-Year Note





Sector Movers Today

·     Airlines officially withdrawing guidance due to coronavirus: DAL withdrew its March quarter & year financial guidance, said to remove 15 points of system capacity/international capacity reduced by 20-25%, domestic by 10-15% and said is instituting companywide hiring freeze and offering voluntary leave options; AAL announced additional schedule changes in response to customer demand related to covid-19 as it will reduce international capacity for summer peak by 10% vs previous selling schedule, including a 55% reduction in trans-pacific capacity and plans to reduce domestic capacity in April by 7.5% versus current schedule; UAL also withdrew its guidance for Q1 as sees incurring losses in quarter and sees reductions in May of at least 20%; SAVE said it is cutting April capacity by 5%, scraps 202 guidance and CEO takes 10% pay cut

·     Bank movers; shares of the big U.S. banks partially recovered after the bludgeoning on Monday, reflecting a broader rebound on hopes of a coordinated policy easing to offset the impact from the coronavirus epidemic; shares of JPM, WFC, BAC, C and MS all posted strong returns after President Donald Trump promised “major” steps to combat the virus outbreak also saying he would discuss a payroll tax cut with congressional Republicans. A rebound in oil prices also helped ease pressure on banks tied to energy loans (CMA, TCBI, ZION, CFG) on fears of defaults

·     Healthcare services and providers; MCK reports that its offer to stockholders to exchange its common shares for shares of PF2 SpinCo, which holds MCK’s interest in CHNG is overprescribed as about 98.2M of MCK shares were tendered, of which ~15.4M were accepted in exchange for ~176M SpinCo shares; CHNG was upgraded to outperform and $19 tgt at Wells Fargo noting that McKesson is almost completed its exchange offering and FCF is improving; GKOS will replace AKS in the S&P SmallCap 600 index on Friday March 13 (CLF is buying AKS)

·     Energy stocks; group partially rebounds after plunging yesterday on Saudi/Russia price war; in the E&P sector; MRO said it will cut 2020 spending by $500M to $1.9B, which is ~30% lower than its 2019 capital budget, hit by slumping oil prices/says will immediately suspend all operated drilling and completion activity in Oklahoma, where it is currently running three rigs and one frac crew (the news follows recent cutback from FANG, PE as well on reduced oil; CRC shares fell after reducing its capital investment due to the changes in the commodity market to a level that maintains the mechanical integrity of its facilities; FTI said it won a “significant” contract for engineering, procurement, construction and installation work from BP offshore Angola.



·     APA +12%; is among the top gainers in the E&P energy complex, paring back some of the prior day losses after oil prices plunged on a price was between Saudi Arabia and Russia

·     ATVI +5%; officially announced the anticipated Call of Duty battle royale Warzone, a game free-to-play and available to all, with or without owning CoD: Modern Warfare; ATVI was also upgraded at Oppenheimer given the pullback in shares

·     CHNG +10%; upgraded to outperform and $19 tgt at Wells Fargo noting that McKesson is almost completed its exchange offering and FCF is improving

·     CY +44%; following news it received clearance from the Committee on Foreign Investment in the United States to be acquired by Germany’s Infineon Technologies

·     DKS +6%; posted a 5.3% comp in Q4 to easily top the 3.2% estimate saying transaction and ticket growth was strong during the quarter/saw gross margin improve 70 bps Y/Y to 28.6% of sales to top the consensus mark of 28.2%

·     HOME +11%; said it sees preliminary Q4 and FY2020 net sales, comp sales and adjusted EPS above the high end of previous outlook (sees Q4 sales of $397.7M vs. previous guidance range of high end of $385M to $393M)

·     NVAX +13%; rises after the Coalition for Epidemic Preparedness (CEPI) has awarded $4M to Novavax to support the development of a COVID-19 vaccine

·     UTHR +4%; was upgraded to buy at Jefferies saying its U.S. physician survey showed growth potential in the company’s Remodulin franchise despite generics as improved line-extension products launch in 2020.



·     GILD -4%; underperforms broader market and biggest decliner in the S&P

·     IMXI -12%; posted revenue slightly below the Street as EBITDA beat, and Cowen downgraded to market perform from outperform as see a more pronounced revenue deceleration in 20/21E

·     SFIX -26spx%; as sees Q3 revenue $465M-$475M below consensus $506.21M saying the coronavirus, macro themes led to lowered revenue outlook/guides Q3 Ebitda loss (4M-$10M) vs. est. +$5.5M

·     TCON -10%; after the company and its development partner, Santen Pharma, discontinued development of its experimental treatment for wet age-related macular degeneration

·     XYL -2%; downgraded to underperform at Credit Suisse not as much predicated on absolute downside but underperformance relative to the sector as global markets stabilize


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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