Mid-Morning Look: March 24, 2020

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Mid-Morning Look

Tuesday, March 24, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities are surging on hopes for a $2 trillion stimulus package to help boost the economy being completed later today, as parties from both sides remain optimistic despite failing to agree yesterday. The jump on the open followed an unprecedented move yesterday when the Fed said it would buy an unlimited number of Treasuries and mortgage-backed securities, starting with $125 billion every business day this week. The U.S. Treasury Department also issued the following statement: “Consistent with the direction from G7 Leaders, we are taking action and enhancing coordination on our dynamic domestic and international policy efforts to respond to the global health, economic, and financial impacts associated with the spread of the coronavirus disease 2019 – COVID-19. Lastly, interesting data on the coronavirus, the cause for the market downturn, travel stoppage, mandated quarantines and the wealth destruction that has sapped around $25 trillion from equity markets since mid-February – as reports show the coronavirus spread slowed in Italy, one of the worst-hit countries. Both new cases and deaths dropped for two days in Italy. “It means it took Italy 43 days from first case to peak case and 12 days after implementing the strictest travel restrictions. Note 43 days was exactly the same amount of time as it took South Korea to reach its apex. And if such is the case, the U.S. would be 14 days behind Italy – following newswires. President Trump also tweeted this morning “Our people want to return to work. They will practice Social Distancing and all else, and seniors will be watched over protectively & lovingly. We can do two things together. THE CURE CANNOT BE WORSE (by far) THAN THE PROBLEM! Congress MUST ACT NOW. We will come back strong!” The comment also helping market sentiment on hopes that businesses may soon see the light at the end of the tunnel to re-open and function normally again. The dollar slips a second day from recent 3-year highs despite better economic data, commodity prices rise led by gold, but oil prices only up modestly, while Treasury yields tick up higher.


Economic Data

·     U.S. March HIS Markit factory PMI at 49.2, the lowest since 2009 while the Markit services index falls to record low 39.1. Followed weak PMI data overseas overnight as the flash U.K. composite purchasing managers index fell in March to a survey low of 37.1 from 53 in February, and the services index plunged to a record low 35.7 from 53.2

·     New Home Sales data for Feb reported at down -4.4% to 765K which was still above estimates for down -1.8% to 750K after prior month upwardly revised to 800K from 764K; the median new home price rose 7.8% YoY to $345,900 and average selling price at $403,800

·     Richmond Fed Manufacturing Survey posted a surprise rise of 2, well above the expected reading for a decline of -13 as shipments rose to 13 after 1 the prior month and new order volume increased to 0 after -10 the prior month; order backlogs fell to -8 after -6 the prior month







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10-Year Note





Sector Movers Today

·     Bank movers; Goldman Sachs readjusted its capital market ratings changes following the prospect of a deep recession and uncertainty over downside risks compounded by liquidity challenges as they upgraded stocks with more resilient earnings such as BK (upgraded to buy) and ICE (added to conviction buy list) or those with significantly discounted valuations such as APO, KKR, LPLA (added to CL), while also upgraded MKTX to neutral from sell saying it is uniquely positioned to benefit from a sustained volatility in credit markets – on the flip side they recommend avoiding shares of JHG as well as TROW and RJF (both downgraded to sell) saying revenue, margin and earnings declines amid deteriorating markets and risks of rising outflows are not captured and also cuts NTRS rating– overall, trims 2020 EPS estimates for alternative managers by 27%, traditional managers by 24%, retail brokers by 15%, and trust banks by 12%

·     More oil companies cutting cap-ex, making changes in response to lower global demand for oil; CVX announces 20% cut to capex, lowering by $4B to $16B while expects 2020 production to be roughly flat relative to 2019 and suspends $5B annual share repurchase program suspended after repurchasing $1.75B of shares during Q1; SU cut its 2020 capex and production outlook and suspends share buybacks for the year, as sees spending lower by C$1.5B (a decrease of 26% compared to the midpoint of the previous forecast, while lower its 2020 production outlook by ~7% to 740K-780K boe/day; LPI reduced its 2020 capital budget 36% to $290M from $450M and said Feb. 26 guidance can no longer be relied upon; expects ~$90m in free cash flow, excluding non-budgeted acquisitions, for 2020; PDS guidance for the year missed the lowest analyst estimate as sees FY capital expenditure C$48M, down from prior C$95M view

·     Auto sector; GM said it draws down $16B from credit lines to stock up on cash while suspends year outlook; Ford (F) works with MMM to increase production of respirators and ventilators; in research, TSLA was upgraded to neutral from sell at UBS, while the firm downgraded Ford to sell with $4.30 tgt while Argus downgraded TSLA to hold as expect the coronavirus pandemic to have a negative impact on vehicle deliveries; KeyBanc upgraded auto supplier MGA to overweight with $40 tgt based on our comfort even in a 30% downside earnings scenario vs. our already heavily-cut estimates, while firm overall substantially lowering numbers across coverage to reflect our best assessment of the pandemic’s global outcome/forecasting 2020 LV production to decline 13% y/y (from -4%)



·     CAR +36%; amid broad bounce back in transportation stocks on hopes for business to resume as normal shortly following President trump tweet (airlines also surging)

·     CTMX 23%; after its collaboration with Astellas to develop bispecifics with $80 million upfront and large potential milestones won over one Wedbush which lifted its rating to outperform from neutral

·     INFO +21%; following better than expected quarterly earnings results

·     NCLH +47%; along with gains in RCL and CCL as cruise lines the top three gainers in the S&P on bounce back of beaten sectors

·     NVAX +26%; after saying its NanoFlu treatment for seasonal flu achieved all primary endpoints in a phase 3 trial for adults 65 an older/NanoFlu was well tolerated and had a safety profile comparable to Fluzone Quadrivalent

·     TDOC announced it experienced a 50% increase in week-over-week visit volumes the week of March 9th due to the coronavirus with total medical visits for the week reaching ~100k



·     KR -3%; as grocers pullback following outperformance with money going into beaten up sectors

·     MIST -73%; as the primary endpoint miss in intranasal etripamil Phase 3 NODE-301 trial in paroxysmal supraventricular tachycardia comes as a disappointment, prompting a downgrade at Oppenheimer

·     ZM -14%; profit taking in one of the biggest upward movers over the last few weeks on rising expectations of increased usage of its teleconferencing


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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