Mid-Morning Look: November 04, 2020

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Mid-Morning Look

Wednesday, November 04, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. stocks extend Monday’s strong gains with technology among the leaders as the Nasdaq rises nearly 4% despite the Presidential election outcome uncertain at the time being with about six key states voting results still to close to be called. Battleground states that remain undecided at this point include PA, GA, NC, WI, MI, and NV, with the electoral vote standing at Biden 238 vs. Trump 213 (last update as 270 needed) – but latest updates show Biden leading in a few, where Trump needs to take the majority. The “Blue Wave” trade gets unwound as Republicans hang on to the Senate: technology stocks rise as concerns of greater regulatory scrutiny, as well as higher corporate and capital gains taxes take a back seat. The unwind contributes to the rally in bonds and a decline in yields with the 10-yr yield down more than 10bps (biggest roll since June) while also ends a push for an aggressive agenda of fiscal spending. The decline in bond yields as well as prospects of a Biden presidency weighing on financial stocks early, while managed care stocks (UNH, CI) rise. Other busy sectors include gaming related stocks as several states passing some form of sports betting, while cannabis and clean energy names tumble after their run into the election. Still today, results from the 2-day FOMC meeting, but no major changes expected. The Dow was up 500 points, with its 50-day moving average at 27,890.34, driving above its 50-day moving average for the first time since late October.


Economic Data

·     ADP National Employment report shows U.S. employment increased by 365,000 private sector jobs in October, missing the 650K est.; September payroll change revised to +753,000 from +749,000

·     ISM non-manufacturing for Oct shows PMI 56.6 vs. est. 57.5 and compared to 57.8 in September; business activity index 61.2 in October from 63.0 in September; prices paid index 63.9 in October vs 59.0 in September; new orders index 58.8 in October vs 61.5 in September and the employment index 50.1 in October vs. 51.8 in September

·     U.S. Sept trade deficit was (-$63.9B) vs. est. (-$63.8B) and August deficit (-$67.0B) from prior (-$67.10B); U.S. Sept goods deficit $80.69B, services surplus $16.82B

·     U.S. IHS Markit October final composite PMI at 56.3 (vs flash 55.5) and Markit October final services PMI at 56.9 (vs flash 56.0)







WTI Crude















10-Year Note





Sector Movers Today

·     Gaming sector active given several states passing some form of sports betting: DKNG, PENN among gainers early; 1) sports betting in Louisiana passed in the majority of parishes, 2) Maryland’s ballot measure passed which was essentially an advisory question asking if voters wanted sports betting (Truist said believe legal sports betting in Maryland is likely driving PENNs planned acquisition by year end of the operations at GLPI’s Hollywood Perryville TRS property); 3) South Dakota voters passed their sports betting legislation at retail locations though mobile betting (said benefits PENN, CZR, TRWH, and most notably, MCRI which Truist thinks could add $2-9 per share of value); 4) Virginia cities Bristol, Danville, Norfolk, and Portsmouth all voted to allow casino gaming in their towns; 5) Nebraska and Colorado voters approved measures for land-based casinos that opens up revenue opportunities and should support sports betting

·     Auto sector; UBER and LYFT rise as Californians have overwhelmingly voted in favor of Proposition 22, a ballot measure that would exempt drivers for app-based transportation and delivery companies from being classified as employees; Ford (F) issues safety recall for select 2013-17 explorer vehicles recall affects about 350,000 vehicles in U.S, affects about 25,200 vehicles in Canada; Goldman Sachs reinstates BWA at Neutral as increased exposure to Battery Electric Vehicles (BEV) following the Delphi acquisition is offset by risks from high diesel exposure and from increasing OEM vertical integration in BEVs while raises VC to neutral and up tgt to $90

·     Semiconductors; Goldman Sachs upgraded AMD to Buy and add shares to the CL as they view the recent pullback as an attractive entry point to gain exposure to a multi-year share gain and margin expansion story (up tgt to $96 from $84) – said look for Sell-rated INTC to continue to lose market share as they cut tgt to $38 from $46 and upgrade TER to Buy as we see an attractive entry point for a company with a strong product cycle and end-market tailwinds

·     Lodging & Leisure names; theme parks active as FUN posted Q3 EPS ($2.41) vs consensus ($1.87) and revenue $87.5M vs consensus $91.2M; EBITDA ($51.0M) vs consensus ($17.3M); says their season pass base increased by approximately 90,000 units, or 5%, since mid-June; HLT Q3 adjusted EPS of 6 cents vs. est. loss (2c), Q3 comparable RevPAR fell 59.9%, a slower pace than the prior quarter’s 81% drop; said it has seen a gradual improvement in demand; private prisons under pressure (GEO, CXW) as Joe Biden has said that he has plans to eliminate them



·     AAPL +3%; along with other large cap tech AMZN, GOOGL, NFLX rise as a more evenly balanced Senate (regardless of Biden or Trump in White House) makes higher capital gain tax or a legislation that regulates capital gain tax more aggressively less likely

·     BIIB +28%; as its experimental Alzheimer’s disease drug was found effective enough in a large trial to support approval, a U.S. FDA panel – the drug will be reviewed by FDA’s independent experts in a meeting on Friday that will make recommendations to the agency.

·     SMCI +14%; reported adjusted profit of 55c vs. est. 16c as sales at $762.3M topped the $748M estimate mainly due to better performance from the U.S. segment, which saw an increase of ~6%

·     SUPN +17%; as Q3 easily beats views/raises FY20 GAAP operating earnings view to $145M-$160M from $90M-$110M and raises FY20 net product sales view to $500M-$525M from $460M-$500M

·     UBER +13%, LYFT +16%; as Californians have overwhelmingly voted in favor of Proposition 22, a ballot measure that would exempt drivers for app-based transportation and delivery companies from being classified as employees.

·     UNH +8%; managed care looking higher on current Biden lead (CI, HUM, CVS)



·     CGC -5%; as profit taking ensues in the cannabis sector after rally into election with hopes for Biden victory

·     CLW -13%; after Q3 profit and revenue both fell short of consensus views

·     GEO -10%; private prisons under pressure (CXW as well) as Joe Biden has said that he has plans to eliminate private prisons

·     SEDG -2%; extends losses a day after lower guidance sunk shares over 20%, falling along with the broader solar sector (FSLR, JKS, DQ) as no “Blue Wave” from election lessens aggressive policies

·     SMG ; after Q4 EPS missed by 3c and in-line sales of $890M noting that selling, general and administrative expenses surged 47% in the quarter

·     WEN -3%; misses analysts’ estimates for Q3 revenue, hurt by weak sales at its restaurants outside the United States which overshadowed a profit beat and a 40% increase in its cash dividend

·     WFC -3%; banking stocks among the top declining sectors as Biden looks to be leading in undecided battleground states, weighing on the industry and fears of higher corporate taxes and increased capital gains taxes


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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