Mid-Morning Look

Monday, November 09, 2020

Major U.S. averages touching record all-time highs today (S&P 500, Dow Jones Industrials and Dow Transports), paced by positive vaccine news after the Covid-19 vaccine from Pfizer and BioNTech was strongly effective according to an early analysis of data from their large Phase 3 trial. Volunteers who took the two injections three weeks apart experienced more than 90% fewer cases of symptomatic Covid-19 than those who received a placebo. The results beat expectations as researchers have been cautioning that a vaccine may only be 60% or 70% effective. The news lifted already strong stock futures overnight after Joe Biden received enough electoral votes over the weekend to be seen as President elect (though Pres. Trump not going down with a fight as he continues to contest several state counts late last week). The vaccine news dominates the headlines as well as trading action as several of the “reopen” related trades are seeing the biggest upside traction including airlines (AAL, DAL, UAL), casinos (WYNN, LVS, MGM), cruise lines (CCL, NCLH, RCL), theme parks (SIX, SEAS, DIS), energy (XOM, CVX), theaters (AMC, CNK), lodging (HLT, H, MAR) among the biggest moves. On the flip side, shares of “stay-at-home” winners, that have benefitted the most from the Covid-19 global lockdown saw the biggest declines: (ZM, ROKU, NFLX, PTON, ATVI, TTWO, CLX, KR, PINS, ETSY, SQ). Vaccine testing stocks hit extremely hard on the day as well (ABT, QDEL, FLDM, TMO). Gold prices fall nearly 4% as the dollar rebounds and investors rotate into stocks and oil prices. Treasury yields back to best levels in 5-months, as the 10-year yield surges over 11 bps to 0.93% in sell-off in safe-haven assets.

Sector Movers Today

·     Restaurants; one of the biggest market beneficiaries included restaurants and casual dining given the increased chances of a Covid vaccine following PFE upbeat news; Dow component MCD reported slightly better Q3 revenue of $5.42B vs. est. $5.38B on better EPS of $2.22 as U.S. comparable sales rose +4.6%; CAKE was upgraded to buy from hold at Deutsche Bank saying outside of near-term weather and COVID risks they sense a reluctance to fully embrace a bull case here just given legacy issues and biases as it pertains to CAKE’s mall exposure – shares of SBUX, CMG, RRGB, WEN, EAT, DRI among top movers

·     Leisure and Gaming; biggest beneficiaries of + PFE vaccine news as reports 90% success for its vaccine in a Phase 3 study – casinos (WYNN, LVS, MGM) rising along with Macau-related names with Joe Biden forecast to win the U.S. presidential election; theme park stocks break sharply higher after Pfizer reports its success for its vaccine in a Phase 3 study (SIX, SEAS, DIS); lodging names also rise (HLT, MAR, H) on hopes a vaccine will boost travel exposure

·     Retailers; massive gains for retailers on the day on reopen hopes given PFE vaccine news (URBN, KSS, M – as well as mall REITs SPG, KIM, MAC, PEI); VSTO upgraded to overweight at KeyBanc saying firearm-related names have historically benefited under a Democratic administration while also sees continued high demand for products in co’s outdoor segment, which includes archery and hunting accessories and sports protection goods, due to the COVID-19 pandemic; MAT downgrade to Hold at Jefferies saying though are not turning more bearish, they are pausing with shares at current levels; surprise PRTY rises on 3Q adj EPS profit $0.10 vs. est. ($0.32) on revs $534Mm vs. est. $489.3Mm; guides 4Q revs $675-695Mm vs. est. $660.3Mm

·     Auto sector; automakers rose following news this weekend that Joe Biden has the current electoral votes to win the Presidency – the win raised prospects of tougher carbon emissions targets and swifter transition to electric vehicles – shares of GM, F higher as Biden had pledged to reinstate California’s zero-emission vehicle rules and reverse the Trump administration’s decision to ease fuel efficiency and carbon emission requirements through 2025 = EV stocks also higher again today (FSK, NKLA, LI, TSLA, WKHS); MGA was downgraded to underweight from equal-weight at Morgan Stanley while being upgraded to outperform at BMO Capital

·     Transports; Dow Transports trade to record highs; airlines lead the index to near record highs (AAL, DAL, JBLU, LUV, UAL) following the vaccine hope news from PFE this morning, giving a boost to travel related names; CHRW upgraded to buy and tgt raised to $118 at Citigroup as sees a credible opportunity for Robinson to earn between $5 and $6 per share next year (our estimate moves to the low-end), which is ~$1+ higher than consensus’ current $4.22.

Stock GAINERS

·     CCL +33%; cruise lines jump on vaccine news

·     FFIV +6%; activist investor Elliott Management has taken a stake in FFIV and spoken to the software company’s management in recent weeks about ways to boost its lagging stock https://on.wsj.com/2U5UMW

·     NVAX +11%; said it was on track to begin a delayed U.S.-based late-stage study of its experimental coronavirus vaccine later this month; also said the vaccine, NVX-CoV2373, had gained the U.S. FDA “fast-track” status

·     PFE, BNTX +14%, 24%; main reason markets surge today after data shows their Covid-19 vaccine is strongly effective, as volunteers who took the two injections three weeks apart experienced more than 90% fewer cases of symptomatic Covid-19 than those who received a placebo

·     PRTY +25%; surprise 3Q adj EPS profit $0.10 vs. est. ($0.32) on revs $534Mm vs. est. $489.3Mm; guides 4Q revs $675-695Mm vs. est. $660.3Mm

·     WYNN +25%; casinos jump on reopen trade

Stock LAGGARDS

·     BIIB -28%; downgraded by several analysts after failed to gain support from a panel of U.S. FDA advisers as outside experts voted 8 to 1, with 2 undecided, that data from a single clinical trial with positive results was insufficient to show its Alzheimer therapy drug aducanumab works

·     CLX -7%; one of the market losers on the positive PFE vaccine news (had rallied on increased usage of its disinfectant wipes)

·     ETSY -14%; as stay at home beneficiaries come under pressure on vaccine news

·     FDX -8%; and UPS shares slide on expectations a vaccine will reopen more foot traffic, less online shopping

·     NEM -6%; gold prices tumble over 3% on rotation into riskier assets

·     PTON -20%; as stay at home stocks decline following the vaccine news

·     QDEL -36%; vaccine testing stocks hammered on vaccine news (FLDM, PKI, ABT, TMO)