Mid-Morning Look

Tuesday, October 06, 2020

U.S. stocks are edging higher, bouncing after initial declines as markets await developments on whether lawmakers in Washington could reach a compromise on new stimulus to support the economic recovery from the coronavirus pandemic ahead of next month’s election. Markets also await Fed Chairman Powell who is scheduled talk about the economic outlook in his addresses to the National Association for Business Economics annual meeting at 10:40 a.m. ET. Tech dropped initially after reports indicate House Democrats investigating the power of big technology firms are looking at possibly breaking up the companies (AMZN, AAPL, FB, GOOGL), but has since quickly recovered. Economic data weak as the U.S. posted its largest monthly trade deficit since 2006 in August as the U.S. trade deficit widened 5.9% from July to $67.1 billion. Imports rose 3.2% to $239B in August, while exports ticked 2.2% higher to $171.9B. A Senior Administration Official told Fox Business there are plans for the House Speaker and Treasury Sec to talk again today about the next COVID-19 relief package. This comes after a source tells FOX Business the two exchanged proposals late yesterday. Treasury yields hit fresh 4-month highs earlier, as the 10 and 30-year touched 0.79% and 1.60% respectively. Oil prices bounce for a second day, while gold is little changed. Software names higher on stronger AYX guidance, travel names recovering after yesterday’s slippage and banks again benefit from the spike ion Treasury yields.

Economic Data

·     The U.S. posted its largest monthly trade deficit since 2006 in August, the Commerce Department said Tuesday, as imports of consumer goods recovered to pre-pandemic levels and exports of services and manufacturing products stalled. August trade deficit (-$67.1B) vs. est. (-$66.1B) and vs. July deficit (-$63.4B) – Aug exports rose +2.2% and imports rose +3.2%

Sector Movers Today

·     Healthcare services and providers; CNC expands Medicare advantage offerings for 2021 saying Medicare plans will operate in 1,249 counties across 33 states in 2021; SDC granted U.S. patents on electric toothbrush, trackable aligner case; Cantor notes large cap managed care 3Q20 earnings are slated to kick off next week (UNH, ANTM, HUM, CNC) and expects higher MLRs and continued caution regarding 2021; QGEN upgraded to buy from neutral and $59 tgt at Bank America saying with a new CEO in place and new products in the portfolio, QGEN has the opportunity to reinvent itself; SYNH upgraded to buy at Mizuho as believe the recent stock performance does not reflect the company’s improved operating performance over the last few quarters, high earnings visibility for 2021

·     Pharma movers; BNTX and PFE said they have initiated rolling submission in Europe with PFE for their lead vaccine candidate against COVID-19; ALXN said it plans to raise 2020 full-year revenue outlook by more than $200 mln when reporting Q3 results (in July they said expects 2020 revenue between $5.55B-45.6B vs. est. $5.67B); VIR and partner GSK to expand early-stage trial of an experimental antibody to treat COVID-19 – after testing on 20 U.S. participants for safety, the trial will now expand as planned to 1,300 patients globally; CRBP slides after saying its lead candidate, lenabasum, to treat cystic fibrosis did not meet main goal in a mid-stage trial; KNSA rises as announces positive data from mid-stage trial of mavrilimumab in giant cell arteritis which causes inflammation of blood vessels

·     Auto sector; AAP upgraded to Overweight at JPMorgan and establishing a $190 target based on strong/sustainable current trends bridging to an easy winter weather comparison as well as increasing top-line benefits from the peak repair cohort (6-12 years old) in 2021 and 2022 and margin story blossoms in 2021; GPI reported preliminary third quarter 2020 results, new share repurchase authorization, and intention to reinstate dividend; BLNK announced the installation of 40 Level 2 EV charging stations at The Elysian residential building in the historic Victor Heights neighborhood near downtown Los Angeles, California

·     Semiconductors; HIMX issued prelim Q3 revs of $239.9M, above the $175.3M estimate as Q3 rev, gross margin and EPS all exceed outlook issued on Aug. 6 citing continued strong business momentum across all our major business sectors in Q4; NVDA tgt price raised by some analysts following its analyst day yesterday (JPM to $605, Opco to $600) on initial customer uptake of the company’s new Bluefield 2 SmartNIC (DPU) platforms with new enterprise customers; AMSC reports preliminary Q2 EPS less than (30c) vs. est. loss (19c) and preliminary Q2 revenue $20.5M-$21.5M vs. est. $18.77M

Stock GAINERS

·     AMC +3%; says more than 80% of its theaters in the United States to remain open as several new movies are lined up for release in October and November

·     AYX +25%; raises Q3 revenue guidance view to $126M-$118M from prior $111M-$115M view (est. $113.6M) representing 22% to 24% YoY growth

·     BNTX +9%; after they have initiated rolling submission in Europe with PFE for their lead vaccine candidate against COVID-19

·     BYND +4%; after scoring very high in the Piper Sandler survey of teens today and being tipped to launch a Beyond Burger product in the U.K. at McDonald’s outlets.

·     GPI +14%; reported preliminary third quarter 2020 results (Q3 EPS $6.40-$6.80 vs. est. $3.51), new share repurchase authorization, and intention to reinstate dividend

·     HIMX +9%; issued prelim Q3 revs of $239.9M, above the $175.3M estimate as Q3 rev, gross margin and EPS all exceed outlook issued on Aug. 6 citing continued strong business momentum across all our major business sectors in Q4

·     KNSA +16%; as announces positive data from mid-stage trial of mavrilimumab in giant cell arteritis which causes inflammation of blood vessels

·     LTHM +3%; after peer ETMC said it and LTHM agreed to an updated development plan to advance ETMC’s direct lithium extraction tech – updated plan prioritizes completing Stage 1 as soon as possible, after which the process is expected to be demonstrated in a pilot plant

·     SEAS +4%; was upgraded to Outperform from Neutral and raising tgt to $30 from $13 at Credit Suisse as believe the data points surrounding headwinds have either changed or are now fully priced in, making us more constructive on a stock with relatively low expectations

Stock LAGGARDS

·     CRBP -41%; slides after saying its lead candidate, lenabasum, to treat cystic fibrosis did not meet main goal in a mid-stage trial

·     IOVA -20% after pushing back timeline for BLA submission for lifileucel into 2021 as co and FDA have not been able to agree on the required potency assays

·     SONO -2%; and LOGI slipped after Bloomberg reported AAPL has stopped selling headphones and wireless speakers from rivals as it gears up to launch new audio products

·     YMAB -6%; announced that the FDA issued a Refusal to File letter for the BLA for omburtamab