Early Look

Wednesday, April 8, 2020

Stock futures in the U.S. are slightly higher, looking to rebound after a late day market swoon erased gains of as much as 3% earlier in the day on Thursday, as major averages finished at the lows as traders track coronavirus death and infection rates that continue to show strikingly high levels. On Tuesday, New York reported its largest single-day COVID-19 death toll at 713 fatalities, while the number of U.S. cases surpassed 400,000 which took the steam out of sentiment midday. Stocks look to be getting a small boost after President Trump said last night that he would ask Congress for an additional $250B for the paycheck protection program for small businesses on top of the previous $350B that’s part of the CARES Act already signed into law (as of yesterday more than $70B of small business loans have been processed). In Asian markets, The Nikkei Index jumped 403 points to 19,353, the Shanghai Index slipped -5 points to 2,815 and the Hang Seng Index dropped -282 points to 23,970. In Europe, the German DAX is down over -120 points to 10,235, while the FTSE 100 is down over 90 points to hold just above the 5,600 level. Earnings season is just around the corner, which is expected to be quite confusing given the lack of future guidance being provided by many companies given the COVID-19 uncertainties.

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -4.27 points, or 0.16%, to 2,659.41

·     The Dow Jones Industrial Average fell -26.13 points, or 0.12%, to 22,653.86

·     The Nasdaq Composite dropped -25.98 points, or 0.33%, to 7,887.26

·     The Russell 2000 Index gained 0.39 points, or 0.03% to 1,139.17

Economic Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       FOMC Meeting Minutes from March 18 meeting

Earnings Calendar:

·     Earnings Before the Open: MSM, RPM

·     Earnings After the Close: KSHB, PSMT, RELL

World News

·     The number of cases of COVID-19 around the world rose to 1.43 million, while the number of fatalities rose to 82,2201 according to Johns Hopkins Whiting School of Engineering’s Centers for Systems Science and Engineering. At least 301,768 people around the world have recovered from the novel coronavirus. The U.S still has the greatest number of cases worldwide, at 399,929 and 12,911 deaths. In Europe, Spain has 141,942 cases and 14,045 deaths. Italy has 135,586 cases and 17,127 fatalities, making it the highest in the world

·     New York Gov. Andrew Cuomo said the state recorded its biggest one-day increase in deaths from COVID-19 on Tuesday, as 731 fatalities brought the state tally to 5,489. There are now 138,836 cases of the virus in New York, making it the epicenter of the U.S. pandemic.

Sector News Breakdown

Consumer

·     Amazon (AMZN) needs people and capacity to handle a surge in orders from its own customers, so the company will place on hold a new delivery service that competes with UPS (UPS) and FedEx (FDX) reported by the WSJ

·     Levi Strauss (LEVI) reports revenue was up 5% in FQ1 while operating income was down 11% to $179M as higher SG&A expenses played in; notes revenue was negatively impacted by unrest in Hong Kong and COVID-19 by two percentage points of growth.

·     Scientific Games (SGMS) won the 10-year contract for the state’s new gaming system to serve the lottery and the 2,400 retail locations where the games are sold

·     TAL Education (TAL) shares fell over -10% last night after disclosing that certain employee wrongdoing was discovered in the company’s routine internal auditing process which consisted of the employee conspiring with external vendors to inflate light class sales.

·     Volaris (VLRS) reports revenue passenger miles declined 10.3% to 1.53B in March; said domestic RPMs fell 9% Y/Y and international RPMs slipped 13.8% for the month; capacity dropped 5.6% to 1.86B available seat miles.

Energy, Industrials & Materials

·     The American Petroleum Institute (API) showed a build of 11.9M barrels of oil for the week ended April 3, while gasoline inventories show a build of 9.45M barrels, distillate inventories show a draw of 177K barrels, and Cushing inventories show a build of 6.8M barrels.

·     HollyFrontier (HFC) cuts cap-ex by about 15% as reduces 2020 total capital expenditures to a range of $525M-$625M from prior $623M-$729M

·     MSC Industrial (MSM) Q2 EPS $1.00 was in-line with estimates with sales $786.1M vs. est. $792.5M; says drew down $300M from its revolving credit facility

·     RPM International (RPM) Q3 adj EPS 23c on revenue $1.17B vs. est. 21c and $1.18B; sees Q4 revenue decline 10%-15% YoY while withdraws its yearly forecast

Financials

·     Berkshire Hathaway Inc.’s (BRK.A) Geico insurance said it will give its auto and motorcycle policyholders a 15% credit on their bills as their policies come up for renewal between Wednesday and Oct 7. The credit will also apply to new policies bought in the same period,

·     Pzena Investment Management (PZN) preliminary assets under management at March 31, 2020 of $26.8B slides from $34.8B in February and $37.1B in February 2019; during Q1, AUM fell $14.4B or 35%

·     PennyMac Financial Services (PFSI) completes an agreement for new servicing advance financing through PNMAC GMSR Issuer Trust, an indirect, wholly owned subsidiary of PFSI.

Healthcare

·     GenMark (GNMK) guides 2020 revenue guidance to $112M-122M, up from prior view of $100M-110M citing a positive impact from COVID-19, and sees Q1 revenue of ~$38.7M, up about 80% from a year ago and 46% above consensus of $26.5M

·     Perrigo Co. (PRGO) said it experienced a Q1 sales boost due to the COVID-19 pandemic; said it expects adjusted operating income of $220M-$$225M of about $1.3B vs. est. $195M and $1.26B

·     Integra LifeSciences (IART) prelim 1Q revenue $352M-$354M vs. est. $367.1M; says while the first two months of the quarter were in line with management expectations, surgical procedures declined significantly in March as healthcare providers reallocated resources; expects ongoing impact from restrictions on surgical procedures and shelter-in-place policies to have a more substantial negative impact on 2Q performance

·     Novavax (NVAX) shares rise 7% after saying it has identified its vaccine candidate to combat the coronavirus and expects to start its first-in-human trial in mid-May with preliminary data in July

·     Keros Therapeutics (KROS) 6M share IPO priced at $16.00

·     UnitedHealth Group (UNH) said it is accelerating payments and other financial support to front-line healthcare providers.

Technology, Media & Telecom

·     Smart Global (SGH) Q2 EPS 52c on sales $272M vs. est. 54c and $268.5M; sees 3Q adjusted EPS 63c-72c on sales $270M-$300M vs. est. 67c and $286.2M

·     Nintendo (NTDOY) has suspended shipments of its Switch console in Japan, Nikkei reports, amid a rush in demand alongside supply chain disruptions caused by the COVID-19 pandemic. That suspension doesn’t apply to the U.S. and Europe, where the company has greater inventory.

·     Pinterest (PINS) shares spiked higher after guiding March revs to $269M-$272M which was above the $266.7M estimate while withdrawing guidance for the full year, and warning that it is seeing softening advertising demand; said sees global monthly active users of 365M-367M

·     Walt Disney Co.’s (DIS) was downgraded to equal weight from overweight at Wells Fargo citing concerns about the company’s parks business saying “we don’t think Parks can get back to anything close to full capacity until testing and/or vaccines are far more ubiquitous and that means it could be 24 months before parks attendance normalizes”