Early Look

Thursday, April 9, 2020

Stock futures are pointing to a slightly lower open following a strong day of returns on Thursday ahead of the long holiday weekend, as investors prepare for a busy day of economic data and oil news. Oil futures gain as investors awaited the outcome of a key meeting of OPEC+ that is intended to end a price war between Russia and Saudi Arabia. Expectations are that OPEC and their allies cut production by 8M-10M barrels per day over 90 days, according to reports, which is a good start at a time when supply is plentiful and demand is suffering greatly due to the stay at home restrictions following the coronavirus. Investors are also preparing for another week of soaring jobless claims (first time unemployment) at 8:30 AM tomorrow morning, with estimates for a spike of 5.25M (after 3.3M claims 2-weeks ago and a whopping 6.64M last week). Stocks are hoping to build on yesterday’s gains after supportive Fed meeting minutes and Bernie Sanders’ suspension of his presidential campaign (giving a boost to health insurers’ shares) added to initial optimism that cases of COVID-19 would soon peak in U.S. hotspots. Wall Street also advanced amid additional efforts by the Trump administration to restart a U.S. economy hobbled by the pandemic, along with additional stimulus measures. The Dow Jones Industrial Average ended up 779 points, or 3.44%, to 23,433, the S&P 500 gained 3.41% and the Nasdaq rose 2.58%. Reopening the U.S. economy would depend on a number of factors, but wider coronavirus testing availability would be a critical component, according to experts. Treasury Secretary Steven Mnuchin said President Donald Trump was “working on a date” for ramping up the U.S. economy. When it was all over yesterday, the Dow closed above 23K for first time since March 13th and the Nasdaq closes above 8K for first time since March 10^th. In Asian markets overnight, The Nikkei Index slipped -7 points to 19,345, the Shanghai Index gained 10 points to settle at 2,825 and the Hang Seng Index rose 329 points to end the week at 24,300. In Europe, the German DAX is up around 50 points to 10,385, while the FTSE 100 is up about 40 points to 5,720.

Market Closing Prices Yesterday

·     The S&P 500 Index surged 90.57 points, or 3.41%, to 2,749.98

·     The Dow Jones Industrial Average rose 779.71 points, or 3.44%, to 23,433.57

·     The Nasdaq Composite spiked 203.64 points, or 2.58%, to 8,090.90

·     The Russell 2000 Index advanced 52.49 points, or 4.61% to 1,191.66

Economic Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 5.5M

·     8:30 AM EST      Continuing Claims…est. 8.23M

·     8:30 AM EST      Producer Price Index (PPI) MoM for March…est. (-0.4%)

·     8:30 AM EST      PPI Ex: Food & Energy MoM for March…est. 0.0%

·     8:30 AM EST      Producer Price Index (PPI) YoY for March…est. 1.2%

·     8:30 AM EST      PPI Ex: Food & Energy YoY for March…est. 1.3%

·     10:00 AM EST    University of Michigan Confidence, Apr-P…est. 75.0

·     10:00 AM EST    Wholesale Inventories MoM for Feb…est. (-0.5%)

·     10:30 AM EST    Weekly EIA Natural Gas Inventory Data

Sector News Breakdown

Consumer

·     Big Lots (BIG) entered into sale and leaseback agreements with affiliates of Oak Street Real Estate relating to the company’s distribution centers and gross proceeds from the transactions are expected to be $725M. Net of expenses and taxes, the company expects to receive estimated net proceeds of approximately $550M

·     Costco (COST) net sales of $15.49b for retail month of March, 5 weeks ended April 5, up 11.7% from $13.87B last year

·     El Pollo Loco (LOCO) says system-wide comparable restaurant sales for Q1 decreased (-1.5%); says the vast majority of El Pollo Loco restaurants are operating on a take-away, mobile pick-up and delivery basis only, as well as maintaining drive-thru operations where available

·     Nautilus (NLS) prelim 1Q net sales $94M vs. est. $75M; Q1 prelim cont ops Ebitda $0.0M-$1.5M

·     PriceSmart (PSMT) Q2 EPS 85c vs. est. 81c on revs $906.7M (up 6.1% YoY) while Q2 net warehouse club sales $871.7M, +6.3% YoY

·     Sleep Number (SNBR) is furloughing nearly 40% of the total company and another 30% of team members are working reduced hours

·     Six Flags (SIX) sees Q1 revenue down $25M-$30M from last year’s level, with $9M of the decline associated with the company’s international agreements; said prior to the park closures, the company’s revenue from its North American theme park operations was higher than the prior year period

·     Starbucks (SBUX) said it sees Q2 EPS about 32c, below ests of 39c saying business disruption related to Covid-19 in China hurt results by 15c-18c; withdraws full-year guidance; expects the negative financial impacts to Q3 will prove “significantly greater” than in Q2 and extend into Q4

Energy, Industrials & Materials

·     Marathon Petroleum (MPC) plans to idle its Gallup refinery in New Mexico, the second-smallest of its 16 U.S. refineries, as of April 15 amid a faltering economy and weakening demand for gasoline as per Bloomberg

·     UPS (UPS) was downgraded to neutral from buy at UBS citing macroeconomic concerns

Financials

·     AGNC Investment (AGNC) lowered its dividend to 12c from 16c as the COVID-19 pandemic hurt its book value in Q1; estimates tangible net book value of ~$13.60 per common share at March 31, 2020, down ~23% YTD

·     Cohen & Steers (CNS) reports preliminary AUM $57.4B as of March 31; a decrease of $11.9B from assets under management at February 29. Net inflows of $109M were offset by market depreciation of $11.7B and distributions of $285M

·     Franklin Resources, Inc. (BEN) preliminary month-end assets under management of $580.2 billion at March 31, 2020, compared to $656.5 billion at February 29, 2020. Assets under management were driven lower by sharp market declines. Preliminary average assets under management for the quarter ended March 31, 2020, were $655.7 billion

·     The Swiss Financial Market Supervisory Authority said it welcomed the move by UBS (UBS) and Credit Suisse (CS) to postpone half of their planned dividend distributions for 2019 to the fourth quarter.

Healthcare

·     Pfizer’s (PFE) Braftovi (encorafenib) and Eli Lilly’s (LLY) Erbitux (cetuximab) combination for the treatment of adults with BRAF V600E mutation-positive metastatic colorectal cancer who have received prior therapy received FDA approval

·     Medtronic (MDT) announces that its Puritan Bennett 560 ventilator will be available next month in the U.S. under emergency use authorization from the FDA

·     Tonix Pharmaceuticals (TNXP) filed a $150M mixed shelf offering

Technology, Media & Telecom

·     Walt Disney Co. (DIS) shares rose 4%; said paid subscriptions to its Disney+ streaming service soared past 50 million. The service, launched in November, previously was at 28 million but has surged with the closure of schools

·     SAP AG (SAP) lowered its FY20 cloud revenue is expected between EU8.3B to EU8.7B compared to the prior EU8.7B to EU9.0B; sees total revenue of EU27.8B to EU28.5B (down from EU29.2B to EU29.7B) and operating profit of EU8.1B-EU8.7B ( vs. prior 8.9B-9.3B); said software license revenue was down 31% Y/Y in Q1, which ended on March 31.

·     Microchip (MCHP) said it expects net sales growth of 3% Q/Q for its quarter ending on March 31; said it received record bookings in the quarter, and the backlog for the June quarter is currently up 9% Q/Q; believes the bookings strength comes from customer panic about potential coronavirus-related supply chain disruptions.

·     Agilisys (AGYS) said it will miss Q4 revenue guidance; do expect revenue and profitability levels for Q4 2020 and the next fiscal year to be negatively affected by the current significant market headwinds

·     Eventbrite (EB) launched an expense reduction effort in reaction to the pandemic that will see it cut its global workforce by 45%; measures are expected to save $100M a year, the company says.

·     Extreme Networks (EXTR) reported preliminary adjusted loss EPS (12c-15c) vs. est. 5c and prelim 3Q revs about $210M vs. est. $245M; manufacturing supply chain is operating at approximately 90% capacity in its Asian facilities and 70% in its non-Asian facilities, up from 40% in late February; sees being near 100% capacity by mid-May

·     ChipMOS (IMOS) reports March revenue of $65M (+4.2% M/M) (+24.2% Y/Y); Q1 revenue of $184.7M (+0.3% Q/Q) (+25.2% Y/Y), benefitted from continued growth in the company’s memory business, with DRAM and NOR flash demand driven by ongoing 5G network buildouts worldwide