Early Look

Monday, April 27, 2020

U.S. stock index reverse initial overnight losses to trade higher ahead of a very busy week of earnings with over 140 S&P companies expected to report this week alone including Apple, Amazon, Facebook, Microsoft, Tesla and Alphabet. Stock indexes fell last week, snapping a two-week streak of gains, as investors weighed economic data, mixed corporate earnings and the latest coronavirus-related economic aid package from Congress. Market participants are rising amid state by state reopening’s, which included “soft” openings for Georgia, Oklahoma, Tennessee and South Carolina last week (which included hair salons, gyms, bowling alleys while the list expands to sit-down restaurants, movie theatres shortly). Texas governor has suggested he could announce rules Friday or Monday that would allow some businesses to reopen. The reopening of hard-hit New York state could begin in mid-May, according to Governor Andrew Cuomo. Italy’s Prime Minister Giuseppe Conte said in an interview its lockdown will be eased from May 4. France is due to present an exit strategy on Tuesday. Oil prices are sliding, as WTI crude tumbles back below $15 per barrel as oil producers start cuts but oversupply still remains. In Asian markets, The Nikkei Index gained 521 points to 19,783, the Shanghai Index rose 6 points to 2,815 and the Hang Seng Index jumped 448 points to 24,280. In Europe, the German DAX is higher by 250 points as it nears the 10,600 level, while the FTSE 100 is up over 80 points to 5,840.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 38.94 points, or 1.39%, to 2,836.74

·     The Dow Jones Industrial Average rose 259.97 points, or 1.11%, to 23,775.27

·     The Nasdaq Composite surged 139.77 points, or 1.65%, to 8,634.52

·     The Russell 2000 Index advanced 18.99 points, or 1.56% to 1,233.05

Economic Calendar for Today

·     10:30 AM EST    Dallas Fed Manufacturing Activity for April

Earnings Calendar:

·     Earnings Before the Open: AMG, AWI, CMS, DORM, EGOV, LECO, WASH

·     Earnings After the Close: AMKR, ARE, AVT, BANR, CATY, CE, CGNX, CINF, CR, CSTR, FFIV, HLIT, HSII, HTLF, KDP, KNL, NOV, OGS, PCH, PFG, PI, PPG, SANM, UHS, WSFS

World News

·     Bank of Japan kicked lifted the cap on Japanese government bond purchases and boosting its purchases of commercial paper and bank loans. The central bank will also triple its holdings of corporate debt to ¥20T ($186B) – easing fundraising for companies hit by the coronavirus. The U.S. Federal Reserve and European Central Bank also are expected to announce further measures.

·     Italy will allow factories and building sites to reopen from May 4 and permit limited family visits as it prepares a staged end to Europe’s longest coronavirus lockdown, Prime Minister Giuseppe Conte said

·     The global case tally for the coronavirus that causes COVID-19 climbed to 2.98 million on Monday, according to data by Johns Hopkins University. The death toll rose to 206,803. At least 869,935 people have recovered. The U.S. has the highest case toll in the world at 965,933 and the highest death toll at 54,877. Spain has the highest number of cases in Europe at 226,629 and 23,190 deaths. Italy has 197,675 cases and 26,664 deaths

Sector News Breakdown

Consumer

·     Adidas (ADDYY) reported a 95% Q1 profit drop and warned that its second quarter will be even more affected by the coronavirus as more than 70% of its stores are currently close

·     Cal-Maine Foods (CALM) issued the following response to a state of Texas lawsuit alleging that the company has engaged in price-gouging during the COVID-19 pandemic: “Cal-Maine Foods strongly denies these allegations and will vigorously defend itself against the lawsuit. Cal-Maine has not exploited this tragic national pandemic for gain

·     Packaged-foods stocks could keep climbing as Covid-19 forces America to dine in, Barron’s reported noting Campbell Soup (CPB), Conagra (CAG), General Mills (GIS), Kellogg (K) and Kraft Heinz (KHC) have rising earnings and below-market valuation

·     Harley-Davidson (HOG) mentioned cautiously in Barron’s saying the stock could be headed for a serious decline this coming week, with the motorcycle maker expected to report earnings on Tuesday. Notes the economic troubles created by the virus, and the significant contribution that financing makes to the company’s operating income could affect valuation

·     Barron’ noted that leading restaurant stocks have recouped much, and in some cases, all, of their big losses sustained during the market rout, with McDonald’s (MCD), Starbucks (SBUX), Chipotle (CMG), Yum! Brands (YUM), and Darden Restaurants (DRI) up 50% to 125% from their lows in March. Investors, however, may be too optimistic about the group’s prospects.

·     Tesla Inc. (TSLA) is calling some workers back to its lone U.S. vehicle-assembly plant starting next week, before San Francisco Bay area stay-home orders are scheduled to expire.

Energy

·     Diamond Offshore (DO) filed for Chapter 11 bankruptcy after having skipped an interest payment on senior debt, beginning a 30-day window as to either make good or default. Note Loews (L) is the majority owner of the company.

·     Barron’s noted that the next few months could be a reckoning in the U.S. oil patch and such a handful of oil stocks could be in a better position to thrive, he such as Chevron (CVX), ConocoPhillips (COP), Schlumberger (SLB), and Phillips 66 (PSX) which could still go lower, but they have a good chance of paying off for investors willing to hold them for the longer term

Financials

·     Deutsche Bank (DB) said it expects to report Q1 revenue of €6.4B, topping consensus estimate of €5.7B and anticipates expects reporting group profit before tax of €206M and net income of €66M; provisions for credit losses are expected to be €0.5B.

Healthcare

·     Axsome Therapeutics (AXSM) announces positive results from a Phase 2/3 clinical trial, ADVANCE-1, evaluating lead drug AXS-05 for the treatment of Alzheimer’s disease (AD) agitation. The study met the primary endpoint of a statistically significant average reduction in a scale called CMAI total score at week 5 compared to placebo

·     Abiomed (ABMD) downgraded to market perform at Leerink

·     Amedisys (AMED) has agreed to acquire Homecare Preferred Choice, doing business as AseraCare Hospice, for $235M in cash (net of $203M inclusive of tax benefit).

·     Clovis Oncology (CLVS) downgraded to underperform with $5 tgt at Leerink

·     Onconova Therapeutics (ONTX) has filed a prospectus for a $150M mixed shelf offering

Industrials & Materials

·     Airbus (EADSY) told employees that the company is “bleeding cash” and warned that its survival was at stake unless it took immediate action, which was initially reported by Bloomberg

·     Boeing Co. (BA) is walking away from its proposed $4.2 billion combination with Embraer SA’s (ERJ) commercial-jet business, ending more than two years of talks, as the plane makers brace for a far smaller market for aircraft after the coronavirus pandemic.

·     Nordic American Tankers (NAT) CEO spoke Friday in an interview yesterday with Mad Money’s Jim Cramer saying “we are making a lot of money at this time, improving our balance sheet tremendously, and I have never seen such a strong market”

·     Tata Steel said it needs more funding due to the scale and length of lockdown disruption; the co is seeking hundreds of millions of pounds in government support amid slumping global orders due to the pandemic.

Technology, Media & Telecom

·     Check Point (CHKP) reported Q1 EPS $1.42 on revs $486M vs. est. $1.38 and $140.3M