Early Look

Friday, December 11, 2020

Futures	Up/Down	%	Last
DJ Industrials	-247.00	0.83%	29,665
S&P 500	-32.50	0.89%	3,628
Nasdaq	-108.50	0.88%	12,292

 

 

Stock futures are looking lower, dropping overnight after drug makers Sanofi (SNY) and GlaxoSmithKline (GSK) announced they have delayed advanced trials of their potential coronavirus vaccine after it produced an “insufficient” response in older adults. They now say it won’t be ready until late next year, and will commence a new second-phase study with a more concentrated antigen in February. The news disappointing markets along with a potential shake-up in Europe after UK PM Johnson warned Britain to prepare for no deal Brexit, says he has the Cabinet’s very strong backing in rejecting the deal on the table. U.S. coronavirus relief talks also faced fresh setbacks, with Senate Republicans suggesting they couldn’t accept some aspects of a $900B bipartisan proposal despite rising U.S. unemployment claims. In Asian markets, The Nikkei Index fell -103 points to 26,652, the Shanghai Index fell -26 points to 3,347 and the Hang Seng Index rose 95 points to 26,505. In Europe, the German DAX is down over 250 points, but holding above the 13,000 level, while the FTSE 100 slides over 60 points to 6,530. Recall U.S. stocks futures opened lower yesterday as well before rallying most of the day.

 

Markets were mixed on Thursday with the S&P 500 closing modestly lower as the Dow joined it in negative territory while the Nasdaq climbed and the Russell 2000 gained over 1%. Markets overcame weak economic data initially as weekly jobless claims unexpectedly jumped to a nearly three-month high last week, coronavirus cases in the U.S. and Europe continue to climb and the fiscal relief package in Washington again failed to materialize. Still, that did not stop the runaway train as major stocks averages jumped off morning lows amid encouraging vaccine developments in recent weeks, leaving market participants torn between near-term risks and longer-term recovery prospects. The excitement of new issues this week has also given markets a boost as Airbnb Inc (ABNB) surged over 110% above the stock’s $68 to open at $146 a share in its public-market debut, following the incredible debuts of food delivery platform DoorDash Inc (DASH) and software company C3.ai (AI) in recent days. IPOs have come at a blistering pace this year, with 397 companies having been brought to public markets, raising $145 billion as of Dec. 7, nearly double the IPO count YoY, according to Dealogic.

 

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -4.72 points, or 0.13%, to 3,668.10

·     The Dow Jones Industrial Average fell -69.55 points, or 0.23%, to 29,999.26

·     The Nasdaq Composite gained 66.86 points, or 0.54%, to 12,405.81

·     The Russell 2000 Index advanced 20.56 points, or 1.08% to 1,922.70

 

Economic Calendar for Today

·     8:30 AM EST      Producer Price Index (PPI) MoM for Nov

·     8:30 AM EST      PPI Ex: Food & Energy MoM for Nov

·     8:30 AM EST      Producer Price Index (PPI) YoY for Nov

·     8:30 AM EST      PPI Ex: Food & Energy YoY for Nov

·     10:00 AM EST    University of Michigan Confidence Dec-P

·     1:00 PM EST       Baker Hughes Weekly Rig Count

 

 

Macro	Up/Down	Last
WTI Crude	-0.35	46.43
Brent	-0.40	49.85
Gold	-10.25	1,826.30
EUR/USD	-0.002	1.2118
JPY/USD	-0.15	104.09
10-Year Note	-0.018	0.89%

 

 

World News

·     UK PM Johnson warned Britain to prepare for no deal Brexit, says he has the Cabinet’s very strong backing in rejecting the deal on the table; he would go the extra mile if there’s any prospect of getting a deal , but also said there was now a strong possibility of no deal – Telegraph reports

 

Sector News Breakdown

Consumer

·     Blue Apron (APRN) announces resignation of CFO; said it expects results for 2020 Q4 to be better than company’s previously provided outlook for period

·     Costco (COST) Q1 EPS $2.62 vs. est. $2.05 on sales $42.35B (up 16.9% from $36.24B last year) vs. est. $42.66B; Q1 membership fees up over 7% YoY to $861M; Q1 comp sales rose 15.4%, total E-Commerce comp sales up 86.4%; adj comp sales +17.1% and adj E-Commerce comp sales up 86.2%

·     China’s sales of SUVs, minivans and sedans rose by double digits in November but were below pre-pandemic levels for the year; sales rose 11.6%Y/Y to 2.3M, according to the China Association of Automobile Manufacturers (XPEV, LI)

·     Dave & Busters (PLAY) 3Q EPS ($1.01) vs. est. ($1.11) on revs $109.1Mm vs. est. $109.4Mm, Q3 comps -66%; sees 4Q further erosion in comp sales, EBITDA; during first 5 weeks of Q4 through dec 6, 2020, co saw overall comparable store sales decline of 71%

·     Fat Brands Inc. (FAT) rises 29%; said it has agreed to combine with Fog Cutter Capital Group Inc., in an effort to ramp up financial flexibility and simplify its corporate structure. The owner of Fatburger, Johnny Rockets, and other restaurants had considered combining with Fog Cutter to eliminate limitations to its ability in using common stock for acquisitions and capital raising, President and Chief Executive Andy Wiederhorn said. https://bit.ly/3qIhX81

·     Lululemon (LULU) 3Q adj EPS $1.16 vs. est. $0.88 on revs $1.1B vs. est. $1.0B, comps +19%, DTC revs 42.8% mix vs 26.9% prior year; not providing detailed guidance at this time; Operating margin decreased 90 bps to 18.3% and adjusted operating margin decreased 10 bps to 19.1%; opened nine net new company-operated stores during the quarter, ending with 515 stores; on Dec 1st, the board approved an increase in its share repurchase authorization from $263.6 million to $500.0 million

·     NIO Inc. (NIO) offers to sell 60M ADSs

·     Quanex Building (NX) Q4 adj EPS 67c vs. est. 46c and Q4 revenue $255.41M vs. est. $238.1M; guides FY21 revenue $900M-$920M vs. est. $879.74M; on a consolidated basis, expect co will generate between $108M-$118M in adjusted Ebitda in fiscal 2021 vs. est. $103.8M

·     Vail Resorts (MTN) 1q loss/share $3.82, vs. est. loss/share $3.60; 1q net revs $131.8m, below est. $158.5m; continues to expect material declines in visitation, rev.

 

Energy, Industrials and Materials

·     Rolls-Royce (RYCEY) downgraded this year’s cash outflow forecast and warned of a challenging outlook as the slump in air travel continues; says it now expected that to be 4.2 billion pounds, worse than the 4 billion pounds it was guided to in October.

·     The E&P sector was upgraded ay Morgan Stanley to Attractive from In-Line as they believe the foundation appears in place for a sustained rally, but they also see the sharp rally in the group in the past month having created valuation disconnects. Diamondback Energy (FANG) upgraded to Overweight from Equal Weight with a $65 price target, citing an estimated 14% free cash flow yield in 2021 that he expects to be highest among its peers; raised Murphy Oil (MUR) to Equal Weight from Underweight with a $14 price target, citing its reduced spending profile and improved cost structure. Range Resources (RRC) also upgraded to Equal Weight from Underweight with a $7 price target, stating that he now sees a more balanced risk/reward

 

Financials

·     A 14-billion-pound ($18.5 billion) class action against Mastercard (MA) for allegedly overcharging more than 46 million people in Britain over a 15-year period was on Friday given the green light by the UK Supreme Court.

·     MetLife (MET) announced that it has signed a definitive agreement to sell Metropolitan Property and Casualty Insurance Company and certain wholly owned subsidiaries to Farmers Group, a subsidiary of Zurich Insurance Group (ZURVY), for $3.94B in cash

·     Synovus (SNV) upgraded to Outperform on better credit and capital view at RBC Capital

·     TPG Pace Beneficial Finance Corp. (TPGY) shares jumped after agreeing to buy Engie (ENGIY) subsidiary EV Charged BV, which specializes in electric vehicle charging technology which will create a combined entity, EVBox Group, with a ~$1.4B valuation

·     Manning & Napier (MN) reports preliminary AUM $19.9B as of November 30, compared with $18.5B at October 31, and $19.2B at September 30

 

Healthcare

·     Pfizer Inc. (PFE) and BioNTech SE (BNTX) announced that the U.S. FDA’s Vaccines and Related Biological Products Advisory Committee voted 17 to 4 in support of the FDA granting Emergency Use Authorization for the companies’ COVID-19 mRNA vaccine. VRBPAC based its recommendation on the totality of scientific evidence shared by the companies, including data from a pivotal Phase 3 clinical study announced last month and published this week in The New England Journal of Medicine

·     Sanofi (SNY) and GlaxoSmithKline (GSK) have delayed advanced trials of their potential coronavirus vaccine after it produced an “insufficient” response in older adults. They now say it won’t be ready until late next year, and will commence a new second-phase study with a more concentrated antigen in February.

·     AbCellera (ABCL) 24.15M share IPO priced at $20.00

·     4D Molecular (FDMT) 8.4M share IPO priced at $23.00

·     Nanobiotix (NBTX) 7.3M share IPO priced at $13.50

·     Option Care Health (OPCH) 10M share Spot Secondary priced at $15.00

·     Bristol-Myers (BMY) raises quarterly dividend to 49 from 45c per share

·     Sonoma Pharmaceuticals (SNOA) and Crown Laboratories announce an exclusive partnership to launch microcyn® technology-based anti-itch over-the-counter products

·     Nabriva Therapeutics (NBRV) 6M share Spot Secondary priced at $2.50

 

Technology, Media & Telecom

·     Broadcom (AVGO) 4Q adj EPS $6.35 vs. est. $6.25 on revs $6.5B vs. est. $6.4B, qtrly dividend increased by 11% to $3.60 share from prior qtr; guides 1Q revs approx $6.6B vs. est. $6.5B (says +13% YoY growth expected, all organic), sees 1Q adj EBITDA about $3.9B (59% margin) vs. est. $3.7B

·     Disney (DIS) says Disney+ has 86.8M subscribers as of December 2nd (had hit 74 million as of early October); said at its analyst day it sees Disney+ subscribers at 230M-260M by FY24 vs. prior view of 60M-90M; says Disney+ subscriber projections now include Star+; says In March of 2021, Disney+ monthly price to rise by $1 to $7.99 for U.S. customers; says will offer a Disney+ and Star+ individually or as a bundle; still expects Disney+ to reach profitability in FY24

·     Ericsson (ERIC) has filed a lawsuit against Samsung Electronics in the US for violating contractual commitments, and cautioned on delayed royalty payments and legal costs for which Samsung will have to bear cost between 1B-1.5B Swedish kronor ($118.1M-177.2M) a quarter

·     Sea Limited (SE) prices upsized 13.2MADS offering (from 11M) at $195.00 per share

·     Certara (CERT) 29.055M share IPO priced at $23.00

·     Qualcomm (QCOM) shares slipped after reports Apple (AAPL) has kicked off the development of its first cellular modem according to Bloomberg, citing Apple’s chip chief telling staff. That Apple modem would replace Qualcomm’s modem in iPhones.

·     Oracle (ORCL) 2Q adj EPS $1.06 vs. est. $1.00 on revs $9.8B vs. est. $9.8B, clous services and license support revs $7.1B, qtrly hardware revs $871Mm, adj op margin 47%, opened 13 additional regional datacenters in 2020; Q2 operating cash flow was $14.0 b during trailing twelve months; Q2 short-term deferred rev were $8.1B; Q2 GAAP operating income was up 13% to $3.6 b and GAAP operating margin was 37%; sees Q3 EPS up 10%-14% to $1.06-$1.10 at constant FX vs. est. $1.04