Early Look

Monday, February 24, 2020

Stock futures in the U.S. are tumbling, following markets lower overnight in Asia and Europe after China’s coronavirus cases rose to at least 76,936 over the weekend, with a total of 2,442 fatalities. In addition, South Korea raised the country’s infectious-disease alert to the highest level after a 20-fold increase in cases and Italy now the virus’s epicenter in Europe, with 140 infections, canceled the Venice Carnival and other events. Turkey will temporarily close its border with Iran, which with 43 infections has the most cases in the Middle East, including eight fatalities. The IMF said its baseline scenario is now for China to expand 5.6% this year, a 0.4% point lower than prior. Following the renewed fears, stocks are plunging worldwide, the CBOE Volatility Index (VIX) is higher by 35% (fear index) to move above the 23 level (highest since August), Treasury prices jump along with gold. In Asian markets, The Nikkei Index fell -92 points to 23,386, the Shanghai Index dipped -8 points to 3,031 and the Hang Seng Index plunged -487 points to 26,820. In Europe, the German DAX is down over -500 points to 13,050, while the FTSE 100 is sharply lower, falling over 3.5% or 260 points to 7,141. Stocks dropped last week led by a sharp decline on Friday as the S&P 500 fell 1.1% after a major piece of U.S. economic data showed a sizable hit from the epidemic. U.S. business activity fell in February for the first time since 2013 as the outbreak made firms hesitant to place orders. Meanwhile, the yield on the 30-year US Treasury hit a record low as renewed fears about the economic fallout of the coronavirus weighed heavily on market sentiment.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -35.48 points, or 1.05%, to 3,337.75

·     The Dow Jones Industrial Average fell -227.57 points, or 0.78%, to 28,992.41

·     The Nasdaq Composite plunged -174.38 points, or 1.79%, to 9,576.59

·     The Russell 2000 Index declined -17.46 points, or 1.03% to 1,678.61

Events Calendar for Today

·     8:30 AM EST      Chicago Fed Nat Activity Index for January

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

·     3:00 PM EST       Fed’s Mester speaks on the Economy at NABE Conference

Earnings Calendar:

·     Earnings Before the Open: AWI, CRI, CTB, DIN, DORM, EPZM, KOS, MMSI, SBRA, STAR, XENT

·     Earnings After the Close: APLE, APY, ARLO, CDEV, CLVS, CSOD, EPR, EVER, GH, HALO, HPQ, HT, HTZ, INTU, KEYS, KTOS, NOVA, NYMT, OII, OKE, PANW, PLOW, RCII, SAIL, SHAK, THC, TNDM, TREX, XHR

Other Key Events:

·     BMO Capital 29th Annual Global Metals & Mining Conference, 2/23-2/26, in Florida

·     JMP Securities Technology Conference, 2/24-2/25, in San Francisco, CA

·     RSA Conference 2020, 2/24-2/28, in San Francisco, CA

·     Stephens West Coast Bank Trip, 2/24-2/26, starting in Denver, CO

·     Wolfe Auto, Auto Tech and Mobility Conference, 2/24-2/26, in New York

Sector News Breakdown

Consumer

·     Carter’s (CRI) Q4 adjusted EPS $2.81/$1.1B vs. est. $2.89/$1.1B; announces new $500M share repurchase plan, raises dividend 20%; sees FY20 adjusted EPS growth 4%-6% vs. est. $7.05; and sees FY20 net sales growth 2%-3; Q1, FY20 guidance does not include potential effects of coronavirus

·     Floor & Decor (FND) upgraded to Neutral from Underperform at Bank America

·     PepsiCo (PEP) to acquire Hangzhou Haomusi Food Co., Ltd., or “Be & Cheery,” one of the largest online snacks’ companies in China, from Haoxiangni Health Food Co., for $705M

Energy Industrials & Materials

·     Non-OPEC production increased by 382 kb/d to 50,930 kb/d in October from 50,512 kb/d in September. This is second highest monthly increase for 2019 after the August increase of 699 kb/d.

·     Boeing Co. (BA) discovered debris inside the fuel tanks of about 35 undelivered 737 Max jets inspected so far, Dow Jones reported, as the plane maker has inspected about 50 out of about 400 stored planes awaiting delivery

·     CenterPoint Energy (CNP) to sell its natural gas retail business, CenterPoint Energy Services, Inc. to Energy Capital Partners, LLC, a private equity and credit investor, for about $400 million.

·     First Solar (FSLR) downgraded to Underperform from Buy at Bank America

Financials

·     Intuit Inc. (INTU) is close to buying Credit Karma Inc. for about $7 billion in cash and stock deal, the WSJ reported this weekend. The purchase, which could be announced by Monday, will push the maker of TurboTax deeper into the consumer finance space, the newspaper said.

·     Wells Fargo & Co. (WFC) will pay $3 billion to settle U.S. investigations into more than a decade of widespread consumer abuses under a deal that lets the bank avoid criminal charges (confirming prior reports earlier Friday)

·     JPMorgan Chase (JPM) is in talks with regulators about launching a digital bank in the U.K. this year, Financial Times reports

Healthcare

·     Epizyme (EPZM) Q4 EPS loss (59c) vs. est. (49c); Q4 collaboration revs $4.3M vs. est. $4.63M; sees 2020 GAAP operating expenses $300M-$330M

·     United Therapeutics (UTHR) and DEKA Research & Development Corp. announced receipt of an additional 510(k) clearance by the FDA related to the Unity Subcutaneous Delivery System for Remodulin Injection, also referred to as the Remunity pump

Technology, Media & Telecom

·     There is not much in news for the tech sector, though the tech heavy Nasdaq Comp futures are down over 3%, dragging names like Apple (AAPL) lower by over 4% to below the $300 level, as fears over the coronavirus impact grow – raising concerns that economies in Europe and Asia will suffer due to plant closures, lower demand