Early Look

Wednesday, July 15, 2020

Futures	Up/Down	%	Last
DJ Industrials	306.00	1.16%	26,797
S&P 500	30.50	0.95%	3,213
Nasdaq	66.50	0.62%	10,712

 

 

U.S. stock futures are on the rise again led by vaccine hopes for the COVID-19 virus after Moderna (MRNA) released data on its coronavirus vaccine that showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study. The data has provided a “bid” for the market, with the sectors hardest hit from the pandemic such as travel, cruise lines, casinos, restaurants and retailers seeing the biggest jumps this morning. Energy stocks also point to a higher open following bullish weekly inventory data overnight, helping oil prices drift higher. Banks will again be in focus today with another handful of earnings results expected today (GS, BK, PNC, USB). In Asian markets, The Nikkei Index jumped 358 points to 22,945, the Shanghai Index fell -53 points to 3,361 and the Hang Seng Index was little changed, settling at 25,481. The decline in Asia comes following U.S. sanctions over Hong Kong where President Trump said there would be “no special privileges, no special economic treatment and no export of sensitive technologies” in his news conference after signing the Hong Kong Autonomy Act. In Europe, the German DAX is up 150 points to 12,850, while the FTSE 100 is up more than 50 points to 6,240. Yesterday, U.S. stocks erased all of Monday’s losses, closing out the session near the best levels of the day led by broad sector strength, though energy shares outperformed (not roughly 435 of the S&P 500 components ended the day in positive territory). Fear in the market place remains non-existent as the CBOE Volatility index (VIX) ends down 2.67 points at 29.52; biggest one-day point decline for VIX since June 29. In a busy day of Fed speakers, comments from Federal Reserve Governor Lael Brainard stood out, calling for sustained large-scale asset purchases by the U.S. central bank to help the economy rebound amid a “thick fog of uncertainty” brought on by COVID-19.

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 42.30 points, or 1.34%, to 3,197.52

·     The Dow Jones Industrial Average rose 556.79 points, or 2.13%, to 26,642.59

·     The Nasdaq Composite climbed 97.73 points, or 0.94%, to 10,488.58

·     The Russell 2000 Index advanced 24.69 points, or 1.76% to 1,428.26

 

Economic Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Import Prices MoM for June…est. 1.0%

·     8:30 AM EST      Export Prices MoM for June…est. 0.8%

·     8:30 AM EST      Empire Manufacturing for July…est. 10.0

·     9:15 AM EST      Industrial Production MoM for June…est. 4.3%

·     9:15 AM EST      Capacity Utilization for June…est. 67.8%

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       Federal Reserve Beige Book Released

 

Earnings Calendar:

·     Earnings Before the Open: BK, GS, PNC, UNH, USB

·     Earnings After the Close: AA, SNBR

 

 

Macro	Up/Down	Last
WTI Crude	0.42	40.71
Brent	0.37	43.27
Gold	-3.70	1,809.70
EUR/USD	0.0032	1.1432
JPY/USD	-0.32	106.92
10-Year Note	+0.003	0.626%

 

 

Sector News Breakdown

Consumer

·     Kura Sushi (KRUS) Q3 EPS ($1.10) vs. est. ($0.80) on revs $2.8Mm vs. est. $$4.1Mm, says 11 of the 25 restaurants open prior to shutdown are currently operating at reduced indoor capacity and 14 units in California are takeout only

·     LCI Industries (LCII) said it expects net sales in a range of $515M-$530M for Q2 above the $387.2M estimate saying increased demand for RVs drove accelerated outdoor recreational products sales, which was well ahead of increasingly bullish expectations (watch for potential strength in shares of other RV companies WGO, CWH, PATK)

·     PVH Corp. (PVH) to cut 450 jobs in North America, affecting 12% of its office workforce, that would save ~$80 mln annually; plans to shutter 162 retail stores of its business that houses brands such as Van Heusen, Calvin Klein and IZOD to cope with the coronavirus crisis

·     The state of Texas approved tax breaks of at least $14.7M for Tesla (TSLA) if the automaker locates a new $1.1B factory in the area.

·     Gap Stores (GPS) upgraded to Outperform from Sector Perform at RBC Capital

 

Energy

·     The American Petroleum Institute (API) showed a draw of 8.32M barrels of oil for the week ending July 10, gasoline inventories showed a draw of 3.61M barrels, distillate inventories show a build of 3.03M barrels and Cushing inventories show a build of 548K barrels.

·     Halliburton (HAL), Schlumberger (SLB) and ProPetro Holding (PUMP) were all upgraded to Outperform from Market Perform at Cowen in the oil services sector

·     Diamondback Energy (FANG) operational update for Q2; reported Q2 average production of 176.3 MBO/d. After voluntarily curtailing 9 MBO/d of total Q2 production, primarily in May, Diamondback elected to return this curtailed production in June, with nearly all curtailed production back online.

·     Viper Energy (VNOM) reported preliminary Production for the second quarter of 24,508 boe/d; said looking toward 2H’20, Diamondback expects to focus its completion activity on areas where Viper has significant mineral ownership, which will allow Viper’s oil production to grow in the back half of the year from the second quarter lows

 

Financials

·     Bank of New York (BK) Q2 EPS $1.01 vs. est. 87c; Q2 Net-interest margin 0.88%; Q2 provision fro credit losses $143M

·     Cincinnati Financial (CINF) announced that its consolidated Q2 results are expected to include pretax catastrophe losses of approximately $231M, adding 16.5% points to the quarterly combined ratio based on estimated property casualty earned premiums; said two multi-state storms in early April each caused approximately $50M in losses, in addition to catastrophe losses from several less severe storms

·     Hanover Insurance (THG) said it expects its 2Q catastrophe losses to be about $148 million, before taxes, or $117 million after taxes, which are driven primarily by hail and wind storms in the Midwest in April.

·     Selective Insurance Group Inc. (SIGI) preliminary Q2 2020 pre-tax net catastrophe losses totaling approximately $83M; sees GAAP combined ratio 90%-91%; saw 92%-93%; sees Q2 non-GAAP operating EPS 35c-40c vs. est. 23c

 

Healthcare

·     Moderna Inc.’s (MRNA) shares surged 16% after hours as its experimental vaccine for COVID-19 showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study, U.S. researchers reported on Tuesday. Volunteers who got two doses of the vaccine had high levels of virus-killing antibodies that exceeded the average levels seen in people who had recovered from COVID-19, the team reported in the New England Journal of Medicine.

·     Positive news may come Thursday on initial trials of the Oxford Covid-19 vaccine that is backed by AstraZeneca (AZN), according to a report from U.K. television broadcaster ITV. The report said “apparently the vaccine is generating the kind of antibody and T-cell (killer cell) response that the researchers would hope to see.” https://on.mktw.net/2ZvHANA

·     UnitedHealth (UNH) Q2 adj EPS $7.12 on revenue $62.1B vs. est. $5.18/$63.43B; backs FY20 adj. EPS view of $16.25-$16.55 vs. est. $16.29; Q2 medical care ratio declined to 70.2% from 83.1% last year, due to temporary deferral of care due to the pandemic; Q2 operating cost ratio increased to 16.1% from 13.9% in Q2 2019

·     Zynex (ZYXI) 2.5M share Block Trade priced at $22.00

·     GoHealth (GOCO) 43.5M share IPO priced at $21.00

 

Technology, Media & Telecom

·     Apple (AAPL) shares rise after the General Court of the European Union today annulled the European Commission’s decision that Apple owed $14.9B in taxes to Ireland. The court ruled that the EU failed to meet the legal standards in showing that Apple was granted illegal subsidy

·     ASML Holding NV (ASML) said Q2 profit rose sharply, driven by higher sales, and that its growth outlook for 2020 remains unchanged relative to the start of the year despite the coronavirus pandemic; posted Q2 profit of 751 million euros ($856.2 million) compared with EUR476 million for the year-earlier period while sales rose to EUR3.33 billion from EUR2.57 billion a year before

·     Alphabet’s (GOOGL) Google today signed an agreement to invest $4.5B in India’s Jio Platforms Ltd, taking a 7.73% stake in the company, pending regulatory review in India

·     Sirius XM Holdings (SIRI) declares quarterly cash dividend and adds a further $2 billion to stock repurchase program

·     Western Digital (WDC) initiated with an outperform and $60 tgt at Bernstein citing the underappreciated NAND business, noting that the roughly $4.4B valuation for the NAND business implied by WDC’s share price is only a quarter of comparable transactions