Early Look

Thursday, July 16, 2020

Futures	Up/Down	%	Last
DJ Industrials	-143.00	0.53%	26,622
S&P 500	-21.50	0.65%	3,198
Nasdaq	-151.50	1.41%	10,532

 

 

U.S. stock futures are pointing to a lower open, pulling back after surging Wednesday amid strength in SmallCaps (Russell 2000) energy, financials, industrials and other beaten-down sectors (airlines, cruise, consumer), tracking Europe and Asia lower as tensions between the U.S. and China heat up. The U.S. is weighing a sweeping travel ban on Chinese Communist Party officials, according to the New York Times after China recently imposed travel restrictions on U.S. lawmakers. Materials and Industrials are also taking a breather after China reported a 3.2% rise in gross domestic product in Q2 (topping estimates of 2% and well off the -6.8% decline in Q1), though it also reported a surprise decline in retail sales for June. In Asian markets, The Nikkei Index fell -175 points to 22,770, the Shanghai Index plunged -151 points (4.5%) to 3,210 and the Hang Seng Index dropped -510 points to 24,970. In Europe, the German DAX is down about -75 points to 12,850, while the FTSE 100 is lower by 30 points to around 6,250. In stocks news, Twitter (TWTR) shares fall after prominent accounts hacked in bitcoin scams late Wednesday, investors prepare for another round of earnings this morning (MS, BAC, JNJ) with tech in focus tonight with Netflix earnings expected out. Worries also remain high that the stock market has gone overboard in its rally: It has taken less than four months for the S&P 500 to almost return to its record after being down nearly 34%. Technology shares are under the most pressure this morning, continuing the theme for the week as the Nasdaq Comp slips further are touching record highs Monday.

Economic Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 1.25M

·     8:30 AM EST      Continuing Claims…est.17.5M

·     8:30 AM EST      Retail Sales MoM for June…est. 5.0%

·     8:30 AM EST      Retail Sales Ex: Autos for June…est. 5.0%

·     8:30 AM EST      Philly Fed Business Outlook for July…est. 20.0

·     10:00 AM EST    Business Inventories for May…est. (-2.3%)

·     10:00 AM EST    NAHB Housing Market Index for July…est. 61

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

·     4:00 PM EST       Net-Long Term TIC Flows for May

 

Earnings Calendar:

·     Earnings Before the Open: ABT, ANGO, BAC, BMI, DPZ, IIIN, JNJ, MS, SON, TFC

·     Earnings After the Close: AHER, FNB, JBHT, NFLX, PPG, WAL

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 29.04 points, or 0.91%, to 3,226.56

·     The Dow Jones Industrial Average rose 227.51 points, or 0.85%, to 26,870.10

·     The Nasdaq Composite climbed 61.92 points, or 0.59%, to 10,550.49

·     The Russell 2000 Index spiked 50.01 points, or 3.50% to 1,478.27

 

 

Macro	Up/Down	Last
WTI Crude	-0.41	40.79
Brent	-0.26	43.53
Gold	-6.40	1,807.40
EUR/USD	-0.0025	1.1387
JPY/USD	0.24	107.18
10-Year Note	-0.011	0.618%

 

 

World News

·     China Q2 GDP expanded 3.2% from a year ago, beating an analyst consensus estimate of 2%, and surging back from a 6.8% rout in the first quarter. Compared to the first quarter, growth was up 11.5%, the National Bureau of Statistics said, while the first half saw a drop of 1.6%.

·     The European Central Bank (ECB) isn’t expected to change interest rates or its quantitative easing program at Thursday’s meeting, so attention will focus on ECB President Christine Lagarde’s press conference

·     The global tally for confirmed cases of the coronavirus that causes COVID-19 climbed above 13.3 million on Wednesday, according to data by Johns Hopkins University, after 230,400 new infections were recorded on Wednesday, the highest number for a one-day period since the start of the outbreak. The previous record was about 229,900 set last Friday.

 

Sector News Breakdown

Consumer

·     Sleep Number (SNBR) Q2 EPS loss (45c) on sales $284.9M better than the loss of (80c) and $216.36M; not providing guidance, expects to meet liquidity needs from operating cash flows and existing credit facility; Q2 gross margin 57.2% vs. 61.0% last year; 95% of retail stores are now open compared with 53% open on average during the second quarter

·     Carnival (CCL) said it sold four Holland America Line ships to undisclosed buyers and will postpone some cruises into 2022. Carnival said it is seeking to raise ~$1.26B in a bond offering.

·     DraftKings (DKNG) said it launched its casino product suite in West Virginia. The company debuted its standalone casino and sports betting mobile app in association with Hollywood Casino at Charlestown Races in West Virginia.

 

Energy

·     California Resources Corp (CRC) filed for Chapter 11 on Wednesday after defaulting on interest payments, becoming the latest U.S. energy major to seek bankruptcy protection in recent years following the slump in oil prices.

·     Transocean (RIG) total backlog approximately $8.9 billion

 

Financials

·     Hartford Financial (HIG) announced preliminary Q2 earnings estimates including net income available to common stockholders of $463 million, or $1.29 per diluted share, and core earnings of $438 million, or $1.22 per diluted share (vs. est. 87c); estimates Q2 incurred losses related to COVID-19 of $251 million, before tax, or $198 million, after tax

·     CNA Financial (CNA) estimates Q2 net catastrophe losses of $182M related to COVID-19, $61M related to civil unrest, and $58M related primarily to severe weather-related events.

·     HeadHunter (HHR) 5M share Secondary priced at $20.25

·     Trean Insurance (TIG) 10.714M share IPO priced at $15.00

·     Postal Realty Trust (PSTL) 3.5M share Secondary priced at $13.00

 

Healthcare

·     Johnson & Johnson (JNJ) Q2 adj EPS $1.67 on sales $18.34B vs. est. $1.50 and $17.64B; 2 worldwide medical device sales $4.29B vs. est. $3.4B; boosts its full-year sales and EPS guidance to $7..75-$7.95 and $81B-$82.5B above consensus of $7.75 and $79.66B; qtrly sales declined 10.8%, operational decline of 9.0%, adj. operational decline of 8.8%, primarily due to negative impact of covid-19 pandemic

·     Aptose Biosciences (APTO) 10.5M share Spot Secondary priced at $5.25

·     Atreca (BCEL) 7.8M share Spot Secondary priced at $16.00

·     Mallinckrodt (MNK) said that the Cardiovascular and Renal Drugs Advisory Committee of the U.S. FDA voted 8-7 to recommend approval for its investigational agent Terlipressin to treat adults with hepatorenal syndrome type 1.

·     Adaptive Biotechnologies (ADPT) 8M share Secondary priced at $40.00

·     Profound Medical (PROF) 2.76M share Secondary priced at $14.50

·     Relay Therapeutics (RLAY) 20M share IPO priced at $20.00

 

Industrials & Materials

·     Alcoa (AA) Q2 adj EPS loss (2c) on revs $2.15B vs. est. loss (46c) and $2.11B (recall they gave guidance last week); continuing to progress on strategic actions, including ongoing review of production portfolio and non-core assets; – forecast Alumina Shipments for the full year of 13.6M-13.7M metric tons; Q2 adj Ebitda fell -59% YoY to $185M; experienced a sequential decline in demand for aluminum value-added products in Q2

·     Ball Corp. (BLL) Crown Holdings (CCK) shares fell late yesterday after a local news outlet in Pennsylvania (WFMZ) reported that Can-Pack, the fourth-largest global beverage can producer, will build its first plant in the US. Citigroup said based on the number of employees and size of the investment, it could be a multi-line facility with 2B+ can capacity and views the news as a clear negative for BLL, CCK, and ARD

·     O-I Glass (OI) said it sees Q2 EPS about breakeven below the consensus 15c saying overall Q2 total sales volumes were down approximately 15% from the prior year; said operating performance was very good as the company’s turnaround initiatives continued to progress well including significant efforts to control costs to partially mitigate the impact of COVID-19

·     Sandvik said it expects recovery in the market following lockdowns to be slow citing low business activity in its key end-market segments, such as automotive, aerospace, energy

·     Virgin Galactic Holdings Inc. (SPCE) said Michael Colglazier will replace George Whitesides, who will become Chief Space Officer, effective Jul 20 (Colglazier was formerly head of Disney Parks International, responsible for operations, strategy, among other things)

 

Technology, Media & Telecom

·     Taiwan Semiconductor (TSM) reported Q2 EPS of 78c, topping views by 8c while revs of $103.8B missed estimates; guided Q3 revenue $11.2B-11.5B vs. consensus of $10.77B with gross margins 50-52% and operating margin 39-41%; said FY20 capital budget to be $16B-$17B.

·     Dell (DELL) is exploring a potential spin-off of its 81% stake in VMware (VMW); says exploration is in an early stage and any spin-off would not occur before September 2021

·     Twitter (TWTR) shares slipped after a number of major accounts on the social networking site were apparently hacked including the official Twitter accounts of Bill Gates, Jeff Bezos, Michael Bloomberg, Joe Biden and Elon Musk seeking bitcoin donations

·     IAC Corp. (IAC) says will share key monthly metrics but will no longer provide specific forward guidance; said Vimeo June rev up 43% and ending subscribers up 16%; Angi HomeServices revs up 14%, Dotdash June rev up 16%; applications rev down 29% in June

·     Cisco (CSCO) downgraded to Neutral from Overweight at JPMorgan

·     VMware (VMW) has expanded its stock repurchase authorization by another $1B.