Early Look

Monday, July 27, 2020

U.S. stock futures are higher while both European and Asian markets were mixed, with investors focused on a busy week of earnings as well as expectations for a government stimulus deal to be revealed potentially today. This week marks an important one for earnings in the S&P 500 index as big cap tech such as Alphabet, Amazon, Apple and Facebook will all report within 24 hours of one another in a week that will feature another 180 members of the S&P 500. Gold prices are surging another $40 to above $1,968 an ounce setting new record highs as the dollar slips (multi0year los now against the euro) and Treasury prices rise. U.S. Treasury Secretary Steven Mnuchin said this weekend that Republicans were set to roll out the next COVID-19 aid package Monday and assured there was backing from the White House for the $1 trillion proposal that had failed late last week. The plan was expected to bring $105 billion to help schools reopen, new money for virus testing and benefits for businesses, including a fresh round of loans, and tax breaks. Mnuchin said extending an expiring unemployment benefit was a top priority for Trump, but called the $600 weekly aid “ridiculous” and a disincentive for people to go back to work. He also promised a fresh round of $1,200 stimulus checks would be coming in August. In Asian markets, The Nikkei Index fell -35 points to 22,715, the Shanghai Index rose 8 points to 3,205 and the Hang Seng Index dropped -102 points to 24,603. In Europe, the German DAX is higher by about 25 points to 12,865, while the FTSE 100 is down a few points to hold just above the 6,100 level. On the coronavirus front, reported cases and fatalities fell in many states hit hard by COVID-19, including Florida, Arizona, California, Texas and New York.

U.S. stocks closed lower Friday as the Nasdaq Composite posted its first back-to-back decline since mid-May, and the S&P 500 index its first consecutive day declines since early June as investors fretted about rising China-U.S. tensions and a lack of progress on another fiscal stimulus bill in Washington. Rising coronavirus cases in 40 American states are also limiting business and consumer activity. For the week, the Dow ended 0.8% lower, the S&P 500 had a decline of 0.3%, and the Nasdaq lost 1.3%. Last week economic data was strong as the IHS Markit flash manufacturing PMI rose to 51.3 in July from 49.8 in the prior month, but weaker than estimates for 51.4, while the flash service PMI rose to 49.6 in the month from 47.9 in the prior month, also below expectations at 50.4. New homes sales showed a rise of 13.8% in June, hitting an annual rate of 776,00 compared with a revised 682,000 prior.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -20.03 points, or 0.62%, to 3,215.63

·     The Dow Jones Industrial Average fell -182.41 points, or 0.68%, to 26,469.89

·     The Nasdaq Composite plunged -98.22.60 points, or 0.94%, to 10,363.18

·     The Russell 2000 Index declined -22.65 points, or 1.52% to 1,467.55

Economic Calendar for Today

·     8:30 AM EST      Durable Goods Orders, June-P…est. 7.0%

·     8:30 AM EST      Durable Goods Orders Ex: Transportation, June-P…est. 3.5%

·     10:30 AM EST    Dallas Fed Manufacturing Activity, July…est. (-4.9)

Earnings Calendar:

·     Earnings Before the Open: ABCB, ACI, AMG, ARLP, AVY, BOH, CBU, EQT, HAS, LECO, RPM, SI

·     Earnings After the Close: AGNC, AMKR, ARE, CATY, CINF, EHC, FFIV, FRTA, HTLF, HXL, JBT, NOV, OGS, PCH, PFG, QTS, TBI, TCF, UHS, USAK, VCRA

Sector News Breakdown

Consumer

·     Hasbro (HAS) Q2 EPS 2c on revs $860.3M vs. est. 20c and $985.5M; says remains committed to its dividend and remains well within its financial covenants; says revs will be impacted by COVID-19 related closures

·     McDonald’s (MCD) mentioned positively in Barron’s noting the stock fell during the early stages of the pandemic, but could rebound when earnings arrive next week. Signs point to big improvements for fast-food, with rising demand for drive-through meals and burgers. Earnings could easily top expectations

·     Barron’s Cover story was “Electric Trucks Are the Future. The Stocks Are for the Bold,” which suggests that though speculative fervor has sent shares of electric-truck makers like Nikola Corporation (NKLA) soaring, competition is stiff and Tesla-like returns may prove elusive. Nikola (NKLA) has no earnings or sales, and its hydrogen-powered truck won’t be available until 2023. But that hasn’t stopped some analysts from predicting more upside for its stock. If the shares fall under $25, that would be a better entry point Barron’s says

·     Electric-truck maker Workhorse (WKHS) soared about 230% in the past month. The company is bidding to supply vehicles for the U.S. Postal Service. If it wins, along with selling more trucks to the likes of UPS, it could hit a $27 price target, according to a Roth Capital Partners analyst, according to Barron’s

·     XpresSpa (XSPA) filed a mixed shelf registration

Energy, Industrials and Materials

·     PG&E (PCG) looks undervalued after exiting bankruptcy according to Barron’s; notes while the shares probably won’t pay dividends until at least 2023, the California utility has clarity on its wildfire liabilities and some downside stock-price protection

·     Barron’s thinks that stocks of Ballard Power Systems Inc (BLDP), Plug Power Inc (PLUG) and other makers of hydrogen fuel cells are in danger of jackknifing. Ballard Power Systems (BLDP)’s stock has been boosted by Wall Street’s renewed enthusiasm for its hydrogen technology. Its fuel cells go mainly into trucks and buses. Despite the rise, five of the eight analysts covering Ballard still rate it Buy, with an average price target around $19

·     Lynas (LYSCF) says it signed a contract with the U.S. Department of Defense to begin initial design work for a heavy rare earth separation facility in Texas, for which the Pentagon will provide initial funding.

Healthcare

·     AstraZeneca (AZN) entered into a global development and commercialization agreement with Daiichi Sankyo for its DS-1062, a TROP2 directed DXd antibody drug conjugate (ADC), for non-small cell lung cancer and triple negative breast cancer. Under the terms of the agreement, AstraZeneca will pay an upfront payment of $1B, in staged payments. Contingent payments of up to $5B include $1B for regulatory milestones, and $4B for sales-related milestone

·     Moderna (MRNA) announced that the Biomedical Advanced Research and Development Authority modified its existing contract with an added commitment of up to $472 million for the company’s Phase 3 study of the mRNA vaccine candidate (mRNA-1273) against COVID-19.

·     Barron’s points out that successful treatments for a cure for sickle cell would demonstrate the potential for gene therapy and boost biotech companies like Crispr Therapeutics AG (CRSP), Vertex Pharmaceuticals (VRTX), and Bluebird Bio (BLUE), as genetic therapies for sickle cell could fetch annual revenue of several billion dollars apiece

·     The FDA notifies Solid Biosciences (SLDB) that its IGNITE DMD Phase I/II clinical trial remains on clinical hold.

·     TCR2 Therapeutics (TCRR) announces positive interim data from the first five patients treated in the Phase 1 portion of the TC-210 Phase 1/2 trial for mesothelin-expressing solid tumors.

·     The FDA reissued LabCorp (LH) Covid test emergency use authorization to allow testing for people who do not have Covid-19 symptoms or who have no reason to suspect infection, and to allow pooled sample testing

Technology, Media & Telecom

·     SAP SE (SAP) announced Sunday it plans to take its Qualtrics cloud-software business public through an initial public offering. SAP bought Qualtrics ahead of its planned IPO in 2018 for around $8 billion.

·     Socket Mobile (SCKT) has launched two versions of the XCover Pro DuraSled: the DS800 XCover Pro for 1D barcode scanning and the DS840 XCover Pro for 1D and 2D barcode scanning