Early Look

Friday, March 27, 2020

U.S. stock futures are notably lower, but off their worst levels as some profit taking ensues after three straight days of solid gains heading into the weekend. U.S. stocks roared higher Thursday, closing up for the third day in a row despite a report showing unemployment claims soared to a record 3.28 million last week, as the coronavirus pandemic shut down businesses across the nation. Markets have taken some comfort from the passage of a historic $2 trillion economic stimulus bill by the Senate, putting it one step closer to being signed into law (just awaits approval from Congress). Stocks scored their third successive day of gains in about six weeks while over the past three days, the Dow has gained 21.3%, its best three-day stretch since 1931, while the S&P 500 has gained 17.5%, the best three-day streak since 1933, according to Dow Jones Market Data. For the year to date, the Dow is down about 21%, the S&P 500 is about 18.7% lower, and the technology-heavy Nasdaq is off 13.1%. In Asian markets, The Nikkei Index jumped 724 points to 19,389, the Shanghai Index edged higher 7 points to settle the week at 2,772 and the Hang Seng Index gained 131 points to 23,484. In Europe, the German DAX is lower by -200 points to 9,800, while the FTSE 100 is also down around -200 points to 5,600. The Dollar Spot Index is headed for its biggest weekly loss since 2009, with the greenback sliding against 16 major peers, just one week removed investors dumped everything they could into U.S. dollars, sending it to 3-year highs. The dollar has since slipped amid less stress in funding markets amid provisions by global central banks. Coronavirus global cases and deaths continue to rise, especially in the U.S., while markets weigh the recent central bank actions and government stimulus efforts against it.

Market Closing Prices Yesterday

·     The S&P 500 Index spiked 154.51 points, or 6.24%, to 2,630.07

·     The Dow Jones Industrial Average rose 1,351.62 points, or 6.38%, to 22,552.17

·     The Nasdaq Composite surged 413.24 points, or 5.60%, to 7,797.54

·     The Russell 2000 Index advanced 69.95 points, or 6.30% to 1,180.32

Economic Calendar for Today

·     8:30 AM EST      Personal Income for February

·     8:30 AM EST      Personal Spending for February

·     8:30 AM EST      PCE Deflator MoM for Feb

·     8:30 AM EST      PCE Core Deflator MoM for Feb

·     10:00 AM EST    University of Michigan Sentiment, Mar-F

·     1:00 PM EST       Baker Hughes Weekly Rig Count

World News

·     The Federal Reserve’s balance sheet expanded to a record $5.3 trillion in the week ended March 25 from $4.7 trillion in the prior week, the central bank said Thursday. The Fed’s balance sheet is expected to continue to expand as the central bank steps in to try to keep credit flowing in all corners of the financial market, including Treasuries, commercial paper and municipal bonds.

·     Fitch Ratings affirmed the United States of America’s Long-Term Foreign-Currency Issuer Default Rating at ‘AAA’ with a Stable Rating Outlook. The rating agency said, “Fitch considers U.S. debt tolerance to be higher than that of other ‘AAA’ sovereigns.

·     The U.K. Chancellor said self-employed people facing financial difficulties can get 80% of their monthly wages covered by the government (capped at £2,500 a month, or about $3,050), as he unveiled a rescue package to help cope with lost income amid a near-shutdown of the economy due to the coronavirus pandemic.

·     India’s central bank cut its key lending rate by 75 basis points in an unscheduled move on Friday, reducing its repurchase rate to 4.40% from 5.15%. The central bank also cut its reverse repurchase rate by 90 basis points to 4.00%.

·     China’s industrial profits tumbled 38.3% in the January-February period from a year ago, according to official data. In the first two months of 2020, China’s state-owned enterprises posted a 32.9% on-year decline in profits, while private firms reported a 33.6% fall

Sector News Breakdown

Consumer

·     GameStop (GME) Q4 adjusted EPS $1.27 on sales $2.19B vs. est. 77c and $2.24B; suspends guidance; Q4 comp sales fell (-26.1%) vs. est. decline (-25.5%); says debt reduced by $401M, inventory reduced by 31%; said COVID-19 led to increased demand of products

·     General Motors (GM) asks employees to defer 20% of pay until 4q 2020 or 1q 2021; 6,500 salaried employees to furlough, get 75% of pay

·     Hilton Hotels (HLT) said it was suspending its stock buybacks and dividend while also furloughing its staff among other measures in response to the coronavirus pandemic impact

·     KB Homes (KBH) Q1 EPS 63c on revs $1.08B vs. est. $956.1M; Q1 net orders rose 31% vs. down -4% YoY; said delivered 2,752 home, up 28% YoYs; has withdrawn guidance for 2020 fiscal year

·     Lear Corp. (LEA) drawing down $1.0B on revolving credit facility, while withdraws full year 2020 guidance and is temporarily suspending share repurchases and quarterly dividend

·     Lulu Lemon (LULU) Q4 adj EPS $2.28 on revs $1.4B vs. est. $2.25 and $1.38B; 4Q gross margin 58.0% vs. 57.3% YoY; 4Q operating margin 29.8%; Q4 comparable store sales up 9%, direct to consumer net revenue increased 41%

·     Major cruise-ship operators (CCL, NCLH, RCL) will not qualify for aid under the roughly $2T coronavirus stimulus package headed for a House vote Friday, The Wall Street Journal reported

·     Spirit Airlines, Inc. (SAVE) said it identified material weakness in internal controls; relates to the operation of certain review controls over the preparation of the 2019 statement of cash flows

·     Sportsman’s Warehouse (SPWH) 4Q adjusted EPS 21c on sales $258.2M vs. est. 21c and $257M; 4Q comparable sales -4.8% while said is not issuing forward guidance

Energy, Industrials & Materials

·     A new OPEC+ deal to balance oil markets might be possible if other countries join in, according to Kirill Dmitriev, head of Russia’s sovereign wealth fund. Dmitriev and Energy Minister Alexander Novak were Russia’s top negotiators in the production cut deal with OPEC (current pact expires on March 31).

·     Royal Gold (RGLD) estimates its prospective depletion rates will increase to $750 to $775 per ounce of gold and $1.45 to $1.50 per pound of copper due to the reduction in gold and copper reserves at Mount Milligan, as reported by Centerra.

·     Scotts Miracle-Gro (SMG) said it sees U.S. consumer segment sales up about 12%, Hawthorne sales up about 55% in fiscal 2Q; says demand for products in Consumer, Hawthorne segments surged in recent weeks

Healthcare

·     Xeris Pharmaceuticals (XERS) citing uncertainty of COID-19, announces a limited-time $0 copay for its glucagon prefilled syringe, Gvoke PFS, effective now through April 30 for commercially insured patients

·     SmileDirectClub (SDC) has begun 3D printing medical-grade face shields for healthcare workers amidst the COVID-19 pandemic as concern surrounding availability of medical supplies grows

Technology, Media & Telecom

·     Progress Software (PRGS) Q1 adj EPS 76c on revs $113.8M vs. est. 70c and $109.7M; cuts FY adjusted revenue to $428M-$438M from $448M-$455M and also lowers year EPS to $2.73-$2.80 from $2.87-$2.92

·     Science Applications (SAIC) 4q adj eps $1.58, est. $1.34; 4q rev $1.54B, est. $1.57B; 4q book-to-bill ratio 1.5, fiscal year ratio 1.2