Mid-Morning Look: November 17, 2020

Mid-Morning Look

Tuesday, November 17, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. stocks are seeing a modest pullback after touching record highs on Monday for the S&P 500, the Dow Jones Industrial Average and the Russell 2000 index as a rebound in cyclical related stocks help major averages play catch up the tech heavy Nasdaq Composite. Stocks were buoyed once again on upbeat vaccine clinical trial data yesterday, this time from Moderna (MRNA) which showed an efficacy rate above 94%, a strong follow up to Pfizer (PFE) data the week prior. The number of newly reported Covid-19 cases in the U.S. jumped on Monday to over 166,000 cases from a day earlier, and the number of those hospitalized hit another record – but investors focus on the long-term hope of a vaccine vs. the near-term economic impact of new tighter restrictions by certain states. In stock news, TSLA rises after being announced it will join the S&P 500 index in the December 21st index rebalance, while pharmacies (CVS, WBA, RAD) and distributors (ABC, CAH, MCK) fall after AMZN launched Amazon Pharmacy as shoppers can pay using their health insurance. Prime members who don’t use their insurance are eligible for discounts on generic and brand-name drugs on Amazon’s site or at about 50,000 participating pharmacies. Economic data plentiful on the day (see below), while Treasury yields dip.


Economic Data

·     October Industrial Production rose +1.1% M/M to 103.2 vs. +1.0% consensus and -0.4% prior (revised) while Manufacturing Output +1.0% M/M vs. consensus of +0.9%; Capacity Utilization 72.8% vs. 72.2% consensus

·     October Retail Sales rose +0.3% M/M vs. +0.4% consensus and +1.6% prior (revised from 1.9%) while Retail Sales (ex: autos ) rise +0.2% M/M vs. +0.5% consensus and +1.2% prior (revised from +1.5%); Ex-gas and autos: +0.2% M/M vs. +0.6% expected and +1.2% prior (revised from +1.5%).

·     Import prices for October fell -0.1% M/M vs. +0.2% consensus and +0.2% prior (revised from +0.3%) driven by lower fuel prices, which more than offset higher nonfuel prices. U.S. import prices fell 1.0% for the year ended in October. Export prices +0.2% M/M vs. +0.3% consensus and +0.6% prior. U.S. export prices declined 1.6% for the year ended October

·     Business inventories rose 0.7% in September after gaining 0.3% in August and compared to estimate for an advance of 0.6% in September. Retail inventories surged 1.7% in September instead of 1.6% as estimated in an advance report published last month. That followed a 0.5% increase in August. Motor vehicle inventories accelerated 3.1%

·     Homebuilder confidence rises to a record in November as the NAHB Housing Market Index: 90 vs. 85 consensus and 85 prior and present single-family sales: 96 vs. 90 previous







WTI Crude















10-Year Note





Sector Movers Today

·     Healthcare services and providers; sector smashed today on the AMZN pharmacy news, led by declines in CVS and WBA as well as distributors ABC, CAH, MCK as Amazon will allow customers in the U.S. to order prescription medications for home delivery, including free delivery for Amazon Prime members (cutting foot traffic to pharmacy retailers); GDRX was another name getting hurt this morning on AMZN push into pharmacy; SDC Q3 EPS loss (11c) on revs $168.5M vs. est. loss (14c) and $146.23M as Q3 unique aligner shipments of 93,301 and said average aligner gross sales price of $1,794 for Q3, compared to $1,788 YoY; TVTY raised to Overweight from Neutral at Cantor; ACHC upgraded to buy from neutral and raise tgt to $54 from $37 at UBS

·     Retailers; WMT reported Q3 Adj EPS $1.34 on revs $134.7B, both topping estimates ($1.18, $131B), Comp Sales +6.4%, e-commerce +79% YoY (slowing from Q2 +97%), and membership income +10.4% on strong sign-up and renewal rates, but the company does not provide guidance; KSS posted a surprise quarterly profit as Q3 adj EPS 1c vs. est. loss (43c) on revs $3.97B vs. est. $3.87B, though Q3 comp sales fell (-13.3%) more than est. (-11.3%) decline as dept store traffic was impacted by the pandemic, and the company announced plans to reinstate dividend during 1H21; COST announced a $10/share one-time special dividend, payable December 11; GME investor Ryan Cohen pushes to conduct a strategic review of its business and reconsider its emphasis on physical store sales to invest in e-commerce and tech-driven digital experiences

·     Auto sector; TSLA will be added to the S&P 500 index effective prior to the open of trading December 21st to coincide with the December quarterly rebalance; in auto retail, Bank America downgraded ADNT and APTV to underperform from buy, cuts LEA to neutral from buy and cuts KAR to underperform from neutral – upgraded SAH to buy from underperform saying the speed of the automotive industry recovery over the past several months puts at risk ongoing sequential improvement into 2021, while sees it being too early to value stocks in the sector on 2022 ests; CRNC results for the quarter and forward guidance were well ahead of the Street on the top line as well as EBITDA (downgraded at RBC on valuation)

·     Aerospace & Defense; BA little profit taking after surging the last few days, boosting the Dow Jones to record highs; TXT was upgraded from Neutral to Positive with $55 tgt at Susquehanna as see positive momentum occurring across all four of TXT’s businesses, with its largest segment, Textron Aviation, set for a notable return to profitability in 4Q; RTX missile system intercepts and destroys intercontinental ballistic missile (ICBM) target outside Earth’s atmosphere calling it an “unprecedented homeland defense test”; MAXR upgraded to buy from hold and increasing our price target to $36 at Canaccord as believe the recent pull-back due to delay risks around the Space Infrastructure segment create an opportunity to own a vertically integrated space company with strong positions in both commercial and gov’t markets at an attractive valuation

·     Internet; Chinese Internet names active after the WSJ reported Chinese companies with shares traded in America would be required to use auditors overseen by U.S. regulators or face being kicked off exchanges under a plan being drafted by regulators https://on.wsj.com/35BL4B5 ; BIDU reported a solid beat and raise and announced the acquisition of JOYY’s live streaming to diversify revenue stream; IQ reported a mixed quarter and weaker guide with membership for the Q weaker and in line ARPU; SPT downgrade to EW from OW at Morgan Stanley but up tgt to $51 saying the story has plenty of room to run with a $25B TAM



·     COST +2%; announced a $10/share one-time special dividend, payable December 11

·     CRMT +2%; Q2 EPS $3.05 vs consensus $2.35 and revenue $223.4M vs consensus $202.4M; same store revenue growth +12.8% vs year-ago +12.2%; retail units sold 14,022 vs year-ago 13,763

·     DKNG +5%; after Loop Capital initiates a buy and street high $100 tgt saying it sees DraftKings as the biggest beneficiary of the fast-growing online gaming industry.

·     KSS +3%; posted a surprise quarterly profit as Q3 adj EPS 1c vs. est. loss (43c) on revs $3.97B vs. est. $3.87B, though Q3 comp sales fell (-13.3%) more than est. (-11.3%) decline as dept store traffic was impacted by the pandemic

·     LXRX +49%; after saying two Phase 3 studies achieved their primary endpoints by showing statistically significant reductions in cardiovascular deaths, hospitalizations for heart failure and urgent heart failure visits in patients treated with sotagliflozin as compared with placebo.

·     TSLA +12%; will be added to the S&P 500 index effective prior to the open of trading December 21st to coincide with the December quarterly rebalance

·     YY +7%; after reported Q3 revenue above Street estimates and after BIDU to acquire YY’s video-based entertainment live streaming business in China for about $3.6 bln in cash



·     ALKS -1% said it received a Complete Response Letter (CRL) from the FDA regarding its New Drug Application for the treatment of adults with schizophrenia and adults with bipolar I disorder

·     BCLI -65%; said data from late-stage study shows its treatment for amyotrophic lateral sclerosis (ALS) did not meet its main goal as was not statistical significance in primary efficacy endpoint

·     BSX -8%; after initiates global recall of all unused inventory of its LOTUS Edge Aortic Valve System and discontinues the product due to complexities associated with the product delivery system – sees pre-tax charge of about $225M-$300M

·     HD -2%; reported a beat on the top and bottom line on better comp sales which rose 24.6% topping consensus of 14%, but shares pressured after saying it will spend about $1 billion more on employees’ compensation and as gross margins of 34.2% in Q3

·     IQ -15%; soft quarter against low expectations; second consecutive subscriber miss by a large margin + continued shift in time spent away from long-form streaming

·     IRTC -6%; downgraded at Oppenheimer as the stock is near their tgt, currently trades at ~19x FY21E P/S, and simply can’t keep up on this rat race of crazy multiples and is baking in a positive scenario of proposed Medicare CPT rates going forward while they worry it gets punted back

·     RAD -16%; pharmacy retailers (CVS, WBA) fall after Amazon’s Pharmacy launch – also hitting shares of GDRX, ABC, CAH, MCK in suppliers



·     Keurig Dr Pepper (KDP) 60M share Spot Secondary priced at $28.45

·     LendingTree (TREE) 2.96M share Spot Secondary priced at $295.00

·     Plug Power (PLUG) 38M share Spot Secondary priced at $22.25

·     Veritiv (VRTV) 1.4M share Spot Secondary priced at $18.50

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Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.