Mid-Morning Look: November 23, 2020

Mid-Morning Look

Monday, November 23, 2020

Index

Up/Down

%

Last

 

DJ Industrials

123.99

0.42%

29,387

S&P 500

6.70

0.19%

3,564

Nasdaq

-12.02

0.08%

11,845

Russell 2000

16.39

0.92%

1,801

 

 

U.S. stocks open higher following another round of upbeat vaccine related news/data, pushing futures up overnight before slipping on the open. Among today’s headlines, AZN coronavirus vaccine reduced the risk of Covid-19 infection by an average of 70.4%, according to an interim analysis of large Phase 3 trials (was as much as 90% effective and as low as 62% depending on the dosage given). REGN Covid-19 antibody cocktail received Emergency Use Authorization from the FDA and MRK announced a deal to buy Covid-19 treatment clinical-stage biopharmaceutical company OncoImmune for an upfront payment of $425 million in cash. Retailers extending gains from last week on hopes for a bullish holiday season (after good results from several names last week – TGT, GPS, LB), while electric vehicles soar on growth expectations for that industry (TSLA, NKLA, BLNK, AYRO among names higher). Oil stocks outperform along with financials on rotation into cyclical sectors (lifting the Smallcap Russell 2000 yet again), while gold prices tumble. A short week ahead with the Thanksgiving Day holiday on Thursday as markets still focus on the surging Covid-19 cases into the holiday and vaccine hopes.

 

Economic Data

·     The November Markit U.S. PMI Composite Flash reported at 57.9 vs. 56.3 prior (best reading since March 2015) as the Employment gauge rose to 57.4 from 53.2 in October (best reading since this data series began more than 10 years ago). Markit November flash manufacturing PMI at 56.7 (vs 53.4 in October) – best since Oct 2014.

 

 

Macro

Up/Down

Last

 

WTI Crude

0.36

42.78

Brent

0.44

45.40

Gold

-38.00

1,834.40

EUR/USD

-0.0028

1.1823

JPY/USD

0.38

104.26

10-Year Note

0.028

0.857%

 

 

Sector Movers Today

·     Healthcare services and providers; SDC has partnered with MET to deliver in-network coverage of SmileDirectClub’s convenient, affordable, remote orthodontic care to the more than 20 million individuals insured under its dental plans; in research, TVTY upgraded to Buy from Neutral at Guggenheim following the sale of its Nutrition segment (expected to close in 4Q), as will revert to exclusively focusing on Healthcare. Guggenheim downgraded HQY to neutral from buy noting shares are up meaningfully in recent weeks, +35% in November vs. S&P 500 +9%, driven by improving investor confidence in the potential recovery of the business; Cowen consumer survey suggests that roughly 39% of refill retail scripts could switch to AMZN pharmacy and the impact is worse for WBA than for CVS given CVS‘ greater diversification

·     KeyBanc downgrading industrial REITs PLD to sector-weight as the group could be sources of funds during the expected value rotation while upgraded FR to Overweight as the stock represents a value name within the industrial group, allowing exposure both to the capital rotation and solid industrial fundamentals; Raymond James downgraded PK and RLJ in lodging REITs saying fundamentals, stocks veering opposite directions; Jefferies also makes changes in lodging REITs as upgraded PK to Buy while downgraded SHO to Hold as consider the prospects for continued volatility through 1H21, but believe that ultimately, higher leverage to recovery should prevail, provided the portfolios remain intact; SPG received a positive mention in this weekend’s edition of Barron’s; in M&A news, RESI agreed to a revised takeover deal with a group led by investment firm Pretium Partners LLC and funds managed by ARES that raises the purchase price to $16.25 a share from $13.50. https://bit.ly/2UQ8m07

·     Healthcare services and providers; SDC has partnered with MET to deliver in-network coverage of SmileDirectClub’s convenient, affordable, remote orthodontic care to the more than 20 million individuals insured under its dental plans; in research, TVTY upgraded to Buy from Neutral at Guggenheim following the sale of its Nutrition segment (expected to close in 4Q), as will revert to exclusively focusing on Healthcare. Guggenheim downgraded HQY to neutral from buy noting shares are up meaningfully in recent weeks, +35% in November vs. S&P 500 +9%, driven by improving investor confidence in the potential recovery of the business; Cowen consumer survey suggests that roughly 39% of refill retail scripts could switch to AMZN pharmacy and the impact is worse for WBA than for CVS given CVS‘ greater diversification

·     Biotech movers; REGN said the antibody cocktail Casirivimab and Imdevimab administered together, a therapy currently being investigated for use in COVID-19, has received Emergency Use Authorization (EAU) from the FDA; EIGR said the FDA approved its experimental drug Zokinvy for treating Hutchinson-Gilford Progeria Syndrome and processing-deficient Progeroid Laminopathies, genetic disorders that cause children to age rapidly; ABIO said the FDA has given fast-track development approval to AB201 as a potential treatment for Covid-19; SDGR rises on collaboration with BMY to discover, develop, and commercialize therapeutics in multiple disease areas; CYTK down after AMGN ends collaboration with co over heart drugs development

 

Stock GAINERS

·     ATUS +9%; announces commencement of tender offer to repurchase up to $2.5 billion of its class a common stock

·     BLNK +30%; rises as much as 20% for the 4th time in last 6-days and up for a 6th straight day overall amid surge in EV space (LI, AYRO, SBE, TSLA, NIO, WKHS, NKLA strong early)

·     KFY +4%; Q2 revenue falls ~13% to $437.8M but came in above the estimates of $376.1M while also posts adjusted profit above estimates as well

·     OXY +8%; as energy stocks again among top leaders in the S&P (oil comes into week with 3-week winning streak) – APA, DVC, MRO, VLO among leaders

·     RESI +21%; agreed to a revised takeover deal with a group led by investment firm Pretium Partners LLC and funds managed by ARES that raises the purchase price to $16.25 a share from $13.50 https://bit.ly/2UQ8m07

·     SDC +11%; has partnered with MET to deliver in-network coverage of SmileDirectClub’s convenient, affordable, remote orthodontic care to the more than 20 million individuals insured under its dental plans

·     TTD +2%; tgt raised to Street high $1,000 from $750 saying the pandemic pulled forward by 1-2 years key connected TV upside drivers for Trade Desk

 

Stock LAGGARDS

·     AZN -3%; said that its coronavirus vaccine reduced the risk of Covid-19 infection by an average of 70.4%, according to an interim analysis of large Phase III trials conducted in the U.K. and Brazil (Leerink cautious saying results “embellished,” and raising questions after safety data disclosures)

·     CYTK -2%; after AMGN ends collaboration with co over heart drugs development

·     K -2%; downgraded to neutral at Credit Suisse and cut tgt to $68 from $77 as expects mgmt to guide to a year of elevated investment in 2021 without promising elevated sales growth

·     NEM -2%; as gold miners decline with slide in gold after better PMI data

·     NLS -5%; stay-at-home winners (ZM, PTON, NLS) pressured early on the ongoing positive vaccine related news over the last week

·     WERN -1%; Bank America downgraded KNX, WERN, TFII to neutral from buy and cut USX to underperform (and lower tgts) as believes selected truck stocks will struggle to move higher in the near-term given what he sees as this sentiment headwind

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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.