Mid-Morning Look

Wednesday, September 02, 2020

New day, same story as stocks continue to push higher with the Dow rising over 200 points moving closer to its record highs while the S&P and Nasdaq also extend gains, rising on further dovish Fed commentary this morning (Williams) and hopes for a stimulus deal as Mnuchin overnight offered a higher number for the Trump administration’s proposed ceiling for a follow-on bill at $1.5T (but is still way below what Democrats want). Commodity prices are sliding as the dollar rebounds against the euro after ECB comments overnight about the recent rise in the euro, weighing on prices of gold and oil early (WTI crude falls over 1%, tracking for lowest close in nearly three weeks). Stocks again finding traction after opening mixed, as investors take any-and-all opportunities to buy on the slightest pullback in markets. Economic data mixed the ADP private payroll data for August disappointed, missing estimates, but markets look to the nonfarm payroll report on Friday. Retailers getting a nice lift initially behind better-than-feared earnings results from VRA, CAL, GES, and Macy’s, while at the same time, energy stocks still among the most unloved on Wall Street. Big night of earnings in software space with CLDR, CRWD, GWRE, MDB, ZUO among those expected to report).

Economic Data

·     ADP private payrolls showed 428K jobs added in Aug, below est. 1.0M, while ADP July payrolls revised to 212K from 167K (ahead of Friday nonfarm payrolls report)

·     Factory Goods Orders for July rise 6.4%, slightly beating the 6.1% estimate while new orders ex-trans rose 2.1% in July after rising 4.8% the prior month and new orders ex-defense for July rise 5.6% after rising 7.3% in June; capital goods non-defense ex aircraft new orders for July rise 1.9% after rising 4.3% in June; durables orders for July rose 11.4% after rising 7.7% in June

Sector Movers Today

·     Retailers; GES shares surge after earnings and resumed its quarterly dividend of $0.1125 per share to investors, while didn’t issue detailed guidance – revenue drops across its Americas retail (-44.7% Y/Y), Americas wholesale (-51.6%), Europe (-39.5%), Asia (-39.7%) in Q2 due to COVID; VRA another winner in retail as profit and sales rose for the recent quarter, buoyed by an acquisition and e-commerce performance that softened the effects of Covid-19 store closures, though also isn’t providing fiscal 2021 guidance due to Covid-19 uncertainties; Macy’s (M) Q2 adj EPS loss smaller than expected on better margins of 23.6%; LE which posted a surprise sales gain for the recent quarter, is guiding for sales declines for the fiscal third and fourth quarters due to dented demand amid the Covid-19 pandemic; sporting goods and gun stocks higher ahead of results from SPWH tonight and SWBI tomorrow morning (follows beats from DKS, HIBB); SCVL one of weak spots in retail following its earnings results overnight

·     Biotech movers; CVAC shares active after reports that the company was meeting with Elon Musk, Tesla’s chief executive, in Germany this week; TWST announces potent sars-cov-2 neutralizing data from covid-19 therapeutic antibody program; MESO said it has received ethics approval to include Australian hospitals in the Phase 3 randomized controlled trial of remestemcel-L in ventilator-dependent COVID-19 patients with acute respiratory distress syndrome

·     Housing & Building Products; ZG upgraded to buy from hold at Deutsche Bank with $106 tgt as see meaningful upside potential to estimates across a number of vectors that can drive the shares higher – added Zillow to our short-term catalyst Call list as a Buy on June 8; HOME shares pull back after surge in shares, after posting only in-line quarterly revenue of $515M and not issuing guidance

Stock GAINERS

·     AMC +14%; after its latest update for U.S. reopening plans for the upcoming Labor Day weekend; said 70% of U.S. AMC locations will have resumed operations by this weekend as the company welcomes guests at about 420 theaters nationwide

·     BF +9%; as beats estimates for quarterly profit and net sales, as people stuck indoors due to COVID-19 restrictions bought more alcoholic beverages with bars closed/also maintains expectations to fully fund ongoing investments in its business and pay regular dividends

·     DKNG +7%; after Michael Jordan will provide strategic and creative input to the board of directors on strategy, product development, inclusion, equity and belonging, marketing activities

·     NVDA +4%; price tgts raised by several analysts today after officially unveiled its GeForce RTX 30 Series GPUs based on the Ampere architecture

·     OSH +8%; after announced last night that it is opening 3 pilot clinics within Walmart Supercenters – these clinics will provide a similar scope of services as a typical OSH center

·     PTON +3%; price target raised to $105 from $58 at JPMorgan and keeps an Overweight rating on the shares ahead of the company’s fiscal Q4 results

·     SDC +23%; after filings show its CEO acquires 12.78M shares in the company at price ranging between $7.63 to $8.25

·     VHC +6%; disclosed that the U.S. District Court for the Eastern District of Texas yesterday denied a motion for relief from judgment brought by Apple, upholding $440M verdict

Stock LAGGARDS

·     AMRN -14%; after reports that judges have been assigned in its appeal of an adverse ruling by a Nevada court opening the gate for generic versions of Vascepa (icosapent ethyl)

·     CRM -2%; little profit taking after recent surge and insider selling according to filings

·     GSX -13%; after SEC probe disclosed following earnings results (recall Muddy Waters, Citron has mentioned GSX as a fraud name in the past month in their short calls)

·     HOME -24%; shares pull back after surge in shares, after posting only in-line quarterly revenue of $515M and not issuing guidance

·     MRO -2%; as energy stocks continue to lag broader market with oil prices slipping

·     SCVL -9%; after Q2 revenue of $300.8M missed the $310M estimate as comp sales grew 12.6% and e-comm rose more than 100%