Morning Preview: October 15, 2020

Early Look

Thursday, October 15, 2020

Futures

Up/Down

%

Last

DJ Industrials

-280.00

0.99%

28,134

S&P 500

-35.50

1.01%

3,446

Nasdaq

-155.50

1.30%

11,818

 

 

Stocks extend losses overnight as the same concerns that markets dismissed over the last two-weeks (while equities advanced) are now the focus of concern for major averages as the economic impact fallout from increased coronavirus outbreaks in the U.S. and Europe, as well as fading hopes for U.S. fiscal stimulus amid the bickering in Washington, are weighing on stocks around the globe. In Asian markets, The Nikkei Index dropped -119 points to 23,507, the Shanghai Index slipped -8 points to 3,332 and the Hang Seng Index plunged over 500 points (2%) to 24,158. In Europe, the German DAX is down nearly -400 points (3%) to 12,640, while the FTSE 100 slides -130 points (2.2%) to the 5,800 level. Uncertainty surrounding the upcoming elections along with the stimulus talks, risks of a second wave of coronavirus infections, and the timeline for Covid-19 vaccines and treatments weigh. Earnings also come into focus next week after banking results this week have disappointed, while markets await weekly jobless claims which are expected to remain stubbornly high above the 800K level.

 

U.S. stocks posted their first two day losing streak in nearly a month (Sept 18th-21st) amid setbacks in earnings (BAC, WFC), politics and the pandemic throughout the session, though overall the selling pressure was relatively mild considering the recent run in equities. The dollar index retreated on Wednesday, a day after notching its biggest daily percentage gain in three weeks, and the euro hit its lowest level in a week as global equity markets remained cautious on waning hopes a COVID-19 vaccine or U.S. fiscal stimulus was on the horizon. U.S. Treasury Secretary Steve Mnuchin said he and House of Representatives Speaker Nancy Pelosi were “far apart” on some details of a relief package, and an agreement would be hard to reach prior to the election, which added to the selling pressure.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -23.26 points, or 0.66%, to 3,488.67

·     The Dow Jones Industrial Average fell -165.81 points, or 0.58%, to 28,514.00

·     The Nasdaq Composite dropped -95.17 points, or 0.80%, to 11,768.73

·     The Russell 2000 Index declined -15.20 points, or 0.93% to 1,621.65

 

Economic Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 883K

·     8:30 AM EST      Continuing Claims

·     8:30 AM EST      Import Prices MoM for September

·     8:30 AM EST      Export Prices MoM for September

·     8:30 AM EST      Philly Fed Business Index for October

·     10:30 AM EST    Weekly EIA Natural Gas Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: APHA, CMC, HOMB, MS, WBA, TFC, WNS

·     Earnings After the Close: ISRG, MRTN, TACO

 

 

Macro

Up/Down

Last

WTI Crude

-1.07

39.97

Brent

-1.05

42.27

Gold

-5.00

1,896.50

EUR/USD

-0.003

1.1716

JPY/USD

0.10

105.27

10-Year Note

-0.028

0.70%

 

 

World News

·     China’s consumer price inflation (CPI) continued to ease in September as prices rose 1.7% from a year earlier, moderating from a 2.4% rise in August, and came in below the forecast of 1.8%; food prices rose 7.9% from a year earlier compared with an increase of 11.2% in August

·     A record 22 U.S. states recorded more than 1,000 new COVID-19 cases on Wednesday, while Treasury Secretary Steve Mnuchin said he did not expect to reach a deal on a coronavirus relief package before the election.

·     Germany posted its highest ever increase in confirmed COVID-19 cases over the past 24 hours, with the number of infections reaching 6,638, and started reimposing restrictions on some of the biggest coronavirus hotspots such as Berlin.

·     The French government has declared a public health state of emergency and announced a curfew for Paris and eight other big cities from Saturday. “Our intensive care wards are under unsustainable pressure,” French President Emmanuel Macron declared.

·     Italy has also surpassed its daily record for newly diagnosed coronavirus cases, while a debate is taking place in England over whether a country-wide “circuit breaker” lockdown is needed. —-Per Seeking Alpha

·     Despite setting an October 15 deadline for reaching a trade “outline” with the EU, Prime Minister Boris Johnson is not walking away from negotiations. The Brexit transition period is due to expire on December 31, at which point the U.K. will leave the single market without a trade agreement

 

Sector News Breakdown

Consumer

·     United Airlines (UAL) Q3 adj EPS loss ($8.16) vs. est. loss ($7.47) and revs fell -78% YoY to $2.49B, mostly in-line with consensus; said Q3 passenger revenue $1.65B down 84%; said had liquidity of $19.4B at quarter end; lowered daily cash burn to $25M in Q3 from $40M on avg in Q2; said Q2 operating costs were down 48% and load factor was at 47.8%, PRASM down 46.8%

·     International Game technology (IGT) announces betting partnership with the NBA company becomes first b2b sports betting platform provider in U.S. to bring NBA official data, marks and logos to regional casinos and sportsbooks

·     MINISO (MNSO) 30.4M share IPO priced at $20.00

·     Sleep Number (SNBR) Q3 EPS $1.79 on revs $531M vs. est. $1.00/$515.82M; guides FY net sales +7-8% vs. est. +4%, sees FY EPS about $4.00 vs. est. $2.89

 

Energy

·     The American Petroleum Institute (API) reported U.S. crude supplies fell by -5.4M barrels for the week ended Oct. 9, while gasoline stockpiles fell -1.5M barrels, distillate inventories declined by -3.9M barrels and crude stocks at the Cushing, Okla., storage hub, rose by 2.2M barrels

·     Ameren (AEE) files automatic mixed securities shelf

·     Duke Energy (DUK) downgraded to Neutral from Outperform at Credit Suisse

·     Kinder Morgan (KMI) upgraded from Sell to Neutral w/ $13 pt at Goldman Sachs

·     Williams (WMB) downgraded from Buy to Neutral w/ $21 pt at Goldman Sachs

·     Array Technologies (ARRY) 47.5M share IPO priced at $22.00

·     VivoPower (VVPR) 2.941M share Secondary priced at $8.50

 

Financials

·     Assurant (AIZ) announced that it expects to record ~$110M pre-tax, or $87M after-tax, of reportable catastrophes in the Global Housing segment for 3Q20

·     New Fortress Energy (NFE) signed a Memorandum of Understanding with the Philippine National Oil Company to identify potential opportunities to accelerate the development of important LNG and power infrastructure in the country

·     Redfin (RDFN) reports preliminary Q3 revenue of $235M vs. a consensus of $221.31M; net income of $30.5M vs. $6.78M year-ago.

·     Truist Financial (TFC) Q3 adj. EPS 97c/$5.57B vs. est. 89c/$5.44B; Q3 CET1 capital ratio 10% and Q3 net charge-offs 0.42%

 

Healthcare

·     Regeneron’s (REGN) Inmazeb becomes first FDA-approved Ebola treatment

·     Accolade (ACCD) 2Q EPS ($0.47) vs. est. ($0.40) on revs $36.8Mm vs. est. $34.6Mm; guides 3Q revs $36-37Mm vs. est. $35Mm, sees FY revs $159-162Mm vs. est. $158Mm

·     Organogenesis Holdings (ORGO) guides Q3 revs $99-$100M vs. est. $72M and forecasts 2020 revenue to be between $311M-$314M vs. est. $275.1m

·     SI-Bone (SIBN) 3.19M share Spot Secondary priced at $22.00

·     Vertex (VRTX) said phase 2 study of vx-814 in patients with alpha-1 antitrypsin deficiency discontinued based upon safety and pharmacokinetic data; phase 2 study of vx-864 continues to enroll and dose patients; data expected in h1 2021

 

Industrials & Materials

·     Alcoa (AA) posted Q3 adj EPS loss ($1.17) vs. est. ($1.38) on sales $2.37B topping the $2.25B est. (but down -7.9% YoY); 3Q adjusted Ebitda $284 million, -27% YoY; ended quarter with cash on hand of $1.74B, which included $736M in net proceeds from a July 2020 debt issuance; expects 2020 shipment outlook for alumina to improve by 0.2 million metric tons to between 13.8 to 13.9 million metric tons

 

Technology, Media & Telecom

·     Fastly (FSLY) -25%; as guides Q3 revs $70M-$71M (which was below its prior $73.5M-$75.5M view) below est. $74.5M; says all previously issued Q3 and FY guidance that co disclosed in its q2 shareholder letter and related call on August 5 should not be relied upon due to the impacts of the uncertain geopolitical environment (shares of other CDN’s AKAM and NET slipped)

·     Taiwan Semiconductor (TSM) Q3 results beat top and bottom-line estimates as revenue rose 29% y/y to $12.14B vs. a consensus of $11.93B; gross margin for the quarter was 53.4% (guidance, 50%-52%), operating margin was 42.1% (guidance, 39%-41%); guides Q4 revenue, $12.4B-12.7B vs. est. $12.04B; gross margin, 51.5%-53.5%; Operating margin 40.5%-42.5%.

·     Twitter (TWTR) and Facebook (FB) shares were active after a New York Post story on Hunter Biden and Ukraine’s Burisma natural gas company ran into sharing roadblocks on key social media platforms, igniting partisan controversy today. Facebook acted to reduce the spread of the story on its platform, prompting Sen. Josh Hawley taking to Twitter to request the grounds for “actively censoring” the news report, adding “Expect a formal inquiry from my office.”

·     Leaf Group (LEAF) files to sell 8M shares of common stock for holders

·     ViacomCBS (VIAC) upgraded to Overweight from Equal Weight at Barclays

·     The DOJ’s antitrust division recently informed executives of AT&T (T) that a merger between DirecTV and Dish (DISH) will likely have to wait until faster 5G wireless service is more widely available in rural markets – NY Post reported

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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.