Early Look

Monday, October 26, 2020

Futures	Up/Down	%	Last
DJ Industrials	-258.00	0.92%	27,931
S&P 500	-31.50	0.91%	3,420
Nasdaq	-91.00	0.78%	11,572

 

 

Stock futures in the U.S. are tumbling, as investors are hit by new worries over fiscal stimulus, Covid-19 restrictions, China sanctions on U.S and corporate profits ahead of the busiest week of earnings coming up, as roughly 186 of the S&P 500 are expected to report over the next five days, including Thursday’s (10/29) barrage of Apple, Alphabet, Amazon, Facebook and Twitter. Stocks rallied to finish Friday higher, but closed the week lower, dropping on stimulus headlines (or lack thereof). China will impose sanctions on U.S. entities participating in Washington’s arms sales to Taiwan, a foreign ministry spokesman said on Monday as BA, LMT, and RTX will be sanctioned. The U.S. reported a record of more than 83,000 new COVID-19 infections on both Friday and Saturday, including a spike in NY cases. Italy and Spain separately introduced new restrictions as World Health Organization Director-General Tedros said Northern Hemisphere countries are facing a “dangerous moment.” And lastly, with just over a week before the U.S. presidential election, negotiators appear to be at an impasse over a fiscal stimulus bill. In corporate news, German software giant SAP lowered its guidance over the weekend citing the impact of the pandemic. On Friday, the S&P (SP500) closed up 0.4%, but down about 0.6% for the week. The Nasdaq (COMP) ended up 0.4%, but off a little more than 1% during the week as both snapped three-week winning streaks. The broader market found itself in a fairly tight range through week of trading as mixed earnings results and failed stimulus negotiations headlines dominating. In Asian markets, The Nikkei Index dipped -22 points to 23,494, the Shanghai Index dropped -26 points to 3,251 and the Hang Seng Index rose 132 points to 24,918. In Europe, the German DAX is lower by -260 points to 12,385, while the FTSE 100 slips about -15 points to 5,845.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 11.90 points, or 0.34%, to 3,465.39

·     The Dow Jones Industrial Average fell -28.09 points, or 0.10%, to 28,335.57

·     The Nasdaq Composite climbed 42.28 points, or 0.37%, to 11,548.28

·     The Russell 2000 Index advanced 10.25 points, or 0.63% to 1,640.50

 

Economic Calendar for Today

·     10:00 AM EST    New Home Sales MoM for Sept

·     10:30 AM EST    Dallas Fed Manufacturing for October

 

Earnings Calendar:

·     Earnings Before the Open: AMG, ARLP, BOH, CBU, HAS, HCA, NRZ, OTIS, PETS, SMPL

·     Earnings After the Close: ACC, AGNC, AMKR, ARE, BHLB, BRO, BYD, CHGG, CINF, CR, FFIV, FIX, FLXS, HLIT, HMST, HSII, HTLF, IVAC, KNL, LRN, NOV, PCH, PFG, PKG, SSD, TBI, TWLO, VRNS

 

 

Macro	Up/Down	Last
WTI Crude	-0.84	39.00
Brent	-0.80	40.97
Gold	0.70	1,902.75
EUR/USD	-0.0049	1.1811
JPY/USD	0.18	104.89
10-Year Note	-0.031	0.81%

 

 

Busy week of IPOs

·     Allegro MicroSystems (ALGM) 25M share IPO expected 10/29 between $12-$14

·     AmeriHome Inc. (AHM) 14.7M share IPO expected 10/29 between $16-$18

·     Biodesix Inc. (BSDX) 4.2M share IPO expected 10/28 between $17-$19

·     Caliber Home Loans (HOMS) 23M share IPO expected 10/29 between $14-$16

·     Galecto (GLTO) 5.7M share IPO expected 10/29 between $14-$16

·     Gatos Silver (GATO) 18.8M share IPO expected 10/28 between $7-$9

·     Leslie’s (LESL) 40M share IPO expected 10/29 between $14-$16

·     Lufax Holding (LU) 175M ADS expected 10/30 between $11.50-$13.50

·     Mavenir (MVNR) 13.6M share IPO expected 10/29 between $20-$24

·     MediaAlpha (MAX) 9.25M share IPO expected 10/28 between $18-$20

·     Root Inc. (ROOT) 24.1M share IPO expected 10/28 between $22-$25

 

Sector News Breakdown

Consumer

·     Coca-Cola (KO) mentioned positively in Barron’s, calling it as under-appreciated post-pandemic “reopening” play. The company’s global reach will allow it to benefit from rising living standards in developing countries as well as a weaker dollar. Year-to-date, the stock has lagged PepsiCo (PEP) and Procter & Gamble (PG)

·     Coca-Cola European Partners (CCEP) is in talks to acquire Coca-Cola Amatil (CCLAY) to expand in Asia Pacific, Bloomberg reported. Negotiations between the European and Australian bottlers are advanced and could be announced within days https://bit.ly/3osIKUr

·     Dunkin’ Brands Group Inc. (DNKN) is reportedly in talks to go private in a sale to private equity-backed Inspire Brands. The New York Times reported Dunkin’, the parent company of the former Dunkin’ Donuts and Baskin-Robbins ice cream, could sell itself for $106.50 a share, a 20% premium over Friday’s closing price, for an implied value of about $8.8B https://on.mktw.net/35C6zRn

·     Sprouts Farmers Market (SFM) mentioned positively in Barron’s saying same-store sales declined as consumers favored one-stop-shops like Target (TGT) and Walmart (WMT) to reduce the risk of virus exposure, adding that its stock has dropped 22% in the past three months. However, Sprouts’ earnings could help the stock reverse course

·     Kontoor Brands (KTB) upgraded to Buy from Neutral with a price target of $38, up from $17 at Bank America

 

Energy

·     Oil is meanwhile extending last week’s losses, declining 2.5% to under $39 per barrel, on concerns over crude demand, as well as the prospect of increased supply from Libya.

·     Cenovus Energy Inc. (CVE) agreed to buy Husky Energy Inc. in an all-stock deal valuing Husky at about C$3.8 billion ($2.9 billion), the deal promises to combine two of the largest players in Canada’s oil sands; Cenovus will own 61% of the new company, while Husky will hold a 39% stake. Husky shareholders will receive 0.7845 of a Cenovus share and 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share https://yhoo.it/37MQo66

·     PG&E (PCG) said it is preparing to shut off power to 386K homes and businesses in 38 northern California counties, affecting nearly 1M people, due to extreme wildfire danger.

·     Lukoil (ULKOY) head said Sunday that the company’s investments will be reduced again if low oil prices continue, adding he considered $40 per barrel low, Russian news agencies reported

·     NextEra Energy (NEE) has succeeded in offering safe and growing yields, Barron’s says. WEC Energy Group (WEC), Xcel Energy (XEL), and Eversource Energy (ES) are among other quality utility companies that benefit from investor’s hunt for stability in earnings, Barron’s cites Reaves Asset Management’s portfolio manager as saying.

 

Financials

·     Blackstone (BX) to buy Simply Self storage for $1.2B, WSJ from Brookfield Asset Management (BAM) – WSJ https://on.wsj.com/35wMITr

·     Hyliion Holdings (HYLN) files to sell 132.6M shares of common stock for holders

 

Healthcare

·     Johnson & Johnson (JNJ) said it’s preparing to resume a large clinical trial of its experimental COVID-19 vaccine after finding no evidence the vaccine caused an “unexplained illness” in a study volunteer that caused the company to pause the trial earlier this month.

·     Novartis (NVS) reports positive Phase II interim analysis results for iptacopan (LNP023), an investigational oral treatment for C3 glomerulopathy (C3G), a rare renal disease, affecting young patients with a poor prognosis.

·     Co-Diagnostics (CODX) files $100M mixed securities shelf

·     Mustang Bio (MBIO) files $100M mixed securities shelf

 

Industrials & Materials

·     Celanese (CE) Q3 adjusted EPS $1.95 on revs $1.4B vs. est. $1.70 and $1.34B; expects FY20 adjusted EPS of $7.00-$7.10 vs. est. $6.99; said Oct and Nov order books are shaping consistently with the third quarter and show no indications of demand retraction; looking to 2021, remain confident that underlying demand will reach pre-COVID levels at some point in the year

·     Carlyle Group Inc. (CG) is nearing an agreement to acquire Siemens AG’s (SIEGY) mechanical drive unit for about 2 billion euros ($2.4 billion), Bloomberg reported

·     Otis Worldwide (OTIS) raises FY20 adj. EPS view to $2.42 from $2.20-$2.30 (est. $2.30) and ups its FY20 revenue view to down 3%-4% from down 4.5%-6.5%, saying it is improving its full year outlook to reflect strong year-to-date performance and anticipated recovery profile.

 

Technology, Media & Telecom

·     SAP AG (SAP) cut its guidance for the year and abandoned its forecast that profitability would expand steadily over the medium term; lowers FY20 revenue guidance to EUR 27.2-EUR 27.8B, from EUR 27.8B-EUR 28.5B; said shifting customers more quickly to lower-margin cloud hosting from its traditional cash-cow software licenses would negatively impact the 2023 operating margin by approximately 4%-5% points relative to the previous mid-term ambition

·     Facebook (FB) and Twitter’s (TWTR) Mark Zuckerberg and Jack Dorsey have agreed to testify on Nov. 17 before a Senate panel looking into restrictions their companies put an on article about the son of Democratic presidential nominee Joe Biden

·     Nokia (NOK) won a three-year rollout contract from Finnish Shared Network, a joint operation by DNA Oyj and Telia Finland Oyj – to supply 5G for SYV’s radio access network (RAN) equipment and managed services.