Early Look

Monday, September 21, 2020

Futures	Up/Down	%	Last
DJ Industrials	-539.00	1.95%	27,065
S&P 500	-52.50	1.57%	3,264
Nasdaq	-149.50	1.37%	10,777

 

 

U.S. stock futures are tumbling along with weakness in Europe as money-laundering allegations for some of Europe’s biggest banks weighs on markets after a third week of declines last Friday. In addition to the reports, virus fears also weigh on markets as travel stocks in Europe were pressured on worries over the region locking down in response to a new wave of coronavirus case. Also, following the passing of Supreme Court Justice Ginsberg this weekend, tension is expected to rise amid the battle for the seat between the President and Democrats, which will likely lead to more uncertainty on the negotiations of a new COVID-19 relief bill to help struggling Americans. Last week, the S&P 500 fell 0.65%, the Dow slipped 0.03%, the Nasdaq declined 0.56% as the S&P 500 posts first three-week drop since Sept-Oct 2019. In Asian markets, The Nikkei Index rose 40 points to 23,360, the Shanghai Index falls 21 points to 3,316 and the Hang Seng Index plunges over 500 points to 23,950. In Europe, the German DAX is down over 400 points to 12,700, while the FTSE 100 drops over 200 points to 5,800. In corporate news, President Trump has given his “blessing” for an Oracle-TikTok deal, though a U.S. judge in California halted the administration’s ban on downloads of the Chinese-owned app WeChat. Oil-related stocks fall premarket as crude prices dip due to possible return of Libyan production and as rising coronavirus cases stoke worries about global demand.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -37.54 points, or 1.12%, to 3,319.47

·     The Dow Jones Industrial Average fell -244.56 points, or 0.88%, to 27,657.42

·     The Nasdaq Composite slipped -116.99 points, or 1.07%, to 10,793.28

·     The Russell 2000 Index declined -5.82 points, or 0.38% to 1,536.78

 

Economic Calendar for Today

·     No Major Economic Data Released

 

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: None

 

Other Key Events:

·     European Society for Medical Oncology (ESMO) Virtual Congress, 9/19-9/21

·     Mizuho Virtual Software Tour, 9/21-9/22

 

 

Macro	Up/Down	Last
WTI Crude	-1.03	40.08
Brent	-0.96	42.19
Gold	-21.85	1,929.00
EUR/USD	-0.0058	1.1782
JPY/USD	-0.47	104.10
10-Year Note	-0.036	0.66%

 

 

World News

·     Supreme Court Ruth Bader Ginsburg passing this weekend is expected to be a hotly contested nomination battle in Washington, as the fight between the President and Congressional Democrats on whether to fill the vacant seat now or wait until after the election is expected to lead to more delays in reaching a middle ground on a new fiscal package.

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) hosts its highly anticipated battery technology day Tuesday as CEO Elon Musk added to the hype recently, tweeting, “Many exciting things will be unveiled.” It will shape investor opinions about the future of electric vehicles and Tesla’s technological lead

·     Shares of alternative energy (PLUG) and electric vehicle names (WKHS) rose Friday amid anticipation for Tesla Inc’s Battery Day on Tuesday: At the same time, call options for U.S.-listed shares of Brazilian mining co Vale SA (VALE) traded up on speculation that TSLA may look to VALE as supplier for nickel, a component in batteries for electric vehicles – Reuters reported

·     Albertsons (ACI) mentioned positively in Barron’s this weekend, noting with Americans eating more meals at home, supermarkets are among the few traditional retailers to thrive, and Albertsons is no exception, as the supermarket chain has had sales growth of more than 20% since the pandemic started

·     Nikola (NKLA) shares tumble over -30% after founder Trevor Milton steps down. “I asked the Board of Directors to let me step aside from my roles as Executive Chairman and a member of the Nikola Board of Directors,” Trevor Milton wrote in a tweet. “The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors.”

·     Nikola (NKLA) is outsourcing battery packs to a California manufacturer for one of its prototype electric trucks, Financial Times reports, citing documents it saw and an unidentified person familiar with the work. It’s the second example of Nikola outsourcing key technology.

·     Watch homebuilders (LEN, BZH, KBH, TOL, MTH): Homebuilder sentiment is at an all-time high, as city-dwellers seek out suburban homes during the coronavirus pandemic. But an overcorrection in the lumber market could spell trouble for homebuilders and homebuyers alike as U.S. lumber prices rose 170% from April to an all-time high in August and slip only slightly in September, driving the cost of the average new home up $16,148 since April 17, as per NAHB.

·     The U.S. Justice Department said Friday it approved Anheuser-Busch’s (ABI) plan to buy the shares of Craft Brew Alliance (BREW) that it does not already own. The $220 million deal, which was announced in November, was approved on condition the companies sell Craft Brew Alliance’s Kona brand beer.

·     D.E Shaw discloses a stake of 5.1% in Overstock.com (OSTK); the filing lists D.E. Shaw as a passive investor.

 

Energy, Industrials and Materials

·     Oil-related stocks fall premarket as crude prices dip due to possible return of Libyan production and as rising coronavirus cases stoke worries about global demand

·     Goldman Sachs added Boeing (BA) and Raytheon (RTX) to the Conviction buy list and removed L3Harris (LHX) and Lockheed Martin (LMT) from the Conviction list

·     Royal Dutch Shell (RDSA) is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets – Reuters

·     Atlantic hurricane season has been very active as 2020 marks only the second time since 1950 the National Hurricane Center exhausted its list of storms after Tropical Storm Wilfred formed on September 18th. Within hours, two more storm had formed — now known as Alpha and Beta.

·     Britain’s Rolls-Royce Holdings Plc said on Saturday it was looking to raise up to 2.5 billion pounds ($3.2 billion) in an effort to strengthen its balance sheet

 

Financials

·     Some of the world’s biggest banks are under pressure after media reports on Sunday said several global banks, including JPM and BK, moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money. Five global banks appeared most often in the documents — HSBC Holdings Plc, JPM, Deutsche Bank AG, Standard Chartered Plc and BK, ICIJ reported. (other banks are down in sympathy)

·     Visa (V) and Mastercard (MA) may have more upside over the next few months, Barron’s said noting their stocks are up less than 15% this year, lower than their average annual gains of 25% to 30%. Given they are broader plays on the global economy, a rebound in growth and travel should lift card transaction volumes next year.

·     PayPal (PYPL) is the clearest winner in the digital shift according to Barron’s saying one growth driver is older Americans going cashless for the first time, who now represent the fastest- growing segment for the company. Wall Street expects PayPal’s earnings and revenue to both rise 20% this year, with sales hitting $21.3 billion.

·     Barron’s said payment-processing stocks Fidelity National (FIS) and Global Payments (GPN) are bargains in the industry, due to the retail slowdown. But they remain a key technology backbone for banks and merchants, generating steady processing revenue, and the merchant-acquiring business should pick up with a revival of retail

 

Healthcare

·     Illumina (ILMN) has struck a deal to pay $7.1 billion in cash and stock to buy the part of Grail Inc. that it doesn’t already own, WSJ reports. The report said the deal for the developer of a blood test that helps detect cancer, is expected to be announced Monday. The deal includes $3.1 billion in cash and $4 billion in Illumina shares https://on.wsj.com/2RNcFaO

·     Moderna’s (MRNA) Phase 3 trial of its COVID-19 vaccine mRNA-1273, two 100 microgram doses 28 days apart, will recruit ~30K adults, 60-75% younger than 65 years old not at risk for complications and 25-40% at least 65 years old (the single most significant risk factor) or less than 65 at increased risk of COVID-19 complications.

·     Bristol Myers Squibb (BMY) and Exelixis (EXEL) have announced the first presentation of results from the pivotal Phase 3 CheckMate -9ER trial, in which Opdivo in combination with CABOMETYX demonstrated “significant improvements” across all efficacy endpoints, including overall survival, in previously untreated advanced renal cell carcinoma. Opdivo in combination with CABOMETYX reduced the risk of death by 40% vs. sunitinib

·     Immunomedics (IMMU) announced “positive” results from cohort 1 of cisplatin-eligible patients in the pivotal Phase 2 TROPHY U-01 study of Trodelvy in metastatic urothelial cancer.

 

Technology, Media & Telecom

·     U.S. President Donald Trump said on Saturday he supported a deal in principle that would allow TikTok to continue to operate in the United States, even as it appeared to conflict with his earlier order for China’s ByteDance to divest the video app, Reuters reported. The U.S. Commerce Department said on Friday it would block new downloads and updates to the app come Sunday.

·     TikTok will be owned by a new company called TikTok Global and headquartered in the United States, possibly in Texas, Trump said. Oracle Corp (ORCL) will take a 12.5% stake in TikTok Global and store all its U.S. user data on its cloud to comply with U.S. national security requirements. Retail giant Walmart Inc (WMT) said it would take a 7.5% stake in TikTok Global.

·     China’s ByteDance is seeking a valuation of $60B for TikTok as Oracle (ORCL) and Walmart (WMT) take stakes in the short-video app’s business to address U.S. security concerns, Bloomberg reported this weekend

·     Semiconductor equipment stocks upgraded at Stifel: raised ratings on Axcelis (ACLS) to buy from hold with $26 tgt, Brooks Automation (BRKS) upgraded to buy with $52 tgt, Ichor Holdings (ICHR) raised to buy with $31 tgt and KLA-Tencor (KLAC) raised to buy with $211 tgt saying recent weakness in the Semiconductor Capital Equipment group, which can be attributed to several factors including concerns on worsening China trade tensions and potential memory capex cuts, has brought shares to more attractive valuations

·     A judge has approved a request from a group of U.S. WeChat users to delay looming federal government restrictions that could effectively make the popular app nearly impossible to use

·     Yelp Inc. (YELP): More than 160,000 businesses listed on the online directory Yelp have indicated that they closed since the onset of the pandemic in early March through Aug. 31. Some 60% of those are businesses that are permanently closing, Yelp reported in its September Local Economic Impact Report.