Early Look

Wednesday, September 23, 2020

Futures	Up/Down	%	Last
DJ Industrials	202.00	0.74%	27,345
S&P 500	15.50	0.46%	3,314
Nasdaq	34.50	0.31%	11,183

 

 

Stock futures are pointing firmly higher amid strong gains in Europe overnight and after big advances on Tuesday snapped the longest market losing streaks in several months. Overnight, Dow component Nike (NKE) reports an earnings crusher, sending shares surging while Tesla’s (TSLA) Battery Day concluded with shares tumbling with some of the innovations showcased at the event being “close to working” and some three years away from fruition – and now no fresh catalysts on the horizon. In Asian markets, The Nikkei Index slid -13 points to 23,346, the Shanghai Index gained 5 points to 3,279 and the Hang Seng Index edged higher 25 points to 23,742. In Europe, the German DAX is up roughly 200-points to 12,790 (or 1.5%), while the FTSE 100 gains 135 points (or 2.3%) to 5,965. Today, investors await economic data and a second day of congressional testimony by Federal Reserve Chairman Jerome Powell, who testified on Capitol Hill over the central bank’s pandemic response. Major stocks averages ended higher for the first time in four days, led by gains in technology as the Nasdaq Composite surged over 1.7% to close near the highs, along with gains in discretionary amid a 5% spike in Amazon after an analyst upgrade and strength in the real estate sector. The S&P closed up 1.1%to snap its 4-day losing streak while the Dow ended up 0.5%.

 

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 34.51 points, or 1.05%, to 3,315.57

·     The Dow Jones Industrial Average rose 140.48 points, or 0.52%, to 27,288.18

·     The Nasdaq Composite spiked 184.84 points, or 1.71%, to 10,963.64

·     The Russell 2000 Index advanced 11.71 points, or 0.79% to 1,496.96

 

Economic Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     9:00 AM EST      Monthly Home Price Index for July

·     9:45 AM EST      Markit Manufacturing Flash PMI, Sept…est. 53.1

·     9:45 AM EST      Markit Services PMI Flash, Sept…est. 54.7

·     10:30 AM EST    Weekly DOE Inventory Data

·     1:00 PM EST       U.S. Treasury to sell $53B 5-year notes

 

Earnings Calendar:

·     Earnings Before the Open: CTAS, GIS, WOR

·     Earnings After the Close: FUL

 

Other Key Events:

·     Bernstein Annual Strategic Decisions Virtual Conference, 9/23-9/24

·     Davidson Diversified Industrials and Service Virtual Conference, 9/22-9/23

·     Stephens Virtual Bank Forum, 9/22-9/24

 

 

Macro	Up/Down	Last
WTI Crude	0.14	39.94
Brent	0.19	41.91
Gold	-7.90	1,892.25
EUR/USD	0.0006	1.1714
JPY/USD	0.02	104.95
10-Year Note	+0.012	0.676%

 

 

World News

·     The IHS Markit flash eurozone manufacturing purchasing managers index (PMI) rose to 53.7 from 51.7, while the flash eurozone services PMI fell to 47.6 from 51.9. Taken together, the composite PMI just barely was above the 50-mark indicating improving conditions, at 50.1.

 

Sector News Breakdown

Consumer

·     Nike (NKE) reported Q1 EPS of 95c, topping estimates by 47c on revenue of $10.6B beating by over $1B on estimates; Gross margin of 44.8% vs. consensus of 42.9%; NIKE Direct sales were $3.7B, up 12% on a reported basis, and up 13% on a currency-neutral basis; Nike brand digital sales rose 82%; Revenue fell 2% for the North America business to $4.23B, while revenue in Europe, Middle East and Africa was up 5% to $1.78B and China revenue was up 6% to $1.78B

·     Tesla (TSLA) Battery event details: shares fell after hours as CEO Musk said that some of the innovations showcased at the event were “close to working” and some three years away from fruition. CEO Elon Musk reiterated that the Shanghai Gigafactory can be scaled up to produce 1M cars a year. Tesla reiterates that it expects vehicle deliveries to increase 30% to 40%. Tesla says its new 80mm cell has 5X the energy, 16% more range and 6X the power. Tesla will continue to buy from battery cell suppliers, but is planning on 3TWh battery capacity by 2030 by supplying itself. Tesla says it wants to make 20M vehicles a year in the long term and aims to get to the $25K price point with full autonomy.

·     Lululemon (LULU) resumed its stock buyback which has a remaining buyback authorization for $263.6M worth of stock.

·     KB Homes (KBH) 3Q EPS 83c on revenue $999.0M tops the 53c and $884M estimate; 3Q deliveries 2,545, -16% YoY, 3Q net orders 4,214, +27% YoY and backlog 6,749, +8.3% YoY; cancellation rate for first three weeks of September 2020 improving to 12% from 17%

·     Steelcase (SCS) Q2 adj EPS 55c on sales $818.8M vs. est. 37c and $782.6M; sees Q3 EPS 12c-18c on revs $690M-$725M vs. est. 18c and $703.9M; orders declined an average of 38% during first three weeks of September compared to prior year; expects to record a total of approximately $26M of restructuring costs related to workforce reductions

·     Stitch Fix (SFIX) 4Q revs $443.4Mm vs. est. $415Mm, EPS ($0.44) vs. est. ($0.17); qtrly active clients of 3.5 mln, an increase of 9% year over year and qtrly net revenue per active client of $486, an increase of 2% year over year on an adjusted basis

·     Sysco Hamptom Roads, a subsidiary of Sysco (SYY) is awarded a US defense logistic five-year, indefinite quantity contract for full-line food distribution worth ~$805M

·     Laird Superfood (LSF) 2.65M share IPO priced at $22.00

 

Energy, Industrials & Materials

·     The American Petroleum Institute (API) reported that U.S. crude supplies rose by 691,000 barrels for the week ended Sept. 18, showed gasoline stockpiles dropped by -7.7M barrels, while distillate inventories declined by -2.1M barrels. Crude stocks at the Cushing, Okla., storage hub, meanwhile, inched up by 298,000 barrels for the week

·     Fortis (FTS) raised its investment in new five-year capital plan to $19.6B for the period 2021 to 2025, up $800M from the prior year’s plan; consolidated rate base is projected to increase from $30.2B in 2020 to $36.4B in 2023 and $40.3B in 2025, translating into three and five-year compound annual growth rates of 6.5% and 6.0%, respectively.

·     JinkoSolar (JKS) 2Q adj EPS $1.20 vs. est. $0.61 on revs $1.2B vs. est. $1.14B; guides 3Q revs $1.22-1.3B vs. est. $1.22B

·     Itron (ITRI) announced a global cost-cutting project that’s expected to achieve $20-25M in annual savings; expects a pre-tax charge of $55-65M related to the restructuring and the majority will be recognized in Q3.

·     In the waste sector; Waste Management (WM) was downgraded to Underweight on valuation at JPMorgan, downgraded Republic Services (RSG) to Neutral with $99 target and upgraded Waste Connections (WCN) to overweight from neutral

 

Financials

·     PayPal (PYPL) and Mastercard (MA) announced that they are continuing the global expansion of the popular PayPal Business Debit Mastercard. The debit card makes it easier for small businesses to have instant access to their PayPal funds and gives them unlimited 0.5% cash back on all their eligible spending

·     KKR (KKR) is close to a $3B+ deal to buy 1-800-Contacts from AEA Investors, beating out rival private equity firms, Bloomberg reported late last night

·     National Storage (NSA) 4.5M share Spot Secondary priced at $33.15

·     Virtu Financial (VIRT) expects its results of operations for the two months ended August 31, 2020 to reflect net trading income of $295M-$303M; adjusted net trading income of $238M-$248

 

Healthcare

·     Aurora (ACB) said for Q4, the company lost $1.9B; for all of fiscal 2020, the company lost $3.3B; sees Q1 revs of $60M-$64M vs. $67.5M in the just-reported 2020 FQ4. Adjusted gross margin before fair value adjustments on cannabis net revenue is seen at 46%-50%, with SG&A costs in the low-$40M range; expects to achieve positive adjusted EBITDA in FQ2 which compares to adjusted EBITDA loss of $34.6M in FQ4 and los

·     GoodRx (GDRX) 34.615M share IPO priced at $34.00

·     Genmab (GMAB) slides -12%; amid news it was locked in a legal battle with its partner Johnson & Johnson (JNJ) over royalty payments for its key cancer drug, source Reuters.

·     MacroGenics (MGNX) announced encouraging preliminary data from a Phase 1/2 clinical trial evaluating flotetuzumab in acute myeloid leukemia (AML) patients

·     Zogenix (ZGNX) plans to offer $200M principal amount of convertible senior notes due 2027

 

Technology, Media & Telecom

·     Western Digital (WDC) is reorganizing and creating separate product business units for the Flash and HDD assets; appoints Robert Soderbery as the EVP and GM of the new Flash unit (he most recently served as Cisco’s SVP and GM of the $20B enterprise networking business)

·     Palantir (PLTR) – With a week to go ahead of its expected direct listing on the New York Stock Exchange, big data analytics company Palantir Technologies offered financial guidance for the September quarter and the 2020 and 2021 calendar years – said it expects Q3 revenue of $278-280M (+46-47% Y/Y) with operating income of $60-62M; for the year, Palantir expects $1.05-1.06B in revenue (+41-43%) and operating income of $116-126M

·     Shopify (SHOP) says two rogue employees stole data from fewer than 200 merchants in a breach that might have exposed customer emails, names, and order information.

·     Bentley (BSY) 10.75M share IPO priced at $22.00