Thursday April 16, 2020
By Devin Zugic
Twitter: @DevinTrader
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Morning Briefing - Subdued in front of initial claims report
The S&P 500 futures trade five points, or 0.2%, above fair value ahead of the release of the weekly jobless claims report at 8:30 a.m. ET. The benchmark index is roughly unchanged for the week.
5.0 million more Americans are projected to have filed for unemployment insurance for the week ending April 11, according to the Briefing.com consensus. Approximately 16.5 million claims were filed over the prior three weeks, including 6.6 million last week, as the economy remained in shutdown mode. On a related note, the White House is expected to release guidelines to relax social distancing measures today.
Alongside the jobless claims report, investors will receive Housing Starts (Briefing.com consensus 1.30 million) and Building Permits (Briefing.com consensus 1.297 million) for March and the Philadelphia Fed Index for April (Briefing.com consensus -25.0).
On the earnings front, Taiwan Semiconductor (TSM 51.92, +2.26, +4.5%) reported better-than-expected quarterly results and issued in-line guidance, which was encouraging since many companies have refrained from providing guidance. Taiwan Semi is the world's largest semiconductor foundry.
U.S. Treasuries currently trade mixed. The 2-yr yield is up one basis point to 0.21%, while the 10-yr yield is down three basis points to 0.61%. The U.S. Dollar Index is up 0.4% to 99.84. WTI crude is up 0.8%, or $0.17, to $20.02/bbl.
In U.S. Corporate news:
Taiwan Semi (TSM 51.92, +2.26): +4.5% after beating top and bottom-line estimates and issuing in-line guidance.
Abbott Labs (ABT 91.64, +0.70): +0.8% after beating top and bottom-line estimates.
BlackRock (BLK 450.00, +6.93): +1.6% after beating earnings estimates.
Morgan Stanley (MS 38.10, -0.30): -0.8% after missing top and bottom-line estimates.
BNY Mellon (BNY 36.50, +1.87): +5.4% after beating profit expectations.
Reviewing overnight developments:
Equity indices in the Asia-Pacific region ended Thursday on a mixed note. Japan's Nikkei: -1.3%, Hong Kong's Hang Seng: -0.6%, China's Shanghai Composite: +0.3%, India's Sensex: +0.7%, South Korea's Kospi: UNCH, Australia's ASX All Ordinaries: -1.0%.
In economic data:
China's March House Prices 5.3% yr/yr (last 5.8%)
Japan's April Reuters Tankan Index -30 (last -20)
South Korea's March trade surplus $4.59 bln (last surplus of $5.04 bln). March Imports 0.3% yr/yr (last -0.3%) and Exports -0.7% yr/yr (last -0.2%)
Australia's March Employment Change 5,900 (expected -40,000; last 26,700) and Full Employment Change -400 (last 6,700). March Participation Rate 66.0% (expected 65.9%; last 66.0%) and Unemployment Rate 5.2% (expected 5.5%; last 5.1%). April MI Inflation Expectations 4.6% (last 4.0%)
In news:
South Korea's ruling party strengthened its position in yesterday's election.
Hong Kong's Cathay Pacific reported a 90% yr/yr drop in passenger traffic in March.
South Korean officials have proposed a second extra budget of KRW7.60 trln, which will not require bond issuance.
Nikkei reported that Japan's economic assessment for April will describe the situation as "worsening sharply."
The IMF cautioned that the Bank of Japan will have a limited effect in stimulating the economy if it cuts rates deeper into negative territory.
Reserve Bank of New Zealand Governor, Adrian Orr, said that the RBNZ has not ruled negative interest rates, adding that the shadow official cash rate is "significantly negative."
Major European indices trade mostly higher while Spain's IBEX (-0.2%) lags amid relative weakness in bank stocks. STOXX Europe 600: +1.0%, Germany's DAX: +1.0%, U.K.'s FTSE 100: +0.4%, France's CAC 40: +0.6%, Italy's FTSE MIB: +1.5%, Spain's IBEX 35: -0.2%.
In economic data:
Eurozone's February Industrial Production -0.1% m/m (expected -0.2%; last 2.3%); -1.9% yr/yr (expected -2.0%; last -1.7%)
Germany's March CPI 0.1% m/m, as expected (last 0.4%); 1.4% yr/yr, as expected (last 1.7%)
Swiss March PPI -0.3% m/m (last -0.9%); -2.7% yr/yr (last -2.1%)
In news:
German commercial credit insurers will receive a EUR30 bln backstop from the government.
French Finance Minister, Bruno Le Maire, said that the European Stability Mechanism could be tapped for non-health spending.
European Central Bank President, Christine Lagarde, said that the central bank may expand euro swap lines.
France sold 3- and 5-yr debt at negative rates while Spain auctioned 3-, 5-, and 15-yr debt. The U.K. sold 30-yr gilts.
U.S. equity futures:
S&P 500 Futures +5 @ 2780
DJIA Futures +17 @ 23408
Nasdaq Futures +51@ 8645
Overseas:
Europe: DAX +1.0%, FTSE +0.4%, CAC +0.6%
Asia: Nikkei -1.3%, Hang Seng -0.6%, Shanghai +0.3%
Commodities:
Crude Oil +0.27 @ 20.14
Nat Gas +0.002 @ 1.600
Gold +20.40 @ 1760.60
Silver +0.315 @ 15.820
Copper +0.007 @ 2.303
U.S. Summary:
Earnings/Guidance (Full Earnings Calendar):
Abbott Labs (ABT) beats by $0.04, beats on revs
American Fincl (AFG) sees Q1 core earnings below consensus; lowers 2020 expectations
Ashland (ASH) sees Q2 EPS above consensus; sees revs slightly below
Barrick (GOLD) reported preliminary first quarter sales of 1.22 million ounces of gold and 110 million pounds of copper as well as preliminary first quarter production of 1.25 million ounces of gold and 115 million pounds of copper
Bed Bath & Beyond (BBBY) beats by $0.18, reports revs in-line; comps -5.6%; does not provide guidance
BlackRock (BLK) beats by $0.06, reports revs in-line
Bloomin' Brands (BLMN) reports US comps for 13 weeks ended March 29 of -10.4%
BNY Mellon (BK) beats by $0.14, misses on revs
Globant (GLOB) reaffirms EPS outlook for Q1, raises Q1 revenue outlook, withdraws 2020 guidance
GoPro (GPRO) sees Q1 below consensus; withdraws FY20 guidance
HEICO (HEI) withdraws 2020 guidance, provides update on outlook
Jack In The Box (JACK) withdraws 2020 guidance, says Q2 comps were -4.2%, announces other steps due to virus
KeyCorp (KEY) reports Q1 (Mar) results, misses on revs
Morgan Stanley (MS) misses by $0.10, misses on revs
Noodles & Co (NDLS) reports Q1 system-wide comps declined 7.2% (previously withdrew 2020 guidance)
Rite Aid (RAD) misses by $0.22, beats on revs; guides FY21 EPS below consensus, revs in-line
Sonoco Products (SON) beats by $0.10, misses on revs; guides Q2 EPS below consensus
Taiwan Semi (TSM) beats by NT 1.17, beats on revs; guides Q2 revs in-line
General News:
White House will release guidelines to relax social distancing measures today, according to The Hill
Governors and health officials are warning there is not adequate testing to open the economy safely, according to New York Times
President Trump threatens an executive order to adjourn Congress if Senate doesn't confirm nominees to his administration. Article II, Section 3 of the Constitution grants the president this power "on extraordinary occasions," according to The Hill
MF adds liquidity line to strengthen COVID-19 response
Fitch downgraded Mexico to 'BBB-'; Outlook Stable
Abbott Labs (ABT) launches laboratory-based antibody blood test as its third COVID-19 test; to begin shipments today
Amazon (AMZN) closes warehouses in France for four days amid dispute over safety, according to FT
ArcelorMittal (MT) receives commitment for new $3 bln term loan facility; will have a maturity of 12 months and can be used for general corporate purposes
Baxter (BAX) provides COVID update; maximizing production of critical medical products; hiring up to 2,000 new employees globally
BlackRock (BLK) CEO Larry Fink CNBC interview: US economy will be slow to reboot because it is so dependent on services; He does not believe there will be a V shaped recovery
Costco (COST) increases quarterly cash dividend to $0.70/share from $0.65/share
Google (GOOG) aims to slow hiring for the rest of this year, according to Bloomberg
Hertz (HTZ) looking for government bailout, according to New York Post
Redfin (RDFN) reports home-buying demand was down 25% yr/yr for the week ending April 13 (after being down as much as 36% for the week ending March 28)
Regeneron Pharma (REGN): FDA has accepted for Priority Review a new BLA for REGN-EB3 for Ebola virus infection; PDUFA set for October 25, 2020
United Airlines (UAL) confirms will get $5 from US Treasury; expects to issue warrants to purchase 4.6 million UAL shares; United Airlines spokesperson says May flights will be cut by 90%; sees similar cuts in June; job cuts likely, according to Reuters
Vanda Pharma (VNDA) and Northwell Health announce enrollment of first patient in ODYSSEY trial in patients with severe COVID-19 pneumonia
M&A:
Endpoints News, citing a Bloomberg story, reports Gilead Sciences (GILD) is allegedly in discussions to purchase a stake in Arcus Biosciences (RCUS)
Syndicate:
Arcturus Therapeutics (ARCT) announces proposed public offering of common stock; size not disclosed
Athersys (ATHX) prices 22.25 mln shares of common stock at $2.25 per share
Calithera Biosciences (CALA) prices offering of 5 mln shares of common stock at $6.25 per share
Performance Food Group (PFGC) commences public offering of 11.5 mln shares of common stock
IPOs:
No IPOs expected to price
Gapping Up/Down
Gapping up:
RCUS +47.9%, URGN +17.9%, BBBY +12.4%, LTRPA +11.8%, VNDA +10.2%, CGEN +8.1%, AXDX +7.8%, XP +7%, KBR +4.8%, ALLT +4.4%, NVAX +3.1%, BLK +3%, BK +2.5%, NDLS +1.8%, COST +1.1%, RAD +0.8%, GILD +0.7%
Gapping down:
ATHX -23.9%, CALA -15.8%, LAKE -6.9%, PFGC -3.7%, GPRO -3%, UAL -2.7%, RDFN -1.9%, ARCT -1.6%, ACGL -1.3%, VIR -0.9%, KEY -0.5%
Analyst Research (see Upgrades/Downgrades calendar for full list):
Upgrades:
AGNC Investment (AGNC) upgraded to Mkt Outperform from Mkt Perform at JMP Securities; tgt $13.50
American Water Works (AWK) upgraded to Buy from Neutral at Goldman; tgt raised to $146
Ares Capital (ARCC) upgraded to Outperform from Mkt Perform at Raymond James; tgt $14
Brixmor Property (BRX) upgraded to Buy from Neutral at Compass Point; tgt $16
Canopy Growth (CGC) upgraded to Hold from Underperform at Jefferies; tgt lowered to $15.60
Freeport-McMoRan (FCX) upgraded to Overweight from Equal Weight at Barclays; tgt $10
J.M. Smucker (SJM) upgraded to Neutral from Underperform at Credit Suisse; tgt $115
Jack In The Box (JACK) upgraded to Buy from Neutral at BTIG Research; tgt $70
Kinross Gold (KGC) upgraded to Sector Outperform from Sector Perform at Scotiabank
Kraft Heinz (KHC) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $38
Owl Rock Capital (ORCC) upgraded to Outperform from Mkt Perform at Raymond James; tgt $13.50
PNC (PNC) upgraded to Buy from Neutral at Nomura; tgt raised to $114
Sherwin-Williams (SHW) upgraded to Overweight from Equal Weight at Wells Fargo; tgt lowered to $550
TPG Specialty Lending (TSLX) upgraded to Outperform from Mkt Perform at Raymond James; tgt $15
TreeHouse Foods (THS) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $60
U.S. Bancorp (USB) upgraded to Buy from Neutral at Nomura; tgt raised to $46
Yamana Gold (AUY) upgraded to Sector Outperform from Sector Perform at Scotiabank
Downgrades:
Barrick (GOLD) downgraded to Equal Weight from Overweight at Barclays
Boston Beer Co (SAM) downgraded to Neutral from Buy at MKM Partners; tgt raised to $371
Boston Properties (BXP) downgraded to Hold from Buy at Jefferies; tgt $94
Ceridian HCM (CDAY) downgraded to Hold from Buy at Jefferies; tgt lowered to $60
Chesapeake Energy (CHK) downgraded to Sell from Neutral at Ladenburg Thalmann; tgt $10
Ciena (CIEN) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $47
Essential Properties Realty Trust (EPRT) downgraded to Sector Perform from Sector Outperform at Scotiabank; tgt $13
Fortune Brands Home & Security (FBHS) downgraded to Neutral from Outperform at Robert W. Baird; tgt $47
Invitation Homes (INVH) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $22
JELD-WEN (JELD) downgraded to Equal Weight from Overweight at Wells Fargo; tgt $11
JELD-WEN (JELD) downgraded to Neutral from Outperform at Robert W. Baird; tgt $9
Kimco Realty (KIM) downgraded to Sell from Neutral at Compass Point; tgt $12
Kite Realty (KRG) downgraded to Neutral from Buy at Compass Point; tgt $12
LyondellBasell (LYB) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $55
Masonite International (DOOR) downgraded to Neutral from Outperform at Robert W. Baird; tgt $55
MasterCard (MA) downgraded to Neutral from Buy at Guggenheim
Mohawk (MHK) downgraded to Neutral from Outperform at Robert W. Baird; tgt $86
Newmont Goldcorp (NEM) downgraded to Equal Weight from Overweight at Barclays; tgt $58
Owens Corning (OC) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $42
Paylocity (PCTY) downgraded to Hold from Buy at Stifel; tgt lowered to $80
Plantronics (PLT) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $10
RPT Realty (RPT) downgraded to Sell from Neutral at Compass Point; tgt $8
Square (SQ) downgraded to Underperform from Mkt Perform at Raymond James
Stantec (STN) downgraded to Market Perform from Outperform at BMO Capital Markets
Thomson Reuters (TRI) downgraded to Sector Perform from Outperform at National Bank Financial
Tilray (TLRY) downgraded to Underperform from Hold at Jefferies; tgt $5
Twitter (TWTR) downgraded to Neutral from Overweight at JP Morgan; tgt $29
Others:
Agilysys (AGYS) initiated with a Neutral at BTIG Research
Atreca (BCEL) initiated with an Outperform at Robert W. Baird; tgt $30
Blackbaud (BLKB) initiated with a Neutral at BTIG Research
Datadog (DDOG) initiated with a Neutral at DA Davidson; tgt $38
Douglas Emmett (DEI) initiated with a Buy at Jefferies; tgt $36
Dynatrace (DT) initiated with a Buy at DA Davidson; tgt $34
eHealth (EHTH) initiated with an Overweight at Barclays; tgt $150
Elastic (ESTC) initiated with a Buy at DA Davidson; tgt $70
Essential Utilities (WTRG) initiated with a Neutral at Goldman; tgt $45
Five9 (FIVN) initiated with a Buy at BTIG Research; tgt $100
Guidewire Software (GWRE) initiated with a Buy at BTIG Research; tgt $100
Hudson Pacific Properties (HPP) initiated with a Hold at Jefferies; tgt $24
Kilroy Realty (KRC) initiated with a Hold at Jefferies; tgt $62
Kirby (KEX) initiated with a Buy at The Benchmark Company; tgt $65
L3Harris (LHX) initiated with a Buy at BofA/Merrill; tgt $250
Mirati Therapeutics (MRTX) initiated with a Buy at Goldman; tgt $151
Model N (MODN) initiated with a Neutral at BTIG Research
Monster Beverage (MNST) resumed with a Buy at BofA/Merrill; tgt $70
RingCentral (RNG) initiated with a Buy at BTIG Research; tgt $265
Tyler Tech (TYL) initiated with a Neutral at BTIG Research
Zoom Video (ZM) initiated with a Neutral at BTIG Research
Upcoming Events:
Econ Data:
08:30 ET: Weekly Initial Claims (Briefing.com consensus 5.000 mln; prior 6.606 mln) and Continuing Claims (prior 7.455 mln)
08:30 ET: April Philadelphia Fed Survey (Briefing.com consensus -25.0; prior -12.7)
08:30 ET: March Housing Starts (Briefing.com consensus 1.300 mln; prior 1.599 mln) and March Building Permits (Briefing.com consensus 1.297 mln; prior 1.464 mln)
10:30 ET: Weekly natural gas inventories (prior +38 bcf)
Earnings:
Monday (April 13)
Morning: None of note
Afternoon: None of note
Tuesday (April 14)
Morning: CONN FAST FRC INFY JNJ JPM WFC
Afternoon: JBHT WAFD
Wednesday (April 15)
Morning: RPM BAC C GS PNC PGR USB UNH
Afternoon: BBBY
Thursday (April 16)
Morning: ABT BMI BLK BK HOMB KEY LOVE RAD SON TSM
Afternoon: ISRG MRTN WAL
Friday (April 17)
Morning: CFG IBKC KSU MUSA RF SLB STT
Afternoon: None of note
Full Earnings Calendar
Asia & Europe detail:
Asia: Nikkei -1.3%, Hang Seng -0.6%, Shanghai +0.3%
Equity indices in the Asia-Pacific region ended Thursday on a mixed note. South Korea's ruling party strengthened its position in yesterday's election. Hong Kong's Cathay Pacific reported a 90% yr/yr drop in passenger traffic in March. South Korean officials have proposed a second extra budget of KRW7.60 trln, which will not require bond issuance. Nikkei reported that Japan's economic assessment for April will describe the situation as "worsening sharply." The IMF cautioned that the Bank of Japan will have a limited effect in stimulating the economy if it cuts rates deeper into negative territory. Reserve Bank of New Zealand Governor, Adrian Orr, said that the RBNZ has not ruled negative interest rates, adding that the shadow official cash rate is "significantly negative."
In economic data:
China's March House Prices 5.3% yr/yr (last 5.8%)
Japan's April Reuters Tankan Index -30 (last -20)
South Korea's March trade surplus $4.59 bln (last surplus of $5.04 bln). March Imports 0.3% yr/yr (last -0.3%) and Exports -0.7% yr/yr (last -0.2%)
Australia's March Employment Change 5,900 (expected -40,000; last 26,700) and Full Employment Change -400 (last 6,700). March Participation Rate 66.0% (expected 65.9%; last 66.0%) and Unemployment Rate 5.2% (expected 5.5%; last 5.1%). April MI Inflation Expectations 4.6% (last 4.0%)
---Equity Markets---
Japan's Nikkei: -1.3%
Hong Kong's Hang Seng: -0.6%
China's Shanghai Composite: +0.3%
India's Sensex: +0.7%
South Korea's Kospi: UNCH
Australia's ASX All Ordinaries: -1.0%
---FX---
USD/JPY: +0.3% to 107.65
USD/CNH: +0.1% to 7.0773
USD/INR: +0.4% to 76.87
Europe: DAX +1.0%, FTSE +0.4%, CAC +0.6%
Major European indices trade mostly higher while Spain's IBEX (-0.2%) lags amid relative weakness in bank stocks. German commercial credit insurers will receive a EUR30 bln backstop from the government. French Finance Minister, Bruno Le Maire, said that the European Stability Mechanism could be tapped for non-health spending. European Central Bank President, Christine Lagarde, said that the central bank may expand euro swap lines. France sold 3- and 5-yr debt at negative rates while Spain auctioned 3-, 5-, and 15-yr debt. The U.K. sold 30-yr gilts.
In economic data:
Eurozone's February Industrial Production -0.1% m/m (expected -0.2%; last 2.3%); -1.9% yr/yr (expected -2.0%; last -1.7%)
Germany's March CPI 0.1% m/m, as expected (last 0.4%); 1.4% yr/yr, as expected (last 1.7%)
Swiss March PPI -0.3% m/m (last -0.9%); -2.7% yr/yr (last -2.1%)
---Equity Markets---
STOXX Europe 600: +1.0%
Germany's DAX: +1.0%
U.K.'s FTSE 100: +0.4%
France's CAC 40: +0.6%
Italy's FTSE MIB: +1.5%
Spain's IBEX 35: -0.2%
---FX---
EUR/USD: -0.2% to 1.0884
GBP/USD: -0.3% to 1.2494
USD/CHF: +0.1% to 0.9657
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Source St. Louis Fed