Hammerstone’s Early Look

By admin | 03/19/2020

Thursday, March 19, 2020

U.S. futures are lower, erasing overnight losses despite central banks providing yet more stimulus to try and combat the economic damage the coronavirus has caused. Last night, the European Central Bank (ECB) announced a massive stimulus plan — a 750 billion-euro ($818 billion) bond repurchase program which will include government and private-sector bonds as well as commercial paper in a bid to calm markets roiled by the virus outbreak. The move comes as market borrowing costs for heavily indebted Italy rose. Also late yesterday, the U.S. Senate overwhelmingly passed a bipartisan, multi-billion dollar emergency package that includes expanded unemployment insurance and paid sick leave for hourly workers (which helped stocks rally into the close). These moves are on top of a 150 bps interest rate cut by the Federal Reserve over the last two-weeks, a $700B QE program and boosted Repo operations as well all in an effort to provide much needed liquidity to markets that are trading on panic and fear with jobs lost, production halted in an overall stoppage of daily life for citizens worldwide. Stocks are coming off another dreadful performance, as the Dow Jones Industrial Average dropped 1,338 points, or 6.3%, to settle below the psychologically important level of 20,000 for its lowest close since February 2017 (briefly fell below 19,000). The losses brought the Dow’s total declines since its Feb. 12th closing high to 32.7%. Selling was broad based again, but heavy damage again was in the energy sector as WTI crude oil prices dropped more than 24% to settle at $20.37 per barrel, the lowest level since early 2002But are rebounding this morning). In Asian markets overnight, The Nikkei Index dropped -173 points to 16,552, the Shanghai Index fell -26 points to 2,702 and the Hang Seng Index declined -582 points (2.6%) to 21,709. In Europe, the German DAX is down about -80 points to 8,350, while the FTSE 100 is down about -50 points to 5,030.

Market Closing Prices Yesterday

• The S&P 500 Index plunged -131.09 points, or 5.18%, to 2,398.10
• The Dow Jones Industrial Average fell -1,338.46 points, or 6.30%, to 19,898.92
• The Nasdaq Composite dropped -344.94 points, or 4.70%, to 6,989.84
• The Russell 2000 Index declined -115.34 points, or 10.42% to 991.16

Economic Calendar for Today

• 8:30 AM EST       Weekly Jobless Claims…est. 220K
• 8:30 AM EST       Continuing Claims…1.738M
• 8:30 AM EST       Philly Fed Business Outlook for March…est. 8.0
• 8:30 AM EST       Current Account Balance for Q4…est. (-$108.6B)
• 10:00 AM EST     Leading Index for February…est. 0.1%
• 10:30 AM EST     Weekly EIA Natural Gas Inventory Data

Earnings Calendar:

• Earnings Before the Open: CMC, DLTH, DRI, LEN, PLCE
• Earnings After the Close: CRIS, CRWD, CTAS, OLLI, SCHL, VIVE, YTEN

World News

• The European Central Bank (ECB) announced a massive stimulus plan — a 750 billion-euro ($818 billion) bond repurchase program which will include government and private-sector bonds as well as commercial paper
• White House top economic adviser Larry Kudlow said late Wednesday that the administration may consider asking for an equity stake in corporations who want coronavirus aid from taxpayers. “One of the ideas is, if we provide assistance, we might take an equity position,” Kudlow said Wednesday at the White House, but cautioned the idea was just one of many
• The preliminary Ifo business climate index for Germany fell to 87.7 points in March from 96 in February, its biggest drop since 1991. That brings the index to its lowest level since August 2009. The preliminary assessment is based on approximately 90% the usual number of responses

Sector News Breakdown

Consumer

• Guess Inc. (GES) Q4 EPS $1.22 on revs $842.3M vs. est. $1.12 and $851.9M; said is not issuing Q1, FY20 guidance due to COVID-19 uncertainty; said qtrly Americas retail comp sales including e-commerce decreased (-3%) in U.S. dollars and constant currency; said global crisis will have a significant negative impact on Q1 results and may impact future results
• Herman Miller (MLHR) Q3 adjusted EPS 74c/$665.7M vs. est. 69c/$679.45M; says while this is clearly a time of near-term uncertainty, we remain confident the progress that we are making on our strategic priorities positions us for continued long-term profitable growth
• Five Below (FIVE) Q4 EPS $1.97/$687.1M vs. est. $1.94/$687.05M; Q4 comps fell (-2.2%) and says not giving Q1 of year guidance
• Vail Resorts Inc. (MTN) said to suspend operations at all of our North American mountain resorts and retail stores and will remain closed through remainder of 2019/2020 ski season; anticipate that our operating results for March and April will have a negative impact of $180M-$200M
• Eldorado Resorts (ERI) said it will temporarily suspend operations at Isle Casino Racing Pompano, Florida starting Tuesday due to COVID-19
• Autoliv (ALV) has tapped $500M from its revolving credit facility of $1.1B, to pay down existing short-term debt and for general corporate purposes
• Lennar (LEN) Q1 EPS $1.27 vs. est. 84c and reports Q1 revenue $4.5B vs. est. $4.16B; Q1 new orders up 18% to 12,376 homes; Q1 backlog up 2% to 17,632 homes and Q1 deliveries up 17% to 10,321 homes; suspends guidance

Energy, Industrials & Materials

• Energy prices plunged on Wednesday as WTI crude fell over 24% to its lowest levels since 2002 and Brent to its lowest since 2003 as governments worldwide accelerated lockdowns to counter the coronavirus pandemic. U.S. crude futures ended the day down 63% for the year-to-date.
• Continental Resources (CLR) to cut 2020 cap-ex budget by 55% to $1.2B and sees 2020 production down less than 5% from a year ago
• Targa Resources (TRGP) cuts dividend to 10c from 91c, lowers FY20 capex to approximately $800M to $900M from its previously communicated range of $1.2B to $1.3B, which represents a 32% reduction at the midpoint of both ranges
• Triumph Group (TGI) borrowed $350 million under existing credit agreement as precautionary approach to increase cash position
• ArcelorMittal (MT) said that it is reducing production at several European sites as demand has been falling due to the coronavirus pandemic.

Financials

• ICE Intercontinental Exchange, Inc. (ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that the New York Stock Exchange will initiate its business continuity plan and move, on a temporary basis, to fully electronic trading on Monday, March 23. All-electronic trading will begin on Monday’s open

Healthcare

• Pfizer (PFE) announced that JADE COMPARE met its co-primary efficacy endpoints. The Phase 3 study evaluated the safety and efficacy of abrocitinib, an investigational oral once-daily Janus kinase 1 inhibitor, in adults with moderate to severe atopic dermatitis who were also on background topical therapy
• Roche (RHHBY) unit Genentech initiates a Phase 3 clinical trial, COVACTA, evaluating Actemra (tocilizumab) plus standard-of-care (SOC) treatment versus placebo + SOC in hospitalized adult patients with severe COVID-19 pneumonia.
• Exact Sciences (EXAS) withdraws guidance due to virus while saying testing labs remain operational and the company is working to facilitate use of online care for patients to access

Technology, Media & Telecom

• ACM Research (ACMR) Q4 EPS 23c on revs $24.6M vs. est. 9c and $22.9M; guided year revs to $130M-$150M vs. est. $138.1M; said covid-19 outbreak is impacting our first quarter results, but to date has not changed our outlook for the year
• PagerDuty (PD) Q4 adjusted EPS loss (3c) on revs $45.9M vs. est. loss (6c) and $45.08M; said recently surpassed an important milestone with over 500,000 users; sees FY21 adjusted EPS loss (31c)-(25c) on revs $208M-$213M vs. est. loss (23c)/$210.28M
• CarGurus (CARG) gives dealers 50% subscription billings discount in April for paying customers; said is suspending full-year 2020 guidance for revenue, non-GAAP operating income, non-GAAP eps

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