MONDAY MORNING BRIEFING

MONDAY MORNING BRIEFING

The opening indication is looking to be very ugly on Wall Street after Saudi Arabia signaled an oil price war and the coronavirus caseload escalated over the weekend. Currently, the S&P 500 futures are down 151 points and trade 5.1% below fair value. WTI crude futures are down 22.4%, or $9.26, to $32.02/bbl.
Saudi Arabia cut oil prices by $6-8/barrel and said it will increase output to 10 million barrels/day next month, and then to 12 million barrels/day if needed, after Russia rejected its plan to cut production on Friday. The drop in oil is its worst decline since the Gulf War in 1991, which is fueling default concerns within the energy sector.
As for the coronavirus situation, U.S. cases climbed to over 500 while Italy placed several northern cities on lockdown on Sunday, essentially quarantining more than 15 million people. Italy’s MIB is currently down 9.9% versus the 6.2% decline in the Europe Stoxx 600.
Growth concerns continue to exacerbate the flight for safety in U.S. Treasuries, as the collapse in oil prices is apt to lower earnings prospects for energy companies and could cause geopolitical issues for oil-dependent nations. Strong expectations for the Fed to issue another rate cut next week amid the coronavirus-induced slowdown is also contributing to the rally in Treasuries.
The 2-yr yield has dropped 22 basis points to 0.27%, and the 10-yr yield has dropped 30 basis points to 0.41%. The U.S. Dollar Index is down 0.8% to 95.15. On a related note, the New York Fed recently increased its daily repo operations to at least $150 billion from at least $100 billion.
In U.S. Corporate news:
• Exxon Mobil (XOM 41.25, -6.44): -13.5% amid the drop in oil prices.
• Chevron (CVX 82.52, -13.07): -13.7% amid the drop in oil prices.
Reviewing overnight developments:
• Equity indices in the Asia-Pacific region began the week on a sharply lower note amid significant weakness in shares of oil producers after Saudi Arabia sparked a price war with Russia by cutting export prices. Japan’s Nikkei: -5.4% Hong Kong’s Hang Seng: -4.2%, China’s Shanghai Composite: -3.0%, India’s Sensex: -5.2%, South Korea’s Kospi: -4.2%, Australia’s ASX All Ordinaries: -7.4%.
• In economic data:
• China’s January/February trade deficit $7.09 bln (expected surplus of $24.60 bln; prior surplus of $47.21 bln). Imports -4.0% yr/yr (expected -15.0%; last 16.5%) and Exports -17.2% yr/yr (expected -14.0%; last 7.9%)
• Japan’s Q4 GDP -1.8% qtr/qtr (expected -1.7%; last -1.6%); -7.1% yr/yr (expected -6.6%; last -6.3%). Q4 GDP Capital Expenditure -4.6% qtr/qtr (expected -4.3%; last -3.7%). February Economy Watchers Current Index 27.4 (expected 44.6; last 41.9)
• In news:
• WTI crude is down $9.03, or 21.8%, at $32.25/bbl, hovering at a level not seen since early 2016. The S&P 500 futures were halted last night after falling 5.0%.
• Japan’s Prime Minister, Shinzo Abe, announced that small and medium sized businesses impacted by the coronavirus will be offered interest free loans with no collateral.
• China’s trade figures for January and February showed an unexpected trade deficit and a larger than expected drop in exports.
• Major European indices trade sharply lower across the board as the continuation of coronavirus-related concerns gets amplified by plunging oil prices. STOXX Europe 600: -6.2%, Germany’s DAX: -6.7%, U.K.’s FTSE 100: -6.1%, France’s CAC 40: -6.6%, Italy’s FTSE MIB: -9.9%, Spain’s IBEX 35: -6.7%.
• In economic data:
• Eurozone’s March Sentix Investor Confidence -17.1 (expected -11.1; last 5.2)
• Germany’s January Industrial Production 3.0% m/m (expected 1.7%; last -2.2%). January trade surplus EUR18.50 bln (expected surplus of EUR15.40 bln; last surplus of EUR19.00 bln). January Imports 0.5% m/m (expected -0.2%; last -0.3%) and Exports 0.0% m/m (expected -0.2%; last 0.2%). January Current Account surplus EUR16.60 bln (expected surplus of EUR20.10 bln; last surplus of EUR24.80 bln)
• Swiss February Unemployment Rate 2.3% (last 2.3%)
• In news:
• The European Commission reportedly aims to approve Italy’s updated spending plan swiftly.

French Finance Minister, Bruno Le Maire, called on the EU to form a fiscal stimulus plan.
• Deutsche Bank is nearing its record low from mid-2016 as interest rates continue falling sharply.
• Germany’s 10-yr bund yield hit a fresh record low of -0.87% today.

U.S. equity futures:
• S&P 500 Futures -145 @ 2819
• DJIA Futures -1256 @ 24533
• Nasdaq Futures -410 @ 8093
Overseas:
• Europe: DAX -7.0%, FTSE -6.6%, CAC -7.0%
• Asia: Nikkei -5.4%, Hang Seng -4.2%, Shanghai -3.0%
Commodities:
• Crude Oil -9.34 @ 31.94
• Nat Gas -0.085 @ 1.623
• Gold +4.95 @ 1677
• Silver -0.278 @ 19.985
• Copper -0.088 @ 2.473

U.S. Summary:
• Earnings/Guidance (Full Earnings Calendar):
• AnaptysBio (ANAB) beats by $0.05, misses on revs
• Changyou.com (CYOU) beats by $0.53, beats on revs
• ChipMOS TECHNOLOGIES (IMOS) reports February revenues +9% yr/yr to NT 1.89 bln
• KLX Energy Services (KLXE) misses by $0.28, misses on revs
• Pebblebrook Hotel Trust (PEB) ‘has withdrawn its 2020 and Q1 2020 Outlook provided on February 20, 2020 due to the large number of recent corporate group cancellations and corporate travel policy restrictions’
• PerkinElmer (PKI) sees Q1 EPS and revenues below prior guidance
• Ryman Hospitality (RHP) withdraws FY20 guidance; provides update on impact of coronavirus
• Sogou (SOGO) misses by $0.01, reports revs in-line; guides Q1 revs above consensus
• Sohu.com (SOHU) misses by $0.05, beats on revs
• Thor Industries (THOR) misses by $0.19, beats on revs
• Varian Medical (VAR) sees Q2 revs below consensus; lowers FY20 guidance
• General News:
• Italy to lock down Milan region in attempt to contain outbreak of coronavirus, according to Bloomberg
• NY Governor Andrew Cuomo declares state of emergency as coronavirus cases and deaths rise, according to the New York Times
• Senator Ted Cruz (R-TX) and Rep. Paul Gosar are isolating themselves after coming in contact with a coronavirus patient at the Conservative Political Action Conference, according to the L.A Times
• The Trump administration is drafting proposals to help economy with coronavirus issues including extending paid sick leave, according to Bloomberg
• NY Fed increases daily repo operations from at least $100 bln to at least $150 bln
• Saudi Arabia cut oil prices and is preparing to increase production which could be start of a price war aimed at Russia, according to Financial Times
• Amazon (AMZN): A judge says AMZN is likely to prevail regarding a key argument in defense contract lawsuit, according to Reuters
• AT&T (T) is working with DOJ on Google (GOOG) investigation, according to the Wall Street Journal
• AVROBIO (AVRO): FDA has granted orphan drug designation to the company’s investigational gene therapy, AVR-RD-04, for the treatment of cystinosis
• Boeing (BA): Ethiopian crash investigators blame Boeing737 Max for March 2019 crash, according to Reuters
• Boeing (BA): FAA aims to require electrical wiring fixes to Boeing 737 Max before it can fly again, according to the Wall Street Journal
• Bristol-Myers (BMY) announces topline results from ELOQUENT-1
• Diamondback Energy (FANG) provides operational update; is reducing activity immediately from nine completion crews to six and expects to drop two drilling rigs in April 2020 and a third later in the second quarter of 2020
• Gilded (GILD) shipped Remdesivir coronavirus drug to China without US approval, according to Axios
• Kala Pharmaceuticals (KALA) announces statistically significant results for primary and key secondary endpoints in Stride 3 clinical trial evaluating Eysuvis for signs and symptoms of dry eye disease
• M&A:
• Allied Motion (AMOT) acquired Dynamic Controls Group; terms not dislcosed
• Aon (AON) and Willis Towers Watson (WLTW) to combine in an all-stock transaction with an implied combined equity value of approximately $80 billion
• TEGNA (TGNA): Apollo Global Mgmt has offered to acquire TGNA for $20/share, according to the Wall Street Journal
• Syndicate:
• Chipotle Mexican Grill (CMG) files for 1,161,232 share common stock offering by selling shareholder
• Devon Energy (DVN) files mixed securities shelf offering
• Gladstone Land (LAND) files for $1 bln mixed securities shelf offering
• Ovintiv (OVV) files mixed securities shelf offering
• Renewable Energy (REGI) files mixed securities shelf offering
• Soliton (SOLY) files for $75 mln mixed securities shelf offering
• TCR2 Therapeutics (TCRR) files for $300 mln mixed securities shelf offering
• IPOs:
• Expected this week:
• IMARA Inc. (IMRA:Nasdaq): Clinical-stage biopharmaceutical company developing therapeutics to treat patients suffering from rare inherited genetic disorders [Planning to offer 4.5 mln shares between $16-$18]
Gapping Up/Down
• Gapping up:
• KALA +14.6%, TLT +7.6%, ARDX +5.4%, SOGO +1.3%, CYOU +0.7%, TGNA +0.6%, LAKE +0.5%, THO +0.5%
• Gapping down:
• OVV -27.2%, DVN -25.3%, FANG -23.8%, USO -22.3%, HAL -21.6%, SLB -17.8%, BP -17.1%, XLE -14.1%, XOM -12.1%, RDS.A -12%, TOT -10.8%, XLF -7.6%, XLI -6.8%, XLK -6.5%, SPY -6.2%, PSX -6.2%, IWM -6%, QQQ -5.9%, DIA -5.7%, AYX -5.4%, SOHU -2.1%
Analyst Research:
• Upgrades:
• American Express (AXP) upgraded to Outperform from Neutral at Robert W. Baird; tgt $124
• Cars.com (CARS) upgraded to Buy from Neutral at BTIG Research; tgt $10
• Cypress Semi (CY) upgraded to Buy from Neutral at Mizuho; tgt lowered to $22
• Darling Ingredients (DAR) upgraded to Buy from Neutral at Goldman; tgt raised to $37
• DHT (DHT) upgraded to Buy from Hold at Stifel; tgt $6.50
• Fortive (FTV) upgraded to Market Perform from Underperform at Cowen; tgt $70
• Healthcare Realty (HR) upgraded to Outperform from Market Perform at BMO Capital Markets
• Huntington Banc (HBAN) upgraded to Outperform from Neutral at Robert W. Baird; tgt $15
• Logitech Int’l SA (LOGI) upgraded to Outperform from Neutral at Wedbush
• PACCAR (PCAR) upgraded to Market Perform from Underperform at Cowen; tgt lowered to $65
• Phillips 66 (PSX) upgraded to Outperform from Neutral at Credit Suisse; tgt $100
• Plexus (PLXS) upgraded to Overweight from Neutral at JP Morgan; tgt $84
• Scorpio Tankers (STNG) upgraded to Buy from Hold at Stifel; tgt $30
• Downgrades:
• Anheuser-Busch InBev (BUD) downgraded to Neutral from Outperform at Credit Suisse
• Antero Midstream (AM) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $4
• BOK Financial (BOKF) downgraded to Mkt Perform from Outperform at Raymond James
• Boot Barn Holdings (BOOT) downgraded to Neutral from Overweight at JP Morgan; tgt $32
• Callon Petroleum (CPE) downgraded to Hold from Buy at SunTrust; tgt $1.50
• Centennial Resource Development (CDEV) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $2.50
• Continental Resources (CLR) downgraded to Hold from Buy at SunTrust; tgt $15
• Delek US Holdings (DK) downgraded to Neutral from Outperform at Credit Suisse; tgt $26
• Devon Energy (DVN) downgraded to Hold from Buy at SunTrust; tgt $15
• DHT (DHT) downgraded to Hold from Buy at DNB Markets
• Diamondback Energy (FANG) downgraded to Hold from Buy at SunTrust; tgt lowered to $55
• Dorian LPG (LPG) downgraded to Hold from Buy at DNB Markets; tgt $18
• Eagle Bulk Shipping (EGLE) downgraded to Hold from Buy at DNB Markets; tgt $4.10
• Earthstone Energy (ESTE) downgraded to Hold from Buy at SunTrust; tgt $4
• Energy Transfer (ET) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $9
• EnLink Midstream (ENLC) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $4
• EOG Resources (EOG) downgraded to Hold from Buy at SunTrust; tgt $60
• Frontline (FRO) downgraded to Hold from Buy at DNB Markets; tgt $8.75
• GasLog (GLOG) downgraded to Hold from Buy at DNB Markets; tgt $7
• Genco Shipping & Trading (GNK) downgraded to Hold from Buy at DNB Markets; tgt $10
• Gilead Sciences (GILD) downgraded to Outperform from Top Pick at RBC Capital Mkts; tgt $86
• Golar LNG (GLNG) downgraded to Hold from Buy at DNB Markets; tgt $19
• Hancock Whitney (HWC) downgraded to Mkt Perform from Strong Buy at Raymond James
• Horizon Global (HZN) downgraded to Sell from Neutral at B. Riley FBR; tgt lowered to $2
• Magnolia Oil & Gas (MGY) downgraded to Hold from Buy at SunTrust; tgt $7
• Masco (MAS) downgraded to Equal Weight from Overweight at Barclays; tgt $48
• Matador Resources (MTDR) downgraded to Hold from Buy at SunTrust; tgt $8
• Occidental Petro (OXY) downgraded to Sell from Hold at SunTrust; tgt $15
• Ovintiv (OVV) downgraded to Sell from Hold at SunTrust; tgt $5
• Parsley Energy (PE) downgraded to Hold from Buy at SunTrust; tgt $11
• Plains All American (PAA) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $12
• Plains GP (PAGP) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $12
• Regions Fincl (RF) downgraded to Mkt Perform from Strong Buy at Raymond James
• Ring Energy (REI) downgraded to Hold from Buy at SunTrust; tgt $1
• Rosehill Resources (ROSE) downgraded to Hold from Buy at SunTrust
• Royal Dutch Shell (RDS.A) downgraded to Mkt Perform from Outperform at Bernstein
• Scorpio Tankers (STNG) downgraded to Hold from Buy at DNB Markets; tgt $30
• Ship Finance Intl (SFL) downgraded to Hold from Buy at DNB Markets; tgt $14.70
• Star Bulk Carriers (SBLK) downgraded to Hold from Buy at DNB Markets; tgt $10.40
• Targa Resources (TRGP) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $28
• Teekay Tankers (TNK) downgraded to Hold from Buy at DNB Markets; tgt $21
• Tellurian (TELL) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $2
• Triumph Bancorp (TBK) downgraded to Neutral from Buy at B. Riley FBR; tgt lowered to $33
• Whiting Petroleum (WLL) downgraded to Hold from Buy at SunTrust; tgt $2
• Others:
• Johnson Controls (JCI) initiated with a Buy at Deutsche Bank; tgt $48
• Vivint Smart Home (VVNT) initiated with a Neutral at Goldman; tgt $25
Upcoming Events:
• Econ Data:
• No economic reports scheduled
• Earnings
• Monday (March 9)
• Morning: CYOU KLXE SOGO SOHU THO
• Afternoon: AVID CASY FNV SFIX SNCR MTN
• Tuesday (March 10)
• Morning: IMOS CVIA DSKE DKS PSN SPAR
• Afternoon: APEI CLDR KFY NEX VSLR
• Wednesday (March 11)
• Morning: EXPR PDD UNFI VRA
• Afternoon: WUBA TACO HUD INSG KRO SMTC WPM ZAGG
• Thursday (March 12)
• Morning:AZUL BEST DG GCO GVA RDNT TUP
• Afternoon: ADBE AVGO CAL CBPO DOCU DOMO MRAM GPS MDLA NNBR ORCL WORK TLYS ULTA UNIT ZUMZ ZUO
• Friday (March 13)
• Morning: BKE GOGO HHR
• Full Earnings Calendar


Asia & Europe detail:
Asia: Nikkei -5.4%, Hang Seng -4.2%, Shanghai -3.0%
Equity indices in the Asia-Pacific region began the week on a sharply lower note amid significant weakness in shares of oil producers after Saudi Arabia sparked a price war with Russia by cutting export prices. WTI crude is down $9.03, or 21.8%, at $32.25/bbl, hovering at a level not seen since early 2016. The S&P 500 futures were halted last night after falling 5.0%. Japan’s Prime Minister, Shinzo Abe, announced that small and medium sized businesses impacted by the coronavirus will be offered interest free loans with no collateral. China’s trade figures for January and February showed an unexpected trade deficit and a larger than expected drop in exports.
• In economic data:
• China’s January/February trade deficit $7.09 bln (expected surplus of $24.60 bln; prior surplus of $47.21 bln). Imports -4.0% yr/yr (expected -15.0%; last 16.5%) and Exports -17.2% yr/yr (expected -14.0%; last 7.9%)
• Japan’s Q4 GDP -1.8% qtr/qtr (expected -1.7%; last -1.6%); -7.1% yr/yr (expected -6.6%; last -6.3%). Q4 GDP Capital Expenditure -4.6% qtr/qtr (expected -4.3%; last -3.7%). February Economy Watchers Current Index 27.4 (expected 44.6; last 41.9)
—Equity Markets—
• Japan’s Nikkei: -5.4%
• Hong Kong’s Hang Seng: -4.2%
• China’s Shanghai Composite: -3.0%
• India’s Sensex: -5.2%
• South Korea’s Kospi: -4.2%
• Australia’s ASX All Ordinaries: -7.4%
—FX—
• USD/JPY: -2.9% to 102.30
• USD/CNH: +0.4% to 6.9511
• USD/INR: +0.1% to 74.10
Europe: DAX -6.7%, FTSE -6.1%, CAC -6.6%
Major European indices trade sharply lower across the board as the continuation of coronavirus-related concerns gets amplified by plunging oil prices. The European Commission reportedly aims to approve Italy’s updated spending plan swiftly. French Finance Minister, Bruno Le Maire, called on the EU to form a fiscal stimulus plan. Deutsche Bank is nearing its record low from mid-2016 as interest rates continue falling sharply. Germany’s 10-yr bund yield hit a fresh record low of -0.87% today.
• In economic data:
• Eurozone’s March Sentix Investor Confidence -17.1 (expected -11.1; last 5.2)
• Germany’s January Industrial Production 3.0% m/m (expected 1.7%; last -2.2%). January trade surplus EUR18.50 bln (expected surplus of EUR15.40 bln; last surplus of EUR19.00 bln). January Imports 0.5% m/m (expected -0.2%; last -0.3%) and Exports 0.0% m/m (expected -0.2%; last 0.2%). January Current Account surplus EUR16.60 bln (expected surplus of EUR20.10 bln; last surplus of EUR24.80 bln)
• Swiss February Unemployment Rate 2.3% (last 2.3%)
—Equity Markets—
• STOXX Europe 600: -6.2%
• Germany’s DAX: -6.7%
• U.K.’s FTSE 100: -6.1%
• France’s CAC 40: -6.6%
• Italy’s FTSE MIB: -9.9%
• Spain’s IBEX 35: -6.7%
—FX—
• EUR/USD: +1.2% to 1.1421
• GBP/USD: +0.3% to 1.3080
• USD/CHF: -1.1% to 0.9268

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