DAILY MORNING CHAI REPORT

The S&P 500 futures are back in positive territory, trading 29 points, or 0.9%, above fair value after falling as much as 1.0% below fair value last evening. The early weakness was attributed to a disappointing COVID-19 vaccine update, which unnerved some investors after the S&P 500 had already fallen 7.1% from its record high. It's been a rough last few days for the Nasdaq, which touched correction territory over the course of three sessions as six of the biggest tech stocks lost more than $1T in market value. While it was the fastest 10% plunge in history (the previous record pace was six sessions notched back in March), 2020 has been a year for the record books. Wall Street now appears to be regaining some footing, with Nasdaq futures ahead by nearly 2%, and contracts tied to the Dow and S&P 500 up 0.6% and 0.8%, respectively. On the economic calendar, the Labor Department is set to release its Job Openings and Labor Turnover Survey for July, and while it is somewhat dated, the report should give investors some insight into the labor market. Specifically, Stat News reported that AstraZeneca's (AZN 53.24, -1.47, -2.7%) COVID-19 study was put on hold following a suspected serious adverse reaction in a trial participant in the UK. AZN shares fell more than 8% on the news, but like the broader market, shares are in rebound mode and are now down just 2.7%. Apple (AAPL 115.87, +3.05, +2.7%) is setting the rebound pace after shedding 16% since Sept. 1. Lululemon athletica (LULU 332.50, -17.30, -5.0%) and Slack (WORK 24.30, -5.02, -17.1%), on the other hand, are some notable holdouts following their earnings reports. On the data front, investors will receive the JOLTS - Job Openings report for July at 10:00 a.m. ET. The weekly MBA Mortgage Applications Index increased 2.9% following a 2.0% decline in the prior week. U.S. Treasuries are trading little changed. The 2-yr yield is up one basis point to 0.15%, and the 10-yr yield is flat at 0.68%. The U.S. Dollar Index is up 0.2% to 93.60. WTI crude futures are up 1.6%, or $0.56, to $37.32/bbl after falling 7.4% yesterday. In U.S. Corporate news: AstraZeneca (AZN 53.24, -1.47): -2.7% on news that its COVID-19 study was said to be put on hold following a suspected serious adverse reaction in a trial participant in the UK, according to Stat News. lululemon athletica (LULU 332.50, -17.30): -5.0% despite beating top and bottom-line estimates. Slack (WORK 24.30, -5.02): -17.1% despite beating top and bottom-line estimates and issuing upside FY21 guidance. Tiffany & Co. (TIF 111.12, -10.69): -8.8% after LVMH (LVMUY) said it won't be able to complete the acquisition of Tiffany. The latter has filed a lawsuit to enforce a merger. Gapping up In reaction to earnings/guidance: QRVO +6.4%, ST +3.6%, GLW +2.1% (expects Q3 sales to grow by a low-teen percentage sequentially vs high-single digit consensus), PHR +1.8%, HQY +1.3% Other news: ITCI +68.5% (announces topline results from its Phase 3 clinical trial (Study 402) evaluating lumateperone as adjunctive therapy to lithium or valproate in the treatment of major depressive episodes associated with Bipolar I or Bipolar II disorder) SCOR +23.1% (granted new US patent for device co-location identification) NNOX +17.7% (enters distribution agreement with SPI Medical for the deployment and introduction of Nanox's medical imaging services in Mexico) DTIL +11.4% (FDA has granted Fast Track Designation to PBCAR269A for the treatment of relapsed/refractory multiple myeloma) KOS +11.2% (to farm down of a portfolio of exploration assets to Shell (RDS.A) for up to $200 mln) BNTX +6.1% (BioNTech and Pfizer to potentially supply the EU with 200 mln doses of mRNA-based vaccine candidate against SARS-CoV-2) CI +3.6% (expands offerings to customers who access health coverage through the Affordable Care Act marketplace) TECK +2.7% (production guidance) PFE +1.3% (BioNTech and Pfizer to potentially supply the EU with 200 mln doses of mRNA-based vaccine candidate against SARS-CoV-2) Analyst comments: SPCE +5% (upgraded to Outperform from Neutral at Credit Suisse) SDC +2.6% (upgraded to Peer Perform from Underperform at Wolfe Research) DKNG +2.5% (initiated with an Outperform at Evercore ISI) AZUL +2.2% (upgraded to Buy from Hold at Deutsche Bank) ARMK +2.1% (upgraded to Buy from Neutral at Goldman) VLRS +2% (upgraded to Buy from Hold at Deutsche Bank) INVH +1.6% (upgraded to Buy from Sell at Goldman) THO +1.6% (upgraded to Outperform from Market Perform at BMO Capital Markets) TREND TrendTracker: Lovesac (LOVE) reports another strong quarter (30.92 ) Lovesac (LOVE) reported another strong quarter with sales up 29% including internet sales +387% offset by showroom sales -45%. Gross margin fell less than expected and the company reported a smaller than expected net loss (positive EBITDA) due to marketing/expense shifts shifting into Q3. The company guided Q3 gross margin and EBITDA down due to in part to expense shifts but called for a profitable year on an adjusted EBITDA basis vs. the $1.7M Consensus. The company may have warned about Q3 costs, but much like Purple (PRPL), I still think this stock is attractive at 1.4x forward sales given the growth and housing tailwind while ~20% of the 11M share float is sold short. I have a small position left from under $24/share and I think the stock is worth buying under $30/share. - World markets attempting to rebound; S&P finds support at 3300 The global equity markets are mixed again, except Asia closed lower, while the US and Europe are signaling a rebound. Continued weakness was the theme early in the evening after AstraZeneca (AZN) reported that it put its COVID-19 vaccine candidate trial temporarily on hold due to an adverse side effect. This rattled markets during the after hours, but a recovery may be underway. S&P Futures are up about 0.8% and trading near the 3360 area. Buyers scooped up a quick test of the 3300 level with the low of the night coming in at 3295.50. Spoos are just off the high of 3368.00. In Asia, the equity markets followed Wall Street lower and struggled to stabilize following the vaccine trial news. This led to a downward slide of nearly 2% in the Shanghai and 1% in the Nikkei. Technology names were hit hardest in the region, mimicking the tone seen in the US on Tuesday. Nikkei heavyweights Fast Retailing and Sony gave back all of the prior day's gains with losses of 1-2%. In Europe, the major bourses are trading higher, in tandem with US futures. Energy names are among the best-performing groups. Stocks such as BP and Royal Dutch Shell (RDS.A) are outpacing the benchmark with gains of well over 2%. This is partially due to the 2% rebound in crude oil this morning, but also related to the sharp decline in the British Pound, as both companies are domiciled in the UK but report profits in USD. ______________________________________________________________________________________________________________________________________ Gapping up In reaction to earnings/guidance: QRVO +6.4%, ST +3.6%, GLW +2.1% (expects Q3 sales to grow by a low-teen percentage sequentially vs high-single digit consensus), PHR +1.8%, HQY +1.3% Other news: ITCI +68.5% (announces topline results from its Phase 3 clinical trial (Study 402) evaluating lumateperone as adjunctive therapy to lithium or valproate in the treatment of major depressive episodes associated with Bipolar I or Bipolar II disorder) SCOR +23.1% (granted new US patent for device co-location identification) NNOX +17.7% (enters distribution agreement with SPI Medical for the deployment and introduction of Nanox's medical imaging services in Mexico) DTIL +11.4% (FDA has granted Fast Track Designation to PBCAR269A for the treatment of relapsed/refractory multiple myeloma) KOS +11.2% (to farm down of a portfolio of exploration assets to Shell (RDS.A) for up to $200 mln) BNTX +6.1% (BioNTech and Pfizer to potentially supply the EU with 200 mln doses of mRNA-based vaccine candidate against SARS-CoV-2) CI +3.6% (expands offerings to customers who access health coverage through the Affordable Care Act marketplace) TECK +2.7% (production guidance) PFE +1.3% (BioNTech and Pfizer to potentially supply the EU with 200 mln doses of mRNA-based vaccine candidate against SARS-CoV-2) Analyst comments: SPCE +5% (upgraded to Outperform from Neutral at Credit Suisse) SDC +2.6% (upgraded to Peer Perform from Underperform at Wolfe Research) DKNG +2.5% (initiated with an Outperform at Evercore ISI) AZUL +2.2% (upgraded to Buy from Hold at Deutsche Bank) ARMK +2.1% (upgraded to Buy from Neutral at Goldman) VLRS +2% (upgraded to Buy from Hold at Deutsche Bank) INVH +1.6% (upgraded to Buy from Sell at Goldman) THO +1.6% (upgraded to Outperform from Market Perform at BMO Capital Markets) ______________________________________________________________________________________________________________________________________ Gapping down In reaction to earnings/guidance: WORK -16.5%, CASY -5.2%, LULU -5%, COUP -4.6%, NAV -4.6%, SCWX -3.9%, ABM -2.3%, LOVE -1.6% Other news: ATNX -9.4% (announced a public offering of 10.0 mln common shares) TIF -9.2% (files lawsuit against LVMH (LVMUY) to enforce merger agreement) AZEK -7.7% (launched secondary public offering of 25.0 mln shares of Class A common stock), ARCE -5.6% (priced an underwritten public offering of 2,500,000 Class A common shares to be issued by Arco at a public offering price of $44.80/share) VRM -4% (commenced public offering of 9.0 mln common shares) SCWX -3.9% (to acquire Delve Laboratories) AZN -2.7% (COVID-19 vaccine trial on hold following suspected serious adverse event, per Stat) ALK -2% (provides investor updates; Q3 planning assumptions include capacity to be down ~55%) UAL -1.2% (continues to see a significant impact in demand for air travel) UAA -1.2% (announced $75 mln increase to 2020 restructuring plan) Analyst comments: ESS -0.5% (downgraded to Sell from Neutral at Goldman) GOGO -0.5% (downgraded to Market Perform from Outperform at Cowen) _________________________________________________________________________________________________________________________________________________ Disney faces heat for filming 'Mulan' in China's Xinjiang Criticism of Disney's (NYSE:DIS) live-action remake of Mulan is growing after the film's end credits revealed a "special thanks" to government entities in Xinjiang, where China is accused of committing rights abuses against millions of Uighur Muslims. It also included the public security bureau in the city of Turpan, where there are believed to be over a dozen "re-education camps" that hold Uighurs in extra-judicial detention. The movie, which was made for $200M before marketing, was already the subject of controversy following social media comments made by Mulan star, Liu Yifei, supporting the Hong Kong police force's crackdown on the city's pro-democracy movement. Covid AstraZeneca pauses vaccine trials after adverse reaction Shares of AstraZeneca (NYSE:AZN) tumbled over 8% in after-hours trading on Tuesday after the drugmaker paused clinical trials of its experimental COVID-19 vaccine, with a participant in a U.K. study experiencing an unexplained illness. However, the stock has since pared losses to 1% as British health minister Matt Hancock explained that the procedure is "not necessarily" a setback and it "depends on what they find when they do the investigation." AstraZeneca confirmed that the pause "is a routine action" and it was trying to expedite the review to "minimize any potential impact on the trial timeline." Slack Technologies (NYSE:WORK) had a rocky return from Labor Day weekend as shares slumped as much as 20% after its earnings report showed calculated billings missing expectations. The company additionally forecast revenue to grow about 33% this quarter, compared with the 49% jump in Q2, marking a bit of a missed opportunity given work-from-home trends. Putting it in perspective: Video-conferencing company Zoom (NASDAQ:ZM) showed 355% growth during the coronavirus pandemic, while Slack may also be having a tough time competing with Microsoft Teams (NASDAQ:MSFT). Boris Johnson's government will publish draft legislation today that could weaken clauses on state aid and customs arrangements for Northern Ireland, as well as undermine Britain's Withdrawal Agreement with the EU. The suggestion that the U.K. might not fully honor its deal with the bloc already prompted Jonathan Jones - head of the government's legal department - to resign yesterday, marking the sixth senior government official to step down this year. On watch: How the British government plans to use the U.K. internal market bill to shave off bits of the Northern Ireland protocol that it doesn't like, particularly in the event that a free trade agreement cannot be reached to replace Britain's single-market membership. Today's Economic Calendar 7:00 MBA Mortgage Applications 8:55 Redbook Chain Store Sales 10:00 Job Openings and Labor Turnover Survey 1:00 PM Results of $35B, 10-Year Note Auction