Good morning. Happy Friday.
Several Asian/Pacific markets were closed. Japan, New Zealand and Australia were very weak. Europe, Africa and the Middle East are mostly down. The UK, France, Germany, Greece, South Africa, Switzerland, Spain, Italy, Austria, Sweden and the Czech Republic are all down more than 1%. Hungary and Saudi Arabia are doing well. Futures in the States point towards a relatively big gap down open for the cash market.
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The dollar is down slightly. Oil is up; copper is down. Gold is down; silver is flat. Bonds are up.
Stories/News from Seeking Alpha…
U.S. stocks lost ground during yesterday’s session, while futures slid another 2% overnight, as investors took profits at the close of the S&P 500’s best month since 1987. Apple’s (NASDAQ:AAPL) failure to give guidance and plans from Amazon (NASDAQ:AMZN) to spend all of its $4B in profit from Q2 sparked uncertainty over the reach of the coronavirus pandemic (more on that below). The downbeat note was accentuated by another 3.8M new jobless claims and the steepest decline in monthly U.S. consumer spending tracing back to 1959. Keep an eye today on earnings from oil majors Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM), as well as refiner Phillips 66 (NYSE:PSX), after Shell (NYSE:RDS.A) suspended its dividend following a historic crash in crude prices.
COVID-19 costs add up
Amazon (AMZN) shares slumped more than 5% in extended trading following Q1 earnings of $5.01 per share that missed analysts’ estimates. The retail giant also said it would spend second-quarter profits – estimated to be $4B (under normal circumstances) – on responding to the COVID-19 pandemic. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” Jeff Bezos said in an earnings release. Positive note? AWS quarterly revenue topped $10B for the first time ever.
Withholding guidance
Apple (AAPL) shares whipsawed during AH trading on quarterly earnings that topped analyst expectations, but revenue growth that remained flat on a year-over-year basis. iPhone sales fell 7% Y/Y, though CEO Tim Cook said China sales were “headed in the right direction” as that country reopens from the novel coronavirus. Shares ended the session down 2% after the tech giant disclosed that it was “impossible to forecast overall results” for the current quarter.
Retaliation threats
Conversations are at a very preliminary stage, but the U.S. appears to be crafting retaliatory measures against China over the coronavirus outbreak. “We signed a trade deal where they’re supposed to buy, and they’ve been buying a lot, actually. But that now becomes secondary to what took place with the virus,” President Trump told reporters. The U.S. is not considering stopping debt payment obligations to Beijing – as that would hurt the “sanctity of the dollar” – but Trump said he could do the same thing, for even more money, via tariffs. A resumption of the trade war wouldn’t be a good recipe for markets, but other ideas are under consideration: Sanctions, non-tariff trade restrictions and lifting China’s sovereign immunity (allowing lawsuits against Beijing in U.S. courts).
DOJ opens probe into PPP loan fraud
“Whenever there’s a trillion dollars out on the street that quickly, the fraudsters are going to come out of the woodwork in an attempt to get access to that money,” said Assistant AG Brian Benczkowski, who runs the DOJ’s criminal division. “There are unfortunately businesses that are sending in loan applications for large amounts of money that are overstating their payroll costs, overstating the number of employees they’ve had, overstating the nature of their business.”
What will the Oracle say?
Warren Buffett will issue his annual letter tomorrow and hold a virtual meeting with Berkshire Hathaway (BRK.A, BRK.B) shareholders. Aside from selling shares of airline stocks, there’s been little discussion of what he plans to do with Berkshire’s estimated $128B in cash, while his silence over the past two months “has been deafening,” notes BTIG’s Julian Emanuel. “Could it be because at 21.6x consensus 2020 earnings, and without clarity as to how the economy is likely to reopen, stocks are expensive to the Oracle of Omaha? Could he be thinking about problems down the road given the borrowing binge that both the U.S. government and Corporate America have been on since March 1?”
Vaccine leader signs deal for 1B doses
Moderna’s (NASDAQ:MRNA) experimental vaccine, mRNA-1273, is currently being tested in early-stage trial by the U.S. National Institutes of Health, with mid-stage trials set for Q2. The 10-year collaboration agreement will see the companies produce up to a billion vaccine doses per year at Lonza U.S. (OTCPK:LZAGY), and would cover additional products in the future. In April, Moderna scored $483M in U.S. federal funding to accelerate development of mRNA-1273.
Boeing raises $25B in fresh debt
Helping the company avoid government aid, Boeing (NYSE:BA) raised $25B in a bond offering on Thursday, a blowout result for the planemaker. The seven-part offering, which includes bonds that won’t be redeemed until 2060, was oversubscribed and attracted better pricing than might have been expected for a firm that just has its credit rating downgraded to a notch above junk status. The deal, expected to close May 4, would be one of the largest-ever corporate bond offerings.
Some ETFs struggle to new market realities
Changes to U.S. Oil Fund’s (NYSEARCA:USO) portfolio have resulted in “significant deviations from its intended investment objective which is for the daily percentage changes in the net asset value per share to reflect the daily percentage changes of the spot price of light, sweet crude oil.” In the past few weeks, the largest oil-focused ETF in the country has been trying to counter potential losses from plunging crude prices by spreading its holdings through contracts expiring in July, August and September. It’s led to some diverging price action: U.S. crude futures are up 11% this week, while USO is on track for a 7% loss, as the cost of rolling futures contracts wiped out gains.
Retail trouble
Clothing apparel company J. Crew is preparing for a bankruptcy filing that could come as soon as this weekend, according to multiple sources. While the company is not publicly traded (it was taken private in 2010 via leveraged buyout), it highlights broader trends in the U.S. retail industry, which was already struggling before the coronavirus pandemic. Reports suggest Neiman Marcus is in the process of a bankruptcy filing, while J.C. Penney (NYSE:JCP) has been in talks with lenders for bankruptcy financing that could total $1B.
What else is happening…
Shale producer Concho (NYSE:CXO) takes $12.6B impairment charge.
Zoom (NASDAQ:ZM) clarifies ‘300M daily active users.’
Intel (NASDAQ:INTC) claims world’s fastest gaming processor.
Three of four largest U.S. airlines now require face masks.
Lockheed (NYSE:LMT) scores $6B Patriot interceptor contract.
Bed Bath & Beyond (NASDAQ:BBBY) looks to bolster turnaround.
Macy’s (NYSE:M) to begin store reopenings next week.
Thursday’s Key Earnings
Apple (AAPL) -2.6% AH on coronavirus uncertainty.
Amazon (AMZN) -5.4% AH announcing plans to spend Q2 profits.
American Airlines (NASDAQ:AAL) -4.9% with load factor plunging to 73.9%.
Altria (NYSE:MO) -3% giving back earlier volume-led gains.
ConocoPhillips (NYSE:COP) -0.3% planning additional curtailments.
Gilead Sciences (NASDAQ:GILD) -2.6% AH posting flat Q1 results.
McDonald’s (NYSE:MCD) -0.1% with buybacks on the back burner.
MGM Resorts (NYSE:MGM) -7.7% AH cutting dividend by 98%.
Twitter (NYSE:TWTR) -7.8% amid ad spending worries.
United Airlines (NASDAQ:UAL) -2% AH on major cash burn.
Visa (NYSE:V) -0.8% AH pulling outlook for 2020.
Today’s Economic Calendar
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
1:00 PM Baker-Hughes Rig Count
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Good morning. Happy Thursday.
The Asian/Pacific markets closed mostly up. Japan, China, India, Taiwan, Australia, Malaysia, Indonesia, Singapore, Thailand and the Philippines gained more than 1%. New Zealand was weak. Europe, Africa and the Middle East currently lean down. Denmark, Hungary, Israel and Saudi Arabia are up; the UK, France, Turkey, Germany, Russia, Greece, South Africa and Sweden are down more than 1%. Futures in the States point towards down open for the cash market.
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BLOG: This is Every Stock on the Leavitt Brothers Trading List
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The dollar is down. Oil is up; copper is down. Gold is flat; silver is down. Bonds are flat.
Stories/News from Seeking Alpha…
Wednesday’s advance put the S&P 500 up more than 13% for April, the index’s biggest monthly increase since 1974, while futures extended the gains ahead of today’s session. Optimism was driven by positive results from Gilead’s (NASDAQ:GILD) remdesivir trial, which could help speed recovery from COVID-19, as well as strong earnings from Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB) that put the Nasdaq Composite on track to erase losses for the year. The Fed further pledged to use “its full range of tools to support the U.S. economy in this challenging time” and the news was enough to override data showing the U.S. economy (-4.8% GDP) had logged its worst quarterly performance since 2009.
Workforce statistics
Jobless claims data is set to grow in the millions this morning, with a consensus forecast of 3.5M filings last week to take the total figure over the past six-week period to at least 30M. At face value, the numbers imply a jump in the unemployment rate to above 15% for April, though it’s unlikely that figure will be reported in the non-farm payrolls report next week. The government has allowed people temporarily unemployed for reasons related to COVID-19 to file for jobless benefits, even those quarantined with the expectation of returning to work and those leaving employment due to risk of exposure.
Earnings roundup
Seeing “signs of stability” after an initial steep decrease in March advertising revenue, Facebook (FB) shares soared 10% AH on Wednesday, while Microsoft (MSFT) climbed 2% as remote work boosted Teams and cloud services. Tesla (NASDAQ:TSLA) also rose 8% on a surprise Q1 profit and numbers that excited investors. Keep an eye out today for earnings from Apple (NASDAQ:AAPL), which has warned of a shortfall in March quarter sales, and Amazon (NASDAQ:AMZN), which has seen a massive surge in demand for online orders (don’t forget AWS).
ECB eyed with eurozone economy in tailspin
Today’s ECB meeting will be closely watched after the French (-5.8% GDP) and Spanish (-5.2% GDP) economies posted their sharpest contractions on record. The central bank has already launched a €750B Pandemic Emergency Purchase Program to weather the COVID-19 pandemic, putting it on track to buy a total of €1.1T in net assets this year. Besides a possible expansion to the program, the ECB is likely to focus on bubbling tensions across the bloc’s financial system, and rein in yield spread expansions between core and so-called peripheral countries.
New age for Big Oil
“Given the continued deterioration in the macroeconomic outlook and significant mid- and long-term uncertainty,” Royal Dutch Shell (RDS.A, RDS.B) is slashing its quarterly dividend to $0.16, from $0.47 per share, for the first time since WWII. COVID-19 has slammed demand for oil, gas and related products, while crude recorded a historic plunge into negative territory earlier this month. Shell’s adjusted current cost of supplies income, used as a proxy for net profit, slid 45% to $2.9B during the first quarter of 2020, compared with $5.3B a year earlier.
Supply cuts
Western Europe’s biggest oil producer, Norway, is joining international efforts to cut supply for the first time in almost two decades. “We will cut production by 250K barrels per day in June and by 134K bpd in the second half of 2020. In addition, the start-up of production of several fields will be delayed until 2021,” Oil Minister Tina Bru declared. The Nordic nation’s annual average crude oil production slipped to a 30-year low of 1.4M bpd in 2019, but stood at 1.75M bpd in February, up 26% from a year ago. Data from the EIA yesterday also showed U.S. crude inventory building slightly less than estimates, suggesting a pick up in fuel demand.
Clash of tech titans
As states mull whether to reopen businesses, two of Silicon Valley’s most iconic billionaires clashed over lockdown measures during their post-earnings conference calls. “I worry that reopening certain places too quickly before inaction rates have been reduced to very minimal levels will almost guarantee future outbreaks and worsen longer-term health and economic outcomes,” said Facebook’s (FB) Mark Zuckerberg. “To say that they cannot leave their house, and they will be arrested if they do, this is fascist,” Tesla’s (TSLA) Elon Musk told analysts. With both companies based in the San Francisco Bay area, could it be that the opinions stem from operating in vastly different industries – online vs. manufacturing?
WeWritedown
SoftBank (OTCPK:SFTBY) has widened its record annual loss forecast to ¥900B ($8.4B), from ¥750B ($7B), as it calculates the bottom line hit from souring investments before it releases earnings on May 18. Triggering the updated outlook are expectations of a ¥700B loss ($6.6B) on its investment in WeWork (WE) which the tech conglomerate holds outside of its $100B Vision Fund (it has poured more than $13.5B in the office-sharing firm so far). Beyond the losses, SoftBank is also being sued by WeWork for its decision to back out of a $3B tender offer that was agreed upon in October 2019.
Masks the new normal
Effective Monday, May 4, most U.S. Costco (NASDAQ:COST) locations and Costco gas stations will return to regular operating hours. Customers and employees alike will be required to wear face coverings or masks, though the rule does not apply to children under the age of 2 or to individuals who are unable to comply due to a medical condition. “The use of a face covering should not be seen as a substitute for social distancing,” the company said in a statement.
What else is happening…
Chesapeake Energy (NYSE:CHK) preparing bankruptcy filing – Reuters.
Emergency loans to the U.S. oil industry?
JD.com (NASDAQ:JD) applies for $3B Hong Kong secondary listing.
Crypto on a tear as Bitcoin (BTC-USD) tops $9,000.
Lyft (NASDAQ:LYFT) to slash workforce by about 17%.
Hertz (NYSE:HTZ) negotiates relief or bailout as bankruptcy looms.
Wednesday’s Key Earnings
Annaly Capital (NYSE:NLY) +2.7% AH weathering Q1, poised for opportunities.
AstraZeneca (NYSE:AZN) -0.5% despite robust results, affirming outlook.
Boeing (NYSE:BA) +5.9% on steps to preserve investment grade rating.
eBay (NASDAQ:EBAY) -3.2% AH on hit to classifieds business.
Facebook (FB) +10.5% AH as ad sales ‘stabilized.’
Enterprise Products (NYSE:EPD) +9.3% cutting $1B from 2020 capex budget.
General Dynamics (NYSE:GD) +0.1% missing expectations.
General Electric (NYSE:GE) -3.2% as coronavirus whacked $1B from FCF.
Mastercard (NYSE:MA) +7.1% beating estimates.
Microsoft (MSFT) +2.2% AH seeing “minimal” COVID-19 impacts.
Northrop Grumman (NYSE:NOC) -3.7% posting light guidance.
Qualcomm (NASDAQ:QCOM) +2.9% AH reporting higher revenue.
Spotify (NYSE:SPOT) +11.5% on soaring usage, paid subscribers.
Tesla (TSLA) +8.7% AH following surprise Q1 profit.
Valero Energy (NYSE:VLO) +14.5% seeing gradual gasoline demand recovery.
Yum! Brands (NYSE:YUM) -0.9% on mixed results.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
10:30 EIA Natural Gas Inventory
3:00 Farm Prices
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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Good morning. Happy Wednesday.
The Asian/Pacific markets closed mostly up. Hong Kong, South Korea, India, Taiwan, Australia, Malaysia, Indonesia and the Philippines gained more than 1%. New Zealand was weak. Europe, Africa and the Middle East are currently mostly up. The UK, Poland, Germany, Russia, Finland, Norway, Hungary, Spain, Portugal, Austria, Sweden and Saudi Arabia are up more than 1%. Futures in the States point towards moderate gap up open for the cash market.
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VIDEO: Trading Ideas for the Coming Week
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The dollar is down slightly. Oil is down 22%; copper is up. Gold is flat; silver is up. Bonds are down.
Stories/News from Seeking Alpha…
U.S. stock futures follow most global markets in indicating a higher open, as today’s conclusion of the Federal Reserve policy meeting is expected to keep the benchmark interest rate near zero and maintain strong support for business during the COVID-19 pandemic. The Commerce Department’s first look at Q1 gross domestic product today surely will reinforce analysts’ forecasts that the economy already was in a deep recession. GDP probably fell at a 4% annualized rate in the quarter, according to a Reuters survey of economists, which would be the steepest pace of contraction since Q1 2009.
Alphabet turns in strong Q1 that ended with ad drop-off
With all eyes on an advertising industry slump, Alphabet (GOOG, GOOGL) posted strong Q1 figures even as it noted a March slowdown. Many big travel booking names have been cutting their multibillion-dollar ad budgets by 50%-80%, and Alphabet revenues are still dominated by advertising (99% of Alphabet revenues from Google, and 84% of that from ads). But in Q1, the company grew revenues 13% and operating income 19%, lifted by a strong first two months before a March drop-off alongside widespread business shutdowns. YouTube ad revenue rose 33.5% year over year, but fell 14% sequentially.
Airbus Q1 operating profit cut in half as COVID-19 crushes aerospace
Underscoring what CEO Guillaume Faury calls the “gravest crisis the aerospace industry has ever known,” Airbus (OTCPK:EADSF, OTCPK:EADSY) reported adjusted Q1 EBIT fell 49% to €281 million ($304.7 million) as revenue slipped 15% to €10.63 billion. The planemaker burned through €8 billion in cash in the quarter, including a previously published €3.6 billion fine to settle bribery and corruption investigations in the U.K., France and the U.S. Airbus said it is whacking €700 million from planned 2020 capital spending and will defer or suspend activities which are “not critical to business continuity” or meeting other commitments.
Boeing discussing major bond issue for funding
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Boeing (NYSE:BA), which also will report earnings this morning, reportedly is talking with investment banks to pursue a major bond issue to strengthen its balance sheet amid the COVID-19 travel shutdown. The planemaker has lined up financiers to market an offering that could hit $10 billion or more in the coming days, even as the company looks at pursuing government help. It considered applying to the Treasury Department for aid under a $17 billion program for companies critical to national security, and the Fed also has programs that could help.
In pandemic world, Zuckerberg tightens grip on Facebook’s wheel
After a December meeting of top Facebook (NASDAQ:FB) brass at CEO Mark Zuckerberg’s Hawaii estate, the board has turned over a little faster, the Wall Street Journal reports, and that’s amounted to the chief tightening his control of the company as well as steering it toward a greater purpose in the COVID-19 pandemic. Only four directors remain from the nine that started 2019, and the likely Zuckerberg-friendlier names that remain may be helping him realize a 2017 mission statement that laid out a more central role for the company in society.
COVID-19 vaccine could be ready for emergency use this fall
As confirmed coronavirus cases in the U.S. top one million, Pfizer (NYSE:PFE) is the latest vaccine developer saying it may have a candidate ready for emergency use in the U.S. by late in the third quarter or early in the fourth. It’s another example of breathtaking development speed, potentially only 9-10 months from the publication of the genetic sequence of the SARS-CoV-2 virus in January to vaccine availability, a process that usually takes at least 10 years. The race to the finish line is in full stride: Sanofi (NASDAQ:SNY), GlaxoSmithKline (NYSE:GSK) and Johnson & Johnson (NYSE:JNJ) are all working feverishly to generate clinical data and ramp up production to meet anticipated enormous global demand.
Oil bounces as Goldman starts to see positives in energy sector
Crude oil prices could be on the rebound, as June WTI crude futures rose 14% overnight after the American Petroleum Institute revealed a 10 million barrel increase in crude inventories in the latest weekly data, below the prior week’s 13.2 million barrel build and short of analyst expectations. Oil prices have been tumbling as investors watch depleting crude storage space and demand destruction from the coronavirus outbreak. But Goldman Sachs is out with a report highlighting a number of reasons why it is more positive on energy stocks, saying demand appears to be near a trough, shut-in announcements are becoming material and valuation is near 25-year lows by some measures.
Starbucks posts first quarterly same-store sales drop in 11 years
With stores closed in Asia and Europe during the quarter, Starbucks (NASDAQ:SBUX) said global comparable store sales fell 10% in its fiscal Q2 as a result of the coronavirus crisis, marking the measure’s first downturn since 2009. Comparable sales in the U.S. fell 3% during the quarter, as roughly half of Starbucks’ company-owned stores in the U.S. are closed. Starbucks plans to start reopening cafes in early May for to-go service and sees 90% of company-operated U.S. stores back in operation by the early part of June, CEO Kevin Johnson said on the post-earnings conference call.
AMC declares war on Universal, banning its films from theaters
The nation’s largest movie theater chain, AMC Entertainment (NYSE:AMC), issued what amounted to a strongly worded declaration of war on studio Universal Pictures (NASDAQ:CMCSA) – saying it won’t play any more Universal films, in reaction to comments about the studio/exhibitor relationship. After Universal found success with a (pandemic-forced) home video launch of planned theatrical release Trolls World Tour, NBCUniversal’s Jeff Shell said the company would explore using both formats when theaters reopened. That’s “categorically unacceptable,” AMC chief Adam Aron says.
What else is happening…
Banks lead European bourses higher.
Uber (NYSE:UBER) CTO to depart, company said to weigh job cuts.
Fed tells municipalities to seek funding from banks first.
Tuesday’s Key Earnings
Alphabet (NASDAQ:GOOG) +7.7% PM after strong Q1 revenue beat.
Ford Motor (NYSE:F) -2.9% PM with losses piling up.
Advanced Micro Devices (NASDAQ:AMD) -1.8% PM as it sees near-term demand uncertainty.
Starbucks (SBUX) -0.8% PM after reporting 10% drop in comparable sales.
FireEye (NASDAQ:FEYE) -3.8% PM on withdrawing FY billings, cash flow outlook.
Mondelez (NASDAQ:MDLZ) flat PM on rising organic sales.
ONEOK (NYSE:OKE) -3.4% AH after slashing capex by another $500M.
Blackstone Mortgage Trust (NYSE:BXMT) +8.4% AH after boosting CECL reserve by $122.7M.
iRobot (NASDAQ:IRBT) -10% PM on revenue warning.
Yum China (NYSE:YUMC) +1.7% PM as it points to uneven recovery.
Juniper Networks (NYSE:JNPR) +4% PM despite supply issues weighing on quarter.
Akamai (NASDAQ:AKAM) -5% PM despite upside Q1.
Cerner (NASDAQ:CERN) -0.5% PM on mixed Q1.
DexCom (NASDAQ:DXCM) +5.9% AH after strong revenue beat.
WW International (NASDAQ:WW) +9.7% AH on strong earnings.
Arcosa (NYSE:ACA) +4.8% AH on Q1 beat.
Horizon Technology (NASDAQ:HRZN) -2% AH as Q1 portfolio yield slips.
C.H. Robinson Worldwide (NASDAQ:CHRW) -2.7% AH on Q1 miss.
R.R. Donnelley & Sons (NYSE:RRD) +36% PM on strong earnings.
Community Health Systems (NYSE:CYH) -3.2% AH as Q1 cash flows ops dip 57%.
Boyd Gaming (NYSE:BYD) -7% AH on soft Q1.
Lattice Semiconductor (NASDAQ:LSCC) +3.9% AH on earnings beat, in-line guidance.
Masimo (NASDAQ:MASI) +5.8% AH on Q1 beat.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 GDP Q1
10:00 Pending Home Sales
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
2:00 PM FOMC Announcement
2:00 PM Chairman Press Conference
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Good morning. Happy Tuesday.
The Asian/Pacific markets did well today. Hong Kong, India, New Zealand and the Philippines led with gains greater than 1%. Europe, Africa and the Middle East are currently mostly up. The UK, Denmark, Poland, France, Germany, Russia, South Africa, Finland, Switzerland, Hungary, Spain, the Netherlands, Italy, Portugal, Austria, Sweden and the Czech Republic are up more than 1%. Futures in the States point towards a 40-point gap up open for the S&P.
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VIDEO: Trading Ideas for the Coming Week
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The dollar is down. Oil is down another 8.5%; copper is up. Gold is flat; silver is up. Bonds are up.
Stories/News from Seeking Alpha…
U.S. stock index futures are up 1% as an earnings parade makes its way down Wall Street, with nearly 170 S&P 500 companies sharing results this week. Today’s lineup includes Pfizer (NYSE:PFE), 3M (NYSE:MMM), Caterpillar (NYSE:CAT), Ford (NYSE:F) and Starbucks (NASDAQ:SBUX), with the biggest spectacle being Google’s report after the close. Analysts are expecting top line numbers from parent Alphabet (GOOG, GOOGL) to be hit by a slowdown in ad spending, though the effects will be more pronounced in Q2. Don’t forget the Fed! The central bank begins its two-day meeting, and while no interest rate changes are expected, all eyes will be on tomorrow’s presser from Chairman Jay Powell.
Fed boosts muni bond buying program
Looking to keep the money flowing, the central bank is buying up to $500B worth of state and local government bonds. Purchases of the paper will be in effect for counties with at least 500K residents, and cities with at least 250K residents (the previous cutoffs were 2M and 1M, respectively). This will allow for up to 261 state, city, and county issuers, up from just 76 previously, with the longest maturity extended to up to three years, from two years previously.
Another price crash
Carl Icahn says we won’t see crude prices in negative territory again, but it is sure looking more likely by the day. WTI plunged 25% on Monday, slumped another 20% overnight to $10/bbl, and there are still 20 days to go until the June settlement date. Weighing on prices is a warning from BP (NYSE:BP) of an unprecedented coronavirus shock (see below), fears over a lack of storage and a reshuffling of contracts by United States Oil Fund USO.
BP profit nosedives, maintains dividend
Underlying replacement cost profit, used as a proxy for net profit, at BP (BP) slid 67% Y/Y in Q1 to $800M after bolstering its financial reserves (with a new $10B credit facility and selling $7B of bonds) during the initial stages of the coronavirus pandemic. “Our industry has been hit by supply and demand shocks on a scale never seen before,” said CEO Bernard Looney, who took the company reins earlier this year. The company also maintained its dividend, having increased it to 10.5 cents in the previous quarter, as the sustainability of Big Oil’s payouts falls under renewed scrutiny.
Mounting credit losses
HSBC (NYSE:HSBC) warned of more earnings pain to come after reporting a 48% plunge in pre-tax income as it was forced to put $3B aside to cover bad debts caused by the pandemic. “The outlook for world economies in 2020 has substantially worsened in the past two months. The impact and duration of the COVID-19 crisis will likely lead to higher ECL [expected credit losses] and put pressure on revenue due to lower customer activity levels and reduced global interest rates.”
Restart date for the Detroit Three
Detroit automakers have targeted May 18 for a restart of some production at U.S. car factories, WSJ reports. Representatives from General Motors (NYSE:GM), Ford Motor (F) and Fiat Chrysler (NYSE:FCAU) agreed on the timeline following talks with Governor Gretchen Whitmer’s office and the United Auto Workers union, which warned last week that it was “too soon and too risky” to reopen plants in early May. While terms haven’t been finalized, the companies are working with the union on drawing up safety protocols.
Slow road to aviation recovery
Air traffic may not bounce back for 2-3 years from the effects of the coronavirus, Boeing (NYSE:BA) CEO David Calhoun warned shareholders during a virtual meeting on Monday. “The health crisis is unlike anything we have ever experienced… and it’s going to be a while before dividends come back,” he added. “We know we’re going to have to borrow more money in the next six months in order to get through this really difficult moment, to provide the right liquidity to the supply chain that represents our industry.”
Vaccine in 2020?
With the number of global coronavirus infections surpassing 3M, the pressure is growing to come up with medical solutions to combat the contagion. In a sign of good news, the Coalition for Epidemic Preparedness Innovations said a vaccine could be available as early as this year for vulnerable groups like healthcare workers, compared to an earlier time frame of 12-18 months. The foundation, which is supporting nine different COVID-19 vaccine projects, has provided funding to Moderna (NASDAQ:MRNA) Novavax (NASDAQ:NVAX) and Inovio Pharmaceuticals (NASDAQ:INO).
‘Food supply chain is breaking’
In a direct appeal to consumers, Tyson Foods (NYSE:TSN) took out a full-page ad in The New York Times to say that the food supply chain is breaking. “As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain,” wrote Chairman John Tyson. “As a result, there will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed.”
Paid residential drone deliveries
The plans were in the making for quite a while, but come just in time to deal with the coronavirus pandemic. Starting in May, UPS (NYSE:UPS) will begin using drones to fill prescriptions for residents of The Villages in Florida, one of the country’s biggest retirement communities with 135,000 residents. The deliveries will be dropped at a central location from a CVS (NYSE:CVS) store about a half mile away and an employee will then ferry them to homes via golf cart. The ultimate goal is for the program to make the deliveries directly, with the drone lowering packages by winch.
What else is happening…
JetBlue (NASDAQ:JBLU) first airline to require passenger masks.
Amazon (NASDAQ:AMZN) safety measures so inadequate – New York AG.
Saudis take $500M stake in Live Nation (NYSE:LYV).
Did Carnival (NYSE:CCL) get a backdoor Fed bailout?
U.S. wireless firms extend COVID-19 concessions.
Apple (NASDAQ:AAPL) delays 5G iPhone production.
NJ court rules J&J (NYSE:JNJ) must face talc lawsuits.
Monday’s Key Earnings
Keurig Dr Pepper (NYSE:KDP) +6% AH reaffirming 2020 outlook.
NXP Semiconductors (NASDAQ:NXPI) +4% AH beating EPS expectations.
Today’s Economic Calendar
FOMC meeting begins
8:30 International trade in goods
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
8:55 Redbook Chain Store Sales
9:00 S&P Corelogic Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
11:30 Results of $22B, 2-Year FRN Auction
1:00 PM Results of $35B, 7-Year Note Auction
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets closed mostly up. Japan, Hong Kong, South Korea, Italy, Taiwan, Austria and Singapore gained more than 1%. Europe, Africa and the Middle East are currently mostly up. The UK, Denmark, France, Turkey, Germany, Greece, Finland, Switzerland, Hungary, Spain, the Netherlands, Italy and the Czech Republic are up more than 1%. Futures in the States point towards positive open for the cash market.
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VIDEO: Trading Ideas for the Coming Week
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The dollar is down. Oil is down 22%; copper is up. Gold is flat; silver is up. Bonds are down.
Stories/News from Seeking Alpha…
News of easing lockdowns saw stocks go green across the globe overnight, though oil tumbled under $15/bbl with storage running short. Spanish children ventured outside for the first time in weeks, while hard-hit Italy and New York laid out a timetable for reopening their economies. Helping boost sentiment was more stimulus from the BOJ (see below), ahead of meetings this week at the Federal Reserve and ECB, with the latter likely to beef up asset purchases. It’s also a busy week for earnings: Around 173 companies in the S&P 500 will report quarterly results, as well as 12 Dow Jones Industrial Average components.
Unlimited bond buying
Further boosting monetary stimulus, the BOJ said it will “purchase a necessary amount of Japanese government bonds,” echoing similar language used by the U.S. Federal Reserve last month. The step is largely symbolic, however, as the BOJ had been purchasing few JGBs recently and could easily expand its purchases without lifting the previous ¥80T upper limit. The central bank will also triple its holdings of corporate debt to ¥20T ($186B) – easing fundraising for companies hit by the coronavirus – and forecast a sharp contraction in GDP this fiscal year.
Public companies took more than thought from PPP pantry
Last week, Morgan Stanley analysts found that public companies had received $243.4M from the original Paycheck Protection Program, but that figure has now ballooned as additional firms file disclosures. More than 200 public companies applied for at least $854.7M, including $76M for Ashford Hospitality Trust (NYSE:AHT), which applied via 117 separate loans, as well as $34M for Braemar Hotels & Resorts (NYSE:BHR). Another $310B in fresh funding has been approved for the PPP program, and demand is expected to be high when it reopens today.
Big economic rebound in Q3?
“You’re going to see the economy really bounce back in July, August, September,” Treasury Secretary Steven Mnuchin said on Fox News Sunday. “You’re seeing trillions of dollars that’s making its way into the economy, and I think this is going to have a significant impact,” he added. “This is not the financial crisis [of 2008].” The position resembles the forecast issued Friday by the Congressional Budget Office, which expects a sharp contraction in this quarter and then growth at an annual rate of 17% in the second half of 2020.
Next oil-related bankruptcy
In a Chapter 11 filing, Diamond Offshore Drilling (NYSE:DO) said operating conditions had worsened “precipitously in recent months” amid a plunge in oil prices and the coronavirus pandemic. Earlier this month, the rig contractor, controlled by Loews (NYSE:L), had skipped an interest payment on senior debt, beginning a 30-day window as to either make good or default. Diamond’s total debt load is about $2B, and the paper has recently been trading hands at pennies on the dollar.
Big week ahead for Boeing
The U.S. planemaker is set to hold its annual meeting, report Q1 results and face the application deadline for a multibillion dollar aid package from the federal government. Reports suggest Boeing (NYSE:BA) will focus on building two financial bridges to the future: Cutting near-term losses brought on by the coronavirus (don’t forget the 737 MAX crisis) and a longer-term plan to deal with fewer orders for commercial jets. New targets for plane production could see as much as 10% of the company’s 160,000 employees cut from the payroll, while CEO Dave Calhoun has previously indicated Boeing may pass on government loans if it requires the U.S. Treasury to take a stake in the company.
Life preserver from Germany
Royal Caribbean Cruises (NYSE:RCL) and Norwegian Cruise Line (NYSE:NCLH) are securing some help from a debt holiday initiative by Germany’s export credit agency, Bloomberg reports. The companies were left out of the Trump administration’s coronavirus rescue package because they are not incorporated in the U.S. in order to avoid U.S. income taxes and minimum wage requirements. Norwegian said the 12-month holiday – which applies to debt used to finance ships – will provide about $386M in additional liquidity through April 2021, while Royal Caribbean will add $250M through debt holiday agreements.
Buzz builds over Beyond Meat
The hot streak for Beyond Meat (NASDAQ:BYND) may continue – after shares ran up a 40% gain over the last week – as more meat plants shut down due to COVID-19 outbreaks. “Even if there aren’t shortages on a national scale, the timing of the closures could lead to a reduced hog herd this year,” observes Oppenheimer analyst Rupesh Parikh. Berenberg’s Donald McLee calls the development the perfect storm after the news of Beyond Meat’s deal with Starbucks (NASDAQ:SBUX) in China and its expansion to the Far East.
Paying a visit to Luckin Coffee
More than a dozen officers from State Administration for Market Regulation descended on Luckin Coffee’s (NASDAQ:LK) headquarters in Xiamen on Sunday, marking the most significant action so far by Chinese authorities against the upstart coffee chain. Since Luckin is listed in the U.S., China’s securities regulator has limited supervisory authority compared to the SAMR, which has power over business licenses and antitrust reviews. Luckin’s American depositary shares have been suspended from trading since April 7 after revealing that much of its 2019 sales were fabricated.
Contact tracing
Reversing course over the weekend, the German government is now backing a coronavirus-tracing app using technology supported by Apple (NASDAQ:AAPL) and Google (GOOG, GOOGL), ditching a home-grown alternative that had come under fire over privacy concerns. In recent weeks, a battle has raged over apps being fast-tracked by governments that use Bluetooth-based smartphone proximity as a basis for infection risk. Governments can either hold personal data on a central server (centralized approach) or keep logs on individual devices (decentralized approach).
What else is happening…
Adidas (OTCQX:ADDYY) sees strong recovery for sporting goods.
Heartburn meds for COVID-19? New York is trying it.
Amazon (NASDAQ:AMZN) screens new merchants via video calls.
Deutsche Bank (NYSE:DB) +10% premarket on earnings news.
Airbus (OTCPK:EADSY) ‘bleeding cash’ and ‘survival at stake.’
No nationalization, but Air France-KLM (OTCPK:AFRAF) scores €10B bailout.
Ford (NYSE:F) recalls skeleton crew for factory prep.
“Depopulation” of chickens in Delaware and Maryland begins.
Today’s Economic Calendar
10:30 Dallas Fed Manufacturing Survey
1:00 PM Results of $43B, 5-Year Note Auction