Daily Market Report | 10/13/2020

US FINANCIAL MARKET

U.S. Stocks Waver as Earnings Season Begins – Wall Street Journal, 10/13/20

• U.S. stocks wobbled Tuesday, pressured by a string of mixed earnings reports from companies ranging from airlines to banks.
• Uncertainty about a second wave of coronavirus infections and the extent to which governments may have to renew restrictions to control the spread is weighing on investors’ minds as the third-quarter earnings season kicks off on Tuesday.
• Delta Air Lines shares dropped 2.6% after it posted a steep drop in sales for the most recent quarter and warned that the novel coronavirus would likely cut into demand for travel for years.
• JPMorgan Chase shares fell 1% after it posted earnings above expectations, but also said it would extend the suspension on stock repurchases at least through the end of the fourth quarter.
• Shares of Citigroup lost 1% after the bank reported profit declined 34% from the same period last year.
• Johnson & Johnson shares slid 1.6% after it halted its coronavirus vaccine trials due to a participant becoming unexpectedly sick, prompting fresh speculation about when immunization shots may become widely available.
• The company also raised its full-year expectations for adjusted operational sales in its earnings report.
• The International Monetary Fund (IMF) also put out an updated outlook for global economic growth, as finance ministers and central bankers gather virtually for the IMF and World Bank’s annual meetings.
• It raised its forecasts for 2020, saying that it now expects the downturn to be less severe than it thought in June.

U.S. Covid-19 Hospitalizations Hit Highest Level in Nearly Six Weeks – Wall Street Journal, 10/13/20

• The U.S. reported more than 41,000 new coronavirus infections, while hospitals in many parts of the country experienced surging numbers of patients infected with the viral disease.
• U.S. hospitalizations are now at their highest level since Sept. 2, according to data from the Covid Tracking Project. As of Monday, there were 35,056 patients hospitalized across the country, more than 16% higher than the level a week earlier.
• Arkansas Gov. Asa Hutchinson warned that high levels of hospitalizations in the state were straining the health-care system and urged residents via Twitter to “work together to reduce our cases.”
• Hospitalizations are also rising in New Jersey, where the state’s seven-day average of Covid-19 cases topped 700 on Monday for the fifth straight day, a benchmark New Jersey last hit in early June.
• India: The country reported 55,342 new cases, the lowest single-day tally in almost two months, bringing the total to more than 7.17 million, health ministry data showed.
• Italy: The country plans new restrictions advising households against hosting more than six guests and limiting operations at bars and restaurants to curb the spread of infections. Hospitality outlets will no longer be able to serve standing customers after 9 p.m. though table service can continue until midnight under the new measures.
• Spain: Nearly 28,000 new coronavirus cases have been reported since Friday, according to data from Spain’s Health Ministry. The number of new cases has moderated since the recent peak of around 16,000 on Sept. 18.
• Singapore: Health authorities said no new locally transmitted cases were detected in the city-state Tuesday—the first time since February that local cases have fallen to zero.

Covid-19 Reinfection Documented in Nevada Adds to Questions on Virus Immunity – Wall Street Journal, 10/13/20

• A Nevada man became the first published case of Covid-19 reinfection in the U.S., adding to a number of examples world-wide signaling that patients who have recovered from the viral disease might still be at risk of getting it again.
• In a paper in the medical journal Lancet Infectious Diseases, a group of authors including University of Nevada researchers recount the case of a 25-year-old who suffered two bouts of Covid-19 infection, one confirmed through testing in mid-April and the second in early June.
• The paper notes that the patient’s second case of Covid-19 was more severe than his first, requiring supplemental oxygen and admission to a hospital after he suffered from shortness of breath.
• The Nevada case comes after similar reinfection case reports from locations including Hong Kong, the Netherlands, Belgium and Ecuador.

Johnson & Johnson Pauses Covid-19 Vaccine Trials Due to Sick Subject – Wall Street Journal, 10/12/20

• Johnson & Johnson said it has paused further dosing in all clinical trials of its experimental Covid-19 vaccine because a study volunteer had an unexplained illness.
• An independent data-safety monitoring board is reviewing the study subject’s illness, the company said. The company didn’t immediately disclose more information about the illness, and said it needed to respect the subject’s privacy.
• J&J, of New Brunswick, N.J., said illnesses and other side effects are an expected part of any clinical study, and it has prespecified guidelines to monitor for the events.

JPMorgan Profit Rises 4%, A Surprising Show of Coronavirus Resilience – Wall Street Journal, 10/13/20

• JPMorgan Chase said Tuesday that its third-quarter profit rose 4%, a surprising result for the nation’s biggest bank during a recession that has hammered much of its business for the year.
• Revenue slipped to $29.15 billion from $29.29 billion a year ago. Analysts had expected it to fall to $28.22 billion.
• Revenue in the corporate and investment bank rose 21% to $11.5 billion. Profit jumped 52% to $4.3 billion.
• Trading revenue rose 30%, topping the 20% increase Chief Financial Officer Jennifer Piepszak had forecast at a conference last month.
• JPMorgan continued to see a surge in deposits in the quarter, as nervous customers hoard cash. Total deposits were up above $2 trillion for the first time, from $1.525 trillion a year ago.
• The bank set aside $794 million to cover potential losses on soured consumer loans, down from $5.83 billion in the second quarter. That helped the consumer bank recover from a loss in the second quarter.
• JPMorgan’s net charge-offs were $1.18 billion, down from both a year ago and the prior quarter, indicating that customers aren’t yet defaulting on their debts in large numbers.
• The bank’s profit rose to $9.44 billion, or $2.92 a share, from $9.08 billion, or $2.68 a share, a year earlier. Analysts had expected $2.23 a share, according to FactSet.
• The bank set aside just $611 million for potential future loan losses, far less than expected and the $10.47 billion it booked in the second quarter.
• If the economy recovers apace, JPMorgan may have $10 billion more than it needs to cover soured loans, Chief Executive James Dimon said. In a double-dip recession, he said, the bank could need another $20 billion in reserves.

Citigroup’s Profit Falls 34% as It Sets Aside More Money for Bad Loans – Wall Street Journal, 10/13/20

• Citigroup said Tuesday that its third-quarter profit slumped 34% and the bank set aside billions of dollars to cover potential losses in the coronavirus recession.
• Total revenue fell 7% to $17.3 billion from $18.57 billion. Analysts had expected $17.21 billion.
• In the consumer bank, revenue dropped 13% and profit declined 30%.
• Revenue from cards declined 18%. Spending volume by customers dropped 10%, though it improved from the second quarter.
• Trading revenue climbed 17% to $4.66 billion and underwriting fees were up, particularly for equity.
• The bank slowed the pace of bulwarking for its loan portfolio, socking away another $2.26 billion of loan-loss provisions in the quarter.
• Citigroup posted a profit of $3.23 billion, or $1.40 a share, down from $4.91 billion, or $2.07 a share, in the same period a year ago.

BlackRock’s Third-Quarter Profit Climbed on Steady Inflows, Higher Fee Revenue – Wall Street Journal, 10/13/20

• Money-management giant BlackRock’s quarterly profit rose 22% as investors turned to its massive lineup of funds to quickly get into markets as well as try to beat them.
• BlackRock’s revenue rose 18% to $4.37 billion.
• The biggest driver of revenue—investment advisory, administration fees and securities lending—rose 8%.
• BlackRock’s iShares ETFs took in $41 billion in new investor money in the latest quarter, roughly in line with a year earlier, with bond products making the most of the flows.
• The investment company posted third-quarter profit of $1.36 billion, or $8.87 share, up from $1.1 billion, or $7.15 a share, a year earlier.
• The returns are a sign that the world’s largest money manager with $7.8 trillion under management continues to grow despite all parts of the economy and markets being upended by the coronavirus pandemic.

J&J raises profit forecast as trial halt weighs – Reuters, 10/13/20

• Johnson & Johnson raised its annual profit forecast for the second time this year in quarterly results on Tuesday, a day after it was the second major drug company to call a temporary halt to trials of its experimental coronavirus vaccine.
• In the third quarter, sales rose to $21.08 billion from $20.73 billion, helped by strength in the company’s largest unit, pharmaceuticals.
• Sales of Imbruvica, which J&J jointly owns with AbbVie, as well as Crohn’s disease drug Stelara, grew in the double-digits, bringing in $1.03 billion and $1.95 billion respectively.
• Its medical device unit’s sales fell 3.6% to $6.15 billion, as patients and hospitals continued to delay non-urgent surgeries due to the COVID-19 pandemic.
• On an adjusted basis, the company earned $2.20 per share, beating analysts’ estimates of $1.98 per share, according to IBES data from Refinitiv.
• The company now expects full-year 2020 adjusted profit of $7.95 to $8.05 per share, from its prior range of $7.75 to $7.95 per share.

COVID-19 tests help Qiagen beat third-quarter sales growth forecast – Reuters, 10/13/20

• German diagnostic test maker Qiagen said sales jumped by a bigger-than-expected 26% in the third quarter, boosted by strong demand for its tests for COVID-19.
• The company said sales in the July-September period came in at $481.3 million compared with $382.7 million in the year-earlier period and ahead of its forecast for third-quarter sales growth of 16-21% at constant exchange rates.
• It said preliminary adjusted earnings per share rose 61% to $0.58 cents at the top end of its forecast for $0.52-$0.58 cents.

Delta Says Air Travel Recovery Still Far Off Amid Pandemic – Wall Street Journal, 10/13/20

• Delta Air Lines offered cautious optimism that demand for travel is starting to return but said its losses were mounting, as the coronavirus pandemic looks likely to continue weighing on travel for years.
• On Tuesday, Delta reported a net loss of $5.4 billion for the September quarter, compared with a profit of $1.5 billion a year earlier, with sales down 76% at $3.1 billion.
• Revenues from passengers booking business class and other premium products fell 86% from a year ago, according to the airline, but were nonetheless an improvement over the 95% drop-off the airline reported three months ago.
• “The virus has had a much broader impact over the course of the year than any of us were suspecting,” Delta Chief Executive Ed Bastian said in an interview.

Disney Elevates Streaming Business in Major Reorganization – Wall Street Journal, 10/12/20

• Walt Disney announced a major reorganization meant to give priority to its streaming-video services and ensure they get a steady flow of the company’s best content, in a shift echoing similar moves by other entertainment giants.
• Under the new structure, Disney is creating content groups for movies, general entertainment and sports.
• It is also forming a distribution arm to determine the best platform for any given content, whether that is a streaming service, a TV network or movie theaters.
• Disney Chief Executive Bob Chapek said the moves are a recognition of how consumers are changing their consumption habits, favoring streaming platforms over movie theaters and traditional broadcast and cable channels.

PC Demand During Pandemic Fuels Strongest U.S. Market Growth in a Decade – Wall Street Journal, 10/13/20

• A surge in remote work, study and home entertainment during the coronavirus pandemic boosted personal computer sales in the third quarter and drove the strongest growth in a decade in the U.S., according to industry data.
• Much of the growth came from Chromebooks, with a roughly 90% surge in the third quarter driven by distance learning, especially in the U.S., according to preliminary data from Gartner Inc., one of the firms that tracks PC shipments.
• While Gartner doesn’t include Chromebooks in its traditional PC market results, on Monday it said that including Chromebooks, world-wide PC shipments rose around 9% year over year in the quarter, with Chromebooks representing about 11% of the combined PC/Chromebook market.
• Data from research firm Canalys showed notebook and mobile workstation shipments also driving growth in the quarter, while sales of desktops and desktop workstations declined 26%.
• Overall, PC shipments rose 3.6% to 71.4 million units in the third quarter, driven by an 11.4% growth in the U.S., the first time in a decade that the region has seen double-digit growth, according to preliminary data from Gartner.

Boeing Subsidies Merit EU Tariffs on $4 Billion in U.S. Goods, WTO Rules – Wall Street Journal, 10/13/20

• The World Trade Organization on Tuesday said the European Union may impose tariffs on $3.99 billion in Boeing Co. jets and other U.S. goods as part of a long-running trade dispute.
• The ruling clears the way for the EU to respond to tariffs that the trade body last October authorized the U.S. to impose on $7.5 billion in Airbus SE jets and other imported European products.
• In 2004, Washington took European countries to the WTO over subsidies to Airbus, and Europe responded soon after with a case against U.S. support for Boeing.
• EU officials have recently said they hope to negotiate a settlement with Washington, and many observers expect Europe to refrain from levying tariffs quickly. The EU last year said it had prepared a preliminary list of U.S. products to target for retaliation, if necessary.