US FINANCIAL MARKET
Wall Street Slides at Open as Trump Warns of New Tariffs on China
- U.S. stocks fell at open on Friday after President Donald Trump threatened to slap new tariffs on China over the coronavirus crisis, while Apple and Amazon became the latest companies to warn of more pain in the future.
- Adding to investor jitters Friday were concerns about fresh tensions between the U.S. and China.
- In an unusual public statement, a U.S. intelligence agency said Thursday that it was investigating whether the coronavirus may have escaped from a laboratory in Wuhan, China.
- Amazon posted record revenue late Thursday but disappointed on profits as coronavirus-related costs such as employee testing and higher wages added to expenses.
- Apple held off on providing guidance for the current quarter for the first time since late 2003.
- Shares of Chevron and Exxon Mobil ticked down 3.6% and 4.1%, respectively, after the companies reported a drop in demand on the back of shelter-in-place rules.
U.S. States Roll Back Restrictions as Lockdowns Ease Across Asia
- Texas, Alabama and other states relaxed stay-at-home measures Friday as the U.S. began a piecemeal reopening of its economy, while parts of Asia where the coronavirus pandemic has waned moved closer to normalcy, though governments warned people to stay vigilant because of the risk of a resurgence.
- By the end of the week, more than half the states in the country will have, in differing forms, relaxed restrictions enacted during the first days of the pandemic.
- In California, state beaches in Orange County, one of the most affected by the virus, will be closed this weekend to avoid large crowds after many residents gathered there last week, Gov. Gavin Newsom said.
- Michigan’s Republican legislature declined to support the extension of Democratic Gov. Gretchen Whitmer’s state of emergency, which expired, and moved to take her to court over her authority to issue measures such as a blanket stay-at-home order.
- In the U.S., total infections climbed to 1.07 million, with more than 63,000 dead from the Covid-19 disease caused by the virus, according to Johns Hopkins.
Apple sales inch higher despite coronavirus but CEO Tim Cook sees uncertain future
- Apple reported sales and profits that beat Wall Street expectations Thursday, with Chief Executive Officer Tim Cook saying China sales were “headed in the right direction” as that country reopens from the novel coronavirus.
- Apple reported overall sales of $58.3 billion, above year-ago results of $58 billion and estimates of $54.5 billion.
- iPhone sales were $29.0 billion, down from $30.9 billion the year before compared with analyst estimates of $28.4 billion.
- Sales for Apple’s services segment, which includes iCloud storage as well as its streaming services for music and television shows, were $13.4 billion, compared with analyst estimates of $12.9 billion.
- Cook said Apple had 515 million subscribers to apps and services on Apple’s platform, up by 125 million from one year earlier.
- Apple’s wearables and accessories segment were $6.3 billion, compared with analyst estimates of $6.7 billion.
- Profit fell about 3% to $11.25 billion but beat estimates on a per share basis.
- In the face of historic economic uncertainty, Apple declined to project sales for its current quarter for the first time since it began providing concrete revenue guidance in late 2003.
Amazon’s Sales Jump as Coronavirus Prompts Surge in Online Shopping
- Amazon.com said it could post its first quarterly loss in five years even as revenue surges because it is spending at least $4 billion in response to the coronavirus pandemic, including plans to test its workforce for COVID-19.
- Revenue for the first quarter rose 26% to $75.5 billion, beating analysts’ average estimate of $73.6 billion.
- Subscription revenue grew 28% to $5.6 billion in the first quarter.
- Amazon Web Services (AWS), the company’s cloud computing unit, revenue increased 33% to $10.2 billion, short of analysts’ estimate of $10.3 billion.
- Advertising and other revenue was up 44% in the first quarter to $3.9 billion.
- Total operating expenses rose 29% in the first quarter to $71.5 billion.
- The boom in sales came at a cost, though, as profit fell 29% from a year earlier to $2.5 billion, short of estimates of $3.26 billion.
- This quarter, with government-mandated lockdowns in full swing, Amazon said it could see a 28% rise in revenue to $81 billion.
- The Seattle retailer forecast operating income will range from a loss of $1.5 billion to a profit of $1.5 billion, versus earnings of $3.1 billion in the same period a year prior.
Visa withdraws annual outlook amid virus outbreak
- Visa on Thursday decided to pull its full-year outlook on rising unemployment numbers and more people conserving cash during the COVID-19 pandemic even while posting a second-quarter profit that rose 4%.
- Net revenue rose 7% to $5.85 billion, beating analysts’ estimates of $5.75 billion.
- The company’s total payments volume (GDV) rose 5% to $2.14 trillion, on a constant dollar basis, in the second quarter, but was well below the 8.2% growth during the same period last year.
- This week, Mastercard reported its GDV growth of 5.5% to $1.6 trillion.
- Visa’s net income rose 4% to $3.08 billion in the second quarter ended March 31 from $2.98 billion a year earlier.
- In January, the world’s No. 1 payments processor forecast a revenue growth in the low-double digits for the full year.
Exxon Posts First Loss in Decades as Oil Giants Signal Trouble Ahead for Industry
- Exxon Mobil on Friday joined a parade of oil companies posting downbeat results on plunging oil demand and collapsing prices, reporting a $610 million first-quarter loss after a nearly $3 billion inventory writedown.
- Exxon’s production rose slightly to about 4 million barrels of oil equivalent per day (boepd) from 3.98 million boepd.
- Exxon posted a loss of $610 million in the quarter, compared with a profit of $2.35 billion a year earlier.
- Earnings from oil and gas production fell 91% from a year ago on weak oil prices, but benefited from higher volumes.
- Exxon’s U.S. shale production was up 56% from a year-ago.
- Exxon has cut this year’s project spending by $10 billion and expects to reduce oil and gas output by 400,000 barrel per day in line with rivals.
Chevron cuts 2020 spending plans again, says profits jump on asset sales
- Chevron on Friday slashed its capital spending plans by another $2 billion as the coronavirus pandemic guts demand for oil and gas, while delivering a year-over-year 38% increase in profits.
- Oil and gas output rose to 3.24 million barrels per day (bpd), an increase of more than 6%.
- Earnings at Chevron beat Wall Street expectations and were $3.6 billion in the first quarter, up from $2.6 billion during the same period last year and boosted by $1.6 billion in asset sales in the Philippines and Azerbaijan.
- The second-largest oil producer in the United States cut its spending budget to $14 billion, down from the $20 billion it had planned before the oil price crash.
- The company plans to curtail its oil output by as much as 300,000 bpd in May and as many as 400,000 bpd in June.
Gilead to work with partners to ramp up production of potential coronavirus treatment
- Gilead Sciences, maker of the closely-watched experimental coronavirus drug remdesivir, on Thursday said it will work with international partners to expand production of the potential COVID-19 treatment.
- Gilead reported total revenue of $5.55 billion for the first quarter, up from $5.28 billion a year earlier.
- Analysts polled by FactSet predicted $5.45 billion in revenue for the latest period.
- Sales of products meant to treat HIV rose to $4.1 billion from $3.6 billion in the first quarter last year.
- Gilead reported profit fell to $1.55 billion, from $1.98 billion the year earlier.
- By the end of next month, Gilead said it expects to have manufactured enough of the drug to treat more than 140,000 patients, and it plans to donate that supply to hospitals.
Honeywell Posts Lower Sales Amid Covid-19 Supply-Chain Disruptions
- Honeywell International on Friday became the latest aerospace supplier to withdraw its full-year outlook on weak demand as the aviation industry struggles with COVID-19 led lockdowns.
- Revenue fell 4.7% to $8.46 billion from $8.88 billion in the comparable quarter last year. Analysts were looking for $8.59 billion.
- The company’s organic sales, which excludes currency fluctuations and the effect of deals, fell 4%.
- The aerospace business, Honeywell’s largest unit by sales, generated $3.36 billion in sales, up 1% from the prior year.
- Net income rose to $1.58 billion in the quarter, from $1.42 billion a year earlier.
- The company withdrew its guidance, citing the evolving nature of the pandemic and its effects on its supply chain and the market. Honeywell said it expects to encounter challenges for its top line, especially in the aerospace and oil-and-gas sectors.
Abbvie stands by 2020 profit forecast as Humira fuels quarterly beat
- AbbVie stuck with its 2020 adjusted profit forecast on Friday after strong demand for its blockbuster rheumatoid arthritis drug, Humira, helped it beat analysts’ estimates for quarterly profit and sales.
- AbbVie’s total sales rose 10.1% to $8.62 billion in the first quarter, above analysts’ estimates of $8.33 billion.
- Sales of Humira, the world’s best selling drug, rose 13.7% in the United States, but fell 14.9% in international markets.
- Sales of new plaque psoriasis drug, Skyrizi, was $300 million, above analysts’ estimates of $259.7 million.
- Profit rose to $3.01 billion, from $2.45 billion a year earlier.
Bleach boom lifts Clorox outlook after best sales growth in a decade
- Clorox posted its biggest rise in quarterly sales in a decade and raised its annual forecast on Friday as it reaped the benefits of soaring demand for bleach and other disinfectants during the COVID-19 pandemic.
- Clorox’s net sales rose 15% to $1.78 billion in the third quarter, the biggest increase in quarterly sales since June 2010.
- Sales in the company’s cleaning division, which makes up nearly 38% of total sales and includes its namesake bleach products as well as Formula 409 and Pine-Sol, surged 32% in the quarter.
- Net earnings jumped to $241 million in the quarter, from $187 million a year earlier.
- Clorox forecast full-year sales to rise between 4% and 6%, compared with a prior forecast of a low single-digit decrease to a 1% increase.
- It also raised its full-year earnings-per-share outlook to a range of $6.70 to $6.90, from its prior range $6.10 to $6.25 per share.
Colgate-Palmolive Report Strong Sales as Consumers Stock Up on Cleaning Supplies
- Colgate-Palmolive on Friday reported strong sales growth in the latest quarter, as consumers stocked their homes with cleaning supplies and other personal-care items in response to the coronavirus pandemic.
- Overall, Colgate’s first-quarter revenue grew 5.5% to $4.1 billion. North American sales of personal- and home-care products, which include Colgate toothpaste and Softsoap hand soap, grew 8.9% in the period compared with the same time last year.
- Net income increased to $715 million in the quarter, compared to a profit of $560 million in the same period a year ago.
- Colgate-Palmolive withdrew its guidance for the 2020 calendar year, citing economic uncertainty caused by the global pandemic.
Amgen studying Otezla for coronavirus, looking into other treatments
- Amgen on Thursday reported better-than-expected first-quarter results and said it plans to study psoriasis drug Otezla as a potential treatment for COVID-19, the respiratory disease caused by the new coronavirus.
- Revenue of $6.16 billion in the quarter topped Wall Street estimates of just under $6 billion.
- Amgen said strong first-quarter sales of Otezla, along with higher volume sales of drugs like cholesterol treatment Repatha, contributed to an 11% increase in revenue for the period.
- Net profit fell 3% to $3.07 per share due to higher operating costs that were partially offset by fewer shares outstanding.
United Airlines posts quarterly loss, shores up $9.6 billion in liquidity
- United Airlines Holdings on Thursday posted a first-quarter loss of $1.7 billion, including charges against investments in Latin America that have soured as the coronavirus pandemic jolts travel industries worldwide.
- Total operating revenue declined 17% to $8 billion.
- On an adjusted net basis, United’s net loss was $639 million compared with a $292 million profit a year earlier.
T-Mobile says Sprint lost 348,000 postpaid phone subscribers in first quarter
- T-Mobile said Sprint lost 348,000 phone subscribers who pay a monthly bill in the first quarter, compared to 189,000 a year ago.
- Sprint’s preliminary postpaid phone churn, or the rate of customer cancellations, increased to 1.89% from 1.82% in the quarter, T-Mobile said in a regulatory filing.
- Sprint’s standalone results for the first quarter are expected to be released in May.
PG&E Outlines Board Shake-Up as It Posts Quarterly Profit
- PG&E on Friday detailed a planned shake-up of its board of directors as it reported a rise in quarterly earnings.
- PG&E recorded first-quarter profits of $371 million, up from $136 million during the same period in 2019.
- The California utility said that only three of its 14 directors will remain on the board once it emerges from bankruptcy protection in coming months.
- PG&E has agreed to settle claims from insurers, individual fire victims, cities and public agencies for more than $25 billion.
- It is now pushing to secure court and regulatory approval of its reorganization plan by June 30, as it must do to qualify for a California wildfire fund created to help the state’s investor-owned utilities handle liability costs stemming from future fires.
Restaurant Brands’ Popeyes sales surge, while Tim Hortons misses estimates
- Restaurant Brands International was propped up in a rough first quarter by the huge success of the Popeye chain’s chicken sandwich, it said on Friday, as it predicted a bigger hit from the coronavirus crisis to come.
- Overall, total revenue fell 3% to $1.23 billion for the first quarter ended March 31.
- The results numbers pointed to a grim second quarter for its Canada-centric Tim Horton’s chain, with widespread closures helping drive a 10% fall in comparable sales in the first three months of the year.
- With restaurants scrambling to shift to drive-in, delivery and other takeaway options, sales at the company’s flagship Burger King operation were better, down 3.7%, while Popeyes continued a stellar run with 26% growth.
- Analysts were expecting a comparable sales rise of 17.47% for Popeyes and a fall of 9.24% for Tim Hortons, according to IBES data from Refinitiv.
- Net income rose to $144 million, from $135 million a year earlier.
Boeing Launches $25 Billion Bond Sale
- Boeing launched Thursday a $25 billion bond offering that it said met near-term financial requirements and for now avoided any federal funding to ride out the coronavirus crisis that has engulfed the global airline industry.
- 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 company with Boeing’s credit rating and challenges.
- Deal includes:
- $3b 3Y Fixed (May 1, 2023) at +425 Treasury
- $3.5b 5Y Fixed (May 1, 2025) at +450
- $2b 7Y Fixed (May 1, 2027) at +450
- $4.5b 10Y Fixed (May 1, 2030) at +450
- $3b 20Y Fixed (May 1, 2040) at +440
- $5.5b 30Y Fixed (May 1, 2050) at +450
- $3.5b 40Y Fixed (May 1, 2060) at +462.5
- The deal, expected to close May 4, would be one of the largest-ever corporate-bond offerings. It comes just a day after Boeing reported a second consecutive quarterly loss and had its credit rating downgraded to a notch above junk status.
- Boeing ended the March quarter with $15.5 billion in cash and equivalents.
- Boeing also ended the quarter with $38.9 billion in debt.
Amazon extends work from home regime till October 2
- Amazon.com has told staff whose job can be done from home that they can do so until at least Oct. 2, pushing out the timeline on a return to work for many employees as it faces scrutiny over conditions in its warehouses.
- The statement did not specify how much of the company’s overall workforce that covered and which roles.
US ECONOMY & POLITICS
U.S. manufacturing skids to 11-year low in April as orders sink: ISM
- U.S. manufacturing activity plunged to an 11-year low in April as the novel coronavirus wreaked havoc on supply chains, supporting analysts’ views the economy was sinking deeper into recession.
- The Institute for Supply Management (ISM) said on Friday its index of national factory activity dropped to a reading of 41.5 last month from 49.1 in March. That was the lowest level since April 2009, just a few months before the Great Recession ended.
- Economists had forecast the index falling to 36.9 in April. The smaller-than-expected drop in the ISM index was because the survey’s measure of supplier deliveries surged to a reading of 76.0 last month from 65.0 in March.
- The ISM’s forward-looking new orders sub-index tumbled to a reading of 27.1 in April, the lowest since December 2008, from 42.2 in March. The survey’s measure of order backlogs at factories plummeted to 37.8 last month from 45.9 in March.
- The ISM’s factory employment index plunged to a reading of 27.5 last month, the lowest since February 1949, from 43.8 in March.
Trump threatens new tariffs on China in retaliation for coronavirus
- U.S. President Donald Trump said on Thursday his hard-fought trade deal with China was now of secondary importance to the coronavirus pandemic and he threatened new tariffs on Beijing, as his administration crafted retaliatory measures over the outbreak.
- Two U.S. officials, speaking on condition of anonymity, said a range of options against China were under discussion, but cautioned that efforts were in the early stages.
- Recommendations have not yet reached the level of Trump’s top national security team or the president, according to sources.
- Trump made clear, however, that his concerns about China’s role in the origin and spread of the virus were taking priority for now over his efforts to build on an initial trade agreement with Beijing that long dominated his dealings with the country.
- The Washington Post reported on Thursday that some officials had discussed the idea of canceling some of the massive U.S. debt held by China as a way to strike at Beijing for perceived shortfalls in its candidness on the COVID-19 pandemic.
In Rare Move, U.S. Intelligence Agencies Confirm Investigating if Coronavirus Emerged From Lab Accident
- The U.S. intelligence community publicly confirmed it is trying to determine whether the coronavirus may have escaped from a laboratory in Wuhan, the city where the pandemic began.
- In an unusual public statement, the Office of the Director of National Intelligence, or ODNI, also said that U.S. intelligence agencies concur with the broad scientific consensus that “the Covid-19 virus was not manmade or genetically modified.”
- But ODNI said U.S. intelligence “will continue to rigorously examine emerging information and intelligence to determine whether the outbreak began through contact with infected animals or if it was the result of an accident at a laboratory in Wuhan.”
- President Trump said Thursday that he has seen intelligence that linked the Wuhan Institute of Virology with the origin of the virus. “Yes, I have,” he said in answer to a question at the White House about whether he has seen such intelligence. Asked to elaborate, he said: “I can’t tell you that, I’m not allowed to tell you that.”
For Many Small Businesses, U.S. Coronavirus Aid Falls Short
- The federal government’s $660 billion aid program for small businesses coping with the coronavirus pandemic threatens to leave hundreds of thousands of companies struggling to survive because of its limits on nonpayroll expenses.
- The Paycheck Protection Program requires that 75% of the funds go for employee salaries, and no more than 25% on rent, mortgage interest and utility payments.
- That is proving to be a deal breaker for many small businesses with modest payrolls and high rent costs, such as restaurants, salons and shops in urban areas including New York, Los Angeles and Chicago.
- The limit on nonpayroll expenses helps explain why less-populated states where rents are generally low, such as Nebraska, Kansas, North Dakota and South Dakota, got a disproportionately larger share of federally backed loans than states with big cities and high rents.
EUROPE & WORLD
Asia Keeps Up Oil Imports, and the Savings Add Up
- Low oil prices are likely to help Asia’s largest economies restart as they begin to emerge from the worst of the coronavirus pandemic, although the lower cost isn’t a panacea.
- Major oil importers in Asia have been on a buying spree since oil prices began to crash around the end of February.
- China imported 42.6 million metric tons of oil in April, about the same as a year earlier despite a sharp slowdown in its economy. That is equivalent to about 307 million barrels.
- South Korea imported a record 14.1 million metric tons and Japan’s 13.9 million metric tons of imports were the highest it has seen in over a year.
- If the trend continues, those countries are poised to save tens of billions of dollars a year on their oil bills, a fraction of the output that China and Japan are losing during the pandemic, but still helpful.
TODAY in HISTORY
- The Act of Union joined England and Scotland to form Great Britain. 1707
- The Empire State Building opened in New York City. At 102 stories, it would be the world’s tallest building for the next 41 years. 1931
- The Democratic People’s Republic of Korea (North Korea) was established with Kim Il Sung as president. 1948
- The Soviet Union shot down an American U-2 reconnaissance plane over Soviet territory. 1960
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