US FINANCIAL MARKET
Stocks Climb as Some U.S. States Ease Lockdowns
- U.S. stock indexes jumped on Tuesday as a recovery in oil prices lifted battered energy stocks and a slew of countries eased coronavirus-induced restrictions in an attempt to revive their economies.
- Some hard-hit countries, including Italy, as well as a handful of U.S. states are tentatively easing stay-at-home orders this week, raising hopes for a recovery in oil demand.
- Data on Tuesday showed the domestic services sector recorded its first contraction in nearly 10-1/2-years, while the Institute for Supply Management’s (ISM) non-manufacturing index showed a smaller-than-expected decline.
- All eyes will now be on the Labor Department’s report of monthly nonfarm payrolls due Friday.
- With more than half of the S&P 500 companies reporting so far, first-quarter earnings are expected to have fallen 12.5%, with analysts expecting an earnings recession by the second quarter, according to Refinitiv data.
- Later Tuesday, major U.S. companies including Walt Disney are scheduled to report earnings.
- Disney has gained millions of subscribers for its new flagship streaming service with people being forced to stay home, but the shutdown of its production processes has hit its pipeline for new releases.
Global Deaths from Coronavirus Pass 251,000
- Globally, there have been more than 251,000 confirmed deaths, nearly 69,000 of which were reported in the U.S., according to data from Johns Hopkins University.
- The U.S. accounts for 1.18 million of the 3.58 million cases world-wide.
- Retailers in California including clothing stores, bookstores, sporting goods stores, and florists can reopen for curbside pickup as soon as Friday, Gov. Gavin Newsom said.
- Manufacturers that supply them can resume operations as well.
- Missouri businesses were permitted to open their doors with restrictions in place, restaurants and salons in Nebraska could prepare for customers, and Ohio manufacturers limited by the pandemic could resume operations.
- New York Gov. Andrew Cuomo detailed the threshold for regions of the hard-hit state to meet before reopening, including for new hospitalizations, available hospital beds and contact tracers.
- The Democrat said reopening would come in phases, with construction and manufacturing resuming operations first.
Fiat Chrysler plunges to loss, but no change to PSA deal
- Fiat Chrysler Automobiles plunged to a first-quarter loss of $1.8 billion and scrapped its full-year earnings forecast on Tuesday, as the automaker grapples with a coronavirus crisis that has hammered production and sales.
- Revenue fell nearly 16% to €20.5 billion ($22.2 billion) compared with the first quarter of 2019.
- North America—long one of the company’s most profitable markets—continued to carry results with Ram-brand truck sales up 7% in the first quarter and its share of the full-size pickup market rose to 24%.
- FCA had a net loss of 1.69 billion euros ($1.83 billion) in the quarter, compared with a 508 million euro net profit a year earlier.
- The automaker said that due to the continued uncertainty related to the pandemic, it had withdrawn its full-year guidance and would update it when it had better visibility of the overall impact of the crisis.
DuPont Swings to Loss, Posts Lower Sales
- Industrial materials maker DuPont on Tuesday doubled its annual cost-savings target and slashed its capital expenditure by about $500 million, as it looks to weather the global trade uncertainties brought on by the coronavirus outbreak.
- The company said sales fell 3.6% to $5.22 billion from the year-ago period. Analysts were targeting $5.07 billion.
- Excluding the effect of currency and portfolio, the company said sales fell 2%.
- The company posted a net loss of $616 million, compared with a profit of $521 million in the same quarter last year.
- DuPont now expects to save $180 million this year, compared to $90 million from steps announced in January to take out stranded costs.
XPO Logistics profit tumbled after coronavirus pummeled business
- XPO Logistics reported a sharp decline in quarterly profit after the novel coronavirus pandemic pummeled demand from consumers and businesses.
- Revenue fell over 6% to $3.86 billion.
- XPO’s core transportation segment revenue declined almost 8% to $2.46 billion, due to COVID-19 and the loss of a large portion of business from Amazon.com – its largest customer.
- The transportation and warehousing company said first-quarter net income tumbled more than 51% to $21 million.
Aptiv profit beats estimates despite fall in sales due to COVID-19 pandemic
- U.S. auto parts maker Aptiv reported a smaller-than-expected decline in quarterly profit on Tuesday, helped by a relatively better performance in its signal and power components unit.
- Net sales declined about 10% to $3.23 billion. Analysts expected revenue of $3.01 billion.
- Adjusted net income fell to $173 million from $273 million a year earlier.
- The company said it expects global light vehicle production to fall between 20% and 30% in 2020, with expected decline in second quarter to be between 50% and 60%.
Martin Marietta Materials Q1 EPS Falls, Revenue Rises; Withdraws FY2020 Guidance
- 1Q revenue $958.2 million, +2% year over year, versus estimates of $928.9 million.
- 1Q aggregates net sales $570.3 million, +5.3% year over year.
- Net income fell to $25.9 million, compared to $42.9 million in the same period a year ago.
- The company withdrew 2020 guidance in light of COVID-19 uncertainty
Aecom Fiscal Q2 Core Profit Rises, Revenue Declines; Cuts 2020 Adjusted EBITDA Target
- Revenue for the quarter totaled $3.25 billion, down from $3.41 billion a year ago. The consensus was for $3.32 billion.
- The company lost $86 million compared to a profit of $77.8 million in the same period a year ago due to a charge from a discontinuation of operations.
- The company’s backlog increased 14% to $41.6 billion.
- For 2020, the company now expects adjusted EBITDA to range from $700 million to $740 million, compared with the originally expected $720 million to $760 million.
- Free cash flow is still estimated to be between $100 million and $30 million, it said.
Apple borrows on the cheap to fund buybacks, dividends
- Apple on Monday capitalized on the Federal Reserve’s emergency measures in response to the coronavirus outbreak to issue its cheapest bonds in years, making it the latest blue-chip company to do so to fund stock buybacks and dividends.
- The technology company raised $8.5 billion by selling four different bonds with maturities ranging from three years to 30 years.
- It sold a $2 billion three-year bond and a five-year $2.25 billion with coupons of 0.75% and 1.125% respectively, the lowest rates the company has paid on bonds with such durations since 2013, according to Refinitiv IFR data.
- The funds will go toward general corporate purposes, including share repurchases and dividend payments, Apple said in a regulatory filing.
WeWork Co-Founder Adam Neumann Sues SoftBank Over Failed $3 Billion Deal
- WeWork’s co-founder and former chief executive Adam Neumann sued SoftBank Group Corp., accusing the Japanese technology group of breaking a key provision of a deal that gave SoftBank control of the shared-office-space company.
- Tokyo-based SoftBank in April terminated an offer to pay up to $3 billion for shares in WeWork, saying conditions to complete the stock sale weren’t met by an April 1 deadline.
- As part of that deal, which led to Mr. Neumann’s ouster from the company’s board, Mr. Neumann had the right to sell up to $970 million in stock to SoftBank.
- SoftBank, in backing out of the deal, cited “multiple, new and significant pending criminal and civil investigations” that it said began after the October deal.
United Airlines to Cut Management Ranks by 30%
- United Airlines expects to shrink its management and administrative ranks by at least 30% starting in October, according to a memo sent to employees Monday, as the coronavirus pandemic wreaks havoc on the airline industry.
- That amounts to at least 3,450 people—the first indication of how many are likely to lose their jobs as United and other airlines grapple with a steep decline in air travel and an uncertain path to recovery.
- Airlines agreed not to lay off workers or cut pay rates through the end of September as a condition of receiving federal aid to cover salaries and benefits.
- United has cut its schedule by 90% this month and slashed costs, suspending salaries for its CEO and president, halving corporate officer salaries, suspending raises and bonuses, and offering employees unpaid leave.
Coronavirus Vaccine Enters Human Testing in U.S.
- Researchers have begun giving healthy volunteers in the U.S. an experimental coronavirus vaccine developed by Pfizer and partner BioNTech SE, the latest study exploring a potential defense against the respiratory disease.
- Results from the 360-person study in the U.S. could come as early as next month, but the vaccine will still need to undergo additional testing in more patients, said Kathrin Jansen, Pfizer’s head of vaccine research and development.
- A vaccine could be ready for emergency use as early as the fall if testing indicates it works safely, Pfizer Chief Executive Albert Bourla told The Wall Street Journal last week, though the company would keep studying it in clinical trials.
US ECONOMY & POLITICS
U.S. services sector activity falls to new record lows: IHS Markit
- U.S. business activity plumbed new record lows in April as the novel coronavirus severely disrupted production at industries, a survey confirmed on Tuesday.
- Data firm IHS Markit said its flash U.S. Composite Output Index, which tracks the manufacturing and services sectors, tumbled to a reading of 27.0 last month.
- That was the lowest since the series began in late 2009 and followed a flash reading of 27.4 and March’s final reading of 40.9.
- The IHS Markit survey’s services sector final Purchasing Managers Index dropped to an all-time low reading of 26.7 in April from a flash reading of 27.0 last month and final 39.8 in March.
U.S. March Trade Deficit Widened as Coronavirus Disruptions Spread
- The U.S. trade deficit widened in March as the economic shock related to the global coronavirus pandemic held down both imports and exports.
- The deficit rose 11.6% to a seasonally adjusted $44.4 billion in March from $39.8 billion in February, snapping two months of declines, the Commerce Department said Tuesday.
- Imports declined 6.2% to $232.2 billion in March, the lowest figure since October 2016.
- Exports were down 9.6% to $187.7 billion, lowest since November 2016.
- The International Monetary Fund predicted last month that global trade would fall 11% this year. The World Trade Organization projects an even steeper decline of between 13% and 32%, affecting all global regions but particularly Asia and North America.
Senior Trump Aides Ease Up on China Pressure
- Senior Trump administration officials signaled that they won’t seek to punish China economically if Beijing abides by trade commitments made earlier this year, despite rising tensions over U.S. allegations that China mishandled the outbreak.
- The comments Monday by Matthew Pottinger, a deputy national security adviser, and Treasury Secretary Steven Mnuchin came amid sharp words in recent days between Washington and Beijing, including a warning by President Trump last week that he could impose tariffs as punishment for the coronavirus pandemic.
- Officials in Beijing criticized the Trump administration, singling out Secretary of State Mike Pompeo, who said Sunday there is “enormous evidence” linking the pandemic to the Wuhan Institute of Virology, which studies coronaviruses.
Chicago Fed economists see ‘U-Cov’ jobless rate as high as 34%
- The official U.S. unemployment rate for April, due out this Friday, will likely vastly understate job destruction from the coronavirus pandemic, so a pair of economists at the Federal Reserve Bank of Chicago set out to create a measure that captures the true extent of labor market losses.
- Their estimate: a ‘U-Cov’ rate in April of somewhere between 25.1% and 34.6%. That’s compared to the 16% rate forecast by economists polled by Reuters, who also estimate American employers shed more than 20 million jobs last month.
- In charts accompanying the blog, the researchers showed the previous ‘U-Cov’ high had been just over 20% in the wake of the Great Recession, more than double the 10% high registered by the traditional unemployment rate.
Coronavirus Hits Hawaii’s Tourism-Dependent Workforce Hard
- Hawaii’s workforce has sought unemployment benefits at the highest rate in the nation since mid-March, reflecting how hard the coronavirus pandemic has hit the state’s vital tourism industry.
- The state’s $18 billion tourism industry ground to a near-halt in March, after the Trump administration recommended Americans avoid unnecessary travel and bars and restaurant dining rooms closed.
- About 194,000 people in Hawaii filed claims for unemployment benefits in the six weeks ended April 25, representing 29.1% of the state’s workforce.
- A recent survey by the Chamber and the University of Hawaii Economic Research Organization found about one in four businesses anticipated having to shut their doors permanently, said Hawaii’s Chamber of Commerce.
California Is First State to Borrow from Federal Government to Make Unemployment Payments
- California has become the first state to borrow money from the federal government so it can continue paying out rising claims for unemployment benefits during the coronavirus pandemic.
- The Golden State borrowed $348 million in federal funds after receiving approval to tap up to $10 billion for this purpose through the end of July, a Treasury Department spokesman said Monday.
- The U.S. government also has approved loans of up to $12.6 billion for Illinois and up to $1.1 billion for Connecticut through the end of July to replenish state unemployment-insurance funds, though the two states hadn’t yet started borrowing.
FDA Sets Standards for Coronavirus Antibody Tests in Crackdown on Fraud
- The FDA has imposed rigorous precision standards on commercial test companies and said it is cracking down on fraudulent actors.
- At least 160 antibody tests for Covid-19 entered the U.S. market without previous FDA scrutiny on March 16, because the agency felt then that it was most important to get them to the public quickly.
- Now, the FDA will require test companies to submit an application for emergency-use authorization and require them to meet standards for accuracy.
- Tests will need to be found 90% “sensitive,” or able to detect coronavirus antibodies, and 95% “specific,” or able to avoid false positive results.
- Apart from fraud and inaccuracy, the tests also are of limited usefulness because researchers are still working to determine the precise level of antibodies sufficient to result in immunity.
EUROPE & WORLD
Germany’s Infineon warns of 5% sales slump in fiscal 2020 on COVID-19 impact
- German chipmaker Infineon Technologies on Monday said that it expects sales to decrease by 5% in the fiscal year because of the impacts of the coronavirus pandemic, compared to an original target of a 5% increase.
- In the second quarter, revenue rose by 4% to 2 billion euros while the profit margin decreased to 13.8% from 15.5%.
- In the current third quarter the company expects revenues for the combined company to be 1.9-2.3 billion, with a profit margin the mid-single digits.
- Excluding Cypress, Infineon now expects 2020 revenues of around 7.6 billion, while including the in-car entertainment company, Infineon’s total revenue would be around 8.4 billion. Infineon also expects a profit margin of around 12 percent.
Hugo Boss expects 50% sales drop next quarter as crisis impact worsens
- Hugo Boss is seeing signs of a sales rebound in China and online, but expects the impact of the coronavirus crisis to worsen before any recovery kicks in after first quarter sales fell by 17%, which knocked its shares.
- Hugo Boss said its first quarter sales were 555 million euros ($605 million), ahead of average analyst forecasts for 548 million, while it posted a loss of 14 million euros, which was worse than the average forecast of 6 million euros.
- Hugo Boss said online sales jumped 39% in the first quarter to account for 11% of total sales and accelerated again strongly in April, with sales more than doubling on its own site and via partner websites and demand particularly strong for sportswear.
- The company expects second quarter sales to fall by at least 50% as three quarters of its stores are still closed. But is confident the retail environment will gradually improve from the third quarter of the year, supporting sales and earnings.
BNP warns of 2020 profit fall as crisis wipes out equity trading
- BNP Paribas set aside more than half a billion euros in loan provisions on Tuesday as the coronavirus crisis wiped out the French bank’s revenue from equity derivatives trading and knocked a third off its first quarter profit.
- Paris-based BNP, whose net income fell to 1.28 billion euros in the quarter while revenue dropped 2.3% to 10.9 billion euros. said it would accelerate cuts to its operating expenses.
- Provisions for expected losses due to the coronavirus crisis were 502 million euros, BNP said. Its cost of risk, which reflects provisions for bad loans, rose by 85.4% to 1.42 billion euros over the period.
- While BNP warned that its 2020 net income could be about 15% to 20% lower than in 2019, the bank’s loans and repurchase agreements almost doubled during the quarter, with its balance sheet growing to 2.7 trillion euros from 2.2 trillion as it rolled out emergency loans to help businesses weather lockdowns.
Coronavirus Sweeps Across Brazil, a Land Ill-Equipped to Fight It
- Brazil has just passed China, the origin of the pandemic, both in confirmed cases, 105,222, and in deaths, 7,288, becoming the hardest-hit country in the developing world.
- Unlike in China, which corralled the virus through stern restrictions, things in Latin America’s largest country are expected to get much worse. Infections are rising by more than 5,000 a day and deaths by nearly 500.
- There is so little testing in Brazil that its real number of Covid-19 infections might be far higher than the official figure. One university study has estimated the total to date at higher than the U.S.’s world-leading 1.2 million.
- The surge comes as Brazil’s president quarrels with state governors and infectious-disease experts who say his government should enact a national stay-at-home rule, as most of its Latin America neighbors have.
- Instead, President Jair Bolsonaro recently fired his health minister, who had urged stringent social isolation measures.
TODAY in HISTORY
- Napoleon Bonaparte died on the island of St. Helena. (1821)
- Pablo Picasso’s “Boy with a Pipe” became the most expensive painting ever sold. (2004)
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