US FINANCIAL MARKET
Stocks Waver as Investors Look to Earnings, Economic Data
- U.S. stocks swung between small gains and losses Wednesday as investors continue to try to untangle key pieces of economic data and corporate earnings.
- The U.S. nonfarm payroll data for April from ADP, a gauge of private-sector employment in the world’s largest economy, on Wednesday registered a slightly smaller drop in payrolls than expected.
- Still, the nonfarm private sector in the U.S. lost about 20.2 million jobs from March to mid-April.
- President Trump on Tuesday said his administration is considering disbanding the White House’s coronavirus task force, even as the virus continues to spread around the U.S.
- A key model projected that the current number of U.S. deaths could nearly double by this summer.
- Shares of General Motors jumped 9% after the auto maker posted a profit on strong truck sales.
- Walt Disney, however, slipped 1.8% after the world’s largest entertainment company said late Tuesday that the coronavirus pandemic took a $1.4 billion bite out of its earnings.
Coronavirus Timeline Is Upended as France Discovers December Case
- French doctors have discovered a case of the new coronavirus dating from late December in a man who was hospitalized near Paris, the earliest publicly identified Covid-19 infection outside China.
- The case, in a man with no history of travel to China, changes the timeline of the pandemic, suggesting that the virus was spreading in Europe at least weeks earlier than previously believed and more than a month before Italy’s outbreak.
- The French case indicates that the virus could have been circulating months before it infected enough people to start flooding French emergency rooms with patients, said Yves Cohen, a French doctor who helped lead the study.
Scientists say a now-dominant strain of the coronavirus could be more contagious than original
- Scientists have identified a new strain of the coronavirus that has become dominant worldwide and appears to be more contagious than the versions that spread in the early days of the COVID-19 pandemic, according to a new study led by scientists at Los Alamos National Laboratory.
- The new strain appeared in February in Europe, migrated quickly to the East Coast of the United States and has been the dominant strain across the world since mid-March, the scientists wrote.
- In addition to spreading faster, it may make people vulnerable to a second infection after a first bout with the disease, the report warned.
- The study has yet to be peer-reviewed, but the researchers noted that news of the mutation was of “urgent concern” considering the more than 100 vaccines in the process of being developed to prevent Covid-19.
Disney takes $1.4 billion coronavirus hit, sets date to reopen Shanghai park
- Walt Disney estimated on Tuesday that global coronavirus lockdowns cut profits by $1.4 billion, mostly from its shuttered theme parks, but said it would reopen Shanghai Disneyland next week.
- Overall revenue for the quarter rose 21% to $18 billion, just ahead of analyst forecasts of $17.8 billion.
- But that was driven by the acquisition of 21st Century Fox’s entertainment assets last year.
- Operating income at the division that includes Disney parks fell 58% to $639 million. Revenue fell 10% to $5.5 billion.
- Studio entertainment revenue rose 18% to $2.5 billion, but operating income fell 8% to $466 million.
- The division that includes the Disney+ streaming service, direct-to-consumer, posted revenue of $4.1 billion in a quarter that registered a significant boost in subscribers but posted an operating loss at the division of $812 million.
- Disney+ had 54.5 million paying subscribers as of May 4, up from 50 million on April 8.
- Media networks reported profit of $2.4 billion up 7% on favorable comparables from the 21CF acquisition.
- Overall operating income for the company fell 37% to $2.4 billion.
- Disney will not pay a dividend for the first half of the fiscal year, which will preserve $1.6 billion in cash assuming it had kept the dividend constant at 88 cents per share.
General Motors the Only Detroit Auto Maker to Post a Profit
- General Motors outlined plans for a May 18 restart of most of its North American plants shut down by the coronavirus pandemic as it reported a stronger than expected quarterly profit, sending its shares up 7.8% in premarket trading.
- Revenue fell 6.2% to $32.7 billion in the quarter, down from $34.9 billion a year ago.
- GM’s global vehicle sales during the first quarter were down 22.4% to nearly 1.5 million from a year earlier.
- GM said sales of its large pickup trucks—the Chevrolet Silverado and GMC Sierra—rose 27% during the quarter, even as overall U.S. sales slid 7%.
- GM posted net income of $247 million, down more than 88% from $2.12 billion in the same period in 2019.
- GM plans to restart the majority of U.S. and Canadian production on May 18 under extensive safety measures, two months after announcing shutdowns.
- The automaker had previously suspended its 2020 profit outlook and did not provide an update on Wednesday.
Activision raises 2020 forecast as ‘Call of Duty’ gets lockdown boost
- Millions of people stuck indoors turned to video games such as Activision Blizzard’s “Call of Duty” to shake off lockdown boredom in the past two months, encouraging the company to raise its revenue forecast for the year.
- The company reported total adjusted revenue of $1.52 billion for the first quarter. Analysts had expected $1.32 billion.
- In the first quarter, Activision had 102 million monthly active users. Call of Duty: Warzone hit 60 million downloads in its first 52 days as a free-to-play battle royale mode for Call of Duty: Modern Warfare.
- The company’s quarterly net income rose to $505 million, from $447 million a year earlier.
- Activision raised its 2020 adjusted revenue forecast to $6.9 billion from $6.73 billion, marginally above estimates of $6.86 billion.
- It also forecast full-year adjusted earnings of $2.62 per share, beating the average estimate of $2.48.
EA sees full-year revenue above estimates as home-sheltering boosts gaming
- Video game publisher Electronic Arts forecast full-year adjusted revenue above estimates, driven by higher sales in its major franchises like “FIFA” and “Apex Legends” as broader videogame sales rose with people staying at home due to the COVID-19 pandemic.
- On an adjusted basis, the company’s revenue fell to $1.21 billion from $1.36 billion, but edged past estimates of $1.19 billion.
- Net income jumped to $418 million in the fourth quarter, from $209 million a year ago.
- The company forecast full-year adjusted revenue of $5.55 billion, beating analysts’ average estimate of $5.37 billion.
Shopify posts surprise adjusted profit as lockdowns drive merchants online
- Canadian e-commerce company Shopify posted a surprise adjusted profit for the first quarter and beat revenue estimates as more users visited its platform after lockdowns led merchants to move their businesses online.
- Total revenue rose 46.6% to $470 million, ahead of analysts’ estimates of $442.9 million.
- Gross merchandise volume (GMV), a metric used in the e-commerce sector to measure transaction volumes, surged 46% to $17.4 billion in the quarter, beating estimates of $16.58 billion.
- Ottawa-based Shopify posted a net loss of $31.4 million for the quarter, compared with $24.2 million a year earlier.
MercadoLibre Surges After Locked-Down Consumers Flock Online
- The Buenos Aires-based company’s net revenue grew by 37.6% to $652 million in the first quarter, beating analysts’ estimate of $629 million.
- Gross merchandise (GMV) and total payment volume (TMV) jumped 34% and 82% on a yearly basis, respectively.
- Despite the first few weeks of virus restrictions, MercadoLibre said gross merchandise volume growth accelerated to 73% in April.
- Only in Brazil, which accounts for 61% of the total, its net revenue climbed by 31.4% in U.S. dollar terms and 55% in Brazilian real terms year-on-year.
- Still, MercadoLibre reported a net loss of $21.1 million after taxes in the quarter ended on March 31 compared with a loss of $54 million in the fourth quarter.
Beyond Meat results beat, suspends 2020 forecast on COVID-19 concerns
- Beyond Meat said sales more than doubled in the latest quarter, boosted by increased demand from its partners and retailers stocking up on the alternative meats as food supply chains faced disruptions because of the coronavirus pandemic.
- Overall, Beyond Meat’s quarterly net sales rose 141.4% to $97.1 million, the slowest growth in at least five quarters, but beat estimates of $88.3 million.
- Sales at its U.S. food service channel rose 156% to $22.6 million in the first quarter, while sales grew 57% to $18.6 million in the international food service business.
- Beyond swung to a profit of $1.8 million in the quarter, compared with a loss of $6.6 million in last year’s first quarter.
Mattel readies Baby Yoda toys for Christmas as factories come back online
- Mattel will have a new line of “Baby Yoda” toys ready to hit shelves in time for Christmas, the company said on Tuesday, as it looks to chart a recovery from a steep drop in first-quarter sales due to the coronavirus lockdowns.
- Mattel said net sales fell 14% to $594.1 million, in the first quarter, short of analysts’ estimates of $652.7 million, as toy stores were forced to close in strict government lockdowns to contain the spread of the virus.
- Mattel, however, reported steep declines across wide parts of its portfolio. Barbie sales fell 10%, while Fisher-Price and Thomas & Friends toys were down 25%. American Girl, which closed its retail stores due to the pandemic, posted a 16% drop in sales.
- The company’s net loss widened to $210.7 million in the first quarter, from $176.3 million a year earlier.
Match quarterly revenue hit by slowing Tinder growth
- Match Group reported quarterly revenue that fell short of Wall Street estimates on Tuesday, hit by slowing growth in its popular dating app “Tinder” as fewer people signed up and paid for its premium features amid the COVID-19 pandemic.
- Total revenue rose 17% to $544.6 million in the first quarter from a year ago, just shy of analysts’ estimates of $544.9 million.
- Tinder added about 100,000 average subscribers, its lowest in at least a year, taking its total average subscriber count to 6 million.
- Net earnings rose to $160.4 million for the quarter, from $123 million, or 42 cents per share, a year earlier.
Pinterest reports bigger-than-expected loss as costs rise
- Pinterest reported a bigger-than-expected first-quarter loss on Tuesday as the image sharing company incurred higher costs, sending its shares down 10% in extended trade.
- Pinterest’s total revenue rose 35% to $272 million, beating analysts’ average estimate of $270.1 million.
- Revenue in the United States, the company’s major market, grew 27% to $237 million.
- The company said monthly active users jumped 26% to 367 million during the quarter and it saw record levels of engagement.
- Net loss widened to $141.2 million in the first quarter, from $41.4 million, a year earlier.
Occidental posts loss on $1.4 billion charges, cuts budget again
- Occidental Petroleum on Tuesday reported that it swung to a loss in the first quarter on write downs, and the troubled oil producer cut its budget for the third time since March in response to the historic crash of oil prices.
- Write downs of $1.4 billion in pipeline assets, losses on interest rate swaps and impairments on oil and gas properties were partially offset by a $1 billion gain on crude oil hedges.
- It reported a net loss of $2.23 billion for the quarter, compared with a profit of $631 million in the year-ago period.
- The company cut its capital budget for the year to between $2.4 billion and $2.6 billion after earlier downsizing it to between $2.7 billion and $2.9 billion, nearly half the original forecast.
- It has identified additional $1.2 billion in operating and overhead cost cuts for 2020, it said on Tuesday.
Marathon Petroleum cuts spending by $1.4 billion as virus saps fuel demand
- U.S. oil refiner Marathon Petroleum on Tuesday cut spending by 30% and detailed other measures to reduce costs, as widespread lockdowns to curb the spread of the COVID-19 pandemic pummel demand for oil and gas.
- Net loss was $9.2 billion as it booked $12.4 billion in charges related to inventory writedowns and goodwill impairment.
- The company expects second-quarter throughput, defined as the amount of crude oil processed by a refinery, to be around 2.13 million barrels of oil per day (bopd), down from 3.1 million bopd a year earlier.
- Marathon, which last month said it will defer or delay some expenses, expects total capital spending to decline by $1.4 billion, reducing its budget for the year to $3 billion. It estimated operating expenses to be $950 million lower in 2020.
CVS Warns of Surge in Non-Coronavirus Health Problems
- CVS Health posted first-quarter profit above Wall Street estimates, as its pharmacy benefits management business and its drugstores benefited from customers stockpiling medicines due to COVID-19 lockdowns.
- Sales rose 8.3% to $66.76 billion, beating estimates of $64.10 billion.
- Sales at CVS’s retail unit rose 7.7% to $22.75 billion, helped by strength in its pharmacies as well as its front-end stores that sell over the counter consumer health products.
- CVS’s health-care benefits business, which includes Aetna, posted revenue of $19.2 billion, an increase of 7.4%.
- Net income rose to $2.01 billion in the quarter, from $1.42 billion a year earlier.
- CVS said its expectations for full-year earnings and cash flow remain unchanged while withdrawing guidance for all other metrics due to uncertainty around coronavirus.
New York Times warns of ad sales drop after upbeat first-quarter results
- The New York Times warned of a steep fall in advertising sales in the current quarter after beating profit and revenue estimates, as it added more subscribers in a period dominated by heavy news coverage around the COVID-19 pandemic.
- The company’s first-quarter revenue rose 1% to $443.6 million – edging past analysts’ estimates of $441.1 million.
- First-quarter advertising revenue, which accounts for less than a fourth of total revenue, fell 15.2% to $106.1 million, and the company expects advertising revenue in the current quarter to slide between 50% and 55% from the year-earlier period.
- The company added 587,000 net new digital subscriptions, pushing digital-only subscriptions to more than five million.
- Net income rose 9% to $32.8 million, compared to $30.2 million in the same period a year ago.
Airbnb to Cut 25% of Workforce as Coronavirus Stalls Global Travel
- Airbnb said it is slashing 1,900 jobs, or a quarter of its workforce, and cutting investments in noncore operations, as the home-sharing giant predicted the coronavirus pandemic would change its business even after more people start traveling again.
- Co-founder and Chief Executive Brian Chesky told employees about the cuts in a memo Tuesday, adding that the company’s revenue forecast for this year is “less than half” of last year’s level.
- Mr. Chesky also said the company is reducing investment in newer areas, pausing its Transportation and Airbnb Studios initiatives while scaling back investments to bring traditional hotels and more luxury properties onto its website.
Uber Cuts 3,700 Jobs, Says CEO Waives Salary Amid Coronavirus Pandemic
- Uber Technologies is cutting about 3,700 workers as the ride-hailing service looks to reduce costs amid the coronavirus pandemic that has led to a dramatic fall off in rides.
- Uber had about 26,900 employees at the end of 2019, so the cuts would represent about a 14% reduction of that.
- The ride-sharing companies this week will be reporting results for the three months through March that won’t reflect the full impact of the coronavirus because many parts of the U.S. weren’t affected until the final weeks of the quarter.
California Sues Uber, Lyft Saying They Misclassified Drivers as Independent Contractors
- California sued Uber Technologies and Lyft for allegedly misclassifying their drivers as independent contractors instead of employees, a move that intensifies a battle between the ride-hailing giants and their home state.
- The state, which seeks up to millions of dollars in civil penalties and to force the companies by court order to reclassify drivers and restore what it called unpaid wages, also said Uber and Lyft haven’t contributed state payroll taxes used to fund general health welfare programs.
- An Uber spokesman said the company would contest the action in court.
US ECONOMY & POLITICS
U.S. Nonfarm Private Sector Lost 20.2 Million Jobs in April
- The nonfarm private sector in the U.S. lost about 20.2 million jobs from March to mid-April as much of the country’s economy ground to a halt during the coronavirus pandemic.
- Large businesses cut nearly 9 million jobs, while small employers — those with fewer than 50 employees — reduced employment by 6 million jobs, underscoring the dire situation for those enterprises. Mid-sized businesses shed 5.3 million workers.
- The ADP report showed service-provider employment declined 16 million, while payrolls at goods producers decreased more than 4.2 million.
- The report also said the number of job losses for its March report was revised to 149,000, instead of 27,000.
Treasury to Increase Auction Sizes of Longer-Dated Securities
- The Treasury Department said Wednesday it plans to ramp up auction sizes of longer-dated securities and will issue a new 20-year bond at an initial offering of $20 billion, much larger than Wall Street analysts were expecting.
- The Treasury has issued an unprecedented $1.46 trillion since the end of March, the agency said Wednesday, and it would borrow $2.99 trillion by the end of June.
- Officials said Wednesday they plan to shift from financing the borrowing through short-term bills to longer-dated securities over the coming quarters “as a prudent means of managing its maturity profile and limiting potential future issuance volatility.”
U.S. Pushes EU to Back Inquiry into China’s Handling of Coronavirus
- The Trump administration is pressing the European Union to support an international inquiry into China’s handling of the new coronavirus, including the origins of the pandemic, as Brussels seeks to avoid taking sides in an increasingly bitter battle between Beijing and Washington over responsibility for the crisis.
- The U.S. is seeking an international probe into whether Beijing mishandled the contagion in its early stages, resulting in a global pandemic that has killed 250,000 and crippled the global economy.
- The EU proposal seeks to avoid pinning blame for the pandemic on any single country and would come only when the immediate crisis has passed.
Vaccine Expert Alleges Top U.S. Health Officials Resisted Coronavirus Warnings
- A government vaccine specialist who was moved out of his job last month alleges that the U.S. Department of Health and Human Services resisted his warnings about the dangers of the coronavirus and removed him from his position for raising alarms about an antimalarial drug President Trump had touted as a potential treatment.
- Dr. Bright alleges in his complaint that when he pushed on Jan. 18 for disaster-leadership group meetings to coordinate planning for an outbreak, Robert Kadlec, HHS’s assistant secretary for preparedness and response, replied by email saying he wasn’t “sure if that is a time sensitive urgency.”
- He also alleged that a consultant representing drugmakers had unusual sway inside HHS, and that those drugmakers were awarded contracts for the U.S. National Stockpile over the objections of internal advisory groups.
EUROPE & WORLD
Coronavirus Projected to Send Eurozone Into Steep Recession
- The eurozone economy will suffer a sharp recession this year and only partially recover next year, according to European Commission forecasts, with the global health emergency likely to send debt levels soaring and deepen longstanding divisions within the currency bloc that could threaten its stability.
- The eurozone economy is projected to contract 7.7% this year and grow 6.3% in 2021, the commission said, which would still leave it some 3% below the EU executive’s previous forecast level by the end of next year.
- Wednesday’s forecasts underline the divergent impact the pandemic could have across the region, with Greece, Spain and Italy projected to contract by close to 10% in 2020 and unemployment rising sharply in Spain in particular.
- Eurozone inflation is expected to remain contained, with the consumer-price index rising 0.2% this year and 1.1% next year. The unemployment rate is forecast to rise to 9.6% this year from 7.5% in 2019.
Virus-hit corporate profits seen sliding further in Europe
- Corporate profits expectations for the second and third quarters continued to deteriorate sharply in Europe, Refinitiv data showed on Wednesday, as fears about the scale of the recession triggered by the coronavirus pandemic continue to grow.
- Companies listed on the pan-European STOXX 600 are now expected to report a 44.9% decline in earnings in the second quarter, down from a 40.4% drop forecast the week before.
- For the third quarter, analyst expectations are now set for a 32.7% fall in earnings versus 29.1% a week ago.
BMW cuts outlook, sees coronavirus pain lasting all year
- BMW expects the coronavirus pandemic to hit demand and earnings throughout this year, prompting the German automaker to cut its profitability forecast for passenger cars following a drop in first-quarter deliveries.
- BMW’s passenger car deliveries fell 20.6% to 477,111 cars in a quarter blighted by the virus outbreak.
- BMW reported a 133% jump in first-quarter profit to 1.38 billion euros ($1.50 billion). But that was against a period last year when earnings were pushed down to 589 million euros by a one-off 1.4 billion euro provision.
- The company also said it had set aside a “low triple digit million” euros amount to cover potential defaults from customers buying cars on loans and leasing contracts.
VW sees multi-speed coronavirus rebound led by China
- Volkswagen sees demand rebounding in China, helped by new buyers switching from public transport and sales of premium vehicles, but warned business would not recover from the coronavirus crisis as quickly in other parts of the world.
- Sales of passenger cars in China were above year-earlier levels in the last week of April, Volkswagen executive Juergen Stackmann, who is responsible for passenger car sales and marketing at the VW brand, said on Wednesday.
- In April, sales in Germany were down 60% on the year, with the rest of Europe down 85% as some major markets like Italy and Spain ground to a halt, Stackmann said.
- Sales in North America were down 50%, and down 81% in South America, he added.
China Challenges Pompeo to Show Proof Coronavirus Came From Wuhan Lab
- China challenged U.S. Secretary of State Mike Pompeo to present evidence that would back his recent claim that the new coronavirus came from a Chinese laboratory.
- The comment by Chinese Foreign Ministry spokeswoman Hua Chunying was the first official Chinese government reaction to Mr. Pompeo’s statement.
- U.S. intelligence officials last week said they were continuing to examine the origins of the virus to determine whether the outbreak began through contact with infected animals or if it was the result of a lab accident.
- Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases, was quoted Monday as saying that the scientific evidence “is very, very strongly leaning toward this could not have been artificially or deliberately manipulated.”
TODAY in HISTORY
- Congress passed the Chinese Exclusion Act over President Chester A. Arthur’s veto. (1882)
- The German airship Hindenburg blew up and burst into flames at Lakehurst, N.J. (1937)
This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S&P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg, the Wall Street Journal.
Content posted by third parties on this site is screened in order to protect clients’ privacy and comply with regulatory requirements. Content containing sensitive personal information, inappropriate language, information about specific investments, misleading information, information about other companies or websites, or information related to litigation will be removed. Content posted by third-parties on this site remains the responsibility of the party posting the content and is not adopted or endorsed by Pence Wealth Management or LPL Financial. Any opinions or statements posted by third parties are their own and may not be representative of the experience of others and are not indicative of future performance or success. Third party content on this site does not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness.