US FINANCIAL MARKET
Stocks Accelerate Gains Despite Grim Jobs Report
- U.S. stocks rose Friday, boosted by an April jobs report that wasn’t quite as bad as feared and signs of an easing in trade tensions between Washington and Beijing.
- Whereas the S&P 500 remains about 10% below where it started the year, the tech-heavy Nasdaq Composite on Thursday closed in positive territory for 2020 for the first time in two months.
- The monthly report from the U.S. Labor Department showed the coronavirus pandemic inflicted the biggest one-month blow to the jobs market on record. The unemployment rate shot up to 14.7% in April from 4.4% in March.
- Employers shed 20.5 million nonfarm jobs, equivalent to erasing every position created in the past decade.
- On Thursday, financial markets began pricing in a negative U.S. interest rate environment for the first time ever, expecting the Federal Reserve to pump even more cash into the system to rescue the economy from a deep global recession.
- Earnings season is in its final stretch. With results in from more than 85% of companies in the S&P 500, earnings are predicted to have fallen 14%, according to FactSet.
Global Coronavirus Deaths Top 270,000 as Some Restrictions Loosen
- Coronavirus-related restrictions are set to loosen further in parts of the U.S. after unprecedented job losses, and other countries are ramping up reopening plans, as the global death toll from the pandemic topped 270,000.
- The total number of reported coronavirus cases world-wide rose to 3.87 million Friday, with about a third of those in the U.S., according to data compiled by Johns Hopkins University.
- The U.S. death toll, the highest in the world, stood at more than 75,500, according to Johns Hopkins.
- Twenty-one states have let some nonessential businesses reopen, although typically with restrictions, such as limiting the number of customers or requiring masks.
- California, one of the first states to implement statewide lockdown orders, was set to take its first step to reopen a portion of its economy.
- On Friday, certain retailers such as clothing stores, bookstores, florists and sporting goods stores can offer curbside pickup. Dine-in restaurants, gyms, offices and other nonessential stores will remain closed.
Uber Sees Path to Profitability After Blow from Coronavirus
- Uber Technologies’ ride service bookings slowly recovered in recent weeks as the company expects a coronavirus-related slowdown will delay the goal of becoming profitable by a matter of quarters, not years.
- Uber on Thursday reported a net loss of $2.94 billion on sales of $3.54 billion in the three months ended March 31, compared with a net loss of $1.09 billion and sales of $3.1 billion a year earlier.
- However, Uber inched closer in the first quarter to its goal of generating an adjusted profit.
- The loss, excluding taxes, interest and other expenses, declined 30% from a year ago, to $612 million.
- Analysts had expected a $1.38 billion net loss on sales of $3.53 billion for the quarter just ended.
- Another bright spot was food delivery, which helped offset the drop in rides. Homebound customers drove a 52% increase in food delivery gross bookings to $4.68 billion in the first quarter.
- Gross bookings from rides, a measure of the total value of fares that’s closely watched by investors, dropped 5% to $10.9 billion. A year earlier, growth was more than 20%.
Booking Holdings Reports Steep Decline in Room Nights Booked
- Booking Holdings reported a decline in room nights booked in the first quarter that was greater than analysts’ estimates, reflecting the extent of economic devastation the coronavirus has wreaked on the travel industry.
- The company reported revenue fell 19% to $2.29 billion in the period, beating the $2.15 billion projected by analysts.
- The online travel operator said the number of room nights booked dropped 43% from a year earlier, while Wall Street had estimated a drop of 29%, according to data compiled by Bloomberg.
- Gross travel bookings, which reflect all travel services booked by customers, came in at $12.4 billion, a 51% decrease.
- Adjusted net income fell 69% to $156 million, in the quarter, from $508 million, a year earlier.
Dropbox Posts First Net Income on Rising Cloud-Software Demand
- Dropbox reported its first-ever net income, in a quarter when demand for cloud software was bolstered by a shift to working from home.
- Sales rose 18% to $455 million. Analysts on average had projected a net loss of 3 cents and revenue of $452.2 million.
- Dropbox said its number of paying customers climbed to 14.6 million in the period, up from 13.2 million a year ago.
- Dropbox achieved profitability as it reported a net income of $39.3 million, compared to a loss of $7.7 million a year earlier.
Roku sees ad sales growth slowing as businesses conserve cash
- Roku said it expects 2020 ad sales to grow at a slower pace and recorded higher cancellations in the first quarter as advertisers save cash amid the COVID-19 pandemic, sending its shares down 10% in extended trading on Thursday.
- Total net revenue rose 55% to $320.8 million, beating analysts’ average estimate of $306.7 million.
- Platform revenue, which includes ad sales, grew 73% to $232.6 million in the quarter.
- But gross margin fell to 56.2%, the lowest at least since the third quarter of 2016, from 62.5% in the previous quarter.
- Among other closely watched metrics, Roku posted 39.8 million active accounts in the quarter and reported 13.2 billion streaming hours.
- Bloomberg Consensus data had pointed to about 39.5 million active accounts and 13.13 billion streaming hours.
- Net loss widened to $54.6 million in the quarter, from $9.7 million a year earlier.
Air Lease cuts jet capex, offers relief to crisis-hit airlines
- Air Lease said it would reduce capital expenditure on new jets in a move likely to restrict its near-term growth but support liquidity, as it faces demands from airlines for rental relief seen as crucial to their survival.
- ALC earlier posted 4.9% lower first-quarter diluted earnings per share of $1.17 as revenues rose 9.7% to $511 million.
- ALC, which had already cut 2020 capital spending plans from $6 billion to $4 billion as a result of the MAX grounding, said it had lowered them again to $2.5 billion for the rest of the year due to the epidemic and supply-chain problems.
- ALC has received requests for help from nearly all airline customers and has so far agreed with almost half of them to defer a total of some $125 million in rentals.
Live Nation’s Revenue Falls, Losses Widen as Coronavirus Hits Concerts
- Live Nation Entertainment reported a drop in revenue for the most recent quarter as social-distancing protocols and lockdown orders began squeezing the world’s largest concert promoter and ticketing provider.
- Revenue fell 21% to $1.37 billion.
- For the quarter that ended March 31, revenue in the concerts segment slipped 25%, to $993.4 million, while ticketing fell 16% to $284.3 million. Sponsorship and advertising rose 20% to $90.3 million.
- In all for the period, Live Nation widened its loss to $184.8 million, from $52.4 million in the year-earlier quarter.
- On Thursday the company said 80% of affected shows have been rescheduled, rather than canceled, and that 90% of fans are holding onto tickets for rescheduled dates.
Google Parent Alphabet Drops Controversial ‘Smart City’ Project
- Google’s parent abandoned plans to develop a “smart city” in a Toronto neighborhood, a controversial project that once embodied the tech giant’s futuristic ambitions.
- Sidewalk Labs cited economic uncertainty and pressure on the local real-estate market in the wake of the coronavirus pandemic.
- Sidewalk was selected by Canadian government entity Waterfront Toronto as the development partner in 2017, in a bid to build a neighborhood on a 12-acre parcel of land along Toronto’s waterfront.
- The plan envisioned an energy-efficient friendly neighborhood where sensors embedded in traffic lights and garbage bins tracked residents and responded to their needs.
Shanghai Disneyland tickets sellout for opening day, signaling pent up demand for theme parks
- It seems Chinese consumers aren’t afraid to return to theme parks.
- Within minutes of opening up tickets for the reopening of Shanghai Disneyland on May 11, Disney sold out.
- Usually, that park sees around 80,000 visitors per day, but the government has mandated Disney operate at 30% capacity, or about 24,000 visitors.
- CEO Bob Chapek said during an earnings call Tuesday that the park would initially operate well below that capacity and then ramp up to reach that 30% cap over the course of several weeks.
J.C. Penney to file for bankruptcy as soon as next week, sources say
- J.C. Penney is preparing to file for bankruptcy protection as soon as next week with plans to permanently close about a quarter of its roughly 850 stores, becoming the latest major U.S. retailer to succumb to fallout from the coronavirus outbreak.
- A bankruptcy filing would cap a long decline for the iconic 118-year-old department store chain, which has struggled with a nearly $4 billion debt load and competition from e-commerce firms even before the pandemic’s onset.
- The Plano, Texas-based company, which employs nearly 85,000 people, is in discussions with creditors for a so-called debtor-in-possession loan to bolster its finances while it navigates bankruptcy proceedings, the sources said.
- The loan could total between $400 million and $500 million, some of the sources said.
US ECONOMY & POLITICS
April Unemployment Rate Rose to a Record 14.7%
- The U.S. economy lost a staggering 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression and the starkest sign yet of how the novel coronavirus pandemic is battering the world’s biggest economy.
- Data for March was revised to show 870,000 jobs lost instead of 701,000 as previously reported.
- The Labor Department’s closely watched monthly employment report on Friday also showed the unemployment rate surging to 14.7% last month, shattering the post-World War Two record of 10.8% touched in November 1982.
- Though the unemployment rate jumped from 4.4%, its ascent was blunted by the drop of 6.432 million from the labor force.
- With the mandated business shutdowns hitting workers hard in the lower-wage leisure and hospitality industry, average hourly earnings shot up 4.7% in April from 0.5% in the prior month. That boosted the annual increase in wages to 7.9% April.
- The labor force participation rate dropped 2.5 percentage points to 60.2% in April, the lowest rate since January 1973.
- A broader measure of unemployment (U6), which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, surged to 22.8% last month from 8.7% in March.
- The employment-to-population ratio, which is viewed as a better measure of an economy’s ability to create employment, tumbled 8.7 percentage points to 51.3%, the lowest rate since the series started in 1948.
- Job losses were almost across the board, with leisure and hospitality industry payrolls plunging 7.7 million.
- Restaurants and bars accounted for nearly three-quarters of the decline.
- Ironically, healthcare employment declined by 1.4 million jobs, with decreases at offices of dentists, doctors, other health practitioners and hospitals.
U.S. and China Negotiators Pledge to Implement Phase One Trade Deal
- The top trade negotiators for the U.S. and China talked on the phone Friday, pledging to create favorable conditions for the phase one trade deal, China’s state-run Xinhua News Agency reported, while President Trump again cast doubts on the deal’s future.
- Mr. Trump, speaking on Fox News on Friday morning, confirmed the call took place and said it “moves along” the deal—but he added: “I feel differently than I did.”
- “I’m having a very hard time with China. I made a great trade deal months before this whole thing happened,” Mr. Trump said, referring to the coronavirus pandemic, which has raised tensions between Beijing and Washington.
- Mr. Trump had earlier threatened to “terminate” the trade deal signed in January if China failed to buy promised goods and services from the U.S.
- “I have not decided yet, if you want to know the truth,” Mr. Trump said on Thursday when asked about the status of the deal.
Businesses Struggle to Lure Workers Away from Unemployment
- Businesses looking for a quick return to normal are running into a big hitch: Workers on unemployment benefits are reluctant to give them up. That’s complicating plans to reopen states and get the U.S. economy back on track.
- About half of all U.S. workers stand to earn more if laid off than they did at jobs before the pandemic, until that increase expires at the end of July.
- Some governors, like Iowa’s Kim Reynolds and Nebraska’s Pete Ricketts, have said that furloughed employees who are called back full time can no longer receive unemployment benefits.
- The South Dakota Department of Labor and Regulation issued a fraud warning last month after several employers informed the state that workers receiving benefits had refused to return to work after being called back.
Demand for Small Business Loans Cools
- Nearly two weeks after the federal government relaunched its small business aid program on April 27 with an additional $310 billion, more than 40% of the money remains available, according to figures released late Thursday by the Small Business Administration, even as small businesses continue to suffer from the fallout of the coronavirus pandemic.
- Bigger banks found that more than 10% of their applications were duplicates, according to loan brokers and industry officials.
- Some smaller lenders reported that half their applications were rejected because the applicant had gotten a loan elsewhere.
- But the likely biggest reason for the slowdown is that many business owners have concluded that the program simply doesn’t meet their needs, lenders and others say.
- The program is generally aimed at companies with 500 or fewer employees, and it requires them to spend 75% of their loans on payroll to have the loan forgiven.
- Many small retail businesses, such as restaurants and hair salons, say that is a problem because they remain largely shut down and are operating with skeletal staffs. For many, especially in urban centers, rent is their largest expense.
U.S. wholesale inventories revised up in March
- U.S. wholesale inventories fell in March, albeit less than initially estimated, and further decreases are likely as the novel coronavirus outbreak continues to weigh on imports of goods.
- The Commerce Department said on Friday that wholesale inventories dropped 0.8% in March instead of declining 1.0% as reported last month. Stocks at wholesalers fell 0.7% in February.
- Sales at wholesalers tumbled 5.2% in March after falling 0.7% in February.
- At March’s sales pace it would take wholesalers 1.37 months to clear shelves, up from 1.31 months in February.
EUROPE & WORLD
Japan’s Sharp halves full-year profit forecast as virus hits tech demand
- Japan’s Sharp, an Apple supplier, cut its full-year profit forecast by 48% on Friday, as demand for technology devices took a hit from the coronavirus outbreak.
- Sharp, which makes sensors, camera modules and screens for Apple’s iPhones, expected annual operating profit in the year ended in March to come in at 52 billion yen ($489 million), down from its previous forecast of 100 billion yen.
- Net profit is seen at 20 billion yen, down 75% from its earlier forecast of 80 billion yen.
TODAY in HISTORY
- Mount Pelee on Martinique erupted, destroying the town of St. Pierre, and killing 40,000 people. (1902)
- V-E Day marks the European victory of the Allies in World War II. (1945)
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