US FINANCIAL MARKET
Stocks Fluctuate Amid Easing Lockdowns
- The S&P 500 swung between gains and losses as the risks of reopening the economy too soon overshadowed hopes of a jump-start to a battered global economy, following an easing of virus-led business shutdowns.
- Wuhan reported its first cluster of coronavirus infections since a lockdown on the city, stoking concerns of a wider resurgence.
- The latest economic data from China suggested the world’s second-largest economy won’t see a quick rebound.
- The producer-price index (PPI), a gauge of factory-gate prices, fell deeper into deflation in April as the pandemic crimped demand at home and abroad.
- Leading U.S. infectious disease expert Anthony Fauci on Tuesday warned Congress that while the federal government is working to help manufacture a vaccine against the new coronavirus, its development “might take some time” to come to market.
- According to a report before the hearing, Fauci warned that moving too quickly to ease restrictions on business and social life will put lives at risk from the pandemic and hamper the economic recovery.
- The Federal Reserve Bank of New York will begin buying corporate-bond exchange-traded funds (ETF) Tuesday. That’s a historic milestone for the Fed, which hasn’t bought ETFs previously, and expands the central bank’s efforts to support the economy and financial system during the crisis.
New Coronavirus Clusters Emerge as Some Countries Ease Lockdowns
- New clusters of coronavirus infections cropped up in some countries that have loosened lockdowns, as more governors across the U.S. detailed plans to reopen their states’ economies.
- In China, seven provinces have reported new locally transmitted cases over the past two weeks, said Mi Feng, spokesman for China’s National Health Commission. “Clustered cases continued to rise,” he said.
- South Korea, which was hit hard by the pandemic earlier this year, has delayed the reopening of schools by a week after a new cluster of infections emerged linked to nightclubs and bars in Seoul.
- The country on Tuesday reported 27 new cases, including 22 that were transmitted locally.
- India reported 3,604 new cases, down from a record single-day high of 4,213, bringing the total count to 70,756, according to local health authorities.
- Prime Minister Narendra Modi discussed with state chief ministers the possibility of extending the nation’s lockdown, which is due to end on May 17.
- The confirmed U.S. death toll stood at more than 80,000 Tuesday, more than a quarter of a global total that exceeded 286,000, according to data from Johns Hopkins University. The total number of confirmed coronavirus cases surpassed 4.2 million globally, with more than 1.34 million of those in the U.S., according to Johns Hopkins.
Shut casinos hit Caesars as COVID-19 puts gambling industry in survival mode
- Caesars Entertainment missed quarterly revenue estimates on Monday as it shuttered its casinos amid nationwide lockdowns to contain the spread of the COVID-19 pandemic.
- Net revenue fell 13.6% to $1.83 billion and missed analysts’ average estimate of $2.04 billion.
- In the first quarter, casino revenue fell 11.5% to $958 million.
- Net income was $189 million in quarter compared with a loss of $217 million a year earlier.
AutoNation chief sees recovery after first-quarter net loss
- AutoNation said a recovery in consumer demand for cars and trucks has begun as states emerge from coronavirus quarantine orders, and shares of the No. 1 U.S. auto retailing chain rose after the company outperformed expectations.
- Revenue fell 6% to $4.7 billion. Analysts on average had expected quarterly revenue $4.57 billion.
- AutoNation said new vehicle sales were down 10.7% at 56,739 vehicles during the first quarter, while used vehicle volumes declined 8.2% to 56,149 units.
- The company posted a net loss of $232.3 million, compared to a profit of $92 million in the same period a year ago.
- Same-store sales for new and used vehicles were down 20% during the last ten days of April, compared to a 50% drop during the first ten days of the month.
Livent posts first-quarter loss on weak prices, lower volume
- Lithium producer Livent reported a quarterly loss on Monday, hit by weak prices of the metal used in rechargeable batteries and lower volume amid the COVID-19 outbreak.
- Livent said revenue fell 30% to $68.5 million compared with a year earlier.
- The company reported a net loss of $1.9 million for the first quarter, compared with a profit of $16.9 million a year earlier.
Elon Musk Says Tesla Is Restarting California Production, Defying Local Order
- Elon Musk said Tesla is resuming production of cars at its lone U.S. assembly factory in defiance of local authorities in what is quickly becoming one of the highest-profile showdowns between business and government about reopening after weeks of sheltering-in-place.
- Tesla stopped production on March 23 at the Fremont, Calif., factory, which builds the hot-selling Model 3 compact car and employs more than 10,000 people, after initially balking at Alameda County’s order for nonessential businesses to close.
- After learning Tesla reopened, the county health department said Monday that it had notified the company that it can only maintain “minimum basic operations” until it receives approval of a plan to reopen.
- Tesla is expected to submit a site-specific plan Monday, the county said.
Boeing CEO sees passenger levels under 25% in September, pain for airlines: NBC interview
- Boeing Chief Executive Dave Calhoun does not expect passenger traffic to reach even a quarter of its levels in September, creating the need for airlines to make “adjustments” as they weather the impact of the coronavirus pandemic.
- In an interview with NBC, Calhoun said: “Traffic levels will not be back to 100%. They won’t even be back to 25%. Maybe by the end of the year we approach 50%. So there will definitely be adjustments that have to be made on the part of the airlines.”
- Asked whether there might be a major U.S. carrier that has to go out of business, Calhoun said: “Yes, most likely. You know, something will happen when September comes around.”
Ryanair cools on Airbus, moves back towards all-Boeing fleet
- Ryanair plans to move back towards an all-Boeing fleet by cancelling leases for Airbus A320s for its Lauda subsidiary and likely replacing 30 Airbus jets at the Austrian airline with Boeing 737s, Chief Executive Michael O’Leary told Reuters.
- Ryanair’s purchase in 2018 of Airbus operator Lauda was pitched as a way to diversify the fleet of the budget airline group, which had until then exclusively flown Boeing jets and currently has over 450 737s.
- Assuming talks with Boeing about compensation for delays in the delivery of 210 737 MAX jets – and on a possible new aircraft order – go to plan, then Ryanair will probably replace Lauda’s 30 Airbus jets with Boeing, he added.
JPMorgan Extends Banking Services to Bitcoin Exchanges
- JPMorgan Chase has taken on two well-known bitcoin exchanges, Coinbase Inc. and Gemini Trust Co., as banking customers, according to people familiar with the matter, the first time the bank has accepted clients from the cryptocurrency industry.
- The move is the latest in a string of positive developments for bitcoin and another sign that Wall Street is becoming more comfortable with the business of cryptocurrencies.
- The accounts were approved in April, and transactions are just starting to be processed, the people said.
US ECONOMY & POLITICS
Consumer Prices Post Biggest Drop Since Last Recession During April Lockdowns
- U.S. consumer prices in April posted their largest monthly decline since the last recession after energy prices collapsed and efforts to contain the new coronavirus disrupted demand for an array of goods and services.
- The Labor Department said the consumer-price index (CPI) fell by 0.8% last month, the second month in a row prices have eased since the pandemic reached the U.S. and the biggest drop since 2008.
- Overall prices were up 0.3% from a year earlier, the smallest 12-month increase since October 2015.
- Excluding the volatile food and energy categories, so-called core prices decreased 0.4%, the largest monthly drop in records dating to 1957.
- Core prices were 1.4% higher from a year ago, the smallest gain since April 2011.
- The Labor Department’s index for gasoline prices tumbled 20.6% in April from the prior month.
Mnuchin Supports Changes to Small-Business Aid Program
- Treasury Secretary Steven Mnuchin said that the government will look to make fixes to help restaurants and others participate in the $660 billion small-business aid program, a move that could help ease some of the criticism surrounding the program.
- The Paycheck Protection Program’s forgiveness requirements mandate borrowers spend 75% of the loan on worker salaries, and for the forgivable amount to be spent over an eight-week period.
- That has drawn objections from many business owners who say they need more money for rent and other overhead costs and from industries that remain mostly closed, as mandated by state regulations.
- Mr. Mnuchin signaled Monday that he would be open to some program tweaks.
China announces new tariff waivers for some U.S. imports
- China announced on Tuesday a new list of 79 U.S. products eligible for waivers from retaliatory tariffs imposed at the height of the bilateral trade war, amid continued pressure on Beijing to boost imports from the United States.
- China’s finance ministry said in a statement the new waivers will take effect on May 19 and expire on May 18, 2021.
- The latest list waives tariffs on products including ores of rare earth metals, gold ores, silver ores and concentrates.
EUROPE & WORLD
China Economic Data Indicate V-Shaped Recovery Is Unlikely
- China’s factory-gate prices contracted in April, falling by the steepest margin in four years, as manufacturers struggled with deflationary pressures from the coronavirus pandemic, which has crimped demand both at home and abroad.
- The producer-price index dropped by 3.1% from a year earlier in April, compared with a 1.5% fall in March, the National Bureau of Statistics said Tuesday.
- Economists polled by The Wall Street Journal had expected the industrial-price gauge to drop by 2.5% year-over-year.
- Separately on Tuesday, China reported a larger-than-expected easing in consumer inflation for April as pork prices moderated and demand continued to remain lackluster, despite the government’s supporting measures.
- The consumer-price index rose 3.3% from a year earlier, retreating from a 4.3% on-year increase in March and lower than the 3.6% increase expected by economists.
- Food prices rose 14.8% on year in April, easing from an 18.3% increase in March.
- Pork-price inflation, which lifted China’s headline consumer-inflation reading over the past year, eased to 96.9% in April, from a 116.4% pace in March, because of an increase in pork supply.
Aramco Profit Is Hit Hard by Collapse in Oil Prices
- Saudi Aramco said its first-quarter profit fell and it would cut spending this year, underscoring the twin impact of an oil-price rout and the coronavirus pandemic on the kingdom’s worsening finances.
- Its revenue fell 16% to $60 billion as Brent crude prices fell 65.6% in the first quarter.
- Aramco’s cash flows from operating activities, stood at $22.4 billion in the first quarter, compared to $24.5 billion in the same period of 2019, the company said.
- Aramco’s net profit fell to 62.48 billion riyals ($16.64 billion) after zakat and tax for the quarter to March 31 from 83.29 billion riyals a year earlier, below estimates by analysts who expected a profit of $17.8 billion.
- Aramco said it continues to expect capital spending for 2020 to be between $25 billion and $30 billion.
- Capital expenditures for 2021 and beyond remain under review.
Toyota sees 80% profit drop as virus wipes $14 billion off car sales
- Toyota Motor said on Tuesday it expects profit to drop by 80% to its lowest in nine years, as Japan’s biggest automaker grapples with the impact of the novel coronavirus which has sapped global demand for vehicles.
- For the full year that ended in March, Toyota’s net profit rose slightly to $19.3 billion.
- Revenue was nearly flat at $278.5 billion.
- Net profit declined 86% to $587 million for the January-March quarter.
- Toyota expects to take a whopping 1.5 trillion yen ($13.95 billion) hit from a fall in global vehicle sales this year due largely to the virus, yet it still expects to eke out an operating profit of 500 billion yen in the year to March.
- Operating profit is expected to fall nearly 80% to $4.7 billion.
- The automaker forecast global sales of 8.9 million vehicles – a nine-year low – versus 10.46 million in the year just ended. It expects sales to recover to 2019 levels next year.
Honda profits shrink to four-year low, coronavirus clouds outlook
- Honda Motor on Tuesday posted its lowest operating profit in four years and refrained from releasing an earnings outlook for the current year because of uncertainty about the longer-term impact of the coronavirus on global car demand.
- In the quarter, Honda posted an operating loss of 5.2 billion yen, its first quarterly loss in four years, pressured by a 28% drop in vehicle sales.
- Honda’s operating profit for the year ended in March fell 13% to 634 billion yen ($5.9 billion), short of a consensus estimate of 669 billion yen profit.
Tencent Music misses quarterly revenue estimates, signals better second quarter
- China’s Tencent Music narrowly missed market estimates for quarterly revenue on Monday as the COVID-19 crisis hurt the company’s social entertainment services business, sending its shares down 4.5% in extended trade overnight.
- Tencent Music said revenue in the period rose about 10% to 6.31 billion yuan ($889 million).
- Analysts expected 6.33 billion yuan.
- Paying subscribers of Tencent Music’s online music service jumped 50% to 42.7 million in the March quarter, and monthly average revenue per paying user jumped 13%.
- Monthly average revenue per subscriber paying for the company’s social entertainment services fell 13% in the first quarter ended March 31. However, the number of paying users in the segment surged 18.5% to 12.8 million.
- The company posted a profit of 0.66 yuan excluding one-time items, ahead of the 0.63 yuan forecast by analysts.
Logitech sales surge as working from home boosts demand
- Logitech International reported a 13.6% rise in quarterly sales on Tuesday as more people used its computer products while working from home due to the coronavirus crisis.
- The rise in remote working – teachers giving lessons via video link and doctors giving virtual consultations – contributed to an increase in sales in the company’s fiscal fourth quarter to $709.2 million from $624.3 million a year earlier.
- Logitech’s operating income on a non-GAAP accounting basis rose 23.3% to $79 million.
- Logitech also retained the forecast it gave in March for mid-single-digit percentage sales growth in constant currencies for the year to the end of March 2021 and a rise in operating profit to $380-400 million.
Brussels Airlines slashes jobs, fleet as COVID-19 bites
- Brussels Airlines, part of Germany’s Lufthansa, said on Tuesday it would reduce its fleet by 30% and its workforce by a quarter to guarantee its survival during and after the COVID-19 pandemic.
- Company chief executive Dieter Vranckx said the global industry had seen a 60% decline in bookings and record cancellations and that the coronavirus crisis would strip $240 billion of revenue from airlines.
- Next year would see a slow recovery of business, but demand was likely to be 25-30% down from 2019 levels, meaning Brussels Airlines was oversized, Vranckx said.
TODAY in HISTORY
- Axis forces in North Africa surrendered. (1943)
- Former president Jimmy Carter became the first U.S. president (in or out of office) to visit Fidel Castro’s Cuba. (2002)
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