US FINANCIAL MARKET
Stocks Pare Drop as Bank Rally Tempers Bleak Data
- The S&P 500 rebounded from Thursday’s lows after briefly crossing a key technical level, with Wells Fargo, JPMorgan and Citigroup climbing at least 2.4%. Energy shares also jumped, joining a rally in oil.
- Earlier losses were driven by weak U.S. jobless claims and after President Donald Trump said he doesn’t want to talk to his Chinese counterpart Xi Jinping right now.
- Trump said he was very disappointed with China over its failure to contain the novel coronavirus, saying the worldwide pandemic cast a pall over his U.S.-China trade deal.
- Earlier, the Global Times, a Communist Party-run newspaper, said Beijing was exploring punitive countermeasures to U.S. lawsuits seeking damages from China for the pandemic.
- Initial jobless claims for the week ended May 9 were 2.98 million, with total applications since mid-March surpassing 36 million.
- The focus now turns to retail sales data on Friday that will reflect the impact of stay-at-home orders on the U.S. consumer in April.
China’s Wuhan Revs Up Testing Amid Second-Wave Coronavirus Fears
- Local officials in the Chinese city of Wuhan, the original center of the Covid-19 pandemic, are scrambling to meet government demands for a massive round of coronavirus testing following the discovery of a new cluster of infections.
- The orders came after six residents of a residential compound in western Wuhan were confirmed infected with the coronavirus over the weekend, ending a 35-day streak without any new cases.
- The Wuhan government is requiring new testing citywide, state-run media reported, citing a leaked internal document issued by the epidemiology team under the city’s coronavirus response command center.
- Small clusters of new coronavirus infections have popped up elsewhere in China. The most serious was in the northeastern city of Jilin, where a woman hired to wash police uniforms spread the virus to 21 other people during a one-week period, sending part of the city back into lockdown.
Cisco Projects Annual Sales Decline as Coronavirus Heightens Uncertainty
- Network-equipment giant Cisco Systems posted lower quarterly sales and projected its first annual sales decline in three years, citing economic uncertainty amid the coronavirus pandemic that has taken a toll on its core business of switches and routers.
- Cisco’s third-quarter revenue fell 8% to $12 billion, narrowly beating analysts’ average estimate of $11.7 billion.
- Revenue from the applications business, which includes videoconferencing, fell 5% to $1.36 billion.
- Meanwhile, revenue from its small but fast-growing security segment rose 6% to $776 million.
- Overall, third-quarter profit fell 9% to $2.77 billion.
- The network gear maker estimated fourth-quarter revenue dropping 8.5% to 11.5% from a year earlier to between $11.47 billion and $11.86 billion. Analysts had expected $11.82 billion.
Delta to have 7,000 more pilots than needed in the fall: memo
- Delta Air Lines, with more than 14,000 pilots on its roster, expects to have 7,000 more than it needs in the fall as the coronavirus pandemic weighs on its operations, according to a memo to flight operations employees seen by Reuters.
- “I recognize that is an alarming number so it’s important to know that our intent is to align staffing for what we need over the long term,” John Laughter, S.V.P. of flight operations, said in the May 14 memo, first reported by Reuters.
- Laughter said that by the third quarter of 2021, the airline would have between 2,500 and 3,500 pilots more than needed to fly its schedule, even accounting for pilots who will reach mandatory retirement age between now and next summer.
Delta to Retire Boeing 777 Fleet to Cut Costs Amid Coronavirus
- Delta Air Lines said it would remove its 18 Boeing 777 aircraft from its fleet by the end of the year as it tries to cut costs amid the decimation of travel by the Covid-19 pandemic.
- The company said it expects to book impairment charges related to aircraft retirement of $1.4 billion to $1.7 billion before tax for the second quarter as a result.
- Delta is also accelerating its retirement plan for the MD-88 and MD-90s, which will exit the fleet in June, and has parked more than 650 jets, Chief Executive Ed Bastian said in a letter to employees Thursday.
- The carrier will rely on its more fuel-efficient Airbus A330 and A350-900 aircraft for long-haul flying when international demand returns, Mr. Bastian said.
Fiat Chrysler, Peugeot Scrap Billion-Dollar Dividends as Merger Faces Pressure
- Fiat Chrysler Automobiles and Peugeot maker PSA canceled dividend payments they promised their shareholders that were part of a broader agreement to merge, but said the deal remains on track.
- Both companies had previously warned their annual dividends for 2019 were under review amid an industrywide scramble to raise and save cash to weather the coronavirus pandemic.
- The planned dividend, €1.1 billion ($1.2 billion) for each company, was an important component in the merger deal.
- In a release issued late Wednesday night, Fiat and Peugeot said they remained on track to complete the planned multibillion-dollar tie-up before the end of March 2021.
FedEx, Strained by Coronavirus, Caps How Much Retailers Can Ship from Stores
- FedEx has limited the number of items that Kohl’s and about two dozen other retailers can ship from certain locations, as the delivery company tries to prevent its network from being overwhelmed during the coronavirus pandemic.
- A FedEx spokeswoman said the limits are similar to what the company does during busy shipping seasons like Christmas.
- FedEx is asking some of its customers to bring their packages directly to the FedEx Ground facility closest to the customer, so that they can bypass the sortation process.
Intelsat Files for Bankruptcy Ahead of Spectrum Auction
- Satellite operator Intelsat filed for bankruptcy protection after falling short of the cash it needed to make airwaves available to be sold to wireless operators in a coming government auction.
- Weighed down by roughly $14.5 billion in debt, Intelsat is seeking to use the chapter 11 proceedings to assist it in taking advantage of a planned auction of a swath of spectrum currently being used by satellite operators that the Federal Communications Commission wants to be repurposed for 5G networks.
- To participate in the auction, Intelsat must spend more than $1 billion to cover the cost of moving its existing customers off the airwaves, people familiar with the matter said.
Uber Discusses GrubHub Takeover Valuing Food Deliverer at Roughly $6 Billion
- Uber Technologies and GrubHub are discussing a takeover valuing GrubHub at roughly $6 billion, with big cost savings that would help pay for the deal, according to people familiar with the matter.
- The companies are considering a deal that would value GrubHub stock at around 1.9 Uber shares, or just over $60 per GrubHub share based on trading Wednesday afternoon, the people said.
- GrubHub had been seeking 2.15 Uber shares in the negotiations, but Uber balked at paying that much.
Uber offer for GrubHub fans worries over delivery fees charged to restaurants
- The possibility that Uber Technologies, which runs Uber Eats, could acquire GrubHub is reigniting some restaurants’ worries over the commissions charged to eateries by the third-party delivery companies.
- Some small eateries have been vocal about their distaste for the services, which sometimes charge mom and pop restaurants – already operating on thin margins – as much as 15% to 30% commissions on each order while giving discounts breaks to marquee chains like McDonald’s.
Tesla, California county reach deal to reopen U.S. plant next week
- Tesla and officials in California have resolved their acrimonious clash over safety procedures at the automaker’s sole U.S. assembly plant with a deal that allows production to resume as early as Monday, county officials said.
- In a tweet, Alameda County said that following talks with Tesla it agreed that the electric carmaker can take steps “in preparation for possible reopening as soon as next week.”
- California Attorney General Xavier Becerra told CNBC that “conversation is going on between Tesla and the county. But at the state level, we’re ready to enforce if we find that anyone is violating the state orders issued by the governor.”
US ECONOMY & POLITICS
Millions more Americans file for jobless benefits as coronavirus layoffs widen
- 2.981 million workers applied for unemployment benefits last week, bringing the total number of applications in two months of coronavirus-related disruptions to 36.5 million.
- While that was down from 3.176 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.
- Continuing claims rose by 456,000 to a record 22.83 million, after the previous week’s total was revised down to 22.38 million.
U.S. import prices post largest drop in over five years
- U.S. import prices fell by the most in more than five years in April as the coronavirus crisis depressed demand for petroleum products, which could strengthen some economists’ predictions of a brief period of deflation.
- The Labor Department said on Thursday import prices dropped 2.6% last month, the largest decline since January 2015, after a revised 2.4% decline in March.
- In the 12 months through April, import prices tumbled 6.8%.
- That was the largest decrease since December 2015 and followed a 4.2% decline in March.
JPMorgan’s U.S. credit card holders spent 40% less due to coronavirus
- Credit card spending among some of JP Morgan Chase & Co’s U.S. customers fell 40% during March and early April compared to last year, as Americans stayed home to protect against the novel coronavirus, according to a new report on Thursday.
- Spending on non-essential goods and services, like retail, restaurants, and entertainment, fell sharply across income brackets accounting for nearly all of the drop in spending during that period, the JP Morgan Chase Institute said.
- The overall fall in spending was 8 times larger than the average drop in household credit card spending in the first month of unemployment during regular times, according to the report.
- Credit card users who report household incomes of less than $39,000 reduced spending by 38%, while wealthier cardholders, with incomes of more than $92,000, reduced spending by 46%.
- The report showed essential spending, like on groceries and healthcare, initially spiked by 20% before falling back.
- Spending on non-essential things fell by 50% and dropped 70% on restaurants.
Trump rips into China over coronavirus, ‘very disappointed’
- U.S. President Donald Trump on Thursday said he was very disappointed in China over its failure to contain the novel coronavirus, saying the worldwide pandemic cast a pall over his U.S.-China trade deal.
- A Chinese state-run newspaper has reported that some government advisers in Beijing were urging fresh talks and possibly invalidating the agreement.
- Trump said again he was not interested in renegotiating.
Trump threatens new taxes on companies that make goods outside United States
- President Donald Trump threatened on Thursday to impose new taxes on American companies that produce goods outside the United States, another move his administration could make to push supply chains away from China and raise new trade barriers.
- Trump said in a Fox Business Network interview that taxation was an “incentive” for companies to return manufacturing to the United States.
- He did not specify whether these would be new across-the-board tariffs or another form of taxes, which would require an act of Congress.
- U.S. officials say that Trump’s administration is “turbocharging” efforts to push companies to move production of away from China, partly as a way to punish Beijing for its early handling of the coronavirus outbreak.
Trump May Push for Chinese Companies to Follow U.S. Accounting Rules for Stock Listings
- President Trump said he was considering whether to require Chinese companies to follow U.S. accounting rules to be listed on U.S. stock exchanges, though he expressed concern that such a move could prompt companies to take their listings elsewhere.
- In an interview on Fox Business Network’s “Mornings with Maria,” Mr. Trump said in response to a question on the subject that he was looking “very strongly” at imposing such a rule on Chinese companies, which aren’t currently required to follow the same accounting rules as U.S. companies listed on the New York Stock Exchange or Nasdaq.
- In 2019, a bipartisan group of lawmakers introduced legislation aiming to force Chinese companies listed on U.S. stock exchanges to submit to greater U.S. regulatory oversight.
- Under the bill, firms that weren’t in compliance with U.S. regulators for three years would be delisted.
Democrats concede loss of U.S. congressional seat in California special election
- Democrats lost a seat in the U.S. Congress as Christy Smith, a California state legislator, conceded on Wednesday in a special election in suburban Los Angeles to Mike Garcia, a former Navy fighter pilot endorsed by President Donald Trump.
- Garcia jumped to a significant early lead on Tuesday night over Smith in California’s 25th district, the California secretary of state’s office said. It put Garcia’s share of the vote at 56 percent to 44 percent for Smith.
- The seat in the northern Los Angeles suburbs became vacant after Democrat Katie Hill last year resigned following a sex scandal.
EUROPE & WORLD
Merck KGaA says profit could slip as fertility treatments shunned
- Merck said a slight decline in operating earnings was on the cards this year as the coronavirus pandemic weighs on demand for chemicals in TV screens and is putting couples off seeking the German group’s fertility treatments.
- First-quarter adjusted EBITDA gained 27% to 1.2 billion euros, surpassing an average analyst estimate of 1.1 billion euros.
- Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for one-off items, would likely be between 4.35 billion euros ($4.70 billion) and 4.85 billion euros, compared with 4.39 billion last year, it said on Thursday.
- Merck had previously banked on the pandemic peaking in the first quarter and subsiding during the second, raising the prospect of strong EBITDA growth in 2020.
Mazda profit hits eight-year low, inventory build-up hurts cash flow
- Mazda Motor said annual profit slid to an eight-year low and that the coronavirus pandemic had resulted in a large build-up in its U.S. car inventories, hobbling efforts to improve its cash flow.
- Mazda had been betting on its new CX-30 compact SUV crossover to freshen up a tired product range in North America and other key markets in the January-March quarter. Instead its global vehicles sales tumbled 20% as many countries put in place lockdown measures.
- Its global sales for the past business year dropped 9% to 1.42 million vehicles.
- Annual operating profit almost halved to 43.6 billion yen ($408 million) for the year ended March, which includes a 10 billion yen virus-related hit. That was, however, far better than a consensus estimate of 25.7 billion yen in profit.
- Mazda had a negative free cash flow of 92.7 billion yen ($867.8 million) at the end of March, its fourth straight quarter of negative cash flow, albeit an improvement from a negative 139.3 billion yen at end-December.
Norwegian Cruise Line swings to $1.88 billion loss on charges
- Norwegian Cruise Line swung to a quarterly loss on a $1.6 billion impairment charge as the COVID-19 pandemic brought the global cruise industry to a virtual standstill.
- Total revenue fell about 11% to $1.25 billion in the first quarter.
- The company said on Thursday it posted a net loss of $1.88 billion, compared with a profit of $118.2 million a year earlier.
- Norwegian Cruise Line said it was well positioned to withstand over 18 months of voyage suspensions, and saw demand for cruise vacations beginning in the fourth quarter of the year and accelerating through 2021.
TODAY in HISTORY
- The Lewis and Clark expedition set out from St. Louis. (1804)
- Frank Sinatra died at the age of 82. (1998)
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