US FINANCIAL MARKET

Wall Street climbs as investors hold out for recovery; Nasdaq at 3-month high

  • Wall Street’s main indexes surged and the Nasdaq hit a three-month high on Wednesday, as investors clung to hopes of a recovery from a coronavirus-fueled slump amid signs of more stimulus for ailing sectors.
  • The tech-heavy index, now about 5% below its all-time high hit in February, boosted by Facebook and Amazon.com, which were trading at record levels, as well as Apple.
  • The S&P 500 tumbled 1% in the final hour of Tuesday’s session after a report raised doubts about positive results from Moderna’s early-stage trial for a COVID-19 vaccine.
  • Home improvement chain Lowe’s rose 1.8% after posting higher quarterly same-store sales.
  • Target slipped 0.7% after the big box retailer reported a 64% plunge in quarterly profit, pummeled by costs to tackle the coronavirus outbreak.

Monkeys infected with COVID-19 develop immunity in studies, a positive sign for vaccines

  • Two studies in monkeys published on Wednesday offer some of the first scientific evidence that surviving COVID-19 may result in immunity from reinfection, a positive sign that vaccines under development may succeed, U.S. researchers said on Wednesday.
  • Although scientists have assumed that antibodies produced in response to the new coronavirus virus are protective, there has been scant scientifically rigorous evidence to back that up.
  • In one of the new studies, researchers infected nine monkeys with COVID-19, the illness caused by the novel coronavirus. After they recovered, the team exposed them to the virus again and the animals did not get sick.
  • These studies, which have been peer reviewed, do not prove that humans develop immunity or how long it might last, but they are reassuring.

Target’s coronavirus-led online sales surge comes at heavy costs

  • Target’s quarterly online sales surged 141% due to panic buying in the coronavirus crisis, the retailer said on Wednesday, driving results past Wall Street expectations even as its operational costs soared.
  • Total revenue hit $19.6 billion, up 11.3% from $17.6 billion a year earlier.
  • Although sales at stores opened for at least a year rose 0.9%, including digital they jumped 10.8%, beating expectations.
  • Stay-at-home orders imposed to contain the virus powered a 141% jump in Target’s online comparable sales, accounting for almost all of its same-store sales growth.
  • The company’s net earnings fell 64.3% to $284 million in the quarter.

Lowe’s sales surge as lockdowns spur home improvement spending

  • Lowe’s reported its biggest rise in quarterly same-store sales in at least 15 years on Wednesday, as people spent more on tools and paint for do-it-yourself projects and home repairs during the coronanvirus lockdowns.
  • Sales rose nearly 11% to $19.68 billion, but the company said it would suspend share buybacks for the rest of the year.
  • Lowe’s same-store sales jumped 11.2%, while analysts were expecting only a 3.4% increase.
  • Online sales for Lowe’s surged 80% in the quarter, after the company limited operating hours and implemented social distancing measures at its stores to minimize the risk of the virus spreading.
  • Net earnings rose 27.8% to $1.34 billion in the first quarter ended May 1.

Urban Outfitters predicts 60% fall in same-store sales on slow recovery

  • Apparel retailer Urban Outfitters on Tuesday projected a 60% decline in same-store sales in the second quarter due to tepid demand recovery from the COVID-19 pandemic disruptions, sending its shares down 6% in extended trading.
  • Net sales fell 32% to $588.5 million, missing expectations of $627.1 million, according to IBES data from Refinitiv.
  • Gross margin decreased to 2% from 31.1% a year earlier, mainly due to higher delivery charges and increased discounts, even as it cut costs through furloughs and decreased investments in its China expansion plans.
  • Excluding items, the company recorded a loss of 77 cents per share, while analysts’ had estimated a 29-cent loss.

Facebook Launches Shopping Platform for Small Businesses

  • Facebook is making a big push into online shopping through Facebook Shops, enlisting small businesses to sell their wares through its platform and giving them access to its technology at the same time the coronavirus pandemic has upended business world-wide.
  • Small businesses, Mr. Zuckerberg said, will be able to personalize virtual storefronts to show specific products that are considered more relevant and use augmented reality to let customers virtually try on things such as sunglasses, lipstick or makeup or sample what furniture might look like in a room.
  • The virtual shops will appear on the businesses’ Facebook and Instagram accounts and, eventually, on the Messenger and WhatsApp messaging tools.

Harley Plans for Fewer Models, Simpler Factories After Coronavirus Shutdown

  • Harley-Davidson is reopening its factories this week at lower production rates and sending dealers a narrower range of motorcycles, steering away from more expansive plans to stop a yearslong sales slide.
  • As many of the company’s 698 U.S. dealers were making plans to reopen, Harley’s director of product sales, Beth Truett, told them in a memo earlier this month that about 70% of them likely wouldn’t receive any additional new motorcycles this year.
  • “We are using this time to course correct and rewire the company in pursuit of making Harley-Davidson one of the most desirable brands in the world,” Ms. Truett said in the memo, which was viewed by The Wall Street Journal.
  • Harley’s strategy reversal shows how some companies are pivoting amid the economic turmoil caused by the pandemic, reviewing operations or products that may not work amid an uncertain recovery.

Johnson & Johnson to stop selling talc baby powder in U.S. and Canada

  • Johnson & Johnson will stop selling its talc Baby Powder in the United States and Canada, it announced on Tuesday, saying demand had fallen in the wake of what it called “misinformation” about the product’s safety amid a barrage of legal challenges.
  • J&J faces more than 19,000 lawsuits from consumers and their survivors claiming its talc products caused cancer due to contamination with asbestos, a known carcinogen. Many are pending before a U.S. district judge in New Jersey.
  • J&J has faced intense scrutiny of the safety of its baby powder following an investigative report by Reuters in 2018 that found the company knew for decades that asbestos lurked in its talc.

Retailers Phase Out Coronavirus Hazard Pay for Essential Workers

  • Some of the biggest U.S. retailers are ending the extra pay they gave to front-line workers as coronavirus-related costs pile up and the ranks of jobless Americans surge, tipping the labor market in employers’ favor.
  • Amazon.com, Kroger and Rite Aid are among the major companies that have ended or plan to stop paying higher wages for tens of thousands of workers in stores and warehouses and on the road.
  • Workers and unions are pushing back, saying they still face extra risk at work.

US ECONOMY & POLITICS

U.S. Economic Recovery Will Drag On Through Next Year, CBO Says

  • The Congressional Budget Office said the U.S. economy’s recovery from the downturn related to coronavirus responses will drag on through the end of next year, as investment collapses and the labor market experiences its sharpest deterioration since the 1930s.
  • Gross domestic product will likely be 5.6% smaller in the fourth quarter of 2020 than a year earlier, the CBO said Tuesday, despite an expected pickup in economic activity in the coming months.
  • Though the CBO raised its projection for GDP growth in the fourth quarter of 2021 to 4.2% from 2.8% in an April forecast, the outlook continued to depict a long road to recovery.
  • The CBO estimated GDP will shrink 11.2% in the current quarter from the January-to-March period, more than quadruple the next-biggest quarterly decline in records going back to 1947.
  • Business and residential investment will be the main drags on growth this year, the CBO said, falling 15.8% and 13.8%, respectively, in the fourth quarter from a year earlier.
  • Consumer spending is seen declining 4.1%, while government purchases will likely slip 1%.
  • The agency sees the number of U.S. jobs falling to 133 million in the second quarter from 158.6 million at the end of 2019—more than triple the number of job losses in the 2007-09 recession.
  • While jobs should start to gradually return in the third quarter of this year, the CBO expects household employment to remain below pre-pandemic levels at 148 million in the last three months of 2021.

Trump Holds Off on Specifying Coronavirus-Relief Priorities

  • President Trump didn’t press Senate Republicans on Tuesday about specific ideas for the possible next round of coronavirus relief, instead focusing on the 2020 election and other concerns, adding to the uncertainty over the timing of any future deal with Democrats.
  • On Tuesday, Mr. Trump spent much of the lunch discussing polling he cast as favorable, as well as his concerns about investigations into Russian election interference and the pace of approving nominees, according to lawmakers who attended.
  • They said they left the meeting without a sense of what Mr. Trump wants to see in the next bill.
  • Mr. Trump did address one aspect of the current stimulus package. He told lawmakers that he was concerned that enhanced unemployment benefits were slowing the economic recovery, according to Sen. Lindsey Graham (R., S.C.).
  • White House economic adviser Larry Kudlow reiterated that Mr. Trump is looking at a payrolltax holiday, as well as potential corporate tax cuts, but said the White House continues to evaluate proposals.

Powell, Mnuchin Outline Contrasting Perils Facing Economy

  • The nation’s top two economic policy leaders offered contrasting visions about the economic outlook, with Treasury Secretary Steven Mnuchin favoring a wait-and-see approach to more federal aid and Federal Reserve Chairman Jerome Powell suggesting more would be needed.
  • Mr. Mnuchin reflected the Trump administration’s belief that the biggest danger to the economy is waiting too long to restart activity after two months in which millions of Americans have sheltered in their homes to slow the spread of infections.
  • Mr. Powell challenged the premise that there is a trade-off between economic growth and protecting the public’s health.
  • Fear of coronavirus infection is the economy’s biggest hurdle, he said, and the recovery will be held back until Americans believe it’s safe to resume commercial activities involving person-to-person contact.
  • Mr. Mnuchin echoed comments by President Trump and other administration officials who are predicting a V-shaped recovery—a sharp downturn followed by a strong bounceback.
  • Mr. Powell and other senior central bank officials have indicated they don’t think a V-shaped recovery is likely.

Fed’s Rosengren Warns Premature Reopening of Economy Carries Risk

  • Federal Reserve Bank of Boston President Eric Rosengren cast a cautious eye at attempts to restart the economy amid the unresolved coronavirus crisis, while also reaffirming the central bank’s desire to do what it takes to offset the pandemic’s impact.
  • In his remarks, Mr. Rosengren, who is not currently a voting member of the rate-setting Federal Open Market Committee, said the U.S. economy had suffered massive damage from the necessarily public health response to the crisis.
  • But he warned that trying to jump start activity is very risky before coronavirus risks are contained.
  • As other Fed officials have done, Mr. Rosengren said that for the economy to truly recover, the public must be confident they can go out in public without negative effect. And that comes down to a real solution to the crisis.

U.S. Senator Rubio sees consensus for extending paycheck loan program

  • There appears to be agreement in Washington to give companies more time to utilize their coronavirus aid under the Paycheck Protection Program, the head of the U.S. Senate’s small business committee said on Wednesday.
  • Senator Marco Rubio told Fox News that he would like Congress to extend the current eight-week period that the program gives employers to make payroll with a quick, simple bill without further additions beyond that provision — a so-called clean bill.
  • Any measure would have to pass the U.S. House of Representatives, which is controlled by Democrats who want more comprehensive action amid the pandemic and last week passed a $3 trillion coronavirus aid package that Senate Republicans, who control the upper chamber, quickly rejected.
  • On Tuesday, U.S. House Republican Leader Kevin McCarthy on said he could support giving borrowers up to 10 or 12 weeks to utilize their PPP loans. President Donald Trump has also said he backs an extension.

U.S. Birthrates Fall to Record Low

  • American women had babies at record-low rates last year and pushed U.S. births down to their smallest total in 35 years, according to federal figures released Wednesday.
  • About 3.75 million babies were born in the U.S. in 2019, down 1% from the prior year, provisional figures from the Centers for Disease Control and Prevention’s National Center for Health Statistics showed.
  • The general fertility rate fell 2% to 58.2 births per 1,000 women aged 15 to 44, its lowest level since the government began tracking the figure in 1909.
  • The total fertility rate—a snapshot of the average number of babies a woman would have over her lifetime—ticked down to 1.7 in 2019, a slight decline from the previous year and another record low.
  • In almost all years since 1971, that rate has been below the level of 2.1 needed for the population to replace itself, without accounting for immigration.

EUROPE & WORLD

Coronavirus Shutdowns Wreak Devastating Toll on Poorest Nations, World Bank Chief Says

  • The coronavirus pandemic is causing a humanitarian emergency in the world’s poorest countries, and it won’t likely end until rich nations are able to safely reopen their economies, the head of the World Bank said.
  • The World Bank estimates that 60 million people world-wide are likely to fall into extreme poverty—subsisting on less than $1.90 a day—this year, while hundreds of millions more could lose their jobs.
  • For poor nations that rely heavily on tourism, crude oil or other commodities, the pandemic’s impact on domestic economies is compounded by declining exports and foreign investment.

Xiaomi gets first-quarter sales boost as smartphone demand rebounds

  • Xiaomi Corp reported a 13.6% rise in first-quarter revenue on Wednesday, beating estimates, as the Chinese smartphone maker sold more phones and benefited from sales of its higher-priced 5G models.
  • Sales in the first quarter of 2020 rose to 49.7 billion yuan ($7.00 billion) from 43.76 billion yuan in the same period prior year, beating analyst expectations of 47.86 billion yuan.
  • The company attributed the jump to rising prices for its just-released 5G phones in China, as well as growing sales overseas.
  • Profits fell by roughly one third due to a drop in the value of Xiaomi’s investments in other companies.

Lenovo profit beats estimates, sees growth as more people work from home

  • Lenovo, the world’s biggest maker of personal computers, reported a deep slump in fourth-quarter profit due to disruptions caused by the coronavirus crisis, although the result was far better than expectations.
  • Net profit tumbled 64% to $43 million but was ahead of estimates of $7.5 million. Revenue slid 9.7% to $10.6 billion.
  • Worldwide shipments of personal computers tumbled 12.3% in the first quarter of 2020, the sharpest fall since 2013 due to the pandemic, research firm Gartner said last month.
  • Lenovo took a 24.4% market share in PCs during the quarter, ahead of rivals HP Inc and Dell Inc which had 21.5% and 19.7% respectively, Gartner said.

High-Tech Push Boosts China’s Chipmakers

  • Chinese semiconductor stocks have soared recently, as investors bet these companies will benefit from Beijing’s quest for high-tech self-reliance.
  • The Chinese government is eager to become self-sufficient in key technologies amid trade tensions with the U.S. and as the Trump administration seeks to thwart access to semiconductors for China’s Huawei Technologies Co.
  • In a show of commitment, China set up a $29 billion fund in October to nurture its domestic chip industry.

TODAY in HISTORY

  • Charles Lindbergh began the first solo nonstop transatlantic flight, departing from Long Island aboard the Spirit of Saint Louis. (1927)
  • Amelia Earhart took off from Newfoundland to become the first woman to fly solo across the Atlantic. (1932)

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.

Recent Tweets

Categories

Tags