Monday Morning Reads

Open Interest Changes:




The front-month May WTI contract plunged as much as 23% overnight to under $15/bbl, the lowest level since March 1999, after losing almost a fifth of its value last week. Production cuts agreed by top producers are barely making a dent in the demand destruction wrought by COVID-19 as the world rapidly runs out of places to store crude. While the May contract expires tomorrow, adding to reasons for prices to crater, the June WTI contract also fell more than 7% to $23/bbl (the spread is usually around $0.50 - it's now around $8-10). Besides the crude slump, U.S. stock index futures are off by 1% as investors look ahead to a busy week for earnings (nearly a fifth of S&P 500 companies report) and gauge the early financial effects of the coronavirus pandemic.
Go deeper: Berkshire Hathaway not investing during the coronavirus crisis.

(Some) tariffs postponed

American importers that "demonstrate a significant financial hardship" from the coronavirus epidemic will be allowed to delay tariff payments for 90 days, though the measure fell short of an across-the-board deferral. It won't apply to anti-dumping and countervailing duties, or importers of goods caught up in trade conflicts - including solar panels, steel, aluminum and a range of Chinese products - as well as enforcement actions against Airbus (OTCPK:EADSY). "This will protect American jobs and help these businesses get through this time," Treasury Secretary Steven Mnuchin said in a statement.
Go deeper: Will there be consequences for China?

Paycheck Protection Program

A deal to replenish funding for the PPP may be reached as soon as today, adding about $300B in funding for small business loans and $50B for disaster lending. It would also provide $75B for hospitals and $25B for a federal testing program, items that Democrats had wanted. "The next 45 days may just become the most critical period in U.S. financial history," said money manager Alan B. Lancz. "Even if we execute properly, the recovery will take time and a best-case scenario is a 'U' shaped recovery."

Bad bank idea

The ECB has held high-level talks with counterparts in Brussels about opening a bad bank as a potential way to deal with a surge in non-performing loans. It would remove billions of euros from balance sheets of eurozone lenders caused by the toxic debts left over from the Global Financial Crisis. However, some in the European Commission still don't want to waive EU rules that say banks only get state aid after a resolution process imposes losses on their shareholders and bondholders.

Will the turnaround at IBM continue?

The company reports its first earnings after Ginni Rometty stepped down as CEO on April 6, to be replaced by Arvind Krishna, who had already played a large role in shifting IBM's (NYSE:IBM) core to cloud, AI, and quantum computing. Investors will be focused on two main things: How the coronavirus pandemic is affecting business and how new management will sharpen Big Blue's focus on the fast-expanding cloud market. Last quarter, IBM surprised Wall Street with Q4 revenue growth, after five straight periods of declining sales. Revenue from recently acquired Red Hat jumped 24% and total cloud revenue rose 21%.
Go deeper: 'Finally A Good Time To Buy IBM' by Robert & Sam Kovacs.

Retail misery

Things were already on shaky ground in the brick-and-mortar retail sector, though the coronavirus crisis is pushing the industry into an even weaker position. Neiman Marcus is preparing to seek bankruptcy protection as soon as this week, becoming the first major U.S. department store operator to succumb to the economic fallout from COVID-19. Combined, $12.3B has been wiped from the market caps of J.C. Penney (NYSE:JCP), Macy's (NYSE:M), Nordstrom (NYSE:JWN) and Kohl's (NYSE:KSS) since the start of 2020 as the companies scramble to shore up their balance sheets.
Go deeper: Rent payments dive for strip mall owners.

Reopening the Vegas Strip

Wynn Resorts (NASDAQ:WYNN) CEO Matt Maddox is urging Nevada's governor to start reopening the Las Vegas Strip in mid- to late May - with extensive safety measures. "Begin with reduced occupancy, physical distancing measures in place, temperature checks and no large gatherings," Maddox said in a Nevada Independent column. "We all need to wear a mask." Wynn's Macau casinos reopened Feb. 20 after a mandatory two-week shutdown, with safety measures in place including temperature checks, fewer open tables and rules against guests standing or congregating.

Massive furloughs at Disney

The financial toll of COVID-19 is building up at the Mouse House as Disney (NYSE:DIS) stops paying more than 100,000 employees this week, or nearly half of its workforce. That will leave staff reliant on state benefits (though healthcare benefits will still be given in full), even as the company protects executive bonuses and a $1.5B dividend payment due in July. The decision will save Disney up to $500M a month across its theme parks and hotels, which have been shut in Europe and the U.S. for almost five weeks.

Stand for something good

Following an outcry, Shake Shack (NYSE:SHAK) is returning all $10M of its loan from the Paycheck Protection Program, the small business rescue fund that ran out of cash less than two weeks after launch. Founder Danny Meyer and CEO Randy Garutti said they've secured separate funding and decided to return the entire $10M so others that "need it most can get it now." The burger chain took part because the law permitted assistance for any restaurant business with no more than 500 employees at a location (it also explains why others such as Potbelly tapped the fund.)


"We recognize the importance of answering the scientific question of whether hydroxychloroquine will be beneficial for patients with COVID-19 disease," said John Tsai, Novartis's (NYSE:NVS) top drug developer. As a result, the company will conduct a randomized Phase III, or late-stage, trial on 440 hospitalized patients after getting the green light from the FDA. Emergency use authorization was granted earlier this month, though so far there is no scientific proof the drug works against coronavirus.
Go deeper: Meet Microsoft's newly launched 'plasmabot.'

What else is happening...

Gym chain 24 Hour Fitness weighs bankruptcy.

It's time to mask up at Walmart (NYSE:WMT).

Dispute sees Amazon (NASDAQ:AMZNextend French warehouse closures.

Beverage industry worries about CO2 supply.

United Airlines (NASDAQ:UAL) sells back planes to conserve cash.

Alibaba (NYSE:BABA) doubles down on cloud investment.

Tech giants must pay for news content Down Under.

Facebook (NASDAQ:FBlaunching Gaming app early - NYT.

Today's Markets
In Asia, Japan -1.2%. Hong Kong -0.2%. China +0.5%. India +0.2%.
In Europe, at midday, London +0.1%. Paris -0.2%. Frankfurt +0.2%.
Futures at 6:20, Dow -0.9%. S&P -0.8%. Nasdaq -0.5%. Crude -22.6% to $14.15. Gold flat at $1699.20. Bitcoin -0.4% to $7128.
Ten-year Treasury Yield -3 bps to 0.62%

Today's Economic Calendar
8:30 Chicago Fed National Activity Index

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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