Wednesday Morning Reads
- Pain Ahead While ‘Shocking’ Reality Sets In
- Supercharged Debt Bets
- Duo in Charge of Saving the Economy
- Tap Credit and Raise Cash
- Aid That Could Be Slow to Come
- Seeing More Losses Coming
- Global ‘Free-for-All’ to Find Masks
- Worker Crunch Hits World’s Top Medical Glove Maker
- Was That the Bottom?
- Cyclical Stock Potential
- The Corona Crisis vs. The Great Depression
- Futures off 3% to start 2nd quarter
- COVID-19-related actions - Healthcare
- Home Depot announces additional bonuses, cuts store hours
- GE finally closes $20B Biopharma sale
- Goldman Sachs names top picks for dividend stability
- BP cuts capex, updates on Q1 operations
- Plans for NY legal pot up in smoke
- First state to adopt facial recognition rules
- Akorn defaults on loan; shares down 20% premarket
- Amgen buys Astellas share of Japan
- Chembio launches rapid COVID-19 blood test; shares up 54% premarket
- UK banks to scrap dividends amid COVID-19 fear
A new study by Morgan Stanley estimates the U.S. deficit will total at least $3.7T in calendar year 2020 and an additional $3T in 2021, financed by the sale of Treasurys, largely to the Federal Reserve. If the economy shrinks this year, the fiscal deficit relative to the size of the economy could even approach 15% to 20% (those numbers haven't been seen since WWII). On top of all those deficits, President Trump on Tuesday called for a new infrastructure spending bill worth $2T, while the Fed launched a temporary lending facility allowing foreign central banks to convert their Treasury holdings to dollars.
Go deeper: WWS Swiss Financial Consulting discusses the dangers of inflation.
In a sign of things to come, Italy's Economy Minister Roberto Gualtieri confirmed a business lobby's forecast of a 6% fall in gross domestic product in 2020. "Unfortunately the estimates are realistic... at the same time we can say that (the Italian economy) can aim at a vigorous rebound," he told daily Il Fatto Quotidiano. Italy has been in lockdown since March 9 and non-essential activities are shut down until April 3, although the regulation is likely to be extended until April 15.
Risk-off sentiment is seeping into the markets once again, with traders deciding their next moves as the second quarter kicks off. S&P 500 futures are down 3% and Dow futures are off more than 600 points, following a warning from President Trump that the coming weeks would be "very painful" and White House projections of 100K-240K U.S. deaths from COVID-19. The Dow already recorded its worst quarter since 1987 in Q1, while the S&P 500 logged its worst quarter on record, as the coronavirus pandemic caused a nationwide shutdown of the economy.
Go deeper: Employment and manufacturing data is on the calendar.
Only one stock in the Dow Jones Industrial Average rose during the first quarter and it was only up by a penny. While Microsoft (NASDAQ:MSFT) said it didn't expect to reach its quarterly revenue target for the business segment that includes Windows - due to coronavirus interruptions - it also said demand was solid and benefited from high usage of cloud services. Hardest hit on the DJIA was Boeing (NYSE:BA), which saw losses of 54%, as well as energy plays Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), and financial names JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS).
With U.S. crude experiencing its worst month and quarter in history, President Trump called Vladimir Putin for a "constructive" and lengthy conversation, agreeing that their energy ministers should begin consultations. The U.S. Department of Energy also appears ready to lease space to oil companies in the Strategic Petroleum Reserve. That would help drillers running out of space to stash their product as demand evaporates due to the coronavirus and Saudi-Russia price war.
The Safer Affordable Fuel-Efficient Vehicles Rule will toughen carbon dioxide emissions standards by 1.5% a year through model year 2026 vs. the 5% reduction set under the Obama Administration. By 2026, new cars are required to average about 40 miles per gallon, instead of the prior requirement that was close to 50 miles per gallon. The issue isn't considered a real gamechanger with California still fighting in court to have its own standards. Ford (NYSE:F), Honda (NYSE:HMC), BMW (OTCPK:BMWYY) and Volkswagen (OTCPK:VWAGY) have already agreed to the tighter standards set by Obama and seem to be planning accordingly.
General Electric (NYSE:GE) has finalized the sale of its BioPharma unit to Danaher (NYSE:DHR), giving it $20B, after accounting for taxes, fees and factored receivable balances. The anticipated proceeds have been central to CEO Larry Culp's efforts to chip away at GE's debilitating debt load and help it recover from a deep slump in recent years. The companies won approval from the Federal Trade Commission last month for the deal, which was announced in early 2019.
Macy's (NYSE:M) shares have sunk more than 70% this year, leaving the struggling company with a market value of $1.52B, as coronavirus-induced store closures compound its struggles with a shift to online shopping. As a result, the once-iconic retailer, which has furloughed most of its staff, is being removed from the S&P 500. It will be replaced by AC maker Carrier Global, which was spun out of United Technologies (NYSE:UTX) in a bid to complete its merger with Raytheon (NYSE:RTN).
Zoom Video's (NASDAQ:ZM) daily U.S. user volumes hit a record 4.84M yesterday, according to Apptopia data, and the company's active users were up 151% Y/Y in March. On the same day, Microsoft (MSFT) Teams had 1.56M users and Slack (NYSE:WORK) had less than 500K. Shares of Zoom, which debuted last year at $36 apiece, closed at $146 on Tuesday, while its market value has more than doubled since the end of January.
Microsoft (MSFT) is hailing new legislation signed by Washington Governor Jay Inslee, calling it the "first time a state or nation has passed a new law devoted exclusively to putting guardrails in place for the use of facial recognition." It requires public agencies to regularly report on their use of the technology, establishes a task force to study its effects and test the software for fairness and accuracy. Law enforcement agencies must also obtain a warrant to run facial recognition scans, except in case of emergency.
What else is happening...
Macau casino operators are bleeding up to $4M/day.
Internet, mobile providers check in with Trump.
Plans for New York legal pot go up in smoke.
In Asia, Japan -4.5%. Hong Kong -2.2%. China -0.6%. India -4.1%.
In Europe, at midday, London -3.6%. Paris -3.6%. Frankfurt -3.2%.
Futures at 6:20, Dow -3%. S&P -3%. Nasdaq -2.6%. Crude -1.2% to $20.23. Gold +0.7% to $1608.40. Bitcoin -2.2% to $6315.
Ten-year Treasury Yield -9 bps to 0.61%