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Wall Street Breakfast: What Moved Markets This Week

Mar. 07, 2020 7:22 AM ET13 Comments
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Stocks ended lower on Friday but well off their worst levels, closing the market's wildest week in recent memory as investors were gripped by recession fears and credit market concerns due to the spread of the coronavirus. In a roller-coaster week that saw the Dow swing 1,000 points or more twice within three days, the index finished up 1.7% while the S&P 500 and the Nasdaq rose 0.6% and 0.1%, respectively. Investors spent the week piling into U.S. Treasury bonds, sending yields tumbling to record lows, bottoming at 0.65% on the 10-year note before finishing 22 basis points lower at 0.71%, a 42-point drop for the week. U.S. crude oil plunged 10% on Friday, the most in more than five years, after OPEC and Russia failed to reach agreement on another production cut.

Economic impacts

The effects of the coronavirus were felt across the U.S. economy as many companies continued to issue profit warnings or caution about their 2020 outlooks. Big tech giants - ranging from Google (GOOG, GOOGL) and Facebook (FB) to Microsoft (MSFT) and Twitter (TWTR) - also asked many of their employees to work from home to help prevent the spread of infections. Global output is expected to fall during the first three months of this year due to the coronavirus, putting the economy at risk of recession, according to forecasts from the OECD.
Go deeper: Airlines may lose up to $113B in revenue - IATA.

Bonds rally

Benchmark 10-year U.S. Treasury yields dropped below 1% on Tuesday (and later touched all-time lows of under 0.7%) following the Fed's first emergency rate cut since the depths of the 2008 financial crisis. The central bank only has another percentage point, or 100 basis points, left to ease until it hits zero, triggering some speculation of quantitative easing. The Bank of Australia and Bank of Canada also jumped on the rate cut bandwagon during the week, while the ECB signaled a readiness to support financial markets.

Simplifying capital rules

The Fed retooled capital rules for the largest U.S. lenders, like JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC), in one of the biggest changes to the post-crisis rulebook for Wall Street. It reduces the total number of capital requirements to eight from 13, "while maintaining the strong capital requirements that are the hallmark of the framework," according to Vice Chairman for Supervision Randal Quarles. However, the Fed held off on making some changes to stress tests, such as incorporating a dormant policy tool to combat credit crunches.

Vaccines are in the works

With about 40 employees working on the project, Takeda Pharmaceutical (TAK) joined Gilead Sciences (GILD) and AbbVie (ABBV) as the latest drugmaker to work on developing a coronavirus vaccine. The experimental drug would be derived from the blood of patients who have recovered from the respiratory disease. "While we don't know for sure that it will work, we think it's definitely a relevant asset that could be of help here," said Dr. Rajeev Venkayya, president of Takeda's vaccines business.

Pulling out of SXSW 2020

Apple (AAPL) and Netflix (NFLX) were the latest tech companies to pull out of the upcoming South by Southwest festival amid concerns about the spread of coronavirus. Apple had been set to premiere three new Apple TV+ originals at the event, while Netflix had planned to screen five films, including LA Originals. Others who have recently pulled out of SXSW 2020 include Amazon Studios (AMZN), Facebook (FB), Twitter (TWTR), TikTok, Mashable and Intel (INTC), though officials say the show will go on.

Risky gamble at OPEC meeting

Crude tumbled as low as $43/bbl after a high-level Russian source told Reuters that the country would not back an OPEC call for extra reductions in oil output. OPEC ministers told Moscow on Thursday that if it doesn't join them in slashing crude output by another 1.5M barrels a day, then the cartel could abandon its reductions altogether. It's a high-stakes move in a market already slammed by the coronavirus and which triggered Saudi Aramco (ARMCO) to delay announcing its monthly crude pricing.
Go deeper: 'Oil & Gas MLPs: Why Such A Sell-Off' by The Dividend Guy.

Miss Climate Action

Defending the business of fossil fuels and resisting targets on carbon emissions, Exxon Mobil (XOM) CEO Darren Woods called pledges by some of its Big Oil rivals to cut carbon dioxide emissions a "beauty competition" that would do little to halt climate change. "Individual companies setting targets and then selling assets to another company so that their portfolio has a different carbon intensity has not solved the problem for the world," he declared. The company is focused on "taking steps to solve the problem for society as a whole."

Wishing a speedy recovery to Jamie Dimon

The 63-year-old CEO, at the helm of JPMorgan (JPM) for over a decade, was rushed into emergency surgery on Wednesday after suffering a tear in his aorta, but he's now "awake, alert and recovering well." The bank was quick to disclose his condition and be upfront about who's in charge. Daniel Pinto and Gordon Smith, the co-presidents and co-chief operating officers, will take the reins as Dimon recovers (possibly giving a glimpse into a future succession plan).
Go deeper: 'JPMorgan Chase - I'm Out At $150' by Regents Research.

Tweets about Africa move were 'mistake'

Jack Dorsey appeared to back off plans to spend part of this year in Africa as he tried to fend off a push by activist fund Elliott Management to replace him. Speaking to Morgan Stanley's TMT conference, the CEO of Twitter (TWTR) and Square (SQ) said he "made a mistake and should have provided more context about why." The continent will be one of the most populated in the next 20-30 years, and room for tech innovation there is incredible, but "in light of COVID-19 and everything else going on I need to reevaluate."

Waymo raising cash from outside investors

Highlighting the costs of developing self-driving vehicles, Alphabet's (GOOG, GOOGL) Waymo raised $2.25B in its first external investment round and expects to add more outside investors. "It's a long road getting this technology out to the world," said CEO John Krafcik. "This is just a normal part of funding our operations." Waymo didn't disclose its post-investment valuation, a figure analysts have been trying to assess for years as Alphabet continues to pump cash into the venture.
Go deeper: The company disclosed its self-driving trucking business will be called Waymo Via.

Weekly Market Movement Wrap

U.S. Indices
Dow +1.8% to 25,865. S&P 500 +0.6% to 2,972. Nasdaq +0.1% to 8,576. Russell 2000 -1.9% to 1,449. CBOE Volatility Index +4.6% to 41.94.

S&P 500 Sectors
Consumer Staples +7.1%. Utilities +8.8%. Financials -0.8%. Telecom -0.1%. Healthcare +5.5%. Industrials -0.7%. Information Technology +2.7%. Materials +4.1%. Energy -1.7%. Consumer Discretionary +0.6%.

World Indices
London -1.8% to 6,463. France -3.2% to 5,139. Germany -2.9% to 11,542. Japan -1.9% to 20,750. China +5.4% to 3,035. Hong Kong +0.1% to 26,147. India -1.9% to 37,577.

Commodities and Bonds
Crude Oil WTI -7.% to $41.64/bbl. Gold +6.9% to $1,674.4/oz. Natural Gas +2.1% to 1.72. Ten-Year Treasury Yield +1.9% to 137.35.

Forex and Cryptos
EUR/USD +2.53%. USD/JPY -2.49%. GBP/USD +1.75%. Bitcoin +5.%. Litecoin +4.9%. Ethereum +5.8%. Ripple +2.9%. Bitcoin-Cash flat.

Top Stock Gainers
Inovio Pharmaceuticals (INO) +225%. Digirad (DRAD) +169%. Tocagen (TOCA) +104%. Enzo Biochem (ENZ) +60%. Opko Health (OPK) +54%.

Top Stock Losers
Amplify Energy (AMPY) -49%. Nine Energy Services (NINE) -47%. Nextdecade Corp (NEXT) -45%. SM Energy (SM) -42%. Cardlytics (CDLX) -39%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

This article was written by

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