Stocks started the new month with sharp losses, sending the Dow, S&P and Nasdaq narrowly into the red for the week, following sobering comments from tech giants Amazon and Apple about the impact of the coronavirus pandemic. Amazon announced plans to spend all profits from the current quarter on its coronavirus response, while Apple reported flat first quarter revenue growth and did not offer guidance due to uncertainties related to the virus' impact. President Trump added to the market's woes by threatening to impose tariffs on China over its handling of the pandemic. Finally, the Institute for Supply Management's manufacturing index fell to its lowest level since April 2009.
The Fed pledged to leave interest rates near zero until full employment and inflation come back and said it would use "its full range of tools to support the U.S. economy in this challenging time." The news was enough to override figures showing GDP contracting by 4.8% in Q1, the worst quarterly performance since 2009. Later in the week, the downbeat note was accentuated by another 3.8M in new jobless claims and the steepest decline in monthly U.S. consumer spending tracing back to 1959.
"Given the continued deterioration in the macroeconomic outlook and significant mid- and long-term uncertainty," Royal Dutch Shell (RDS.A, RDS.B) slashed its quarterly dividend to $0.16, from $0.47 per share, for the first time since WWII. COVID-19 slammed demand for oil, gas and related products, while crude recorded a historic plunge into negative territory earlier this month. Shell's adjusted current cost of supplies income, used as a proxy for net profit, slid 45% to $2.9B during the quarter, compared with $5.3B a year earlier.
Go deeper: USO struggles with investment objective.
Seeing "signs of stability" after an initial steep decrease in March ad revenue, Facebook (FB) shares soared 10% AH on Wednesday, while Microsoft (MSFT) climbed 2% as remote work boosted Teams and cloud services. Alphabet (GOOG, GOOGL) also rose 4%, posting strong Q1 figures even as it noted a March advertising slowdown. There was a more of a muted view at Apple (AAPL), which failed to give guidance for the June quarter, as well as Amazon (AMZN), which said it would spend all its Q2 profits on responding to the COVID-19 pandemic.
Conversations are at a very preliminary stage, but the U.S. appears to be crafting retaliatory measures against China over the coronavirus outbreak. "We signed a trade deal where they're supposed to buy, and they've been buying a lot, actually. But that now becomes secondary to what took place with the virus," President Trump told reporters. The U.S. is not considering stopping debt payment obligations to Beijing - as that would hurt the "sanctity of the dollar" - but Trump said he could do the same thing, for even more money, via tariffs. While a resumption of the trade war wouldn't be a good recipe for markets, other ideas are under consideration: Sanctions, non-tariff trade restrictions and lifting China's sovereign immunity (allowing lawsuits against Beijing in U.S. courts).
Go deeper: EU chief wants probe into coronavirus origin.
Helping the company avoid government aid, Boeing (BA) raised $25B in a bond offering on Thursday, a blowout result for the planemaker. The seven-part offering, which includes bonds that won’t be redeemed until 2060, was oversubscribed and attracted better pricing than might have been expected for a firm that just has its credit rating downgraded to a notch above junk status. The deal, expected to close May 4, would be one of the largest-ever corporate bond offerings.
Go deeper: Another blow to Boeing's space wing.
Moderna's (MRNA) experimental vaccine, mRNA-1273, is currently being tested in early-stage trial by the U.S. National Institutes of Health, with mid-stage trials set for Q2. The 10-year collaboration agreement will see the companies produce up to a billion vaccine doses per year at Lonza U.S. (OTCPK:LZAGY), and would cover additional products in the future. Gilead's (GILD) remdesivir trial also drove optimism during the week due to its positive results, though several downgrades to the stock rolled in on Friday.
Go deeper: Coronavirus vaccine could be ready in 2020.
In a direct appeal to consumers, Tyson Foods (TSN) took out a full-page ad in The New York Times to say that the food supply chain is breaking. "As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain," wrote Chairman John Tyson. "As a result, there will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed."
Go deeper: Buzz builds over Beyond Meat.
SoftBank (OTCPK:SFTBY) widened its record annual loss forecast to ¥900B ($8.4B), from ¥750B ($7B), as it calculated the bottom line hit from souring investments before it releases earnings on May 18. Triggering the updated outlook are expectations of a ¥700B loss ($6.6B) on its investment in WeWork (WE) which the tech conglomerate holds outside of its $100B Vision Fund (it has poured more than $13.5B in the office-sharing firm so far). Beyond the losses, SoftBank is also being sued by WeWork for its decision to back out of a $3B tender offer that was agreed upon in October 2019.
J. Crew prepared for a bankruptcy filing that could come as soon as this weekend, according to multiple sources. While the clothing apparel company is not publicly traded (it was taken private in 2010 via leveraged buyout), it highlights broader trends in the U.S. retail industry, which was already struggling before the coronavirus pandemic. Reports suggest Neiman Marcus is in the process of a bankruptcy filing, while J.C. Penney (JCP) has been in talks with lenders for bankruptcy financing that could total $1B.
Dow -0.2% to 23,724. S&P 500 -0.2% to 2,831. Nasdaq -0.3% to 8,605. Russell 2000 +2.% to 1,257. CBOE Volatility Index +3.5% to 37.19.
S&P 500 Sectors
Consumer Staples -0.8%. Utilities -1.9%. Financials +4.8%. Telecom +3.7%. Healthcare -0.6%. Industrials +4.3%. Information Technology +3.2%. Materials +4.2%. Energy +9.5%. Consumer Discretionary +3.7%.
London +0.2% to 5,763. France +4.1% to 4,572. Germany +5.1% to 10,862. Japan +1.9% to 19,619. China +1.8% to 2,860. Hong Kong +3.4% to 24,644. India +7.6% to 33,718.
Commodities and Bonds
Crude Oil WTI +16.3% to $19.71/bbl. Gold -1.6% to $1,708.2/oz. Natural Gas +7.7% to 1.885. Ten-Year Treasury Yield -0.1% to 139.01.
Forex and Cryptos
EUR/USD +1.43%. USD/JPY -0.56%. GBP/USD +1.03%. Bitcoin +16.2%. Litecoin +4.9%. Ethereum +11.5%. Ripple +11.3%.
Top Stock Gainers
Creative Realities (CREX) +266%. Capricor Therapeutics (CAPR) +192%. Mohawk Group Holdings (MWK) +100%. Midatech Pharma (MTP) +93%. Neonode (NEON) +86%.
Top Stock Losers
Chesapeake Energy (CHK) -63%. Blue Apron Holdings (APRN) -39%. Verona Pharma (VRNA) -36%. Pluristem Therapeutics (PSTI) -32%. Mesoblast (MESO) -31%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.
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