Weekly Market Update: Markets show more stability as governments talk about ‘reopening’ plans and as funding markets peril recedes
Fri, 17 Apr 04:15 PM EST/09:15 PM GMT
Coming out of the Easter break investors held cautious optimism, rooted in growing evidence that peak Covid-19 infections had likely passed for NYC and other harder hit parts of the Northeast and continental Europe. Confidence in improving functioning of key funding markets was further enhanced by another steady stream of corporate bond offerings for both investment-grade and higher yielding corporate debt. US stocks climbed higher to once again hit the best levels since the full onset of the coronavirus pandemic. The VIX fell back below 40 for the first time since early March and the S&P retook the 2,800 level. Large-cap tech remained the momentum driver, specifically names that appear best positioned to benefit from the pandemic trading landscape. FANG + Microsoft saw their percentage of the S&P 500 rise above 21% for the first time ever as Amazon and Netflix forged new all-time highs. Equities were boosted late in the week after promising early data was leaked on Gilead’s remdesivir antiviral in treatment of COVID-19, and on the White House releasing a broad guideline for states looking to reopen their economies.
Markets were still forced to confront an ever-mounting wall of worry related to the new pandemic reality. Weekly initial jobless claims surged another 5+ million, bringing the 4-week total above a staggering 22M newly unemployed. The Philly Fed survey registered its lowest reading since July 1980 and Empire manufacturing fell to levels never seen before. Monthly housing starts and permits plunged by double digit percentages. CEOs of key financial companies continued to suggest a V-shaped recovery was unlikely when discussing quarterly results while acknowledging despite a shifting focus towards reopening, economic conditions in many areas are still realistically quite some time from normalizing. Credit events emerged in both the retail and energy sectors, as firms were forced to look at restructuring options. The US government’s SBA relief fund maxed out while the Treasury and Congress struggled to reach any agreement to replenish those funds.
WTI crude dropped back below $20 amid continued large builds in inventory readings and mounting forecasts for severe demand destruction that will more than likely offset the recent OPEC+ agreement. US Treasury yields tracked lower once again. The 10-year dropped back below 65 bps and the 2-year slipped below 20 bps for the first time since 2011. For the week, the S&P gained 3% and peaked above its 50-day moving average for the first time since February, while the DJIA added 2.2%, and the Nasdaq surged 6.1%.
In corporate news this week, major US banks kicked off earnings season. Bank of America, Goldman and Citigroup saw their profits take a hit, while JPMorgan among others warned of loan losses and defaults on the horizon as COVID-19 wreaks havoc on the economy. Teladoc issued encouraging preliminary Q1 numbers as the rising adoption of telehealth providers buoyed revenue and adjusted EBITDA. Apple announced its long-awaited second-generation iPhone SE, which featured a faster chip and improved single-camera system, arriving on sale this week at $399. Verizon acquired video conference technology provider BlueJeans Network for around $500M as the work-from-home movement surges amid the coronavirus lockdown. Chinese regulators officially gave conditional approval for Nvidia to purchase Mellanox for $125/share in cash, in line with recent reporting. Boeing said it’s ready to reopen its Puget Sound facility and resume commercial aircraft production by next week, which gave a boost to sentiment after Thursday’s market close. Berkshire Hathaway accepted Occidental shares in lieu of cash dividends (and then immediately sold those extra shares), after Warren Buffett’s holding company bought $10B in preferred shares last year. Diamond Offshore elected not to make a semiannual interest payment due on 2039 notes and said it intends to utilize a 30-day grace period.
MON 4/13
FDA Clears First Saliva Collection for Coronavirus COVID-19 (SARS-CoV-2) for Emergency Use Authorization (EUA)
(US) Former presidential candidate Sen Sanders endorses VP Biden for President
NY Gov Cuomo: any plan for reopening must fit the facts and circumstance; New York, New Jersey, Connecticut, Pennsylvania, Rhode Island and Delaware to set up a working group to draft plan to reopen economy
(US) New York Fed to reduce the frequency of some repo operations during this monthly period in light of more stable repo market conditions
*(CN) CHINA MAR TRADE BALANCE: $19.9B V $20.0BE
TUES 4/14
JPM Reports Q1 $0.78 v $2.49e, Managed Rev $29.1B v $29.0Be
FAST Reports Q1 $0.35 v $0.34e, Rev $1.37B v $1.36Be
(US) Former President Obama to endorse VP Joe Biden in a video to be released this morning - NBC News
BA Reports Mar deliveries 20, Net orders -282; Q1 deliveries 50
(US) Treasury Sec Mnuchin: Most major airlines to participate in PPP, talks continue with other airlines
WEDS 4/15
BAC Reports Q1 $0.40 v $0.65e, Rev $22.8B v $22.5Be; committed to no COVID-19 layoffs in 2020
(DE) German Fin Min Scholz: Europe needs joint EU answers on post crisis economic revival for region
*(US) APR EMPIRE MANUFACTURING: -78.2 V -35.0E (record low)
*(US) MAR ADVANCE RETAIL SALES M/M: -8.7% V -8.0%E (record drop); RETAIL SALES (EX-AUTO) M/M: -4.5% V -5.0%E
OXY Berkshire files to sell 17.3M shares - filing
*(US) MAR INDUSTRIAL PRODUCTION M/M: -5.4% V -4.0%E; CAPACITY UTILIZATION: 72.7% V 74.0%E
*(US) DOE CRUDE: +19.2M V +11ME; GASOLINE: +4.9M V +6.5ME; DISTILLATE: +6.3M V +1.5ME
(US) Small Business Paycheck Protection Program (PPP) expected to run out of initial $350B allocation later today - press
THURS 4/16
(DE) German Fin Min Scholz: Looks to reduce additional debt from 2023 - financial press
CODX COVID-19 test technology validated for use on saliva samples
MLNX China said to give conditional approval of Nvidia's purchase (in-line with recent speculation) - financial press
*(US) APR PHILADELPHIA FED BUSINESS OUTLOOK: -56.6 V -32.0E (lowest since Jul 1980)
VZ Reportedly to acquire cloud video conferencing company BlueJeans Network for $500M - press
(US) New York Gov Cuomo: Extends NY lockdown to May 15th
*(US) US President Trump tells governors that the states can take time before easing measures; sets out 3 Phases of guidelines for reopening state economies
GILD Stat News: early data from remdesivir trials in Covid-19 has been positive (update)
BA To resume commercial aircraft production at Puget Sound in phased approach beginning next week
RIO.AU Reports Q1 Pilbara iron ore shipments 72.9Mt v 69.1Mt y/y; Pilbara iron production 77.8Mt v 76.0Mt y/y
*(CN) CHINA Q1 GDP Q/Q: -9.8% V -12.0%E; Y/Y: -6.8% V -6.0%E (1st contraction since 1976)
FRI 4/17
*(EU) EURO ZONE MAR FINAL CPI Y/Y: 0.7% V 0.7%E; CPI CORE Y/Y: 1.0% V 1.0%E
PG Reports Q3 $1.17 v $1.11e, Rev $17.2B v $17.0Be
STT Reports Q1 $1.62 v $1.35e, Rev $3.07B v $2.91Be
Markets were still forced to confront an ever-mounting wall of worry related to the new pandemic reality. Weekly initial jobless claims surged another 5+ million, bringing the 4-week total above a staggering 22M newly unemployed. The Philly Fed survey registered its lowest reading since July 1980 and Empire manufacturing fell to levels never seen before. Monthly housing starts and permits plunged by double digit percentages. CEOs of key financial companies continued to suggest a V-shaped recovery was unlikely when discussing quarterly results while acknowledging despite a shifting focus towards reopening, economic conditions in many areas are still realistically quite some time from normalizing. Credit events emerged in both the retail and energy sectors, as firms were forced to look at restructuring options. The US government’s SBA relief fund maxed out while the Treasury and Congress struggled to reach any agreement to replenish those funds.
WTI crude dropped back below $20 amid continued large builds in inventory readings and mounting forecasts for severe demand destruction that will more than likely offset the recent OPEC+ agreement. US Treasury yields tracked lower once again. The 10-year dropped back below 65 bps and the 2-year slipped below 20 bps for the first time since 2011. For the week, the S&P gained 3% and peaked above its 50-day moving average for the first time since February, while the DJIA added 2.2%, and the Nasdaq surged 6.1%.
In corporate news this week, major US banks kicked off earnings season. Bank of America, Goldman and Citigroup saw their profits take a hit, while JPMorgan among others warned of loan losses and defaults on the horizon as COVID-19 wreaks havoc on the economy. Teladoc issued encouraging preliminary Q1 numbers as the rising adoption of telehealth providers buoyed revenue and adjusted EBITDA. Apple announced its long-awaited second-generation iPhone SE, which featured a faster chip and improved single-camera system, arriving on sale this week at $399. Verizon acquired video conference technology provider BlueJeans Network for around $500M as the work-from-home movement surges amid the coronavirus lockdown. Chinese regulators officially gave conditional approval for Nvidia to purchase Mellanox for $125/share in cash, in line with recent reporting. Boeing said it’s ready to reopen its Puget Sound facility and resume commercial aircraft production by next week, which gave a boost to sentiment after Thursday’s market close. Berkshire Hathaway accepted Occidental shares in lieu of cash dividends (and then immediately sold those extra shares), after Warren Buffett’s holding company bought $10B in preferred shares last year. Diamond Offshore elected not to make a semiannual interest payment due on 2039 notes and said it intends to utilize a 30-day grace period.
MON 4/13
FDA Clears First Saliva Collection for Coronavirus COVID-19 (SARS-CoV-2) for Emergency Use Authorization (EUA)
(US) Former presidential candidate Sen Sanders endorses VP Biden for President
NY Gov Cuomo: any plan for reopening must fit the facts and circumstance; New York, New Jersey, Connecticut, Pennsylvania, Rhode Island and Delaware to set up a working group to draft plan to reopen economy
(US) New York Fed to reduce the frequency of some repo operations during this monthly period in light of more stable repo market conditions
*(CN) CHINA MAR TRADE BALANCE: $19.9B V $20.0BE
TUES 4/14
JPM Reports Q1 $0.78 v $2.49e, Managed Rev $29.1B v $29.0Be
FAST Reports Q1 $0.35 v $0.34e, Rev $1.37B v $1.36Be
(US) Former President Obama to endorse VP Joe Biden in a video to be released this morning - NBC News
BA Reports Mar deliveries 20, Net orders -282; Q1 deliveries 50
(US) Treasury Sec Mnuchin: Most major airlines to participate in PPP, talks continue with other airlines
WEDS 4/15
BAC Reports Q1 $0.40 v $0.65e, Rev $22.8B v $22.5Be; committed to no COVID-19 layoffs in 2020
(DE) German Fin Min Scholz: Europe needs joint EU answers on post crisis economic revival for region
*(US) APR EMPIRE MANUFACTURING: -78.2 V -35.0E (record low)
*(US) MAR ADVANCE RETAIL SALES M/M: -8.7% V -8.0%E (record drop); RETAIL SALES (EX-AUTO) M/M: -4.5% V -5.0%E
OXY Berkshire files to sell 17.3M shares - filing
*(US) MAR INDUSTRIAL PRODUCTION M/M: -5.4% V -4.0%E; CAPACITY UTILIZATION: 72.7% V 74.0%E
*(US) DOE CRUDE: +19.2M V +11ME; GASOLINE: +4.9M V +6.5ME; DISTILLATE: +6.3M V +1.5ME
(US) Small Business Paycheck Protection Program (PPP) expected to run out of initial $350B allocation later today - press
THURS 4/16
(DE) German Fin Min Scholz: Looks to reduce additional debt from 2023 - financial press
CODX COVID-19 test technology validated for use on saliva samples
MLNX China said to give conditional approval of Nvidia's purchase (in-line with recent speculation) - financial press
*(US) APR PHILADELPHIA FED BUSINESS OUTLOOK: -56.6 V -32.0E (lowest since Jul 1980)
VZ Reportedly to acquire cloud video conferencing company BlueJeans Network for $500M - press
(US) New York Gov Cuomo: Extends NY lockdown to May 15th
*(US) US President Trump tells governors that the states can take time before easing measures; sets out 3 Phases of guidelines for reopening state economies
GILD Stat News: early data from remdesivir trials in Covid-19 has been positive (update)
BA To resume commercial aircraft production at Puget Sound in phased approach beginning next week
RIO.AU Reports Q1 Pilbara iron ore shipments 72.9Mt v 69.1Mt y/y; Pilbara iron production 77.8Mt v 76.0Mt y/y
*(CN) CHINA Q1 GDP Q/Q: -9.8% V -12.0%E; Y/Y: -6.8% V -6.0%E (1st contraction since 1976)
FRI 4/17
*(EU) EURO ZONE MAR FINAL CPI Y/Y: 0.7% V 0.7%E; CPI CORE Y/Y: 1.0% V 1.0%E
PG Reports Q3 $1.17 v $1.11e, Rev $17.2B v $17.0Be
STT Reports Q1 $1.62 v $1.35e, Rev $3.07B v $2.91Be
