US stock markets continued to rally this week in the face of another series of all time low economic readings. Investors remained willing to look past the pandemic induced seizure and focus on the gradual reopening that is taking hold across portions of Europe and some parts of the US. Q1 earnings reports surged in number, but the underlying story remained largely the same. Significant gains were seen for as basket of well-known tech/consumer companies that revealed numbers that solidified investors’ belief that they are the best positioned to benefit from the changing business landscape amid the coronavirus pandemic. Paced by large cap tech, the Nasdaq composite found its way back into positive territory for the year. The VIX dropped below 30 for the first time in more than 2 months, albeit amid dwindling volumes.
Larger than expected rate cuts by several central banks outside the US served as a reminder that officials remain at the ready to provide stimulus as the crisis plays out. On Thursday Fed fund futures contracts for 2021 began trading above par, suggesting some traders are betting the Fed will allow the policy rate to move into negative territory. Short rates remained subdued into the April employment report on Friday. The jobs numbers were ugly as expected, but perhaps not as dismal as some had thought. The decline in payrolls topped 20M and the unemployment rate jumped to nearly 15%, but that number probably still doesn’t fully reflect the damage inflicted by the pandemic. WTI crude prices rallied alongside stock prices and a host of other commodities further signaling investors’ willingness to look past the current period of uncertainty and position for some level of economic resurgence. For the week, the S&P gained 3%, the DJIA added 2.6%, and the Nasdaq rose 6%.
A deluge of corporate earnings gave a broad sampling of how companies are handling the coronavirus crisis. Disney’s EPS missed expectations as earnings dropped -90% y/y, and the media juggernaut cut capex and said it will not pay a dividend this summer. General Motors earnings beat by a wide margin despite recent halts in production, though the company said it plans to restart US operations on May 18th. CVS came in ahead of consensus on its top and bottom line as the retailer experienced an influx of demand due to the coronavirus, but the company said it saw some signs of moderation in April. Tyson Foods’ Q2 earnings and revenue missed estimates as the meat producer struggles with production slowdowns, though it said it expects to remain profitable in the second half. Uber shares hit the gas despite widening losses as the CEO seemed optimistic that ride volume was rising again after a trough in mid-April and said adjusted EBITDA margins would continue to improve in Q3. Wayfair soared on an EPS beat and cheery Q2 commentary, Pinterest dropped after seeing a sharp deceleration in its ad business, and Shopify shares hit record highs as its subscription revenue rose substantially. Pfizer began its coronavirus vaccine trials in humans this week and estimates that, if the tests are successful, a vaccine could be ready for emergency use as soon as September. Amid a significant hiatus in M&A activity in the pharma space, Alexion announced it would acquire Portola for $18/share in cash in a deal valued at $1.6B.
MON 5/4
(US) April ISM New York: 4.3 v 12.9 prior (all time low)
(US) Treasury quarterly financing estimates: to borrow $3.0T in Apr-June quarter v $2.4Be (prior estimate to pay down $56B) (most since Q4'08)
TUES 5/5
PFE Exec: Expect millions of doses of Covid-19 vaccine by October - CNBC
(US) Atlanta Fed cuts Q2 GDP growth to -17.6% from -16.6%
(US) Fed Vice Chair Clarida (moderate, voter): recovery could begin in H2 of this year; it's important to make sure the rebound is as robust as possible - CNBC interview
DIS Reports Q2 $0.60 v $0.83e, Rev $18.0B v $18.0Be
WEDS 5/6
(EU) EU Commission Spring Forecasts: Cuts 2020 GDP to contraction territory; Raises 2021
GM Reports Q1 $0.62 v $0.18e, Rev $32.7B v $32.6Be
(US) Treasury to sell $20B 20-year bond - quarterly refunding announcement
*(US) DOE CRUDE: +4.6M V +8ME; GASOLINE: -3.2M V +0.5ME; DISTILLATE: +9.5M V +3ME
*(CN) CHINA APR TRADE BALANCE:$45.3B V $8.7BE
THURS 5/7
*(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.10%; AS EXPECTED
(US) China and US trade chiefs could hold a phone call as soon as next week regarding progress on implementation of the phase-1 trade deal - press
ARAMCO.SA Raises ARAB light official selling price to Asia by $1.40 to -$6.50
*(US) Q1 PRELIMINARY NONFARM PRODUCTIVITY: -2.5% V -5.5%E; UNIT LABOR COSTS: 4.8% V 4.5%E
*(US) INITIAL JOBLESS CLAIMS: 3.17M V 3.00ME; CONTINUING CLAIMS: 22.6M V 19.80ME
(US) Jan 2021 Fed funds futures trade above par, predicting negative policy rate
Nevada Gaming Commission votes to approve casino virus safety policies ahead of reopening casinos - press
*(US) MAR CONSUMER CREDIT: -$12.1B V +$15.0BE
(US) US Treasury confirms conference call between USTR Lighthizer, Treasury Sec Mnuchin, and China Vice Premier Liu He
FRI 5/8
SIE.DE Reports Q2 Net €652M v €1.81B y/y, Industrial Business EBITA €1.59B v €1.94B y/y, Rev €14.2B v €14.3B y/y; sees stronger COVID-19 impact in Q3; withdraws FY20 EPS guidance
*(US) APR UNEMPLOYMENT RATE: 14.7% V 16.0%E
*(CA) CANADA APR NET CHANGE IN EMPLOYMENT: -1.99M V -4.00ME; UNEMPLOYMENT RATE: 13.0% V 18.1%E
*(US) APR AVERAGE HOURLY EARNINGS M/M: 4.7% V 0.5%E; Y/Y: 7.9% V 3.3%E; AVERAGE WEEKLY HOURS: 34.2 V 33.6E
(US) New York Fed Nowcast: cuts Q2 forecast to -31.2% from -9.3%
(US) Atlanta Fed cuts Q2 GDP growth to -34.9% from -17.6%
Larger than expected rate cuts by several central banks outside the US served as a reminder that officials remain at the ready to provide stimulus as the crisis plays out. On Thursday Fed fund futures contracts for 2021 began trading above par, suggesting some traders are betting the Fed will allow the policy rate to move into negative territory. Short rates remained subdued into the April employment report on Friday. The jobs numbers were ugly as expected, but perhaps not as dismal as some had thought. The decline in payrolls topped 20M and the unemployment rate jumped to nearly 15%, but that number probably still doesn’t fully reflect the damage inflicted by the pandemic. WTI crude prices rallied alongside stock prices and a host of other commodities further signaling investors’ willingness to look past the current period of uncertainty and position for some level of economic resurgence. For the week, the S&P gained 3%, the DJIA added 2.6%, and the Nasdaq rose 6%.
A deluge of corporate earnings gave a broad sampling of how companies are handling the coronavirus crisis. Disney’s EPS missed expectations as earnings dropped -90% y/y, and the media juggernaut cut capex and said it will not pay a dividend this summer. General Motors earnings beat by a wide margin despite recent halts in production, though the company said it plans to restart US operations on May 18th. CVS came in ahead of consensus on its top and bottom line as the retailer experienced an influx of demand due to the coronavirus, but the company said it saw some signs of moderation in April. Tyson Foods’ Q2 earnings and revenue missed estimates as the meat producer struggles with production slowdowns, though it said it expects to remain profitable in the second half. Uber shares hit the gas despite widening losses as the CEO seemed optimistic that ride volume was rising again after a trough in mid-April and said adjusted EBITDA margins would continue to improve in Q3. Wayfair soared on an EPS beat and cheery Q2 commentary, Pinterest dropped after seeing a sharp deceleration in its ad business, and Shopify shares hit record highs as its subscription revenue rose substantially. Pfizer began its coronavirus vaccine trials in humans this week and estimates that, if the tests are successful, a vaccine could be ready for emergency use as soon as September. Amid a significant hiatus in M&A activity in the pharma space, Alexion announced it would acquire Portola for $18/share in cash in a deal valued at $1.6B.
MON 5/4
(US) April ISM New York: 4.3 v 12.9 prior (all time low)
(US) Treasury quarterly financing estimates: to borrow $3.0T in Apr-June quarter v $2.4Be (prior estimate to pay down $56B) (most since Q4'08)
TUES 5/5
PFE Exec: Expect millions of doses of Covid-19 vaccine by October - CNBC
(US) Atlanta Fed cuts Q2 GDP growth to -17.6% from -16.6%
(US) Fed Vice Chair Clarida (moderate, voter): recovery could begin in H2 of this year; it's important to make sure the rebound is as robust as possible - CNBC interview
DIS Reports Q2 $0.60 v $0.83e, Rev $18.0B v $18.0Be
WEDS 5/6
(EU) EU Commission Spring Forecasts: Cuts 2020 GDP to contraction territory; Raises 2021
GM Reports Q1 $0.62 v $0.18e, Rev $32.7B v $32.6Be
(US) Treasury to sell $20B 20-year bond - quarterly refunding announcement
*(US) DOE CRUDE: +4.6M V +8ME; GASOLINE: -3.2M V +0.5ME; DISTILLATE: +9.5M V +3ME
*(CN) CHINA APR TRADE BALANCE:$45.3B V $8.7BE
THURS 5/7
*(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.10%; AS EXPECTED
(US) China and US trade chiefs could hold a phone call as soon as next week regarding progress on implementation of the phase-1 trade deal - press
ARAMCO.SA Raises ARAB light official selling price to Asia by $1.40 to -$6.50
*(US) Q1 PRELIMINARY NONFARM PRODUCTIVITY: -2.5% V -5.5%E; UNIT LABOR COSTS: 4.8% V 4.5%E
*(US) INITIAL JOBLESS CLAIMS: 3.17M V 3.00ME; CONTINUING CLAIMS: 22.6M V 19.80ME
(US) Jan 2021 Fed funds futures trade above par, predicting negative policy rate
Nevada Gaming Commission votes to approve casino virus safety policies ahead of reopening casinos - press
*(US) MAR CONSUMER CREDIT: -$12.1B V +$15.0BE
(US) US Treasury confirms conference call between USTR Lighthizer, Treasury Sec Mnuchin, and China Vice Premier Liu He
FRI 5/8
SIE.DE Reports Q2 Net €652M v €1.81B y/y, Industrial Business EBITA €1.59B v €1.94B y/y, Rev €14.2B v €14.3B y/y; sees stronger COVID-19 impact in Q3; withdraws FY20 EPS guidance
*(US) APR UNEMPLOYMENT RATE: 14.7% V 16.0%E
*(CA) CANADA APR NET CHANGE IN EMPLOYMENT: -1.99M V -4.00ME; UNEMPLOYMENT RATE: 13.0% V 18.1%E
*(US) APR AVERAGE HOURLY EARNINGS M/M: 4.7% V 0.5%E; Y/Y: 7.9% V 3.3%E; AVERAGE WEEKLY HOURS: 34.2 V 33.6E
(US) New York Fed Nowcast: cuts Q2 forecast to -31.2% from -9.3%
(US) Atlanta Fed cuts Q2 GDP growth to -34.9% from -17.6%
