Optimism over the economy’s reopening appears to be supporting stock prices and the oil rally, as S&P 500 futures rose another 1% overnight and crude topped $25/bbl. Speaking in an interview Tuesday evening, President Trump outlined that restarting business activity was key and said “we have to get our country open and we have to get it open soon.” The state of the jobs market is also on the radar over the next few days, with the ADP National Employment Report today, weekly jobless claims tomorrow and non-farm payrolls figures on Friday. On the earnings front, General Motors (NYSE:GM) and CVS (NYSE:CVS) report before the bell, while Square (NYSE:SQ) and Paypal (NASDAQ:PYPL) report after the close.
Disney (NYSE:DIS) shares fell 2% AH on Tuesday after revealing the extent of the financial damage from coronavirus closures. $1.4B was wiped from its quarterly profit, mostly from its shuttered theme parks, but the company did say it would reopen Shanghai Disneyland to a reduced number of visitors next week. It’s also forgoing its first half dividend payment worth $1.6B and pulled its guidance for the rest of the year. Bright spot? Disney+ signed up more than 54M subscribers as of Monday (executives had predicted it would take four years to hit 60M).
Go deeper: See the earnings call transcript here.
The automaker will likely comment on what economic hit it expects from the COVID-19 pandemic and when it intends to resume North American production. GM has already suspended its dividend and share buybacks, closed its Maven car-sharing unit and delayed work on some product programs, while adding $16B to its cash position by drawing down credit lines. Many hope the U.S. market reopening will mirror China, where GM sales fell 43% in Q1, but quickly rebounded to grow by double digits in April.
Go deeper: GM in talks for $2B loan to boost liquidity.
Even after grounding more than 3,000 aircraft, or nearly 50% of their active fleets, U.S. airlines are averaging just 17 passengers per domestic flight and 29 passengers per international flight. The industry is “burning more than $10B in cash a month,” trade group Airlines for America warned in prepared testimony ahead of today’s Senate hearing on the “State of the Aviation Industry.” It will “emerge from this crisis a mere shadow of what it was just three short months ago,” CEO Nicholas Calio declared. “If carriers were to refund all tickets… this will result in negative cash balances that will lead to bankruptcy.”
In its first estimate since lockdowns were put into place, the European Commission said the EU will contract 7.5% in 2020 as the coronavirus pandemic brings the worst economic shock since the Great Depression in the 1930s. “While the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter,” said Valdis Dombrovskis, VP for economic affairs.
U.S. Immigration and Customs Enforcement is working with companies like 3M (NYSE:MMM), Amazon (NASDAQ:AMZN) and Pfizer (NYSE:PFE) to curtail the flood of counterfeit masks, coronavirus tests and other equipment entering the country. U.S. Customs has seized nearly 500 shipments of unauthorized products, while agents have opened 315 investigations and made 11 arrests of people allegedly selling or shipping improper goods. The agency has also been able to identify more than 19,000 suspect COVID-19-related domain names due to the partnership and is working to take many of them down.
U.S. hospitals are losing around $50B per month due to the large number of cancelled elective procedures, costs associated with treating COVID-19 and an increased number of uninsured patients. “I think it’s fair to say that hospitals are facing perhaps the greatest challenge that they have ever faced in their history,” said CEO of the American Hospital Association, Rick Pollack, calling the situation a “triple whammy.” However, the net impact on U.S. health insurers is quite the opposite and is “going to be positive for them,” added Jeff Jonas of Gabelli Funds. “The costs from COVID-19 are going to be actually very small and more than outweighed by the deferral of elective procedures.”
Gilead Sciences (NASDAQ:GILD) is in discussions with “leading chemical and pharmaceutical companies” to expand manufacturing of its remdesivir COVID-19 treatment to ensure wider access to the drug in Europe, Asia and the developing world through at least 2022. It’s also negotiating long-term voluntary licenses with several generic drugmakers in India and Pakistan to produce the drug for developing markets. Advanced talks are already underway with UNICEF to deliver remdesivir using the agency’s distribution networks.
More gloom is surfacing for the apparel retail industry a day after J. Crew filed for bankruptcy protection. Lord & Taylor is preparing to liquidate its inventory as soon as its 38 department stores reopen, but is holding off on a bankruptcy filing until it ensures customers will be able to attend its “going out of business” sales. Meanwhile, Nordstrom (NYSE:JWN) said it would close 16 locations and restructure its operations in an effort to cut costs and weather the impact of the COVID-19 pandemic.
Embroiled in a bribery scandal, Samsung’s (OTC:SSNLF) de facto leader Jay Y. Lee, apologized over controversial succession plans and said he will not hand over management rights to his children. “Samsung failed to live up to public expectations. I will not abuse loopholes in the law in relation to the succession of corporate control, or do anything that can be criticized ethically.” The 52-year old Lee is the third-generation leader of Samsung – a family-controlled conglomerate, known as chaebol in South Korea.
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Originally published on MarketWatch