Market Brief: April 13, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Monday, April 13, 2020
Mostly Lower. Stocks trimmed their losses at the end of Monday’s trading, pushing the tech-heavy Nasdaq into positive territory, as investors weighed the prospects for a U.S. recovery once the lockdowns instituted to stem the Covid-19 pandemic are lifted. The S&P 500 fell 1% to end around 2,762. The Dow Jones Industrial Average fell 329 points, or 1.4%, to finish near 23,391, based on preliminary numbers. The Nasdaq Composite rose 0.5% to end at 8,192. Equities struggled to find their direction amid continuing questions around how the U.S. economy might recover from the unprecedented, exogenous shock of the coronavirus. At the same time, signs that the coronavirus may be nearing a peak soon in the U.S., along with a deal to end a month-long price war between Russia and the Organization of the Petroleum Exporting countries helped to give more bullish investors hope
that financial markets would find their footing.
DJIA 23,390.77 -328.60
S&P 500 2,761.63 -28.19
NASDAQ 8,192.42 38.85
US 10-Year Note 0.75 0.03
Dollar Index 99.42 -0.10
Crude Oil 22.62 -0.14
Gold 1,765.70 12.90
Global Dow 2,562.87 -20.27
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Oil’s Wild Ride Continues After Trump Says Production Cuts Could Be Much Deeper
Oil prices seesawed on Monday morning, as an underwhelming OPEC production deal over the weekend was overshadowed by two tweets from President Donald Trump saying that production cuts would be much deeper.

West Texas Intermediate futures, the U.S. benchmark, rose, then fell and then rose again after Trump’s tweet. Around 10:20 a.m., they were up 3.5%, to $23.56 a barrel. Brent futures, the international benchmark, also moved up and down, and were up about 1.6%, to $31.98 a barrel. Oil prices had been rising this month in anticipation of a deal.

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Ford Issues First-Quarter Profit Warning
Ford Motor on Monday released some first-quarter earnings and balance-sheet numbers ahead of the company’s earnings call later in April, and its stock tumbled following the news.

Ford said it would report an adjusted pretax loss of roughly $600 million and that deliveries to dealers plunged 21%. Frankly, this shouldn’t be a surprise. Things aren’t great for car makers right now. For starters, production was halted industrywide in March and plants aren’t slated to reopen until early May.

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Ford Teams Up With 3M and Thermo Fisher to Make Health Equipment
Ford Motor, the iconic American auto maker, is getting into the health-care business in a big way, partnering with 3M, Thermo Fisher Scientific and others to make respirators, face shields, gowns, ventilators and Covid-19 test kits needed in the fight against the deadly virus.

It is an interesting time in the automotive industry to say the least. U.S. production was halted in mid-March and auto firms, including Ford, General Motors, and Tesla, have raced to change over assembly lines to manufacture health-care equipment to help battle the pandemic.

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SoftBank’s Latest Write-Down Stems from $10 Billion in New Vision Fund Losses
SoftBank Group this morning announced a $16.7 billion write-down on the value of its SoftBank Vision Fund for its fiscal year ended in March.

While the company’s announcement didn’t specify how much of the charge stemmed from new investment losses, a fund spokesman tells Barron’s that the latest write-down reflects $9.9 billion of lost value in the quarter that ended in March. With the new write-down, the fund has posted an investment loss of about $400 million since its 2016 inception, wiping out cumulative gains of $9.5 billion through December.

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Amazon to Hire 75,000 More Employees Amid Strong Demand
E-commerce and cloud giant Amazon said it was hiring 75,000 more employees, in addition to the 100,000 it already hired, to help meet increased demand. Shares rallied Monday following the news.

The company said it now expects to invest more than $500 million in payroll increases, up from a previous estimate of $350 million, as hourly employees’ wages are increased by $2 an hour, and as hourly base pay for overtime hours worked was doubled.

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GE Is Refinancing, With Billions in Longer-Term Debt
General Electric continues to aggressively manage its balance sheet. The company announced a debt deal on Monday, tendering for bonds due before 2024. The move essentially replaces shorter-term debt with longer-term debt.

General Electric has roughly $35 billion in bonds due between now and 2024. The final amount of the new debt sale will depend on the market, but it could amount to tens of billions.

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Apple iPhone Sales Surged in China, but Competition From 5G Phones Is Rising
Apple iPhone sales in China staged a dramatic rebound in March, new data show, as the market begins to recover from the supply and demand shocks caused by the onset of the coronavirus pandemic.

In March, according to new data from China’s Ministry of Industry and Information Technology, total handset sales were up 241% from February to 21.8 million units, though still down 23% from a year earlier. The total included 6.2 million 5G phones, up 161% from February, and accounting for 27% of all phones shipped, down from 37% a month earlier.

Barclays analyst Tim Long says this reflects a 416% surge in iPhone sales in March from February, to about 2.5 million units, shifting the balance back to 4G phones. Apple is expected to announce its first 5G iPhones later this year.

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New Data on Gilead’s Covid-19 Drug Is Positive but Inconclusive
New data on 53 Covid-19 patients treated with Gilead Sciences’ remdesivir may raise hopes for the success of continuing trials, but isn’t conclusive enough to show whether the experimental drug can help people survive serious cases of the disease.

The data, published Friday in the New England Journal of Medicine, were from hospitalized patients given the drug on a compassionate-use basis, not from a clinical trial. There was no control group randomly selected to receive a placebo. That makes it difficult to determine exactly what the results mean.

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Eli Lilly Arthritis Drug Will Be Tested in Seriously Ill Covid-19 Patients
An Eli Lilly drug designed to treat arthritis is the latest anti-inflammatory being tested as a potential treatment for seriously ill Covid-19 patients.

On Friday, Eli Lilly said its drug baricitinib, which the Food and Drug Administration has approved as a treatment for rheumatoid arthritis, would be included in a large study run by the National Institute of Allergy and Infectious Diseases to test various potential therapies to treat Covid-19.

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The View From Space: China Hasn’t Started Rebound
Investors are watching China for clues about how the global economy—and the U.S. economy specifically—will pick up once the spread of the coronavirus slows and lockdowns lift. They should be wary.

Official reports from the Chinese government, a set of closely followed purchasing managers’ indexes, recently showed that Chinese manufacturing and service-sector activity unexpectedly expanded in March after suffering the worst contractions on record in February. Some investors and economists found in the news reason to be optimistic about the ability of economies around the world to rebound quickly once the virus threat dissipates. But that optimism requires an assumption the data are accurate.

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