Market Brief: April 6, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Monday, April 6, 2020
Optimism on Coronavirus. U.S. stocks closed sharply higher Monday, buoyed by declining numbers of deaths from Covid-19 in New York City and Europe. The Dow Jones Industrial Average jumped about 1,627 points, or 7.7%, to close near 22,680, while the S&P 500 added about 175 points, or 7.0%%, to close at about 2663. The Nasdaq Composite Index rose about 540 points, or 7.3%, to close near 7913.
DJIA 22,679.99 1,627.46
S&P 500 2,663.68 175.03
NASDAQ 7,913.24 540.15
US 10-Year Note 0.68 0.08
Dollar Index 100.73 0.15
Crude Oil 26.21 -2.13
Gold 1,708.40 62.70
Global Dow 2,479.68 115.17
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CEO Jamie Dimon Says JPMorgan Chase Can Weather the Storm
JPMorgan Chase CEO James Dimon said in his annual letter to shareholders that the bank’s earnings will be down “meaningfully” this year but touted the company’s broad strength.

JPMorgan Chase has $500 billion in liquid assets and an additional $300 billion in borrowing capacity from the Federal Reserve that it can use to support loans, Dimon said, adding that those figures don’t include additional capacity under some of the Fed’s newly created credit facilities.

Dimon also noted the stability of JPMorgan’s dividend—something that has been called into question at all of the major U.S. banks after their European counterparts were urged to suspend their payouts amid the pandemic.

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Oil Is Falling Again. Here’s the Latest on the Global OPEC Production Deal.
After a three-day rally that launched Brent crude futures 50% higher, the momentum reversed on Monday, and oil was down. Cracks are starting to show up in a rescue plan that international negotiators have been discussing.

Investors are awaiting more clarity on a global plan to cut production to reduce the current oversupply of oil. The Organization of the Petroleum Exporting Countries, or OPEC, and its allies, a group known as OPEC+, plan to talk on Thursday after delaying an expected Monday meeting. For OPEC to make a deal, however, the U.S. will likely have to agree to its own coordinated production cut—a drastic change from the competitive free market ethos that has characterized the U.S. oil industry for decades.

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Carnival Stock Rallies After Saudi Stake Disclosure and a ‘Zero Sail’ Assessment
Shares of Carnival, the largest cruise operator, and its peers were making a strong showing Monday morning amid a broad market rally.

One potential piece of good news for Carnival: Saudi Arabia’s sovereign wealth fund recently took an 8.2% stake in the company. Meanwhile, Carnival has enough liquidity to keep the company afloat through November under a “Zero Sail” scenario outlined by analysts at Wells Fargo Securities.

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California Wildfire Victims Now Are Insisting on a Better Deal from PG&E
California wildfire victims are pushing for a better deal from PG&E.

Pacific Gas & Electric and its holding company PG&E have been in bankruptcy court since January 2019, when they filed to manage the potential costs of a series of historically destructive wildfires caused by the utility’s equipment. On Monday, attorneys representing victims of those wildfires in effect withdrew from a $13.5 billion settlement they reached with the utility late last year. They told the court that their mediation process with the company was “at an impasse.”

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The Fed Has Averted a Systemic Financial Crisis—For Now. Here are 3 Areas to Monitor.
Bad news is said to come in threes, but let’s hope full-blown crises don’t. The Covid-19 global health crisis rapidly became a global economic crisis, but, so far, it has not touched off a financial crisis.

U.S. banks, for the most part, are in good shape, and central bankers injected trillions of dollars to stabilize financial markets—and stand willing to do more. But three areas—emerging markets, corporate bonds, and, of course, the banks themselves—require close monitoring to ensure today’s fragile fiscal stability doesn’t turn into a big problem.

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Citigroup Says Over 10% of High-Yield Bonds Could Default
The high-yield bond market might be rebounding, but strategists are warning that there could be more pain to come—Citigroup says that more than 10% of the market could default.

The two biggest high-yield bond exchange-traded funds rose Monday as investors seemed incrementally more optimistic about a rebound in U.S. economic growth after signs that the spread of coronavirus could be slowing.

But buyers may want to dial down their optimism about lower-rated bonds. Unlike the investment-grade market, the market for high-yield debt won’t get Federal Reserve support. And Wall Street strategists say that risky companies are far more likely to default than they were before the coronavirus brought the economy to a standstill.

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Vir Biotechnology Strikes Covid-19 Deal With GlaxoSmithKline
Shares of Vir Biotechnology leapt more than 25% on Monday, after the company said it is collaborating with GlaxoSmithKline to develop an antibody drug to treat Covid-19.

Vir and GlaxoSmithKline said they believe they could begin testing Vir’s Covid-19 drug candidates in Phase 2 clinical trials within three to five months.

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Gilead Expects to Have 1 Million Doses of an Experimental Covid-19 Drug by Year-End
The biotech company Gilead said it is donating its supply of 1.5 million doses of remdesivir, an antiviral drug being tested as a potential treatment for Covid-19. That would likely be enough to treat 140,000 patients.

The announcement came in a letter from Gilead CEO Daniel O’Day, issued on Saturday. O’Day said the company was working to boost production of remdesivir, cutting the amount of time it takes to produce the drug from a year to six months. He said the company aimed to have 500,000 treatment courses manufactured by October, and 1 million by the end of 2020.

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Zoom Stock Slides on Growing Security and Valuation Concerns
Zoom Video Communications shares are taking it on the chin as concerns about security issues and the company’s lofty valuation weigh on one of the biggest beneficiaries of the coronavirus pandemic and the related economic fallout.

Credit Suisse analyst Brad Zelnick on Monday cut his rating on Zoom shares to Underperform from Neutral, while lifting his price target on the shares to $105, from $95, still below Friday’s closing level of $128.20.

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Coronavirus Has Been Good for Pot. But Ontario’s Shops Are Deemed Not Essential.
The cannabis business has been one of the few sectors benefiting from the Covid-19 pandemic, as customers rushed last month to stockpile staples they considered essential.

But officials in the Canadian province of Ontario are apparently not among those who consider cannabis essential. Cannabis stores in the province closed down on Saturday, after the government excluded recreational pot from its list of essential businesses.

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