Market Brief: April 7, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Tuesday, April 7, 2020
U-Turn. U.S. stocks gave back strong gains in late-afternoon trading on Tuesday, with major indexes dipping into negative territory in the final minutes of the day. Stocks had been sharply higher for a second day, fueled by optimism regarding the cresting of the Covid-19 coronavirus wave in several hot spots around the world. But signs of increasing stockpiles of oil sent benchmark prices plunging, dragging energy sector shares from their day’s highs. And data from the U.S. Centers for Disease Control and Prevention out on Tuesday afternoon showed a possible reacceleration in the U.S. coronavirus outbreak.
DJIA 22,653.86 -26.13
S&P 500 2,658.85 -4.83
NASDAQ 7,887.26 -25.98
US 10-Year Note 0.73 0.05
Dollar Index 99.93 -0.75
Crude Oil 24.10 -1.98
Gold 1,682.30 -11.60
Global Dow 2,510.92 31.93
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Exxon Announces Big Spending Cuts
Exxon Mobil has become one of the last major oil companies to announce budget cuts in response to Covid-19, and its moves are impressing Wall Street. The stock closed 2.0% higher Tuesday.

Exxon, which had been spending more aggressively than peers, is now cutting more aggressively, too. The company will reduce its capital spending to $23 billion this year, from an expected $33 billion. It will also reduce operating expenses by 15%.

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3M Is Going to Import 167 Million Masks Following Trump Tweet
3M and the Trump administration reached an agreement to import 167 million masks into the U.S. over the next three months, addressing anger by the president over exports of protective gear at a time when equipment in this country is in short supply.

Mike Roman, the company’s CEO, said the imports will supplement the 35 million N95 respirators 3M currently produces each month in the U.S. Including local production, 3M plans to supply more than 270 million masks over the next three months. The imports will come primarily from 3M facilities in China.

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TJX, With 286,000 Workers, Is Latest Retailer to Plan Furloughs
TJX, parent company of T.J. Maxx, Marshalls, HomeGoods, Sierra, and Homesense, plans to begin temporary furloughs after April 11, the company disclosed in an SEC filing on Tuesday.

As of Feb. 1, TJX had about 286,000 employees globally. Such plans would affect the majority of store and distribution center associates in the U.S. Existing employee benefits will continue for eligible employees at no cost. It plans to take comparable actions with respect to its non-U.S. workforce.

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Banks Are Lending to Companies at the Fastest Rate Ever. Households, Not So Much.
The economy is in free fall and businesses are desperate for cash. The good news is that, for the past few weeks, they have been getting at least some of what they need from the banks. Households have been less fortunate.

The amount of commercial and industrial loans outstanding jumped by $365 billion between March 11 and March 25, according to new data published by the Federal Reserve. That represents a 15.4% increase in the span of two weeks, which is by far the fastest growth rate in C&I lending since the data begin in 1973.

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Activist Investor Bill Ackman Is Feeling Positive These Days About the Markets
After warning last month that “hell is coming,” billionaire hedge fund manager Bill Ackman is starting to feel optimistic.

The sometimes-activist investor behind Pershing Square disclosed his newfound optimism in a series of tweets Sunday and in Pershing Square’s annual report, released late Monday. Ackman said that the aggressive use of lockdowns and stay-at-home orders to prevent the spread of the coronavirus appears to be working, meaning that his worst fears about the virus’ spread—and hell coming—may not be realized. He said he was also encouraged by recently passed fiscal relief to the country’s workforce.

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WeWork Outside Directors Sue SoftBank Group Over Canceled $3B Tender Offer
The strained relationship between SoftBank Group and WeWork continues to create new drama.

As expected, WeWork parent We Co. has filed a lawsuit against SoftBank Group on behalf of a special committee of outside directors, seeking to force its single largest investor and financial rescuer to complete a now-terminated tender offer for $3 billion of WeWork shares.

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Digital Advertising Rates Are Down by 30%, IAC Says
Digital ad rates are falling hard. It isn’t just that there are fewer ads—the remaining ones are generating less revenue.

That was one of the more startling disclosures in a lengthy letter to shareholders published Monday night by IAC CEO Joey Levin. A holding company best known for its large stake in the digital dating company Match Group, IAC operates a variety of ad-supported businesses, in particular through a set of content sites under the company’s Dotdash unit. In the letter, IAC said it is seeing ad rates down about 30% year over year across its ad-related businesses.

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Kraft Heinz Reports ‘Surging Demand’
“Surging demand” during the coronavirus outbreak is driving better-than-expected sales growth for Kraft Heinz, the company said Monday.

The company said in an update Monday that it now expects 3% sales growth in the first quarter. That is about $200 million better than Wall Street was modeling. Investors appeared to like the news. Kraft Heinz stock was trading 2.7% higher late in Tuesday’s session.

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Big Luckin Coffee Investor Sells Entire Stake
Luckin Coffee has seen a big investor sell off the Chinese coffee chain’s shares after the company disclosed that an executive may have been providing false data that boosted its sales figures.

Lone Pine Capital had been a buyer of Luckin’s American depositary receipts late last year. It disclosed an overall investment of 6.1 million Luckin ADRs, a 14.5% stake, as of Nov. 29. But according to an SEC filing, Lone Pine’s stake in Luckin slipped below 5% on April 2—the day the alleged fraud was disclosed—and by the next day, it was zero.

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Mallinckrodt Refinances Debt
Shares of the embattled generic-drug company Mallinckrodt jumped on Tuesday morning after the company filed notice with the Securities and Exchange Commission that it had refinanced $495 million in debt due this year. Creditors agreed to exchange the 2020 bonds for higher-yielding bonds due in 2025.

Mallinckrodt shares have been slammed in recent years, as the company has struggled under a heavy debt load, an avalanche of opioid lawsuits, and other challenges. The company reached a tentative deal in February to settle the thousands of opioid lawsuits it faces. Under the terms of that deal, certain Mallinckrodt subsidiaries, including SpecGx, will file for bankruptcy and pay $1.6 billion to the opioid plaintiffs.

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