Market Brief: July 13, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Monday, July 13, 2020
Nasdaq Slides. The Nasdaq Composite Index turned sharply negative as the broad-market rally, led by technology and tech-related stocks, unraveled within the final hour of trade Monday afternoon. The Nasdaq Composite Index closed down 2.1% at about 10,391, but had been up by nearly 2% at 10,824 earlier in the session; the S&P 500 index closed 0.9% lower at 3155 after touching an intraday peak at 3235.32, briefly erasing its year-to-date losses. Meanwhile, the Dow Jones Industrial Average gave up its solid gains to cut its rally substantially. The Dow closed with a gain of about 0.04% at about 26,086, but had hit a Monday peak at 26,639. News of reclosing in coronavirus-ravaged states, particularly California, partly helped to derail the day’s strong opening gains.
DJIA 26,085.80 10.50
S&P 500 3,155.22 -29.82
NASDAQ 10,390.84 -226.60
US 10-Year Note 0.62 -0.02
Dollar Index 96.55 -0.10
Crude Oil 39.62 -0.93
Gold 1,804.30 2.40
Global Dow 2,904.45 10.88
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Second-Quarter Earnings Season Will Be Ugly. Here’s What to Expect.
PepsiCo kicked off what might be the most bizarre earnings season in memory Monday morning.

The second quarter of 2020 included an April of nationwide economic lockdown, a May of rapid reopening and releasing of pent-up demand, and a June in which that recovery met new coronavirus outbreaks and some reimposed restrictions on activity in certain states. Through it all, consumers and businesses have been forced to adjust their daily tasks, working conditions, and spending patterns to a pandemic-impacted world. Needless to say, it was a difficult quarter to predict.

Wall Street analysts have given it their best shot. Consensus bottom-up estimates are for S&P 500 revenues to fall 12% from the second quarter of last year, while earnings are expected to tumble 44%. While that most likely won’t be the exact result, 10 points in either direction is an ugly number. (Pepsi reported results that were better than feared.)

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Analog Devices Agrees to Buy Maxim for $20B
In a deal reverberating through the semiconductor industry, Analog Devices announced an agreement to buy rival Maxim Integrated Products in an all-stock combination valued at about $20.5 billion.

The terms call for Maxim holders to receive 0.63 Analog Devices shares for each Maxim share. After the transaction closes, current Analog holders will have 69% of the combined company, with Maxim holders owning 31%. The deal is structured to be tax-free for U.S. income-tax purposes. Wells Fargo analyst Gary Mobley noted that this would be the largest chip-sector deal in four years—since Intel’s acquisition of MobileEye and Analog Devices’ acquisition of Linear Technology—and should buoy other chip shares.

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Pfizer, BioNTech Vaccines Get FDA Fast Track Designation
Shares of Pfizer and American depositary receipts of German biotech BioNTech jumped on Monday after the companies announced that the Food and Drug Administration had granted Fast Track designation to two Covid-19 vaccines that the companies are developing jointly.

The FDA grants Fast Track designation to speed review and approval of experimental drugs that could fill unmet medical needs. The Pfizer and BioNTech vaccines aren’t the first to receive the nod: In May, Moderna said that the FDA had given its experimental Covid-19 vaccine a Fast Track designation.

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Sunbelt States Are Breaking the Wrong Record as Covid-19 Cases Surge
U.S. Covid-19 case counts have risen steadily in recent weeks, particularly in Southern states where governors pushed to reopen their crimped economies. Sunday, Florida set a record with its one day jump of over 15,000 new cases—well above the 12,274 daily peak that New York state suffered back in April.

The Sunbelt spike can’t solely be blamed on increased testing because hospitalizations are rising, too. Hot spot states like Arizona, California, Florida, and Texas may have to reconsider their reopening plans. Few regions can afford complacency. The national number of daily new cases burst past 50,000 as July began and has continued rising in each subsequent day, except two. On Friday, 68,000 additional cases were reported.

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U.S. Budget Deficit Soars to Record $864 Billion in June—Higher Than All of Last Year
The federal government’s budget deficit soared to a monthly record of $864 billion in June, as Washington doled out huge sums of money to try to aid small businesses and unemployed workers amid the coronavirus pandemic.

The increase last month pushed the budget gap for the current fiscal year to $2.7 trillion, compared to $747 billion in the same nine-month period last year, the U.S. Treasury Department said Monday. The government operates on an annual budget that runs from Oct 1. to Sept. 30 instead of using the calendar year more common in the business world.

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OPEC Meeting Has Oil Investors Worried
OPEC+ and its allies may be ready to start pumping more crude, and that prospect is sending shivers through oil markets. Oil prices slipped on Monday. Brent crude futures, the global benchmark, fell 1%, to $42.80 a barrel, on the day. West Texas Intermediate crude futures fell 1%, to $40.18 a barrel.

The alliance is scheduled to meet on Wednesday to discuss its production agreement. Currently, the group has voluntarily reduced production by 9.7 million barrels a day, or about 10% of normal global production. Based on the deal the group extended last month, the cut would be tapered to 7.7 million barrels this month.

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Spartan Buys Fisker for $2.9 Billion. What It Says About Hot Electric-Vehicle Stocks.
It is official. Spartan Energy Acquisition is buying California-based electric-vehicle maker Fisker, in a deal valuing the startup at $2.9 billion—another billion-dollar valuation for the ultrahot alternative-fuel space.

Spartan’s market value crossed the billion-dollar threshold last week when the stock jumped 55% on news of the potential combination. The transaction will bring more than $1 billion in fresh capital to Fisker, the target company, fully funding the development of Fisker’s electric SUV called Ocean.

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Bill Ackman’s Pershing Square Is Going Even Bigger With Its SPAC
Bill Ackman’s Pershing Square Capital Management made a splash in late June, when it filed to raise a $3 billion blank-check company with some unconventional terms.

Willing initial public offering investors are clearly plentiful: On Monday, the hedge fund resubmitted its prospectus to the Securities and Exchange Commission, and is now seeking to raise $4 billion for its special-purpose acquisition company, or SPAC. A listing could come as soon as this week.

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Wealthy Investors Anticipate Permanent Lifestyle Changes After Covid-19
The Covid-19 crisis will have lasting impact on the finances and lifestyles of wealthy investors across the world, a UBS survey released Monday finds.

Three-quarters of wealthy investors surveyed anticipate permanent lifestyle shifts after the pandemic. About 70% say they will reduce travel; 88% say staying healthy is a top priority; and 46% may forsake cities for less populated areas.

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Your Taxes Are Due Wednesday. Here’s What You Need to Know.
It’s time: The July 15 deadline for filing 2019 tax returns is upon us. If the three-month delay still arrived faster than expected, you’re not alone. There are still some moves you can make, including weighing the benefits of extending the deadline to Oct. 15.

The Internal Revenue Service’s postponement of this year’s filing deadline for all individual taxpayers, from the usual April 15 to July 15, gave welcome breathing room during the disruptive early months of the Covid-19 pandemic. While Treasury Secretary Steven Mnuchin indicated in late June that there was a chance of another postponement, the IRS swiftly put an end to that notion.

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