Market Brief: July 15, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Wednesday, July 15, 2020
Vaccine News Spurs Gains. U.S. stocks finished higher on Wednesday as corporate earnings came in better than expected and positive developments around a Covid-19 vaccine helped to buoy investor sentiment, despite the U.S. notching a record tally of new Covid-19 cases. The Dow Jones Industrial Average gained 228 points, or 0.9%, to end at 26,870, based on preliminary numbers. The S&P 500 rose 0.9% to close at 3227, while the Nasdaq Composite gained 0.6% to finish around 10,550. The Federal Reserve’s Beige Book reported that economic activity increased in almost all its districts, but remained well below where it was prior to the Covid-19 pandemic. Moderna shares rallied sharply after the biotech firm reported promising results from a study of its coronavirus vaccine candidate.
DJIA 26,870.10 227.51
S&P 500 3,226.56 29.04
NASDAQ 10,550.49 61.91
US 10-Year Note 0.62 -0.00
Dollar Index 96.04 -0.22
Crude Oil 40.97 0.68
Gold 1,813.80 0.40
Global Dow 2,960.36 38.18
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Here Are the Long-Awaited Data on Moderna’s Vaccine Trial. So Far, So Good.
Moderna’s announcement of positive data on a Phase 1 trial of its Covid-19 vaccine in May was met with skepticism from some experts, who noted that the company had not included much detail on the trial’s outcome in its press release. Now, two months later, that detail is here.

The vaccine “induced anti–SARS-CoV-2 immune responses in all participants, and no trial-limiting safety concerns were identified,” says a New England Journal of Medicine paper published on Tuesday evening. “These findings support further development of this vaccine.”

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Positive Data Reportedly Are Coming for AstraZeneca Covid-19 Vaccine Trial
Shares of U.K.-based drugmaker AstraZeneca surged Wednesday on an anonymously sourced report from a prominent British journalist claiming the medical journal The Lancet will publish “positive news soon” on the Covid-19 vaccine the company is developing with Oxford University.

The brief article, which appeared early Wednesday on the website of the British television network ITV, was by Robert Peston, ITV News’ political editor. Peston writes that The Lancet will publish positive news on the Oxford vaccine, and that the paper will show that the vaccine elicited both antibody and T-cell responses in study participants.

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Apple and Ireland Win Appeal in EU Dispute
The European General Court ruled on Wednesday that the European Commission was wrong in 2016 to order Ireland to claw back some €13.1 billion ($14.9 billion) from Apple as undue tax advantages deemed illegal state aid.

Even though Apple and the Irish government, which had appealed the decision, rejoiced at the ruling, this may not be quite the end of the legal story. The Commission has the right to appeal to the Court of Justice of the European Union—the EU’s highest court—and it may take another few years before a final ruling is issued.

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Increased Trading Helps Goldman Sachs Smash Earnings Estimates
Goldman Sachs Group just reported a blowout quarter, thanks to a surge in trading and underwriting.

Goldman Sachs saw net revenue of $13.3 billion for the quarter ending June 30, blowing past analysts’ estimates of $9.8 billion and marking the bank’s second-highest quarterly revenue ever. Earnings per share totaled $6.26, again eclipsing Wall Street’s projections of $3.78 a share, as well as the profit of $5.81 a share from the same quarter a year ago. The strong result was largely the result of increased trading activity amid the volatility of the second quarter.

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Uncertainty Colors Business Outlook Even as Reopening Boosts Activity
Business activity has mostly picked up across the U.S., though the outlook remains uncertain and activity remains well below pre-pandemic levels, the Federal Reserve’s latest collection of anecdotes from its 12 districts shows.

The beige-book report, prepared based on information collected by regional Fed banks on or before July 6, gives investors an anonymized glimpse of the economy from businesses at the ground level. As lockdowns lifted and businesses reopened, many respondents reported that demand picked up and prompted hiring. But as the coronavirus continues to spread and threatens reopenings, businesses remain worried about the magnitude of the pandemic’s economic implications.

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Surging Factory Output Supports Case for V-Shaped Industrial Recovery
Investors still betting on a V-shaped recovery, at least in some parts of the U.S. economy, got a batch of good news that underpins hope that the worst is over for the beleaguered industrial sector.

Industrial production climbed 5.4% while manufacturing output jumped 7.2% in June from a month earlier, the Federal Reserve said Wednesday. Economists expected increases of 4.3% and 5.5%, respectively, according to FactSet. In May, those rates were 1.4% and 3.9%, respectively.

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The Manufacturing Sector Is on the Mend, New York Factory Survey Suggests
Industrial stocks have been hammered this year, lagging behind the broader market as the coronavirus pandemic slowed factory activity and trade tensions linger. A report Wednesday offers a glimmer of hope that the worst for the sector might be over.

The Federal Reserve Bank of New York said its Empire State manufacturing index, comprising survey results collected July 2 through July 9, rose for the first time since the pandemic took hold in the U.S. as demand sprang back. It came in at a better-than-expected 17.2 for July, breaking a streak of contracting activity that included record lows in May and April. Economists surveyed by FactSet predicted an improvement to 10 from minus 0.2 in June.

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Oil Rises on OPEC Deal and Inventory Drop. Don’t Expect Further Gains Soon.
After a shaky few days, oil prices rose on Wednesday following an unsurprising result at an OPEC meeting and better-than-expected government data out of the U.S.

Brent crude, the global benchmark, settled 2.1% higher to $43.79 on Tuesday, as West Texas Intermediate crude prices settled up by 2.3% to $41.20. Oil stocks were rising, with U.S. producer Diamondback Energy up 1.3%.

OPEC and its allies, a group known as OPEC+ that includes Russia, agreed to boost production by 2 million barrels a day in August. That would leave the group’s production of 7.7 million barrels below normal levels, rather than its current 9.7 million barrel cut. The production increase threatens to result in another oil glut, but OPEC ministers have said that the production increase will be buffered by more cuts from countries like Iraq that didn’t comply with the group’s prior deal.

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UnitedHealth Beats Earnings Expectations but Says Costs Will Come Later This Year
The health insurance giant UnitedHealth Group reported second-quarter earnings of $7.12 a share Wednesday, higher than the FactSet consensus estimate of $5.28 per share. The company attributed the number to patients deferring medical care due to the Covid-19 pandemic.

“The Company expects these results will be offset in the quarters ahead by…the resumption of deferred care and future COVID-19 cost and economic impacts,” UnitedHealth Group said. Demand for care had hit relatively normal levels by the end of the second quarter, after falling dramatically from mid-March through April, the company said.

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Beyond Meat Is Entering Brazil, in Latest Expansion
Beyond Meat is expanding its geographic borders again. The company announced a new partnership on Wednesday to bring its alternative-protein products into Brazil.

Beyond Meat products will start off in 19 St. Marche locations across São Paulo. St. Marche is owned by private-equity firm L Catterton.

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