Market Brief: July 7, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Tuesday, July 7, 2020
Economic Worries Weigh on Market. U.S. stocks closed sharply lower Tuesday as investors assessed the economic damage from the coronavirus pandemic and a White House aide said the Trump administration wanted to put a cap on an upcoming fiscal stimulus package. The Dow Jones Industrial Average fell 397 points, or 1.5%, to close near 25,890, while the S&P 500 lost 34 points, or 1.1%, closing near 3145. The tech-heavy Nasdaq, which was in positive territory most of the day, closed near 10,344, down 90 points, or 0.9%. The stock selloff intensified in the afternoon after Federal Reserve officials expressed concern about the pandemic’s economic impact. Investors continued to reward biotech companies that may offer the best treatments for the virus: Novavax shares surged over 31% Tuesday after it said it had secured $1.6 billion in government funding for its vaccine.
DJIA 25,890.18 -396.85
S&P 500 3,145.32 -34.40
NASDAQ 10,343.89 -89.76
US 10-Year Note 0.64 -0.04
Dollar Index 97.00 0.28
Crude Oil 40.34 -0.29
Gold 1,808.40 14.90
Global Dow 2,880.46 -33.35
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Novavax Gets a $1.6 Billion U.S. Infusion for a Covid-19 Vaccine
The biotech company Novavax took a leap forward in the Covid-19 vaccine race Tuesday morning, announcing that the U.S. government had awarded it $1.6 billion to test and manufacture its Covid-19 vaccine.

The company will deliver 100 million doses of the vaccine to the federal government, which it said could be ready “as early as late 2020.”

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The U.S. Is Buying $450M of Regeneron’s Experimental Covid-19 Antibody
A day after announcing the start of late-stage trials of an antibody cocktail designed to treat and prevent Covid-19, Regeneron Pharmaceuticals said it had signed a $450 million contract with the U.S. government to procure up to 1.3 million doses of the drug. The company said the first doses could be ready as early as the end of the summer.

Regeneron stock jumped 2% on Tuesday morning. The stock rose 0.8% on Monday on both positive and negative Covid-19 updates from the company: Disappointing results in a trial of its arthritis drug Kevzara in serious Covid-19 patients, and promising results in a small safety trial of the antibody cocktail.

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Carnival Cancels More Cruises Due to Virus, and Delays or Adjusts Other Sailing Itineraries
Carnival has canceled more sailings, pushed back others, and redeployed some of its ships—the latest signs of the continuing damage wrought by the coronavirus pandemic on the cruise industry.

The company said in a release that itineraries of the ship Mardi Gras out of Port Canaveral, Fla., from Nov. 14 through Jan. 30, 2021, have been canceled. Instead, that ship, which can hold more than 5,000 passengers, is scheduled to enter into service in early February of next year.

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Secretive Data Analytics Company Palantir Files Confidentially for IPO
Palantir Technologies said on Monday that it had filed confidentially with the Securities and Exchange Commission for an initial public offering.

That, in fact, is all that the notoriously secretive Palo Alto, Calif.-based data analytics company said about its plan—there are no details on bankers, timing, or the size of the offering.

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Judge Casts Doubt on Part of Bayer’s Roundup Settlement
Bayer stock tumbled on Tuesday, after a district judge hinted he would reject part of the company’s $10.9 billion plan to settle lawsuits claiming Roundup causes cancer.

The German chemicals giant announced at the end of June it had agreed to pay up to $10.9 billion to settle close to 100,000 lawsuits claiming Roundup had caused cancer. The company acquired the weed killer when it bought U.S. agribusiness Monsanto for $63 billion in 2018, inheriting its legal liabilities. Bayer has lost three jury trials in recent years totaling more than $2 billion in damages, all of which are being appealed and aren’t covered by the settlement. The company has consistently denied allegations of a link between the herbicide and cancer.

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Walmart Reportedly Is Ready to Take On Amazon Prime
Walmart shares were soaring Tuesday on a report that the company late this month will introduce an Amazon Prime-style subscription service called Walmart+.

According to the technology news site Recode, the new service will cost $98 a year, and include same-day grocery delivery, fuel discounts at Walmart gas stations, and early access to product deals, among other features. Recode had originally reported on the program in February; at that time Walmart+ was supposed to roll out in March or April. But the launch apparently was delayed by the onset of the Covid-19 pandemic.

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A U.S. Ban on TikTok Probably Won’t Happen, Analyst Says
The popular video-sharing app TikTok may be in the White House’s crosshairs. Though RBC Capital Markets analyst Mark Mahaney doesn’t expect TikTok to be banned, shares of rival Snap were rising Tuesday.

Secretary of State Mike Pompeo said on Fox News Monday night that the U.S. is considering banning Chinese-owned social media apps like TikTok. The app was recently banned in India over concerns that the app’s owner could share user data with China. The company has denied such claims.

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A Home Price Slump Is Coming
Despite relatively steady home price appreciation in May, the U.S. housing market is on the precipice of an extended price slump, according to a CoreLogic report released Tuesday. The housing data provider’s May Home Price Index and HPI Forecast report predicts a year-over-year home price decrease of 6.6% by May 2021.

The forecast comes on the heels of a host of relatively positive housing data that found demand picking up after its initial coronavirus-induced decline in early spring. Home prices in May 2020 grew 4.8% from the same month in 2019 and 0.7% from April 2019, according to the CoreLogic report—greater than the 0.3% month-over-month increase CoreLogic predicted in April.

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A Majority of Consumers Expect Brands to Take a Stand on Social Issues
As the U.S. confronts a pandemic, economic downturn, and rising social unrest, a majority of consumers expect companies to take a stand on these issues, according to a new survey.

Nearly 60% of Americans want the companies they buy products from to have a position about issues such as racial discrimination and social justice, a survey carried out in June among 1,004 respondents found. Roughly 50% of the survey’s respondents said they often do online research to see how a brand reacted to the social issues.

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How Home Depot and Other Retail Stocks Would Fare in a Blue Wave
With just a few months left until the election, polling indicates increasing support for presumptive Democratic presidential candidate Joe Biden. Given that he has expressed support for at least some rollback of corporate tax cuts, RBC Capital Markets argues that investors should be aware of how that eventuality could hit retailer earnings.

Analyst Scot Ciccarelli takes a look at the sector Tuesday, writing that the Tax Cuts and Jobs Act (TCJA), which lowered the federal corporate tax rate to 21% from 35%, would likely come under pressure if Biden wins the presidency, as he has talked about increasing that rate to 28%. That would represent a 4% to 9% earnings hit for the retailers he covers, while a return to the 35% rate—which other Democrats have advocated for—would mean a 10% to 18% earnings headwind.

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