Market Brief: June 30, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Tuesday, June 30, 2020
Strong Quarter. U.S. stock indexes finished higher on Tuesday, capping the best quarter for Wall Street in around 20 years, after strong economic data helped to offset concerns around a rising Covid-19 tally in the U.S. The S&P 500 gained 1.5% to 3100. The Dow Jones Industrial Average rose 0.9%, or 217 points, to about 25,813, based on preliminary numbers. The Nasdaq Composite climbed 1.9% to 10,059. For the month, the S&P is up 1.8%, the Nasdaq gained 6%, and the Dow gained 1.7%. And for the second-quarter, the S&P jumped 18%, the Nasdaq soared 29.4%, and the Dow rose 15.6%. Market participants parsed joint testimony from Powell and Mnuchin about the U.S.’s economic response to the global public health disaster on Tuesday. In economic data, the Case-Shiller house price index rose 4% on an annual basis in April. Meanwhile, the index of consumer confidence
rose to 98.1 this month from a revised 85.9 in May.
DJIA 25,812.88 217.08
S&P 500 3,100.29 47.05
NASDAQ 10,058.77 184.61
US 10-Year Note 0.66 0.03
Dollar Index 97.41 -0.13
Crude Oil 39.35 -0.35
Gold 1,798.80 17.60
Global Dow 2,821.16 22.10
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Consumers Grow Less Frightened. Don’t Expect a Surge in Spending.
Consumers turned less pessimistic about the state of the U.S. economy in June, but confidence remains well below pre-pandemic levels as the coronavirus continues to spread and tens of millions remain unemployed.

The Conference Board, a private research group, on Tuesday said its gauge of consumer confidence jumped to 98.1 in June from 85.9 in May. The increase was much better than expected; economists surveyed by FactSet expected a rise to 90.6. While improving confidence is welcome insofar as it suggests consumers are increasingly likely to spend and power the economic recovery, sentiment remains far below the 132.6 level notched in February.

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Oil Major Royal Dutch Shell Warns of $22 Billion Hit
Anglo-Dutch oil supermajor Royal Dutch Shell said on Tuesday it expects to take a hit of up to $22 billion in the second quarter as coronavirus has a lasting effect on demand for oil and gas.

In a trading update on Tuesday, Shell said it would book charges between $15 billion and $22 billion in the second quarter as it lowered its mid- and long-term oil and gas price outlook, citing the pandemic and its shift to lower carbon emissions.

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Exxon Mobil Resists Write-Downs as Oil, Gas Prices Plummet
As its peers write down U.S. shale assets by billions of dollars amid lower oil and gas prices, Exxon Mobil stands increasingly alone in not adjusting the value of its holdings.

Exxon has yet to write down any shale assets this year, holding to a belief that oil and gas values will eventually rebound. Several oil and gas accounting experts allege that Exxon’s reticence to adjust the value of shale assets on its balance sheet amounts to accounting fraud. In a series of complaints filed to U.S. authorities, they argue that the company is deceiving investors by failing to write down much of the value of XTO Energy, a natural-gas driller it purchased for $31 billion a decade ago, along with other assets.

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Boeing Loses Another Big 737 MAX Order
Commercial aerospace and defense giant Boeing lost another customer for its troubled 737 MAX jet as Norwegian Air Shuttle canceled an order for 92 planes.

It isn’t the first cancellation Boeing has dealt with since the MAX was grounded in March 2019. Orders for more than 100 planes were canceled in April and more than 300 have come off the books in 2020, a result of “contractual changes.”

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Uber Is Reportedly Close to Deal to Buy Food-Delivery Rival Postmates
Uber Technologies may have finally found itself a partner in the food-delivery business. Both The Wall Street Journal and the New York Times are reporting that the company is close to a deal to buy privately held Postmates for about $2.6 billion.

The combination comes weeks after Uber tried but failed to acquire Grubhub, which instead accepted a bid from European food-delivery company Just Eat Takeaway.

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Lululemon Is Buying Mirror. Why That’s a Smart Move.
Lululemon Athletica just spent half a billion dollars to buy at-home workout startup Mirror, and its shares are climbing. The cost might look steep, but analysts agree it is a good strategic move for Lululemon.

The stock has risen 34.5% year to date, as yoga gear not only doubles as office wear in the age of Covid-19, but also fits well with consumers’ renewed focus on wellness. The Mirror deal gives it a way to engage with consumers to boost loyalty and sales even if stores aren’t open, while also tapping into the hot at-home fitness trend, which may have even longer legs if new virus hot spots force gym closures. Time will tell whether the price was right.

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YouTube TV Boosts Its Price by 30%. It’s Starting to Look a Lot Like Cable.
Cutting the cord just got a little more expensive.

YouTube TV on Tuesday said in a blog post it is raising the price of the virtual cable television service by 30%, to $64.99 a month from $49.99. The new price for the service, which is operated by Alphabet, is effective Tuesday for new users, and will be rolled out quickly to existing subscribers.

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As Coronavirus Cases Spike in Reopened States, Diners Turn Away From Restaurants
Coronavirus outbreaks in Arizona, Florida, South Carolina, and Texas are causing consumers to pull back from high-risk activities and threatening the nascent recovery. To see how, one needs only to look at the restaurant scene.

The number of seated diners at restaurants has dropped by 20% in Arizona and Texas over the past few weeks, according to Barron’s analysis of daily data published by Open Table, and by more than 10% in Florida and South Carolina.

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Conagra’s Sales Jump
Conagra Brands stock was rising Tuesday, after the packaged-food maker’s upbeat forecast and fiscal fourth-quarter earnings report.

Conagra said it earned 75 cents a share on revenue of $3.29 billion. Analysts were forecasting earnings of 51 cents on revenue of $3.13 billion. The company highlighted a 21% increase in volume and favorable pricing behind its 21.5% increase in organic sales in the quarter, related to increased at-home food consumption during the Covid-19 pandemic.

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Wells Fargo Was Forced to Cut Its Dividend After Fed Stress Test
Wells Fargo shares fell in late trading Monday after confirming that it will have to cut its third-quarter dividend. The stock closed slightly lower on Tuesday.

The announcement comes three days after the Federal Reserve released the results of its annual stress test. While the regulator said that the banking sector was well-capitalized and equipped to handle “the harshest shocks,” it nevertheless put restrictions on the level of capital banks can return to shareholders. Share repurchases are halted, dividends are capped at second-quarter payouts, and further dividends are limited to an average of recent earnings.

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