Market Brief: March 24, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Tuesday, March 24, 2020
Dow’s Best Day Since 1933. Stocks soared on Tuesday after the U.S. Senate appeared to be closing in on an agreement over a multitrillion-dollar economic rescue bill. “If last night we were on the five-yard line, I’d say now we’re on the two-yard line,” said Senate Minority Leader Chuck Schumer on Tuesday. The Dow Jones Industrial Average closed Tuesday up 2,093 points, or 11.3%, to trade well above 20,000 points again and notch its greatest one-day gain since 1933. The S&P 500 rose 9.3%, and the Nasdaq Composite gained 8.1%.
DJIA 20,424.33 1,832.40
S&P 500 2,447.33 209.93
NASDAQ 7,417.86 557.18
US 10-Year Note 0.84 0.05
Dollar Index 101.98 -0.50
Crude Oil 24.11 0.75
Gold 1,663.00 95.40
Global Dow 2,327.25 188.28
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
GM Says It Will Borrow Billions and ‘Aggressively’ Preserve Cash
General Motors said Tuesday it was pushing hard to conserve cash and drawing down $16 billion from previously existing credit lines as it confronts the financial toll of the coronavirus outbreak.

The company is “aggressively pursuing austerity measures” to preserve cash, CEO Mary Barra said in written comments. GM also said it would suspend its 2020 guidance. GM said that the combination of tapping its credit lines and its cash on hand would leave it with between $31 billion and $32 billion in cash at the end of the month.

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Chevron Will Stop Buying Back Stock
Chevron will suspend its stock buybacks and reduce capital spending by $4 billion this year to account for the recent plunge in oil prices, the company announced on Tuesday. But Chevron will hold on to its dividend, a key selling point for investors. The stock now yields 9.5%.

Chevron had expected to spend $5 billion on share repurchases this year, and will end the first quarter having spent $1.75 billion, the company said. But the buybacks will end there.

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Tokyo Olympics Postponed Over Coronavirus Pandemic
Olympic chiefs on Tuesday postponed the 2020 Tokyo Games until next year, a historic move to push back the world’s biggest sporting event due to the coronavirus pandemic that is upending global society.

The dramatic step is the first time the Olympics has been postponed in peacetime and comes as a devastating blow to the city of Tokyo and the Olympic movement.

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Boeing CEO Says Company Won’t Give Up Equity for a Bailout
Shares of commercial aerospace giant Boeing were surging for a second day on Tuesday after CEO Dave Calhoun said he wasn’t willing to give the U.S. government stock in return for a bailout.

That means shareholders don’t have to worry about dilution, and shares were up about 20% shortly before the close on Tuesday. During the financial crisis, car companies, banks and insurance firms gave the government equity in exchange for bailout funds.

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Ford to Make Ventilators, Respirators, Face Masks for Covid-19 Response
Ford Motor is getting into the medical-supply business, at least for now.

In a statement on Tuesday morning, the auto maker announced plans to manufacture a number of devices and tools used by health-care workers treating Covid-19 patients, including plastic face shields, powered air-purifying respirators, and a simplified respirator.

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Intel Suspends Its Stock Buyback Program
Intel has suspended its stock repurchase plan to conserve its resources for other needs as it copes with the impact of the coronavirus pandemic.

In a filing with the SEC, the chip maker said that, to date, “Intel has kept its factories operational while safeguarding the health and safety of employees and continues to have a strong balance sheet.” But the company said the suspension of the buyback plan “is prudent given uncertainty regarding the length and severity of the pandemic.” Intel said it isn’t changing its dividend rate—the stock yields about 2.9%—and still has capacity to reinstate purchasers “as circumstances warrant.”

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S&P 500 Dividends Could Drop for First Time Since the Financial Crisis
The last time the S&P 500’s total dividends declined from the previous year was in the aftermath of the financial crisis. Expect that to happen this year.

Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, says an overall decline in dividend payments in 2020 “is very feasible” due to the coronavirus pandemic. That warning marks a drastic turnabout from the start of the year, when Silverblatt was expecting dividend increases of about 9% for S&P 500 companies.

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The Fed Has Never Bought ETFs Before. Here’s Why That’s Changing.
The array of stimulus measures the Federal Reserve announced on Monday had an unusual feature: The central bank will buy bond exchange-traded funds.

Under a program it introduced on Monday, called the Secondary Market Corporate Credit Facility, the Fed can buy up to 20% of the assets of any exchange-traded fund that provides broad exposure to the investment-grade bond market.

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Fed’s Playbook Echoes 2008, but With a Mammoth Twist
The measures announced by the Federal Reserve in recent weeks to combat the coronavirus crisis are unprecedented in size and scope because the crisis itself is unlike any other the world has faced. While they build on the central bank’s response to the 2008-’09 financial crisis, they vastly exceed steps taken more than a decade ago to shore up the faltering U.S. economy.

This time around, moreover, there is no debate about the need for government intervention. In 2008—and well beyond—dissenters questioned the wisdom and fairness of bailing out the corporate sector, and especially the nation’s banks.

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Companies Plan to Boost Production of Controversial Malaria Drug as Demand Jumps
Demand for hydroxychloroquine, the malaria drug that President Trump has touted as a treatment for Covid-19 despite limited evidence, has already begun to increase, according to a note from SVB Leerink analyst Ami Fadia.

Fadia wrote that 10.2 million hydroxychloroquine pills were sold in the week ending March 13, according to data-science company Iqvia, well above the average weekly volume of 8.5 million pills.

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