Market Brief: March 25, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Wednesday, March 25, 2020
Dow Gains Again. The Dow Jones Industrial Average on Wednesday booked its first back-to-back gains in about seven weeks as investors have waded back into a battered market, but stocks lost ground in the final few minutes of trade as problems cropped up in the last leg of passage of a $2 trillion coronavirus rescue package. Sen. Bernie Sanders of Vermont, an independent, threatened to delay the bill over a key unemployment-insurance proposal, according to reports. A group of Republican senators also opposed aspects of the bill, with Ben Sasse, Tim Scott and Lindsey Graham saying they would delay a Senate vote, according to reports, over those issues. The Dow closed up 495 points, or 2.4%, at 21,200, but the index had been as high as 22,019.93 with about a half-hour left in regular trade before reports of challenges to aspects of the rescue bill were reported. The
S&P 500 index rose 28 points, or 1.2%, to 2,476, while the Nasdaq Composite Index finished 0.5% lower at 7,384. All three major benchmarks closed well off their intraday peaks.
DJIA 21,200.55 495.64
S&P 500 2,475.56 28.23
NASDAQ 7,384.30 -33.56
US 10-Year Note 0.84 -0.00
Dollar Index 100.89 -1.15
Crude Oil 24.28 0.27
Gold 1,638.70 -22.10
Global Dow 2,409.16 270.19
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Senate Takes Up $2 Trillion Stimulus Deal
Congress and the White House have finally reached an agreement on a multitrillion-dollar economic rescue bill, and investors have focused on what will be in the package.

The precise language was still being written on Wednesday morning, but a few key points were emerging. Companies that get aid will be required to stop buying back their stock, an oversight panel will keep tabs on $500 billion in aid for troubled companies, and the medical system will get a major chunk of aid that Sen. Minority Leader Charles Schumer described as a Marshall Plan for facilities battling the coronavirus.

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Occidental Cuts Costs, Reaches Truce With Carl Icahn
Occidental Petroleum reduced its capital spending and cut compensation for staff on Wednesday as the company attempts to shore up its balance sheet amid extreme weakness in oil markets. The actions still might not be enough to put the company on strong financial footing, one analyst argued.

The company, which has vast holdings in the Permian Basin in the U.S. and other areas, also said it had made a deal with activist investor Carl Icahn to add his nominees to the company’s board of directors. Icahn had criticized Occidental for buying oil-and-gas producer Anadarko last year, saying the deal was too expensive. Buying Anadarko left Occidental with more than $30 billion in net debt at the end of the year.

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Short-Term Treasury Yields Fall Below Zero
Treasury yields have turned lower again, with short-term yields reaching yet another postcrisis milestone: falling below zero.

It is rare for short-term Treasury yields to fall into negative territory, though not unprecedented. And it probably is a sign that the coronavirus cash grab hasn’t fully abated, despite U.S. authorities’ efforts to ease the impact of the virus on the country.

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Target’s Sales Surge, but It Isn’t All Good News
Target’s sales are surging. But so are its costs, and the retailer isn’t quite sure what will come next.

The company said Wednesday that it is pulling its full-year profit, sales, and earnings-per-share guidance because of an “unusually wide range of potential outcomes” during the first quarter of the year.

The move shows just how hard it is for any business—and retailers in particular—to fully understand the financial impact that the coronavirus outbreak will have. Target, for instance, has seen a boom in sales, but it has also spent $300 million over and above usual costs to keep its stores stocked, as supply chain disruptions and massive customer demand for specific items hit the company simultaneously.

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Mylan Says India’s Coronavirus Lockdown Won’t Affect Drug Production
Shares of the generic drugmaker Mylan were down Wednesday, amid worry over how India’s abrupt decision to effectively ban its citizens from leaving their homes would affect drugmakers.

While China is reportedly the world’s largest producer of the active pharmaceutical ingredients used to make drugs, India is a major manufacturer of generic drugs. But analysts suggest that the Indian order, meant to diminish the spread of Covid-19, may not be an issue for Mylan.

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J.P. Morgan Sees Big Rise in Stock Buying for Rest of 2020. That Could Help Boost Prices.
Longer-term investors are likely to be significant buyers of equities over the rest of 2020.

That’s the conclusion of the J.P. Morgan Global Quantitative and Derivatives Strategy team headed by Nikolaos Panigirtzoglou. It sees net purchases of $3.25 trillion in equities in major investment sectors over the rest of the year, a dramatic reversal of the net selling of $1.88 trillion the team estimates took place during the first quarter.

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Facebook’s Usage Is Soaring. Why That’s Not Helping the Stock.
Facebook shares have been largely left out of Wednesday’s stock market rally, as investors grapple with the company’s warning that, despite a spike in usage, its advertising business is feeling the pain of the global coronavirus pandemic.

Late Tuesday, Facebook disclosed in a blog post that it has “seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of Covid-19.” On Monday, Twitter sharply reduced its own March quarter revenue outlook, citing the impact of a slowing global ad market. While both Facebook and Twitter are seeing an increase in usage, there has not been an accompanying boost in revenue.

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Home-Purchase Applications Dropped to Lowest Since August
The economic repercussions of the coronavirus pandemic have put an end to the U.S. housing market’s early 2020 momentum, according to data released by the Mortgage Bankers Association Wednesday.

According to the association’s latest Weekly Mortgage Applications Survey, the volume of home-purchase applications for the week ended Friday was 15% lower than it was a week earlier. It was down 11% from the same week one year ago.

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Low-Wage Workers Need Fast Relief to Maintain ‘Law and Order,’ Says Banker
About one-third of the country’s workers are employed in low-wage jobs that were among the first to go as America locks down to contain the spread of Covid-19. These 37 million workers earned just $539 a week, on average, says Daniel Alpert, a New York investment banker who tracks low-wage employment with a team of economists (and no relation to this reporter).

Many of these workers are in customer-facing roles in retail, travel, and food service. But their customers have disappeared. Lacking personal resources, these millions of Americans could be reduced to desperate straits without quick government help. “This is a real issue, from a survival standpoint,” Alpert says, “and from ensuring law and order.”

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Aetna Will Waive Copays and Deductibles for Covid-19 Hospitalizations
Aetna, the insurance company owned by CVS Health, said Wednesday morning that patients covered by its commercial insurance plans won’t be charged deductibles, copays or coinsurance for inpatient hospital stays to treat Covid-19.

Most insurers have already said they would cover the costs of Covid-19 tests. Aetna appears to be the first major insurer to take this further step.

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