Market Brief: March 27, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Friday, March 27, 2020
Best Week Since 1938. The Dow Jones Industrial Average ended Friday’s session lower, but the blue-chip index notched its best weekly gain since 1938, as President Donald Trump was set to sign into law an important coronavirus rescue package just after the market’s close. The Dow fell 915 points, or 4.1%, to around 21,636; the S&P 500 index closed 89 points, or 3.4%, lower at 2,542; while the Nasdaq Composite Index ended the session down 3.7% at around 7,502. For the week, the Dow booked a gain of 12.8%, which marks its best weekly rise since 1938, according to FactSet data. The S&P 500 notched a weekly gain of 10.3%, representing its sharpest weekly rise since 2008, while the Nasdaq Composite Index booked a 9.1% weekly gain. In addition to the fiscal response, the week was marked by the Federal Reserve announcing an unlimited bond-buying program to loosen
seized-up parts of the financial markets. All these factors helped to boost the market, but deep-set worries about when the virus will ultimately peak still have investors on edge.
DJIA 21,636.78 -915.39
S&P 500 2,541.47 -88.60
NASDAQ 7,502.38 -295.16
US 10-Year Note 0.68 -0.17
Dollar Index 98.33 -1.02
Crude Oil 21.65 -0.95
Gold 1,625.90 -25.30
Global Dow 2,444.65 -57.71
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
House Passes Economic Rescue Package. Here’s What’s in It.
The House of Representatives passed the Cares Act on Friday, sending it to President Donald Trump for his signature.

The Senate approved the bill just before midnight Wednesday, sending the measure to the House for a planned vote on Friday. It was passed in that chamber by a voice vote.

The text of the bill includes measures that Democrats fought for in negotiations, including additional oversight of the $500 billion corporate aid fund and a significant expansion in the duration and generosity of unemployment benefits. Also included is a measure that will send many individuals $1,200 checks along with $500 per child.

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General Motors Stock Falls After Trump Slams Its Efforts to Produce Ventilators
President Donald Trump lashed out at General Motors on Friday, saying in a series of tweets that the auto maker had failed to ramp up its production of in-demand ventilators as quickly as the company had said it could. At about 2:45 p.m. ET Friday, GM’s stock was down 3.8%, while the S&P 500 was down 2.3%.

“As usual with ‘this’ General Motors, things just never seem to work out,” Trump tweeted Friday. “They said they were going to give us 40,000 much needed Ventilators, “very quickly.” Now they are saying it will only be 6000, in late April, and they want top dollar. Always a mess with Mary B.,” he said in reference to the company’s CEO Mary Barra.

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Cruise Lines Shut Out of Stimulus Bill Aid
For now, at least, the three big U.S. cruise operators will be left to their own devices when it comes to finding more sources of liquidity.

One big concern: The companies don’t qualify for financial assistance as outlined by the U.S. Senate’s $2 trillion stimulus bill. Recipients of aid, including loans or loan guarantees, must be “organized in the United States” under U.S. laws, have significant operations there, and have a majority of its employees based there as well, according to the Senate bill.

A key sticking point for the cruise companies is that while they are based in the U.S., they are incorporated abroad. That means they don’t pay a lot of U.S. taxes. They do pay state income taxes and port fees, according to The Wall Street Journal.

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U.S. Consumers Are Scared. Confidence Is the Lowest in More Than 3 Years.
American consumers’ confidence in the economy is deteriorating as anxiety over the coronavirus takes hold.

The University of Michigan’s index of consumer sentiment dropped to 89.1 in March from 101.0 in February. That’s the lowest level in more than three years, and the monthly decline is among the worst on record. Economists polled by The Wall Street Journal expected a slightly less severe drop to 90.0.

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Dell and VMware Pull Earnings Guidance on Virus-Related Worries
Dell Technologies and its majority-owned subsidiary VMware have both withdrawn their financial guidance, citing uncertainties about their businesses created by the ongoing coronavirus pandemic.

Dell said in an SEC filing that it is seeing “heightened interest in work from home solutions and continuing execution in its global supply chain, and remains confident in its liquidity position,” but that it is “unable to predict the extent to which the global Covid-19 pandemic may adversely impact its business operations, financial performance and results of operations for the current fiscal year.”

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Pfizer and Mylan Postpone Upjohn Deal
In another sign of the dramatic impact that the Covid-19 pandemic is having across the health-care industry, Pfizer and Mylan are pushing off a closely watched deal to merge a large Pfizer unit with Mylan.

In statements Thursday, Mylan and Pfizer said that the deal, which was expected to close in the middle of this year, will now close in the second half of this year. They also said that a Mylan shareholder meeting at which shareholders were to vote to approve the deal has been postponed from April 27 to June 30.

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Big Pharma and Biotech Need to Do More in the Fight Against Covid-19
Over the past decade, biotechnology firms and pharmaceutical companies have stockpiled an armament of scientists, laboratories, and capital in the billions of dollars. Those labs could end the current global nightmare of Covid-19. Are they doing enough?

Now, after a slow start, there are nearly 60 programs under way to develop a Covid-19 treatment and more than 40 to develop a vaccine, by both commercial and noncommercial labs, according to an accounting by the Milken Institute. Brian Abrahams, an analyst at RBC Capital Markets, thinks the biotech industry should be doing much more.

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Coronavirus Means Fewer Stock Buybacks, Analyst Says. It Could Shake Up Biopharma.
As the federal government prepares to bail out industries amid the Covid-19 pandemic, stock buybacks are falling out of favor. One sector that does a lot of repurchases? The biopharma industry.

In a note out on Friday, SVB Leerink analyst Geoffrey Porges argued that share buybacks would face far more scrutiny after the current crisis, which could force biopharma executives to spend their cash in other ways.

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Bill Ackman Defends CNBC Interview and $2.6 Billion Profit in Letter to Investors
Activist investor Bill Ackman came under fire this week after revealing he made $2.6 billion on a $27 million bet that U.S. and European credit spreads would widen as the global economy slowed during the coronavirus pandemic. It was the type of quick return that would be career-defining for other hedge-fund managers.

One could say it was for Ackman—though perhaps not in the way he would have intended. The win was overshadowed by an emotional interview Ackman gave to CNBC on March 18, just several days before he finished unwinding the hedges. Questions subsequently arose about his motives for the CNBC appearance, in which the billionaire investor warned that “hell is coming.”

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Expect the Unexpected After the Coronavirus Crisis: Inflation
The passage of the unprecedentedly huge coronavirus crisis bill, totaling more than $2 trillion, by the Senate—complementing the Federal Reserve pulling out all the stops to shore up the financial system—appeared to halt the downward spiral of the stock and credit markets. While that sum is roughly equal to 9% of the U.S. gross domestic product, it won’t prevent the economy from contracting at a record annual rate of as much as 30% in the second quarter, according to the most-dire estimates.

The certain rise in unemployment, plus the fall in global commodities, especially those related to energy, will hold down prices for some time. But once the crisis caused by this pandemic has passed, the aftereffects of the efforts to counter it could be bad news for bond investors, in the form of higher inflation and higher interest rates.

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