Market Brief: March 30, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Monday, March 30, 2020
Strong Gains. U.S. stock indexes ended sharply higher Monday, with the main benchmarks booking gains of at least 3% as investors appeared to take comfort from a more sober tone from the White House about the coronavirus epidemic. The Dow Jones Industrial Average closed up about 690 points, or 3.2%, settling at about 22,327, while the S&P 500 added about 85 points, or 3.4%, to close near 2,626. The Nasdaq Composite index closed near 7,774, up about 272 points or 3.6%. Shares of Microsoft popped more than 7% as analysts say the company is well positioned as Americans continue to work from home.
DJIA 22,327.48 690.70
S&P 500 2,626.65 85.18
NASDAQ 7,774.15 271.77
US 10-Year Note 0.71 0.03
Dollar Index 98.99 0.63
Crude Oil 20.21 -1.30
Gold 1,641.30 -12.80
Global Dow 2,474.44 34.96
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Oil Prices Flirt With 18-Year Low
Oil prices have plunged this year, as supply has jumped and demand has plummeted. They are down more than 50% just this month. On Monday, they took a new leg down, with West Texas Intermediate crude futures temporarily falling below $20. The last time Texas oil settled below $20 was in 2002.

Oil prices bounced back slightly around 9 a.m., with Brent crude futures down 8.1% to $22.92 and WTI crude down 5.4% to $20.35.

The basic dynamics in energy trading markets haven’t changed. Investors are concerned that Saudi Arabia and other nations have boosted production just as Covid-19 causes economies around the world to stall and stop using as much oil.

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Macy’s Furloughs Majority of Its Workers
Macy’s will furlough the majority of its 130,000 employees this week, the department store operator said in a statement Monday.

Macy’s has been hit hard by the coronavirus pandemic, with all of its stores closed since mid-March. Plummeting consumer discretionary spending has taken a huge toll on the company’s sales.

“While the digital business remains open, we have lost the majority of our sales due to the store closures,” Macy’s said. As a result, the company is “moving to the absolute minimum workforce needed to maintain basic operations,” the statement said. “There will be fewer furloughs in our digital business, supporting distribution centers and call centers so we can continue to serve our customers online.”

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Abbott Gets Emergency Approval for 5-Minute Test for Covid-19
Shares of the medical-device maker Abbott Laboratories soared Monday after the company said on Friday that it had received emergency approval from the Food and Drug Administration for a Covid-19 test that takes just five minutes.

The Abbott test is the second rapid point-of-care test from a major medical-device firm approved in recent days. Last week, a Danaher subsidiary received an FDA emergency-use authorization for a Covid-19 test that can return results in 45 minutes.

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Johnson & Johnson Says Its Coronavirus Vaccine Could Be Ready Early Next Year
Johnson & Johnson said Monday it could have a Covid-19 vaccine available for emergency use early next year.

Though not a major vaccine maker, Johnson & Johnson was among the first companies to announce a Covid-19 vaccine development program back in January. Now, the company said its program has developed a candidate vaccine and two backup candidates. It plans to begin testing the vaccine in humans in September.

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Cruise Operators Scramble to Preserve Cash as Federal Aid Is Uncertain
The cruise industry is scrambling to stay afloat during what increasingly looks like an extended coronavirus-driven freeze on voyages, but a hoped-for lifeline so far hasn’t been extended.

While President Trump hasn’t shut the door on these companies receiving financial assistance, they currently don’t qualify as outlined in the $2 trillion stimulus package signed into law Friday. They are effectively precluded from aid in the Cares Act because they’re incorporated overseas in countries like Liberia and Panama, meaning they pay little in U.S. taxes.

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Microsoft Sees Huge Spike in Demand for Cloud Services
Microsoft has seen a 775% spike in the use of cloud services in regions with social distancing or shelter in place orders as a result of the coronavirus pandemic, the company disclosed on Sunday in a blog post. And the company hinted that the increase in demand for cloud-computing services is leading to some strains on the system.

Earlier this month, Microsoft disclosed a sharp increase in users of its Teams collaborative communications software to more than 44 million daily users. In the latest disclosure, Microsoft added that Windows Virtual Desktop usage is up more than three times and noted that government use of the company’s business intelligence software to share “dashboards” on the virus has surged 42% in a week.

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S&P 500 Dividends Will Fall 25% This Year, Analysts Say
S&P 500 dividends will fall by 25% this year as the coronavirus crisis drives companies across many sectors to conserve cash, Goldman Sachs said in a note Monday.

Declared dividends among S&P 500 companies increased by 9% in the first quarter, but “we expect a wave of dividend suspensions, cuts and eliminations will result in dividends declining by 38% during the next nine months,” the note observes. As a result, the dividends paid out this year will end up being 25% below last year’s level, Goldman adds.

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The Bond Market’s Biggest Borrowers Are Companies That Might Not Need the Money
Dozens of companies borrowed record sums in investment-grade bond markets last week, after the Federal Reserve helped provide market stability. But they weren’t the companies hit hardest by coronavirus.

Nearly 50 companies tapped markets to raise $109 billion last week, the highest ever. About $63 billion of that came in the first half of the week, just as investors were withdrawing record amounts of cash from bond funds: There were $38 billion of outflows from investment-grade corporate bond funds in the week ended March 25, according to Refinitiv Lipper data.

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Why the Stimulus Package Includes $10 Billion for the U.S. Postal Service
The Cares Act, the $2 trillion stimulus package signed into law on Friday, is a massive shot in the arm for a moribund economy, with payments and loan guarantees to workers, small businesses, and industries hard hit by the Covid-19 pandemic. The U.S. Postal Service is included in the act too—it allows USPS to borrow up to $10 billion from the Treasury.

The government wants to ensure mail and packages keep flowing during this unprecedented period of economic pause. It’s a necessary step given that logistics providers are the lifeblood of any economy.

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The Stimulus Package Will Help People Pay for Health Care During the Coronavirus Outbreak
The $2.2 trillion economic stimulus approved by the House of Representatives on Friday will make it more affordable and easier for families to manage their health-care needs.

The health-care provisions under the package, which requires approval from President Trump before going into effect, will be particularly welcome to families with high-deductible health insurance plans and either health savings accounts (HSAs) or flexible spending account (FSAs), which are pretax savings accounts specifically for health-care expenses.

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