Market Brief: May 13, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Wednesday, May 13, 2020
Economic Worries. U.S. stock indexes finished sharply lower but off their lows of the session on Wednesday as comments from Federal Reserve Chairman Jerome Powell about the economic outlook in the aftermath of the Covid-19 pandemic shattered buying enthusiasm on Wall Street. Powell said on Wednesday that the U.S. economic outlook was “both highly uncertain and subject to significant downside risks.” He was speaking in a webcast hosted by the Peterson Institute for International Economics. The Dow Jones Industrial Average finished 516 points, or 2.2%, lower at 23,247 but well off its intraday low at 23,067.64. The S&P 500 index closed 1.8% lower at 2820 but off its nadir at 2793.15, weighed down by a 4.4% decline in the energy sector and a 3% tumble in financials, as gauged by the SPDR sector exchange-traded funds. Meanwhile, the Nasdaq Composite Index was off 1.6% at
8863. Powell said further fiscal support would be expensive but worth it if it helped bring about a stronger recovery. “The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” he said. In economic news, the April producer-price index plunged by 1.3%. Economists surveyed by MarketWatch, on average, forecast the index to fall 0.5%.
DJIA 23,268.10 -496.68
S&P 500 2,809.43 -60.69
NASDAQ 8,861.20 -141.36
US 10-Year Note 0.64 -0.05
Dollar Index 100.26 0.32
Crude Oil 25.36 -0.42
Gold 1,720.50 13.70
Global Dow 2,555.81 -46.14
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Fed’s Powell Throws Cold Water on Negative-Rates Speculation
Federal Reserve Chair Jerome Powell says the central bank’s rate-setting committee isn’t currently considering negative interest rates as part of its response to the coronavirus crisis, a comment that came after moves in the futures market recently pointed to benchmark rates below zero.

In a virtual conversation with Peterson Institute for International Economics President Adam Posen on Wednesday morning, Powell said that the Fed would instead continue relying on other tools in its arsenal, including forward guidance.

Continue reading ›
Airlines Get a Reprieve, but Also a Warning
Airlines that took bailout funds will now have more flexibility to cancel routes, according to new rules issued by the Transportation Department on Tuesday. But the government is also warning airlines to issue refunds for canceled flights, and analysts are continuing to take down earnings estimates, pushing out the timeline for a recovery.

The market’s early verdict on the government’s new rules appears to be that it’s too little, too late. Shares of United Airlines were down almost 10% near midday Wednesday. Delta Air Lines and American Airlines slumped more than 8% and Southwest Airlines was off 6%. United’s stock, around $20.40, was trading below its March lows and below its lowest closing price since Dec. 10, 2012. The stock has lost more than 16% in the past three trading days and is down more than 76% this year.

Continue reading ›
Cisco’s Profit Continues to Flow During Covid-19 Despite Revenue Slowdown
Cisco Systems showed more resilience in its earnings than expected Wednesday and shares went higher in after-hours trading, but the tech giant’s sales are declining amid the Covid-19 pandemic.

The maker of network services, videoconferencing tools, and security software reported third-quarter net income of $2.8 billion, or 65 cents a share, as revenue declined 8% to $12 billion from $12.96 billion in the year-ago period. After adjusting for stock compensation and other effects, Cisco reported earnings of 79 cents a share, up slightly from 78 cents a share a year ago. Analysts surveyed by FactSet had projected adjusted earnings of 71 cents a share on revenue of $11.9 billion on average, though those expectations have come down significantly since Covid-19 began to spread across the globe.

Continue reading ›
Musk Wins. Tesla Can Reopen Its Factory.
Alameda gave in, and Tesla is allowed to reopen its assembly line.

Alameda County, home to the Tesla’s flagship Fremont, Calif., plant, said in a statement Tuesday that “we have agreed Tesla can begin to augment their Minimum Business Operations this week in preparation for a possible reopening as soon as next week.”

Continue reading ›
As Stock Buybacks Disappear, Dividends Stand to Gain
Bye, buybacks. Hello, dividends.

With stock buybacks waning, how companies manage their dividends “will take on new importance as investors make judgments about equity valuations,” concludes a note by investment research firm DataTrek Research. The note’s author, Nicholas Colas, refers to a “social aversion” toward buybacks, which until recently had been a popular way for large U.S. companies to return capital to shareholders.

Continue reading ›
Interest in Buying Homes Is Coming Back Despite Crisis
A weekly gauge of interest in buying homes increased for the fourth week in a row, a trend that will likely continue due to pent-up demand and loosening social distancing measures, according to a Wednesday release from the Mortgage Bankers Association, or MBA.

The trade group’s Purchase Index, which measures the weekly volume of applications for loans to acquire a home, increased 11% for the week ending May 8 from the week prior, on both a seasonally-adjusted and unadjusted basis. It’s the fourth week-over-week increase since applications started rising in mid-April.

Continue reading ›
As Street Mulls Potential Grubhub Deal, Uber Sets $750 Million Debt Offer
The plot is thickening in Uber Technologies’ potential bid for food-delivery rival Grubhub.

On Tuesday, The Wall Street Journal reported that the two companies were in talks on a deal for Uber to acquire Grubhub in a stock deal that would issue 2.15 Uber shares for each Grubhub share. Wednesday morning, Uber announced plans to sell $750 million of senior notes due 2025, with proceeds targeted “primarily for working capital and other general corporate purposes, which may include potential acquisitions and strategic transactions.”

Continue reading ›
Despite Promises to Pause Coronavirus Cuts, Bank Job Losses Hit 6-Year High
The world’s largest investment banks cut 2,800 front-line jobs in the first quarter, the highest number for six years, ahead of widespread promises to pause redundancies through the coronavirus crisis.

The trading floor—an area that has propped up profits this year as lenders’ profits slid because of billions put aside to cover Covid-19 related losses—felt the brunt of these cuts, according to new figures from data provider Coalition.

Continue reading ›
Tencent Crushes First-Quarter Earnings Despite Covid-19 Pandemic
Chinese online giant Tencent Holdings reported first-quarter earnings on Wednesday. The results came in better than analyst expectations, thanks to a strong performance in gaming and the resilience of its advertising business.

For the first quarter of 2020, Tencent grew its revenue by 26% year over year to 108 billion Chinese yuan ($15.3 billion), better than the 101 billion yuan expected by analysts polled by FactSet. Earnings attributable to stockholders hit 28.9 billion yuan, up 6% from the year-ago period. Diluted earnings came in at 2.99 yuan per share, beating analysts’ consensus expectations for 2.35 yuan.

Continue reading ›
Exxon Mobil Faces New Climate Challenge From Shareholder
Exxon Mobil is facing a new challenge from a shareholder who wants the company to make a more serious commitment to combating climate change.

A similar proposal last year failed, and Exxon won a court case over related issues last year. But Exxon is facing growing scrutiny about its role in climate change—and moves by other oil companies will only add to the pressure. While the last shareholder proposal failed, it won a higher percentage of the vote than it did the year before.

Continue reading ›
Dow Jones Contact Us
| Privacy Policy
| Cookie Policy
4300 Route 1 North, South Brunswick, NJ 08852
Copyright ©
2020 Dow Jones & Company, Inc. All Rights Reserved. Not for redistribution.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market or economic conditions.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.