Market Brief: May 14, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Thursday, May 14, 2020
Turnaround. U.S. stocks recovered from early morning losses to end Thursday sharply higher, snapping a two-session losing streak on the strength of financial-sector stocks, which had suffered steep losses in recent weeks. The Dow Jones Industrial Average gained 377 points, or 1.6% to close near 23,625, the S&P 500 index added roughly 33 points, or 1.2%, to end the session at 2852, and the Nasdaq Composite index advanced about 81 points, or 0.9%, to close around 8944. Investors looked past data showing another 2.98 million Americans filed new applications for jobless benefits during the week ended May 9. A weeklong rise in oil prices helped drive the indexes to gains, market participants said.
DJIA 23,625.34 377.37
S&P 500 2,846.24 26.24
NASDAQ 8,943.72 80.55
US 10-Year Note 0.62 -0.03
Dollar Index 100.32 0.08
Crude Oil 27.50 2.21
Gold 1,739.40 23.00
Global Dow 2,543.38 -12.46
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Coronavirus Jobs Toll Tops 36 Million
An additional 3 million Americans filed for unemployment insurance last week, the fewest since lockdowns began in earnest mid-March and a reason for investors to believe the toll on jobs from the coronavirus has peaked.

Still, the latest tally leaves the number of jobs lost to the virus at more than 36 million—a massive number with economic consequences that are only starting to play out. The Labor Department said Thursday that the seasonally adjusted rise in initial jobless claims for the week ending May 9 fell from the previous week’s 3.2 million. Economists polled by FactSet expected a bigger fall to 2.5 million.

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Oil Is Rising as Forecasts Get More Hopeful
Oil prices are higher as the International Energy Agency gave a somewhat more hopeful projection for oil demand than it did last month. A shift in the oil futures market may also be contributing to a more upbeat outlook for the industry.

Expectations for demand are still extremely low for the second quarter, with the IEA projecting a decline of 19.9 million barrels a day, which would leave consumption about 20% below last year’s level. But those projections are better than they were last month.

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China Sharpens U.S. Criticism Even as Trade Deal Inches Forward
Amid the souring of U.S. public opinion toward China, and increasingly sharp anti-China rhetoric from Washington, hawks on the other side of the Pacific are raising their voices as well.

In recent weeks, Chinese state media and scholars have lashed out at the U.S. and others they accuse of using the coronavirus outbreak as a political weapon against China. The growing tensions come as the U.S. election approaches, with China thrust into the spotlight as the source of the epidemic that has crippled the American economy and eroded President Trump’s approval rating.

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Doubts Emerge About Potential Uber Acquisition of Grubhub
Investors are suddenly getting a little nervous about the prospects for an Uber Technologies acquisition of Grubhub.

Earlier in the week, the Wall Street Journal reported that the two companies were in talks for a transaction in which Uber would use its stock to buy Grubhub. But CNBC reported Thursday morning that either a deal will come soon, or there won’t be a deal at all—and so far, the two sides apparently can’t reach an agreement on price. On Thursday afternoon, Grubhub shares were down 6%, to $54.64, but still up 17% for the week. Uber was off 2.9%, at $32.07, and is now down slightly for the week.

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Norwegian Cruise Line Swings to Loss as Pandemic Toll Mounts
Norwegian Cruise Line Holdings reported a first-quarter adjusted loss of 99 cents a share, compared with earnings of 54 cents a share a year earlier—more evidence of how the pandemic has wreaked havoc across the industry.

Norwegian said in a release Thursday that it “has experienced rapid and significant impacts related to the COVID-19 global pandemic including significant softness in near-term demand and an elevated rate of cancellations for existing bookings.”

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Abivax Wins French Approval to Test Drug to Treat Covid-19
The French biotech company Abivax announced Thursday that it had received clearance from French regulators to begin a 1,000-patient trial of its experimental anti-inflammatory drug ABX464 in Covid-19 patients, sending shares of the company sharply higher.

ABX464 has also been tested in ulcerative colitis, where it showed positive results in a Phase 2 trial. Abivax says that ABX464’s anti-inflammatory mechanisms could help prevent or treat the overactive immune responses that can lead to death in serious cases of Covid-19.

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Tesla Won the Battle to Reopen Its Fremont Factory. Why It Could Still Lose the War.
Tesla CEO Elon Musk won his battle with Alameda County over reopening Tesla’s U.S. factory in Fremont, Calif., this week. But he might lose the war. Reopening now is a risky proposition and there are a couple of issues percolating on Wall Street.

Early reopening might expose the company to new liabilities. “Investors must try to balance the potential benefit of an earlier reopening (less cash burn) with the risk of liability from potentially adverse health outcomes,” Morgan Stanley analyst Adam Jonas wrote in a Thursday research report. “All [auto makers] confront this risk during the restart.

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Delta Air Lines Is Retiring Boeing 777 Jets to Save Money
Delta Air Lines is burning through $50 million a day—and it plans to retire its fleet of Boeing 777 jets to save money. Its stock is sinking on the news.

Delta said in a filing Thursday that it plans to retire its 18 Boeing 777 planes and accelerate the retirement of MD-88 and MD-90 aircraft. Delta CEO Ed Bastian told employees in a memo that the airline is burning through $50 million in cash a day and that retiring the aircraft will “help us stem the bleeding.”

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Boeing’s 777 Jet Is Out at Delta. Here’s Why That’s No Reason to Sell Boeing Stock.
Boeing stock traded lower for most of Thursday’s session (although it did close higher) after Delta Air Lines said it would retire its fleet of Boeing 777 wide-body jets.

But the stock shouldn’t have initially slumped following the news, for a simple reason: Delta is predominantly an Airbus customer for wide-body jets. Out of the roughly 900 aircraft the U.S. airline operates, 18 are 777-model planes. Delta has 42 A330 aircraft and an additional 13 A350 aircraft for a total of 55 Airbus wide-body jets.

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Penske Automotive Group Suspends Dividend, Ending Run of Quarterly 1-Cent Increases
Penske Automotive Group has suspended its dividend, ending a streak of one-cent a share quarterly dividend increases dating to 2011.

Penske, whose businesses include operating automotive and commercial truck dealerships in the U.S. and abroad, in February had declared its 35th consecutive dividend increase of a penny. It was an unusual approach as most U.S. companies put through dividend increases once a year.

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