Plus, Boeing said it had more cancellations than new orders in February, and Pepsi is buying Rockstar Energy.
Stocks plummeted to start Wednesday with the Dow falling 1,000 points, or 4%. The S&P 500 sank 3.6%, while the Nasdaq traded 3.3% lower.
More than half of Tuesday’s gains were wiped out this morning after President Donald Trump failed to deliver on his promise for a substantial stimulus package to combat the economic impact of the coronavirus. This morning’s losses put the three major averages closer to entering bear-market territory, with the Dow down 18.8% below its all-time high set last month, the S&P 500 down 18.2% from its recent high, and the Nasdaq down 18%. “Markets seem disappointed that the White House did not release details of its fiscal to the coronavirus,” said Brian Gardner, a Washington policy analyst at KBW. “We are still in early days and policymakers are continuing to grapple with different options and negotiate between the two parties and between Congress and the administration.” As stocks fell, investors again flooded into safe havens with the 10-year Treasury yield dropping 6 basis points to 0.69%. Gold was also climbing, rising to $1,671.80 in early trading.
The World Health Organization this morning declared COVID-19 a global pandemic as the novel coronavirus spreads rapidly. Cases of the coronavirus have risen to more than 121,500 globally, while global deaths have risen to at least 4,373. Iran reported 958 new cases, taking its tally to 9,000, while the number of cases in Switzerland rose from 476 to 645 overnight. In Spain, confirmed cases rose to 2,002 from 1,639. German Chancellor Angela Merkel said that up to 70% of the German population will likely contract the coronavirus as confirmed cases top 1,565. Merkel said her government “will do whatever is necessary” to limit the impact of the outbreak and called on the EU to work in concert to fight the spread. In the U.S., confirmed cases surged to at least 1,039 as the virus spread to at least 35 states and the District of Columbia. The U.S. Treasury Department is considering extending the 2019 tax-filing deadline beyond April 15 to provide relief from economic disruption caused by the outbreak, and the Trump administration is working on an executive order to declare a nationwide state of emergency. “The Trump Administration’s forthcoming Executive Order is a very strong first step toward increasing domestic production by enforcing Buy American requirements for pharmaceuticals and medical supplies,” said Senator Marco Rubio in a statement.
Oil fell to start Wednesday after Saudi Aramco said it had been directed by the energy ministry to raise its production capacity by a million barrels per day. Brent Crude is down -3.33% to $35.98 per barrel, while West Texas Intermediate Crude is down -3.41% to $33.19 per barrel. The United Arab Emirates—a close Saudi ally—also promised to push more crude to customers than it normally produces, ramping up the all-out price war between Saudi Arabia and Russia that has sent oil prices tumbling. “Saudi Arabia is pulling the trigger of its oil bazooka,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Switzerland.
Boeing shares are down nearly -12% this morning after the company said this morning that it logged more commercial aircraft cancellations than new orders in February as airlines struggle in the wake of the global coronavirus outbreak. Boeing said Air Canada cancelled 11 Max aircraft orders, while other customers convert orders for larger plans. The cancellations tipped Boeing’s monthly orders into negative territory, with the manufacturer logged 18 gross orders last month compared to 46 cancellations. It was also reported that the planemaker is planning to draw down the full amount of a $13.825 billion loan as early as Friday that it obtained last month to help it deal with cash burn while it prepares to return its 737 Max plane to the skies.
PepsiCo announced that it will acquire Rockstar Energy in a $3.85 billion deal, giving the company a leg up on rival Coca-Cola in the energy drink space. “As we work to be more consumer-centric and capitalize on rising demand in the functional beverage space, this highly strategic acquisition will enable us to leverage PepsiCo’s capabilities to both accelerate Rockstar’s performance and unlock our ability to expand in the category with existing brands such as Mountain Dew,” said PepsiCo CEO Ramon Laguarta in a news release.
Stocks We’re Watching
Teledoc Health Inc (NYSE: TDOC): Teledoc shares are up more than 18% over the last week and nearly 75% so far this year as health facilities around the world gear up to face the COVID-19 outbreak with officials encouraging the use of alternative forms of care like telehealth. Teledoc is the global leader in virtual care and is thus well-positioned to benefit from surging demand for telehealth services. RBC Capital analyst Sean Dodge raised his price target on Teledoc shares to $150 form $140 on Friday, while maintaining his Outperform rating for the stock. Dodge sees the company’s progress in adding new clients, expanding multi-product adoption, and fine-tuning its “industry-leading” engagement as impressive as it drives an organic revenue growth of 20% to 30%.