Plus, oil is climbing after Trump said Russia and Saudi Arabia will work toward easing the pressure on oil by ending their price war, U.S. coronavirus cases rose past 216,000, and Luckin Coffee shares plummeted after the company disclosed that its COO had fabricated 2019 sales figures.
Stocks were higher in volatile trading to start Thursday with the Dow gaining 280 points, or 1.3%. The S&P 500 added 1%, while the Nasdaq traded 0.9% higher.
WTI crude futures are up roughly 26% and Brent crude futures are up around 21% at the time of writing after President Donald Trump said Russia and Saudi Arabia will ease the pressure on oil by ending the price war they started last month. “Worldwide, the oil industry has been ravaged,” Trump said to reporters late yesterday. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal” within a “few days.” However, even if an agreement is reached, it may not be enough to counter the oversupply brought about by both nations increasing production during an unprecedented slow in demand. “The challenge though is the size of the oversupply problem,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Saudi Arabia and Russia won’t singlehandedly remove for instance half (5 million bpd) of their [country’s] oil production to save the potential 10-12 million bpd of upstream shut-ins required to balance the market in the second quarter. At best, we believe parties will agree to continue discussing and monitor the market situation.”
Jobless claims skyrocketed last week. According to the Labor Department, the number of Americans filing for unemployment rose to a record of more than 6.65 million new claims, bringing the total over the last two weeks to 10 million as shutdowns have widened across the country. “Sadly, this probably still underestimates the actual numbers because of the overload in the systems and not every call getting through,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Even if we’re accurately calculating the numbers, we still likely have worse to come.” Barclays chief U.S. economist Michael Gapen told Bloomberg, “When you look at the number last week and this week and take those together that’s roughly a 6 percentage-point rise in the April unemployment already, and we have a few more weeks to go for the April employment report. It is likely the unemployment rate will be rising above where we saw it in ‘o8 and ’09 and may come as soon as that April employment report, if not certainly into the May report.”
Cases of the coronavirus in the U.S. surged to more than 216,000 as the global count approaches 1 million infected. Bloomberg reported that the Pentagon is trying to obtain 100,000 body bags for FEMA officials in preparation of an expected increase in the number of deaths from the coronavirus pandemic as the projected number of deaths rises to around 200,000. A FEMA spokesperson said, “FEMA is aware of many states’ planning efforts to account for mortuary contingencies and has increased its posture to support these requests once received from the states. Prudent planning for these future conditions is taken very seriously by FEMA, and we are working with Regional and State health and emergency managers to ramp up available assets to meet contingency needs for the most affected areas.” And former FDA Commissioner Scott Gottlieb said today that life will continue to be disrupted by COVID-19 until an effective treatment is found. “If we don’t have it, this virus is going to come back in the fall and it’s going to continue to shut down parts of our lives,” Gottlieb told CNBC. “This is going to circulate in the background. The consumer is not going to bounce back. People are going to be afraid to go out and we’re going to continue to see people succumb to this virus.” Gottlieb added that while a vaccine “might be two years away,” a treatment drug could be developed “in the near term” though it will require global regulators to change their approval process.
Zoom Video Communications shares dropped as much as -16% this morning following CEO Eric Yuan’s apology for the security lapses on the video conferencing platform that have been reported this week. Zoom has seen a surge in users, as its platform saw up to 200 users per day in March, up from around 10 million per day in December, as people around the world are told to stay home from work and school amid the coronavirus pandemic. The company has been criticized for sharing data with Facebook, abusing permissions on Mac computers, not properly describing how it encrypts data, problems with zoombombing where people hijack Zoom conversations with outside content, and for having a vulnerability that allegedly exposes Windows login credentials to hackers. “We recognize that we have fallen short of the community’s—and our own—privacy and security expectations,” Yuan said. “For that, I am deeply sorry.” Yuan added that the company will freeze work on all features for the next 90 days as it focuses solely on improving privacy. The company will also include a bug bounty program, and will have third-party experts do a review of its platform. Yuan said that the platform was designed for enterprises that run significant “security reviews” of its app, and was not designed “with the foresight that, in a matter of weeks, every person in the world would suddenly be working, studying and socializing from home.”
And Luckin Coffee shares sank more than -81% this morning after the Chinese coffee chain disclosed that an internal investigation revealed that its COO, Jian Liu, had fabricated 2019 sales figures by around 2.2 billion yuan, or around $310 million, casting doubt on the foundations of the chain’s emergence as a key competitor to Starbucks. “Certain costs and expenses were also substantially inflated by fabricated transactions during this period,” the company said, noting that its special board committee investigating the matter had not yet independently verified the figures. Liu and several employees who reported to him who had engaged in the misconduct have been suspended, and Luckin said it will take legal action against those responsible. Muddy Waters Research in January said it was shorting the stock in light of what it described as fraud and a “fundamentally broken business,” while Luckin responded by saying that the short seller’s report was “misleading” and “false.”
Stocks We’re Watching
Chembio Diagnostics (NASDAQ: CEMI): Chembio shares surged as much as 56% yesterday after the company announced the U.S. launch of the rapid DPP COVID-19 serological point-of-care test that deliver results within 15 minutes of a simple finger stick. “The results and data from our DPP COVID-19 test can help improve clinical outcomes through the management of individual patients by enabling clinicians to understand the likelihood of past and present infection and to manage populations as a whole as a surveillance test,” said Richard Eberly, CEO of Chembio. “Our measured approach has positioned us to offer a viable and sustainable long-term solution for clinicians. We expect to begin shipping product in April 2020, and we will continue to work with our partner LumiraDx to provide DPP COVID-19 tests with the ability to scale based upon market demand.”