Plus, oil fell lower again, GM is suspending its dividend to shore up cash, Tesla is calling employees back to its Fremont, California plant ahead of schedule, and Starbucks shares are higher after the coffee giant struck a partnership with Sequoia Capital China to expand its operations in the world’s second largest economy.
Stocks were higher to start Monday with the Dow rising 132 points, or 0.5%. The S&P 500 added 0.8%, while the Nasdaq gained 0.9%.
States including Alaska, Georgia, South Carolina, Tennessee, and Texas are beginning to allow restaurants and other establishments to reopen, while New York Governor Andrew Cuomo said Sunday that the state is planning to reopen its economy in phases, beginning with construction and manufacturing, possibly on May 15, and said upstate New York would reopen before New York City. “As various states begin to reopen their economies and relax social distancing rules, we will get a glimpse of what the new normal looks like,” said Chaikin Analytics’ Marc Chaikin. “The biggest risk to the stock market is a premature reopening of the U.S. economy which results in an increase in COVID-19 cases and requires an abrupt reversal of these efforts to awaken the economy out of its engineered coma.” But as states begin to reopen, New Jersey Governor Phil Murphy said today that the state could be headed toward an “Armageddon” scenario, with an inability to fund public schools, if it doesn’t receive more federal aid due to the coronavirus pandemic.
Oil dropped again this morning, with West Texas Intermediate falling more than 25% to $12.60 per barrel as of this writing, as the biggest oil ETF said it will sell out of its June WTI futures positions, adding downward pressure as the coronavirus pandemic continues to roil demand. While drilling in the U.S. is falling and Saudi Arabia has started reducing output ahead of OPEC+’s start date for supply cuts, an immense surplus of oil means that storage tanks around the world are nearing capacity, with South Korea—which has the fourth-largest commercial storage capacity in Asia—reportedly already out of onshore space. “The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Actions are needed no as the problem stopped being theoretical and far away. The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken.”
General Motors said this morning that it will suspend its quarterly dividend and stock buybacks to preserve cash as the coronavirus outbreak has left its factories and dealerships partially closed across the U.S. The automaker said it has “taken other significant austerity measures to preserve near-term available cash,” and said that it extended a $3.6 billion, three-year revolving credit facility to April 2022 to help bolster its liquidity. “We continue to enhance our liquidity to help navigate the uncertainties in the global market created by this pandemic,” said GM CFO Dhivya Suryadevara in a press release. “Fortifying our cash position and strengthening our balance sheet will position the company to create value for all our stakeholders through this cycle.”
Tesla shares are up more than 8% this morning after it reportedly asked dozens of employees to return to work by this Wednesday in order to resume production at its Fremont, California car plant ahead of when the area’s stay-home orders are scheduled to expire. “Bringing back workers ahead of a potential Fremont factory restart on May 4 is a clear feather in the cap for the bulls,” said Wedbush analyst Dan Ives in an interview. “It appears the underlying delivery demand is still there despite this economic abyss and speaks to Tesla looking to fulfill domestic orders.” Tesla halted production in mid-March to help slow the spread of the coronavirus.
And Starbucks shares are up nearly 3% today the coffee giant said that it has struck a partnership with venture capital firm Sequoia Capital China to co-invest in technology businesses in China. Starbucks said that it will look to form “commercial partnerships with next-generation food and retail technology companies” and will gain early access to “ideas in the retail marketplace, creating opportunities for strategic investment” in the world’s second-largest economy. “The partnership enables Starbucks to tap into the most dynamic Chinese technology entrepreneurs in order to delight our customers with meaningful innovations created in China, for China,” said Belinda Wong, chairman and chief executive officer at Starbucks China.
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Mesoblast Ltd (NASDAQ: MESO): Mesoblast shares rocketed as much as 219% higher on Friday after the company announced 83% survival in ventilator-dependent COVID-19 patients with moderate to severe acute respiratory distress syndrome (ARDS) treated with two intravenous infusions of the company’s allogeneic mesenchymal stem cell product candidate remestemcel-L within the first five days. “The remarkable clinical outcomes in these critically ill patients continue to underscore the potential benefits of remestemcel-L as an anti-inflammatory agent in cytokine release syndromes associated with high mortality, including acute graft versus host disease and COVID-19 ARDS,” said Mesoblast CEO Dr. Silviu Itescu in a statement. “We intend to rapidly complete the randomized, placebo-controlled Phase 2/3 trial in COVID-19 ARDS patients to rigorously confirm that remestemcel-L improves survival in these critically ill patients.”