Plus, President Trump said he would not close the country again if a second wave of coronavirus cases emerges, the IMF said banks will struggle through 2025 in a sustained low interest rate environment, E.L.F. Beauty shares are surging higher on an earnings beat, and Roku shares are down after a downgrade.
Stocks were lower to start Friday with the Dow dropping 104 points, or 0.4%. the S&P 500 slipped 0.1%, while the Nasdaq traded just below of the flatline.
China sent a clear message to President Donald Trump overnight: We’re going to do what we want in Hong Kong, and we’re don’t care about the consequences. China released draft legislation over new national security measures for Hong Kong that would effectively bypass the city’s legislature and increase Beijing’s hold over the city-state in another round of tit-for-tat escalation between it and the U.S. “Xi feels threatened, the leadership feels threatened – this is a crisis,” said David Zweig, an emeritus professor at the Hong Kong University of Science and Technology and the director of Transnational China Consulting Ltd. “This is, ‘We’re not going to give an inch, we’re going to tighten up, and Hong Kong’s national security as a potential subversive center is greater than its economic value.” China did, however, pledge to implement the phase one trade deal with the U.S. despite recent setbacks from the coronavirus and increased hostility between the world’s two largest economies. “We will work with the United States to implement the phase one China-U.S. economic and trade agreement,” said Premier Li Keqiang. “China will continue to boost economic and trade cooperation with other countries to deliver mutual benefits.”
In coronavirus news, Trump said “we are not closing our country” again if there’s a second wave of coronavirus infections. “People say that’s a very distinct possibility, it’s standard,” Trump said Thursday during a tour of a Ford factory in Michigan. “We are going to put out the fires. We’re not going to close the country. We can put out the fires. Whether it is an ember or a flame, we are going to put it out. But we are not closing our country.” Meanwhile, Dr. Anthony Fauci, director of the National Institute of Allergy and Infections Diseases and a member of the White House coronavirus task force, told The Washington Post that there’s “no doubt” there will be new waves of cases. “The virus is not going to disappear,” Fauci said. “It’s a highly transmissible virus. At any given time, it’s some place or another. As long as that’s the case, there’s a risk of resurgence.” Still, Fauci said it’s “conceivable” that the U.S. could have a vaccine for COVID-19 by December, “if we don’t run into things that are, as they say, unanticipated setbacks, that we could have a vaccine that we could be beginning to deploy at the end of this calendar year, December 2020, or into January, 2021.” Fauci did, however, add that any timeline for a vaccine is “never a promise.”
The International Monetary Fund said the global banking sector is likely to remain under pressure in the wake of the coronavirus crisis through 2025 as the economy recovers. In its “Global Financial Stability Report,” the IMF found that banks in many developed economies will struggle amid a sustained period of low interest rates, with the coronavirus downturn set to “test banks’ resilience” as they face loan losses and tighter margins. “Underlying profitability pressures are likely to persist over the medium- and longer-term even once the global economy begins to recover from the current shock,” the IMF wrote in the report. JPMorgan, Goldman Sachs, and Bank of America shares were all lower in early trading.
In earnings news, E.L.F. Beauty shares are up more than 15% this morning after the cosmetics maker reported an earnings beat. In its fiscal fourth quarter, E.L.F. earned $0.10 on revenue of $74.71 million, compared to expectations for earnings of $0.05 per share on revenue of $64.11 million. “We’ve taken up our investment levels on both marketing and digital and it’s just been really great consumer engagement,” said E.L.F. CEO Tarang Amin. “Our e.l.f. cosmetics dotcom business is up triple-digits, but I think even our retailer dot-com businesses are up significantly as well.” Deere shares opened more than 3% higher this morning after the farm equipment manufacturer crushed earnings estimates, reporting earnings of $2.11 per share on sales of $8.2 billion, compared to expectations for earnings of $1.72 per share on sales of $7.9 billion. The coronavirus pandemic is, however, weighing on guidance for future earnings, with Deere’s new estimate down 40% from its original estimate for fiscal year 2020 in November 2019. “John Deere’s foremost priority in confronting the coronavirus crisis has been to safeguard the health and well-being of employees while fulfilling it’s obligation as an essential business,” said CEO John May in the company’s earnings release. And Foot Locker shares are down more than -11% today after the sneaker retailer reported a larger loss than expected as well as a 42.8% drop in sales last quarter. Foot Locker lost $0.67 per share on revenue of $1.18 billion in its fiscal first quarter, compared to expectations for a loss of $0.23 on revenue of $1.31 billion.
And Roku shares are down nearly -5% this morning after a downgrade from Stephens analyst Kyle Evans. Evans lowered his rating on the streaming device maker’s shares from Overweight to Equal Weight, and cut his price target to $105. Evans cited the “slow pace” of Roku’s international expansion, as well as the potential for investors’ expectations to climb past the point of what can be reasonably expected, and said that he has concerns about Roku’s partnership with Chinese electronics firm TCL, which makes Roku-branded TVs. “These aren’t new fears to us or ROKU shareholders, we don’t have any new/incremental information on this key partnership and the agreement has clearly been mutually beneficial from a market share perspective, but we believe Roku has benefited tremendously from TCL’s heavy lifting.”
Stocks We’re Watching
Biotricity Inc (OTC: BTCY): Biotricity shares are up more than 26% since Wednesday after the medical diagnostics and consumer healthcare technology company announced that it had received communication from the FDA that said its 510(k) submission for its next generation Bioflux Software Device is now in the Substantiative Phase of the review process, with expected response by the end of June. “Biotricity has a track record in receiving FDA 510(k)s and is confident in the process,” said Dr. Waqaas Al-Siddiq, Founder and CEO of Biotricity. “We look forward to completing this 501(k) and submitting additional 501(k)s later this year. We are excited about our continued development and look forward to launching our next generation technologies once the adequate regulatory clearances are obtained.”