Plus, cruise stocks are down after the CDC officially halts the summer sailing season, Netflix reported disappointing earnings and subscriber growth guidance, and British Airways is grounding its fleet of Boeing 747 jumbo jets ahead of schedule.
Stocks were lower to start Friday with the Dow sliding 100 points, or 0.4%. The S&P 500 slipped 0.2%, while the Nasdaq fell 0.4%.
The U.S. reported a record 77,255 new coronavirus cases yesterday, shattering the previous single-day record on July 10 by nearly 10,000. Cases are on the rise in forty-four states and the District of Columbia, with California, Florida, and Texas accounting for more than half of all new cases. White House coronavirus advisor Dr. Anthony Fauci urged young Americans to take the pandemic more seriously, as not doing so could propagate the virus. “You have to have responsibility for yourself but also a societal responsibility that you’re getting infected is not just you in a vacuum,” Fauci said. “You’re propagating the pandemic.” And Adm. Brett Giroir, the assistant secretary for the Department of Health and Human Services said this morning that the transmission of the deadly virus is coming from people who are asymptomatic and never develop symptoms, thus reinforcing the need for widespread mask usage. “Just feeling like you want to go get a test is really not the best strategy, but we know that most of the spread are from asymptomatic people, particularly young adults, so you have to cast a wide net and I think we’re able to do that.”
As COVID continues to roil the country, time is running out for America’s leaders to decide whether or not to extend its largest economic rescue effort ever. Congress has just days to prevent millions of Americans left jobless by the pandemic from seeing their income dry up, with the $600 per week in federal unemployment benefits expiring at the end of July. With the stimulus programs passed at the start of the pandemic due to expire in the coming weeks and months, their expiration will test the still-fragile U.S. recovery. That is, unless, policy makers opt to keep supports in place. House Speaker Nancy Pelosi said yesterday that Democrats and Republicans need to resolve several disputes about what to include in a new coronavirus relief bill as the financial lifelines are set to expire, seeing a cult between the breadth of relief each party wants to provide just two weeks ahead of when Congress is set to adjourn for the month of August. “They know there’s going to be a bill,” Pelosi said, referring to her Republican counterparts. “First it was going to be no bill. And then it was going to be some little bill. Now it’s $1.3 [trillion]. That’s not enough.” Senate Majority Leader Mitch McConnell said that the Senate aims to unveil its coronavirus relief plans next week, adding that “kids in school, jobs and health care are likely to be the focus of the bill.”
Cruise stocks are down again this morning after falling precipitously yesterday following the CDC’s move to extend its ban on passenger cruising from U.S. ports through September 30, citing “ongoing” coronavirus outbreaks aboard ships and formally locking down U.S. ports through the prime summer sailing season. Shares of Carnival Corp. are down -2%, Norwegian Cruise is down -2.4%, and Royal Cariibbean Cruises shares are down -1.8%. In extending the cruise ban, CDC Director Dr. Robert Redfield said that data collected by the agency shows that at least 2,973 COVID-19 infections and 34 deaths came from cruise ships since the CDC began tracking the data earlier in the year. “These data have also revealed a total of 99 outbreaks on 123 different cruise ships, meaning that 80% of ships within U.S. jurisdiction were affected by COVID-19 during this time frame,” Redfield said. “In addition, 9 ships still have ongoing or resolving COVID-19 outbreaks on board.”
Netflix shares are down more than 7% today following the streaming platform reporting disappointing second quarter earnings and subscriber growth guidance late yesterday. Netflix reported earnings per share of $1.59 on revenue of $6.15 billion, compared to earnings per share of $1.81 expected by analysts. While the streaming pioneer added more subscribers than anticipated—adding 10.09 million new subscribers last quarter, compared to 8.26 million expected—it said it expects to add just 2.5 million net subscribers in the third quarter, while analysts had expected 5.27 million. Netflix said in a shareholder letter that “growth is slowing as consumers get through the initial shock of COVID and social restrictions. Our paid net additions for the month of June also included the subscriptions we cancelled for the small percentage of members who had not used the service recently.” Netflix also announced that Ted Sarandos has been promoted to co-CEO, elevating him from chief content officer where he has led the company’s move into original content. “While Reed [Hastings] was the visionary, Ted is the future,” said Gil Simon, chief investment officer at SoMa Equity Partners. “He’s networked within the creative community and his ability to bring on A-list show runners and film producers is the secret sauce.”
And Boeing shares are down nearly -1% this morning on news that British Airways is retiring its entire fleet of Boeing 747 jets. The airline had planned to phase out the “jumbo jet” by 2024, but travel restrictions due to the coronavirus has led to the company taking action sooner. “It is with great sadness that we can confirm we are proposing to retire our entire 747 fleet with immediate effect,” British Airways said. “This is not how we wanted or expected to have to say goodbye to our incredible fleet of 747 aircraft. It is unlikely our magnificent ‘queen of the skies’ will ever operate commercial services for British Airways again due to the downturn in travel caused by the COVID-19 global pandemic. [The 747] will always hold a special place in our hearts at British Airways.” Instead of the Boeing 747, the carrier will operate more flights on “modern, fuel-efficient aircraft” including the Airbus A350 and Boeing 787. Boeing recently warned that 12,000 jobs were at risk due to the pandemic and resulting hit to air travel.
Stocks We’re Watching
InnerWorkings (NASDAQ: INWK): InnerWorkings shares gained as much as 122% yesterday after its announced that it has signed an agreement to be acquired by HH Global Group Limited in a deal valuing InnerWorkings at $177 million. “Over the past several months, we’ve been taking actions to put InnerWorkings in the best position to weather the challenging environment in which we’re operating,” said Rich Stoddart, CEO of InnerWorkings. “In these times of significant economic uncertainty, the Board of Directors and management determined to undertake a comprehensive process to preserve and enhance value for shareholders. After exploring a range of financing and strategic alternatives, and implementing meaningful cost saving measures in response to the COVID-19 pandemic, we’re confident this combination represents the best path forward for our shareholders and InnerWorkings. In addition to delivering an immediate cash premium to our shareholders, the combination will create a company with a stronger balance sheet and will enhance our ability to accelerate our transformation and serve our client base.”