Plus, Trump’s impeachment trial gets underway in the Senate today, the World Economic Forum in Davos kicked off, and earnings season marches on with Halliburton reporting.
Stocks fell to start Tuesday with the Dow dropping 66 points, or 0.2%. The S&P 500 traded 0.2% lower, while the Nasdaq dipped 0.1%.
Global markets slid lower as concern grows around the spread of the respiratory virus in China that has infected more than 200 people and killed six. Officials have said that the mystery virus can spread between humans and has infected several medical workers, stirring memories of the SARS outbreak from 17 years ago that killed 800 and sparking concern about an international pandemic as millions prepare to travel ahead of the Lunar New Year holidays. “People are getting nervous and cashing out,” said Wang Chen, a partner with XuFunds Investing Management Co., adding that the firm has cut some positions. “We have a long holiday coming up and the virus outbreak, and there was a bit too much hype in the market recently.” Australian National University associate professor of medicine Sanjaya Senanayake said, “The risk from this virus causing pandemonium has increased because it is spreading from different countries, and we are now seeing that it can be more easily transmitted from person to person,” however, compared to SARS, “the one good factor, I guess, at the moment seems to be the low mortality rate.”
The impeachment trial of President Donald Trump begins in the Senate this afternoon, with Republicans and Democrats expected to clash on the rules of the trial at the outset. Senate majority Leader Mitch McConnell put forth a resolution that would set a rapid and grueling schedule for the trial, giving House managers and Trump’s defense team just 24 hours of floor time each to make their arguments, with just two days to use that time. With proceedings each day getting underway at 1 p.m., arguments under McConnell’s proposed timeline would stretch late into the night on both days, which House Speaker Nancy Pelosi called a “dark of night” trial. “The Senate GOP Leader has chosen a cover-up for the president, rather than honor his oath to the constitution,” Pelosi said in a statement. While there have been questions around whether or not witnesses will be called in the trial, McConnell’s resolution will allow for the Senate to take a roll call vote on whether to call witnesses following opposition from four Republican senators. A poll from Monmouth University identified that more than three in four Americans say that Trump administration officials, including the president himself, should be invited to testify before the Senate, and found that 57% of Americans say House impeachment managers should be able to introduce new evidence to the case.
Trump spoke in Davos ahead of his impeachment trial getting underway today. In his speech, he called the trial a “hoax” and “disgraceful,” while touting his economic achievements, saying the U.S. is “thriving” and “winning again like never before.” But some have said the president’s speech was “too optimistic,” and many business leaders at the World Economic Forum meeting in Davos have indicated they aren’t convinced the latest round of trade negotiations between the U.S. and China will yield a “phase two” deal before then end of Trump’s term. “No one thinks it’s going to happen,” said Ian Bremmer, the president of Eurasia Group. “I really would be shocked to see a trade two deal get done before the election.” Trump also launched a veiled attack on environmental “alarmists” in a speech at the Swiss resort, taking aim at the World Economic Forum’s key focus this year, meanwhile environmental activist Greta Thunberg said to the business elite at the Davos gathering that while everybody has been talking about the climate, “pretty much nothing has been done, since the global emissions of CO2 have not reduced.”
Tesla shares are up nearly 6% this morning even as a safety petition was put forth by short seller Brian Sparks calling for the automaker’s vehicles to be recalled to the National Highway Traffic Safety Administration. While the NHTSA said it would review the petition, Tesla said the petition’s claims are “completely false.” “We investigate every single incident where the driver alleges to us that their vehicle accelerated contrary to their input, and in every case where we had the vehicle’s data, we confirmed that the car operated as designed.” Headlines have also been sparked for the electric car maker this morning following an upgrade from New Street Research Analyst Pierre Ferragu, who boosted his price target on the stock to $960 by early 2021 – 77% above the current price. Ferragu anticipates Tesla will sell 2 million to 3 million cars per year after 2025 at industry-leading margins, which would justify a market capitalization $230 billion to $350 billion, or roughly $1,100 to $1,700 per share, though the analyst cautioned that “the stock will remain volatile, as the spread between bull and bear cases remains wide.”
On the earnings front, U.S. oilfield services firm Halliburton reported this morning posting a $1.7 billion loss after taking a $2.2 billion write-down due to a slowdown in drilling in North America, but beating on adjusted earnings per share of $0.32 compared to analysts’ expectations for $0.29. Stephens analyst Tommy Moll said that the write-down may prove to be a turning point as “this development, particularly if coupled with earnings call commentary indicating continued emphasis on margins and rationing of capital for 2020, provides the positive rate of change signal investors have sought.” Netflix reports after the bell today and is expected to report quarterly earnings of $0.58 per share and subscriber additions of 8.96 million globally.
Stocks We’re Watching
Forty Seven Inc (NASDAQ: FTSV): Forty Seven shares jumped 20% on Friday following an upgrade from Oppenheimer analyst Mark Breidenbach. Breidenbach issued an Outperform rating for the stock and boosted his price target from $35 to $60 – 36% higher than the current price. The analyst said in a note that in the near term, Forty Seven plans to initiate two pivotal trials evaluating its magrolimab treatment in patients with myelodysplastic syndrome and diffuse large B-cell lymphoma, and said that the company is funded into the first quarter of 2022 following a recent capital raise of $195.6 million.
Zymeworks Inc (NYSE: ZYME): Zymeworks shares are up more than 9% over the last week following the company’s announcement that it had initiated a Phase 2 trial evaluating its ZW25 combination therapy and had reached an agreement with Pfizer to advance the study. Paradigm Capital analyst Scott McAuley boosted his price target for the clinical stage biotech to $51 saying, “We see opportunities for near-term gains in ZYME’s value through strategic and clinical updates on ZW49 at the upcoming JPMorgan Conference and ASCO, as well as possible clinical updates of ZW25 in breast cancer and gastroesophageal adenocarcinoma.” “To date, ZYME has announced three Phase 2 trials for its lead asset, ZW25, indicating that it intends to seek approval for treatment of three types of cancer,” McAuley added.