Plus, President Trump abandoned his hope of re-opening the U.S. economy by Easter as cases surge to more than 143,000, Macy’s said it is furloughing the majority of its 130,000 employees, and Johnson & Johnson said it will begin human trails on its experimental COVID-19 vaccine by September.
Stocks were higher to start Monday, with the Dow adding 342 points, or 1.6%. The S&P 500 gained 1.9%, while the Nasdaq rose 2.3%.
Stocks were modestly higher this morning coming off of the market’s volatile last week when stocks posted their biggest weekly gain since 2009. UBS strategists said “selling fatigue” may have kicked in as investors were no longer selling everything in reaction to incremental bad news. “However, both because infection rates are likely to keep rising for some time, and also because in cash equity markets we have not yet seen a capitulation in the core positions in growth style stocks, it may be early to say a firm bottom has already been made,” the UBS strategists, led by Bhanu Baweja, wrote in a note. “I do think that we’re going to continue to see volatility,” said Fabiana Fedeli, global head of fundamental equities at Robeco. “Whatever has happened with equity markets, the VIX has stayed at very elevated levels. We’re going to have a lot of news flow and some of it will be negative – it could be concerns over the outbreak, it could be concerning the balance sheets of companies.”
Oil hit a 18-year low today as the coronavirus crisis cratered demand amid a rising surplus. West Texas Intermediate crude briefly fell below $20 this morning and is at $20.36 at the time of writing, while Brent Crude fell as low as $21.76 and has since recovered to $22.20. “From a technical point of view, the price [of WTI crude] is now dancing between the significant figure of $20 and the support at $20.50, which is the bottom reached in the last few weeks,” said Carlo Alberto De Casa, chief analyst at ActivTrades. “A clear fall below $20 would open space for further declines amid this massively bearish trend.” The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, and analysts say some higher cost producers may have no choice but to shutter, especially given the fact that storage capacities are nearly full. “Many companies we spoke to suggested they have begun planning for potential shut-ins within days,” said SunTrust Robinson Humphrey analyst Neal Dingmann. “While the multi-decade low crude prices would have already, in our opinion, caused many U.S. operators to reduce activity/let production decline without any other system constraints, we see increased risk of existing production being shut-in with a lack of any end-market purchasers. We believe refineries could begin (or potentially already have begun) to stop crude purchases with the inability to make a profit on gasoline production. We believe there is a likely scenario where midstream providers declare force majeure on their upstream operators as the potential for U.S. crude storage becomes fulled over the next several months.”
The number of COVID-19 cases in the U.S. has surged to at least 143,000, while the death toll has risen to more than 2,500. President Donald Trump abandoned his ambition to re-open the U.S. economy by Easter, heeding advice from top health officials and governors across the nation that doing so would risk a greater death toll as the outbreak accelerates. Instead, Trump has said his guidelines for Americans to practice “social distancing” would remain in place until at least April 30, and said that he hoped that the country would reach “the bottom of the hill” by June 1. The about-face came after Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, and Deborah Birx, the State Department immunologist advising Vice President Mike Pence presented alarming new projections that millions of Americans could become infected with COVID-19. Fauci also said to CNN that as many as 200,000 Americans may die from the virus if efforts to mitigate the spread of the virus aren’t successful. “The number I gave out is, you know, based on modeling,” Fauci said. “And I think it’s entirely conceivable that if we do not mitigate to the extent that we’re trying to do – that you could reach that number. What we’re trying to do is not let that happen.” Globally, cases have risen to more than 732,153. More regions have gone into lockdown, including Moscow, Russia, and the Thai tourism hot-spot, Phuket. Germany’s economic advisors warned that the country could see its worst recession since 2009, and the death toll from the outbreak in the hard-hit Lombardy region in Italy rose to 458 in a day to around 6,818 as confirmed cases rose to 42.161. “We are in the most acute phase,” said Italian Prime Minister Giuseppe Conte, as total confirmed cases in the country rose to 97,689.
Macy’s said this morning that it will furlough the majority of its 130,000 employees beginning this week as the department store copes with significant sales losses during the COVID-19 pandemic. The retailer said that it has lost most of its sales, even as it remains open online, and did not specify how many employees would be impacted by the furloughs. Macy’s said that while it has suspended its dividend, drawn down a line of credit, frozen hiring and spending, and cancelled some orders. “While these actions have helped, it is not enough,” the company said in a statement. “Across Macy’s, Bloomingdale’s, and Bluemercury brands, we will be moving to the absolute minimum workforce needed to maintain basic operations.” Macy’s also said that it is evaluating all other financing options.
Johnson & Johnson said today that human testing of its experimental coronavirus vaccine will begin by September and could be available for emergency use authorization in early 2021. The news sent shares up, with the stock up more than 7% at the time of writing. “We have very good early indicators that not only can we depend on this to be a safe vaccine base but also one that will ultimately be effective based on all the early testing and modeling we’ve been doing,” said J&J Chairman and CEO Alex Gorsky. “This is a bit of a moonshot for J&J going forward, but it’s one we feel is very, very important for us to be doing at this period in time.” And shares of Abbott Laboratories are also up more than 7% this morning after the company unveiled a coronavirus test that can confirm if an individual has the virus in as little as five minutes, and that is so small and portable that it can be used in almost any healthcare setting. Abbott said late Friday that the FDA has given emergency use authorization for the test “for use by authorized laboratories and patient care settings.” “This is really going to provide a tremendous opportunity for front-line caregivers, those having to diagnose a lot of infections, to close the gap with out testing,” said John Frels, vice president of research and development at Abbott Diagnostics. “A clinic will be able to turn that result around quickly, while the patient is waiting.”
Stocks We’re Watching
Arcturus Therapeutics (NASDAQ: ARCT): On Friday, Arcturus Therapeutics gave details about its strategy to rapidly learn about the safety and efficacy profile of its experimental COVID-19 vaccine using Duke-NUS’ genetic correlation system. “The data generated from the Duke-NUS system gives us the ability to more efficiently select the dose and help streamline our vaccine development program, potentially accelerating our timeline,” said Pad Chivukula, Ph.D., Chief Scientific Officer of Arcturus.
BIO-key International (NASDAQ: BKYI): This nano-cap gained as much as 378% on Friday after it announced that it had secured a $45 million contract to provide its biometric software and hardware solutions in support of a Nigerian Ministry of Labour program to educate, empower and create employment for one million recent college graduates in Nigeria. “Our strategic partnership with NELEX is yet another substantial step towards promoting and advocating BIO-key and, more importantly, driving real-life use cases for its identity management technologies. NELEX is the Federal Government of Nigeria’s regulatory agency responsible for creating high quality employment across Nigeria,” said Akintunde Jeje, Managing Director for BIO-key and Chairman at Exponential Launch Africa Limited. “This high profile relationship provides access to BIO-key’s innovative technologies, and our collaboration will reinforce our position as the premier biometric solutions provider in Nigeria and Africa as a whole.”