Plus, manufacturing contracted in March, new mortgage applications fell, Fiat Chrysler reported a more than 10% decline in auto sales in the first quarter, and T-Mobile and Sprint finally completed their merger.
Stocks were down to start the first day of the second quarter with the Dow falling 620 points, or 2.8%. The S&P 500 sank 3%, while the Nasdaq traded 2.6% lower.
President Donald Trump warned of a “very, very painful two weeks” ahead as officials now project as many as 240,000 deaths from COVID-19 in the U.S., even with the most stringent distancing measures in place, with fatalities from the virus peaking in the next two weeks. The latest projection from the University of Washington’s Institute for Health Metrics and Evaluation predicts the death toll from the pandemic will spike dramatically this month from the current 4,081 to roughly 60,000 people—even with isolation measures in place throughout the country—with the death toll expected to peak by April 15 with more than 2,200 deaths per day. The model indicates the pace of deaths will plateau in May and June, and will total around 84,000 by the first week of August. “They’re shocking numbers, you know,” Trump said yesterday. “You’re talking about deaths. Even at the low end you were shocked, when you see 100,000 – 120,000 – 200,000 – people over a very short time.” The U.S. now has at least 189,633 cases of the coronavirus, while globally cases have climbed to more than 873,767.
U.S. manufacturing activity contracted in March as the coronavirus pandemic put pressure on the economy. The Institute for Supply Management manufacturing index fell to 49.1 last month from 50.1 in February as activity was driven down by a steep decline in new orders and production. “The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors,” said Timothy Fiore, chair of the ISM, in a statement. Elsewhere in the economy, mortgage applications to buy a home plummeted 24% last month as the coronavirus outbreak halted the usual spring housing push. Refinancing volume spiked 26% last week, and was 168% higher than a year ago. “Mortgage rates and applications continue to experience significant volatility from the economic and financial market uncertainty caused by the coronavirus crisis,” said Joel Kan, the Mortgage Banker Association’s associate vice president of economic and industry forecasting. “The bleaker economic outlook, along with the first wave of realized job losses reported in last week’s unemployment claims numbers, likely caused potential homebuyers to pull back.”
The White House is not currently planning for a fourth emergency coronavirus stimulus package as it focuses instead on implementing the $2 trillion relief package passed last week, according to administration officials. “Right now there is only executing phase 3,” an official said. However, Treasury Secretary Steven Mnuchin said that while the $2 trillion stimulus package will backstop the U.S. economy for three months, he expects “there will be more bills.” “If we need more programs and more money, we will be going back to Congress and asking for that,” Mnuchin said, adding that the Trump administration has discussed a potential infrastructure bill with Congress that would help boost the battered U.S. economy. House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer have signaled that they are open to conversations about an infrastructure plan, though fiscally conservative Senate Republicans are expected to object to any plan for more mammoth spending.
Fiat Chrysler gave the first glimmer of the extent of the collapse in auto sales amid the coronavirus crisis today. The automaker said vehicle sales in the U.S. fell 10.4% in the first quarter as consumers stayed home and dealerships shuttered. Fiat Chrysler said “strong momentum in January and February was more than offset by the negative economic impact of the coronavirus in March,” which is typically its strongest sales month of the quarter. “There are basically no U.S. auto sales right now,” said Adam Jonas, a Morgan Stanley analyst. “Investors have fully embraced the reality that the U.S. auto industry may be shut down for one or two full months. We’re now being asked to run scenarios of six-month or nine-month shutdowns.”
T-Mobile and Sprint have finally closed their merger, and the combined company will begin to unify the Sprint brand under T-Mobile this summer. With that, T-Mobile CEO John Legere has officially handed over the reigns to President and COO Mike Sievert who plans to “start lighting up 5G on what was Sprint’s spectrum almost immediately.” “During this extraordinary time, it has become abundantly clear how vital a strong and reliable network is to the world we live in. The New T-Mobile’s commitment to delivering a transformative broad and deep nationwide 5G network is more important and more needed than ever and what we are building is mission-critical for consumers,” Sievert said in a press release. “With this powerful network, the New T-Mobile will deliver real choice and value to wireless and home broadband customers and double down on all the things customers have always loved about the Un-carrier. T-Mobile has been changing wireless for good — and now we are going to do it on a whole new level!” In other M&A news, Xerox has officially pulled its hostile takeover bid for HP. “The current global health crisis and resulting macroeconomic and market turmoil caused by Covid-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc.,” Xerox said in a statement. “Accordingly, we are withdrawing our tender offer to acquire HP and will no longer seek to nominate our slate of highly qualified candidates to HP’s Board of Directors.”
Stocks We’re Watching
SG Blocks Inc (NASDAQ: SGBX): SG Blocks shares jumped as much as 373% yesterday after the company reported Q4 earnings results. “We delivered another successful quarter of execution to finish 2019 with multiple new contracts and a strengthening of our balance sheet with the completion of financing transactions to support our near-term capital needs,” said Paul Galvin, CEO of SG Blocks. “We strategically licensed our residential technology which is facilitating a reduction in our operating expenses and is expected to yield a significant royalty stream in 2020 and beyond. SG Residential is off to a strong start in the advancement of the Monticello Mews and Guayama projects both of which had land closings in 2019. Looking ahead, we remain focused on implementing the residential license and directing our time and attention in the medical, education and disaster relief markets. Most recently, we made several products available to the COVID-19 pandemic. We continue to network and respond to inquiries for an array of products that can address needs created by this pandemic while monitoring the effect that the virus could have on our operations.”