The IMF Just Warned The Coronavirus Economic Downturn Could Be The Worst In Nearly A Century

Plus, earnings season began with JPMorgan, Wells Fargo, and Johnson & Johnson reporting, Roku shares are higher after the streaming device maker said it netted 3 million active accounts in the first quarter, and Tesla shares are up after an upgrade.

Stocks were higher to start Tuesday with the Dow adding 447 points, or 1.91%. The S&P 500 gained 2.21%, while the Nasdaq traded 2.92% higher.

Stocks jumped in response to news that the first bunch of Q1 earnings reports weren’t as bad as feared. JPMorgan kicked things off reporting its first-quarter profit tumbled 69% to the lowest level in more than six years, though revenue held up well amid the coronavirus pandemic. JPMorgan’s trading division posted a 32% increase in revenue to a record of $7.2 billion in the quarter, while the firm set aside $8.29 billion for bad loans, more than double what some analysts had expected. Wells Fargo also reported, positing a profit of just $0.01 per share, and revenue of $17.717 billion, below analysts’ expectations for revenue of $19.284 billion. Wells noted that its results “were impacted by a $3.1 billion reserve build, which reflected the expected impact these unprecedented times could have on our customers.” And Johnson & Johnson shares are up 5% this morning after it reported first quarter earnings of $2.30 per share, beating consensus estimates of $2 per share. The drugmaker also raised its dividend from $0.95 per share o $1.01 per share, a 6.3% increase. “The fundamentals of Johnson & Johnson are strong,” said CFO Joseph Wolk. “Once this pandemic abates, everything is still in line for us to get back to where we thought, and where folks thought, we would be.”

But it’s not all good news this morning. The International Monetary Fund said today that the “Great Lockdown” recession will be the steepest in nearly a century and wanted that the global economy’s contraction and recovery will be worse than anticipated if the coronavirus lingers or if there are subsequent outbreaks. The IMF’s World Economic Outlook report is its first since the start of the spread of the coronavirus and the subsequent lockdown of major economies, and the IMF said in the report that global gross domestic product will contract 3% this year, compared to its previous projection for a 3.3% expansion. “It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that sent during the global financial crisis a decade ago,” said Gita Gopinath, the IMF’s chief economist, in the report. “A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound.”

Cases of the coronavirus in the U.S. are approaching 600,000, as the death toll nears 24,000. President Trump claimed that he had “total” authority to reopen the economy over the restrictions states have put in place to combat the coronavirus. In response, ten U.S. states—representing 38.8% of the total U.S. economic output in Q4 of 2019—said they will be coordinating plans separately from the White House to reopen businesses shutdown by the outbreak. California, Washington, and Oregon teamed up on coordinating a plan on the West Coast, while seven states on the East Coast teamed up, with each state ultimately making its own decisions based on specific state needs. Meanwhile, an epidemiologist at the University of Hong Kong warned that countries run the risk of unleashing a second wave of the coronavirus by lifting current social distancing orders too early. “I think having timelines is going to be very challenging. No country is going to want to open up too early, and then be the first major country to have a big second wave,’ said Ben Cowling, a professor at the School of Public Health at the University of Hong Kong. “I think it’s going to be very difficult because we know that even countries that overcome their first wave, they’re going to have challenges from other countries who are still experiencing their first wave or even experiencing a second wave, which could be starting now in China. …Testing is critical, but [there’s] still a need for some social distancing in place. So it may not be a full opening up, even in June or July.”

Roku shares are up more than 10% this morning after it said it netted three million active accounts during the first quarter as Americans stayed home amid the coronavirus crisis. “Consumers are turning to Roku now more than ever,” said CEO Anthony Wood in a press release. “As the leading TV streaming platform in the U.S., Roku is proud to provide easy access to live news, free movies and TV, great paid content, and helpful programming for individuals and families who are sheltering at home.” The streaming device maker is expected to report first quarter earnings on May 7, and said that it expects to report net revenue between $307 million and $317 million.

And Tesla shares are up more than 12% after Credit Suisse analyst Dan Levy, a Tesla bear, upgraded the stock, saying that the electric car maker is in a better position than automakers like GM and Ford who are working on transitioning from gas-powered engines toward bater-powered platforms even as earnings and cash flow dry up in the midst of the coronavirus crisis. According to Levy, Tesla is in a better position as “it is solely focused on electrification and doesn’t have the dilemma of balancing a transition.” 

Stocks We’re Watching

SCWorx Corp (NASDAQ: WORX): Shares of this nano-cap skyrocketed as much as 561% yesterday after it said it has received a purchase order for 2 million COVID-19 Rapid Testing Kits from virtual healthcare network Rethink My Healthcare with a provision for additional orders of 2 million units per week for 23 weeks. “Widespread testing for COVID-19 disease in the United States is absolutely critical for saving lives and reopening our economy,” said Marc Schessel, CEO of SCWorx. “Our substantial purchase order from Rethink My Healthcare will significantly increase the availability of rapid-test kits in the United States. Additional purchase orders currently under negotiation with certain other parties could further increase the U.S. supply of these important tests in the near term.”