Plus, lawmakers are nearing an agreement on additional funding for the small business aid program, Shake Shack said it will be returning the $10 million federal loan it’s set to receive to provide more needed funding to independent restaurants, and United Airlines said it recorded a $2.1 billion loss in Q1.
Stocks fell sharply to start Monday with the Dow falling 200 points, or 2%. The S&P 500 sunk 1.6%, while the Nasdaq traded 0.9% lower.
Oil suffered its largest one-day price drop in the modern era, with West Texas Intermediate crude at one point crashing 40% to below $11 per barrel as traders continue to contend with a massive drop in demand amid an historic supply glut, and on concerns that the world is starting to run out of places to store crude. “There is no limit to the downside to prices when inventories and pipelines are full,” said hedge fund head Pierre Andurand. “Negative prices are possible.” Buyers of crude in Texas are offering as little as $2 a barrel for some oil streams, raising the likelihood that producers could soon be paying customers to take crude off their hands.
Coronavirus latest: As cases in the U.S. surge to roughly 762,000 and the death count rises to more than 70,337, a wave of protests over shelter-in-place orders boiled over this weekend with protesters ignoring social distancing guidelines and packing sidewalks and streets in cities all over the country. State governors, however, didn’t budge on statewide orders, and top infectious disease expert Dr. Anthony Fauci pushed back on protestors, saying that the U.S. economy won’t recover until the virus is “under control.” “Unless we get the virus under control, the real recovery economically is not going to happen,” Fauci said, “so what you do if you jump the gun and go into a situation where you have a big spike, you’re going to set yourself back.” Meanwhile, as epidemiologists warn that a second wave of the coronavirus is all-but inevitable, Citi Private Bank chief investment officer David Bailin argued this morning that the market isn’t pricing in such a scenario. “In the event that we have a very significant second wave of disease in the United States that cause a further shutdown of the economy… that clearly is not priced into the market,” Bailin said. “The other thing that may not be priced into the market is the fact that this virus may take another 18 to 24 months to really cycle through the globe, and ultimately [until we] have a vaccine.”
Lawmakers are nearing a deal on a second wave of funding into the tapped-out small business aid program. Democrats and the Trump administration are nearing an agreement for Congress to act on this week on a deal as large as $500 billion, according Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi. President Trump in a press briefing yesterday expressed optimism that a deal can be reached. “We have a good chance of getting a deal,” Trump said, adding that a deal could be announced as soon as today.
Speaking of stimulus, Shake Shack said today that it will return the $10 million small business loan it received from the U.S. government as part of the CARES Act coronavirus relief package as it was able to raise around $150 million in additional capital with last week’s equity offering. Shake Shack CEO Randy Garutti and founder Danny Meyer said in a blog post released this morning that the $10 million returned could be reallocated to the independent restaurants “who need it most, (and) haven’t gotten any assistance.” “Our people would benefit from a $10 million PPP loan but we’re fortunate to now have acmes to capital that others d not. Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours,” Garutti and Meyer wrote. Shake Shack runs around 189 restaurants in the U.S., with roughly 45 employees per each outlet, and has closed furloughed or laid off more than 1,000 employees amid the coronavirus pandemic which caused the burger chain’s March sales to fall 28.5%.
One company not giving their stimulus money back is United Airlines, which this morning said on a preliminary basis, it recorded a $2.1 billion loss for the first quarter as the coronavirus pandemic drove air travel demand to the lowest level in decades. The airline said it has applied for up to $4.5 billion in government loans on top of $5 billion in federal payroll grants and loans it expects to receive. The $4.5 billion loan has a term of up to 5 years, and if the company borrows the full amount, it will be obligated to issue warrants for the government to buy 14.2 million shares, or around 5.7% of the shares outstanding, at a strike price of $31.50. Separately, United also said it has entered into a sale-and-lease agreement with BOC Aviation for 16 Boeing 737 Max aircraft and 6 Boeing 787-9 aircraft, which will be delivered this year.
Stocks We’re Watching
Axonics Modulation Technologies Inc (NASDAQ: AXNX): Shares of this medical technology firm gained more than 20% last week after the company announced that the FDA approved its next generation rechargeable implantable neurostimulator (“INS”) for its r-SNM System under a premarket approval supplement. “This FDA approval is another example of our commitment to innovation and to creating awareness, particularly among middle-aged women, that sacral neuromodulation is a safe and efficacious treatment for bladder and bowel dysfunction,” said Axonics CEO Raymond W. Cohen. “From our inception, delivering a superior patient experience has been at the forefront of our development efforts. With this objective in mind, we developed a bespoke SNM device that is intuitive, fuss-free, long-lived, MRI full-body compatible, safe and clinically effective. The response by the SNM implanting community and their patients has been exceptional. This is evidenced by the fact that in just five months in the U.S. market, approximately one-third of centers offering SNM therapy are now implanting the Axonics System. We will continue to innovate by adding new embodiments and capabilities to our SNM product offering as well as working with the FDA to expand clinical indications.”