“Jobless Claims Are A Warning That The Worst Isn’t Over Yet For The American Economy”

Plus, oil extended its rally, Target is seeing a doubling of online orders but warned that its expenses have gone up, Domino’s reported a 4.4% increase in sales, and Eli Lilly reported a 15% rise in revenues.

Stocks rose higher to start Thursday with the Dow adding 263 points, or 1.1%. The S&P 500 traded 1.1% higher, while the Nasdaq gained 1.3%.

More than 4 million Americans applied for unemployment benefits last week, bringing the five-week total amid the coronavirus pandemic to 26.5 million – marking the steepest downturn for the U.S. labor market since the Great Depression, and wiping out the 22.442 million jobs added to nonfarm payrolls since November 2009. The Labor Department reported this morning that new jobless claims totaled 4.427 million, and while the number was lower than last week’s, “We’re still talking about workers filing for unemployment benefits in the millions – so it isn’t ‘good news’ per se,” said Ian Lyngen, head of rates strategy at BMO Capital Markets. “Jobless claims are a warning that the worst isn’t over yet for the American economy with businesses and consumers alike being sucked down into the abyss of the pandemic recession,” said Chris Rupkey, chief financial economist at MUFG. “The risks to the outlook are that the economy is digging itself such a big deep hole that it will become harder and harder to climb back out of it.”

Oil extended Wednesday’s rally this morning, with West Texas Intermediate rising 30% to $17.96 per barrel at the time of writing, while Brent crude is up nearly 13% to $23.01 per barrel.  Still, despite today’s and yesterday’s gains, WTI crude is down around -70% so far this year, and Brent crude is down around -65% year-to-date. What’s more, some of the world’s top oil traders warned today that the world is nearing a crunch point where refiners will have nowhere left to put their products. “The main driver for the rocketing clean tanker rates is that the production of clean product exceeds the current demand and that land-based strongest are filling, which drives storage onto product tankers at sea,” said Joakim Norholm Vasehus, a spokesman at Torm A/W, a Copenhagen-based owner of dozens of refined-fuel tankers. “The shipping market is now the main bottleneck,” added Torbjorn Tornqvist, head of commodity trading at Gunvor Group Ltd. “We are fast approaching the crunch point whereby it will be hard to find any ships, and shipping rates are currently stratospheric.”

As cases of the coronavirus in the U.S. rise to more than 843,900, the House is set to pass the $484 billion pandemic relief bill to replenish the small business aid program that has run dry, fund hospitals, and expand testing. The Small Business Administration today issued new guidance that will make it “unlikely” that large publicly traded companies will be able to access the next round of funding for the small business Paycheck Protection Program after 75 publicly traded firms received coronavirus relief loans meant for small businesses in the last round of funding. In a marked shift of tone from his repeated calls for states to reopen their economies, President Donald Trump said at a White House press conference late yesterday that he disagreed with Georgia governor Brian Kemp’s decision to reopen gyms, fitness centers, massage parlors, tattoo parlors, movie theaters, barbers, hair salons, and nail salons this week. “I disagree with what he’s doing,” Trump said. “I think it’s too soon. Safety has to dominate.”

Target shares are down this morning after the retailer warned that while it has benefitted from a surge in online shopping, it will report lower profits due to higher costs for the quarter beginning on February 2. Since the start of the quarter, Target’s same-store sales have risen more than 7% as a result of doubling online sales, however the company has already spent more than $300 million on coronavirus-related employee expenses, such as paid sick leave. CEO Brian Cornell also said, however, that the trend of shoppers avoiding trips to Target stores has worked in the retailer’s favor, and that the company’s investments in online shopping options and its workforce will lead to “market share gains” that Kemp thinks “will benefit the brand for years to come.” “Because of our strong business model, we are able to make considerable investments to support our team, put protections in place, and adjust to serve our guests,” Cornell said in a statement. “As a result, we are seeing record-setting digital growth, strong demand for our same-day fulfillment services and broad market-share gains across each of our core categories.”

And in earnings news, Domino’s reported fiscal first-quarter sales growth of 4.4%, and net income of $121.6 million, or $3.07 per share, compared to $92.6 million, or $2.20 per share, in the same period last year. Eli Lilly reported earnings per share of $1.75 for its first quarter, beating Street expectations for $1.48 per share, with the company reporting a 15% rise in revenues in the quarter to $5.9 billion. Jefferies health care analyst Jared Holz said that Lilly’s results could help reassure investors in the pharmaceutical space, writing in a note, “LLY’s confidence in its business, despite COVID-19 (and management does mention the fact that the overall environment is more tenuous given economic uncertainties) we believe will give investors confidence in the space especially as other sub-sectors see meaningful disruption.”

Stocks We’re Watching

Hoth Therapeutics Inc (NASDAQ; HOTH): Hoth Therapeutics shares are up 14% so far this week after the biopharma announced top line data from its pre-clinical trial studying topical administration of Anandamide (AEA)-loaded Z-pods for the treatment of Cutaneous Lupus Erythematosus (CLE), a chronic autoimmune skin disease, in partnership with Zylo Therapeutics. The study showed that mice treated with the AEA-loaded particles experienced lesions that regressed in size and severity. “We are pleased to have concluded our preclinical study of CLE,” said Mr. Robb Knie, CEO of Hoth. “Clearly, administering anandamide through the AEA-laoded Z-pods delivery system has significant lesion improvement in CLE patients. Together with the Zylo team, we will continue to move this treatment forward through to the clinic.”