Plus, oil prices rose on reports of an explosion at an oil tanker in Syria, Treasury Secretary Mnuchin said it’s “outrageous” that the Los Angeles Lakers and other large companies received aid meant for small businesses, Simon Property Group is preparing to reopen 49 of its mall properties nationwide, and its a busy day for earnings.
Stocks were higher to start Tuesday, but quickly gave up gains. The Dow is up nearly 18 points, or 0.07%, the S&P 500 is down 0.27%, and the Nasdaq is down 1%.
Oil prices briefly moved higher on Tuesday with West Texas Intermediate crude rising as high as $13.69 per barrel before falling back down to $11.98 at the time of writing. Oil was higher following reports that a bomb on an oil tanker exploded in Syria. The explosion in Afrin, Syria killed at least 10 people, according to initial reports, and it assumed to have been a “terror attack” according to Turkey’s Anadolu news agency. Such an explosion may “raise the risk premium, even in a market with a glut of crude,” said Phil Flynn, senior market analyst at The Price Futures Group. “Still, we need to find out if this was a one off incident and who the perpetrators turn out to be.” Flynn added that either way, “the uncertainty about this report is raising speculation of growing desperation on the part of some oil producers.”
Following last week’s passage of a new round of funding to replenish the Paycheck Protection Program, Treasury Secretary Steven Mnuchin said today that the government will audit any company requesting more than $2 million from the small business loan program in an effort to avoid a recurrence of the funds going to large public companies. “I’m going to be putting out an announcement later this morning that for any loan over $2 million, the Small Business Administration will be doing a full review of that loan before there is loan forgiveness,” Mnuchin told CNBC. “This was a program designed for small businesses. It was not a program that was designed for public companies that had liquidity.” Mnuchin also said he was surprised that the Los Angeles Lakers took a loan from the small business fund. “I’m not a big fan of the fact that they took a $4.6 million” loan, Mnuchin said of the Lakers, which is one of the best-known and most successful teams in the NBA. “I think that’s outrageous.” The Lakers aren’t the only major brand to take a loan from the program, with Ruth’s Chris Steak House owner Ruth’s Hospitality Group taking a $20 million loan from the Paycheck Protection Program, and AutoNation taking a $77 million loan from the program, among 200 other publicly traded companies that applied for the program.
As coronavirus cases in the U.S. inch closer to 1 million, White House health advisor Dr. Anthony Fauci said today that the nation “could be in for a bad fall” if researches haven’t found an effective treatment for COVID-19 by then. “In my mind,” Fauci said, “it’s inevitable that we will have a return of the virus, or maybe even that it never went away.” Even as several states prepare to reopen parts of their economies, Fauci also warned against states reopening businesses prematurely, saying that it could result in “a rebound to get us right back in the same boat that we were in a few weeks ago.” Outbreak preparedness expert Jeremy Konyndyk, senior policy fellow at the Center for Global Development, echoed Fauci’s sentiment saying, “We’re not remotely prepared neither in terms of the epidemiology of the outbreak in the United States, nor in terms of our preparedness capacities to begin suppressing this virus in ways other than through social distancing.”
One company planning a return to business anyway is Simon Property Group, the largest mall operator in the U.S. As states like South Carolina and Georgia start reopening amid the coronavirus pandemic, Simon is planning to reopen 49 of its malls and outlet centers between May 1 and May 4 with limited hours to allow for expanded cleaning overnight. Simon said high-touch areas like food court tables, escalators, door knobs, and electronic directories will be sanitized regularly once operations have resumed, and has asked retailers to do the same in their stores. Simon employees will be mandated to wear masks while they are working and will be encouraged to take “frequent breaks for handwashing,” shoppers are encouraged to wear masks or some sort of face coverings when they go to Simon’s malls, and the company will provide CDC-approved masks and hand sanitizing packets to shoppers who ask for them. Simon Property Group shares are up more than 11% on the news.
It’s a busy day for earnings, with Google-parent Alphabet, Advanced Micro Devices, and Starbucks among those reporting after the bell later today. Reporting this morning, BP Plc said that while earnings were hit hard in the first three months of the year, the worst of the virus-driven crisis is yet to come. Pfizer said its total sales dropped 8% in the first quarter from a year ago. Southwest Airlines posted its first loss since 2011 and said revenue in may could fall as much as 95% year-over-year. Caterpillar said it saw a sales drop of 21% in the first quarter as the coronavirus pandemic disrupted demand in the construction and mining sectors. PepsiCo reported its first quarter adjusted earnings rose 10% as consumers stock up on soda and snacks amid coronavirus stay-at-home orders. And industrial conglomerate 3M delivered better-than-expected earnings for the first quarter as demand for the company’s health care unit’s personal safety equipment rose.
Stocks We’re Watching
Avadel Pharmaceuticals (NASDAQ: AVDL): Shares of this biotech gained as much as 37% yesterday and are up nearly 10% this morning after it announced positive topline data from its pivotal Phase 3 REST-ON trial studying the efficacy of its FT218 treatment for patients with narcolepsy. “We are excited to see these positive topline data from the REST-ON study, where all three dose levels of once-nightly FT218 demonstrated a statistically significant and clinically meaningful improvement on the measures of the two prominent symptoms of narcolepsy, as well as an improvement in overall functioning compared to placebo,” said Jordan Dubow, M.D., Chief Medical Officer of Avadel. “Once-nightly FT218 delivered a clinically meaningful response within three weeks of treatment initiation, which was sustained through each treatment period. Commonly known sodium oxybate adverse reactions occurred at low rates at the highest dose level. We think once-nightly FT218, if approved, has the potential to be a meaningful contributor to patient care. We look forward to presenting more detailed data from the REST-ON study in publications and at upcoming medical conferences.”