Plus, stocks were lower on fears that President Trump may reignite tensions with China, Amazon said that it expects to spend as much as it earns in the second quarter on COVID-related expenses, and Apple shares took a hit after the iPhone maker declined to give forecast for the first time in a decade.
Stocks fell to start Friday with the Dow sinking 414 points, or 1.7%. The S&P was down 2%, while the Nasdaq traded 2.1% lower.
Global stocks slipped lower after President Donald Trump reignited his campaign against China by saying that he could block a government retirement fund from investing in Chinese stocks considered a national security risk and impose tariffs to retaliate against Beijing’s handling of the coronavirus. “The FTSE extended losses on Friday as investors turned their backs on mining, travel and financial stocks,” said Russ Mould investment director, AJ Bell. “Weighing on stocks were renewed tensions between the U.S. and China, with Donald Trump claiming to have evidence that coronavirus started in a Chinese lab, thus stoking fears that another trade spat will emerge.”
As cases of the coronavirus rise to at least 3,276,373 globally, experts wrote in a new report that the pandemic is likely to last as long as two years and won’t be controlled until around two-thirds of the world’s population is immune. The report published by the University of Minnesota’s Center for Infectious Disease Research and Policy (CIDRAP) said that the first wave of COVID-19 would last through spring 2020 and is likely to be followed by “a series of repetitive smaller waves” occurring throughout the summer and then consistently over a one- to two-year period before gradually diminishing. “The occurrence of these waves may vary geographically and may depend on what mitigation measures are in place and how they are eased,” the report stated. “Depending on the height of the wave peaks, this scenario could require periodic reinstitution and subsequent relaxation of mitigation measures over the next one to two years.”
“If you’re a shareowner in Amazon, you may want to take a seat,” Amazon CEO Jeff Bezos said in an earnings statement. “Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.” For the second quarter, Amazon said operating income could range from $1.5 billion to a loss of $1.5 billion, adding a dour note to Q1 financial results that showcased the e-commerce giant’s success amid the coronavirus crisis when shoppers are forced to buy online. Amazon CFO Brian Olsavsky said that he also expects the company will spend $1 billion on COVID-19 testing in 2020, adding that Amazon has designated a team of researchers, engineers, procurement specialists, and program managers to work on building incremental testing capacity. Amazon said the team is building a lab and has begun to pilot test of front-line employees. In other Amazon news, the House Judiciary Committee has asked Bezos to testify after Democratic leaders of the committee accused his deputies of potentially lying to Congress following a report from the Wall Street Journal that laid bare Amazon’s use of third-party seller data. “If the reporting in the Wall Street Journal article is accurate, then statements Amazon made to the Committee about the company’s business practices appear to be misleading, and possibly criminally false or perjurious,” the Committee wrote in a letter to Bezos.
Apple shares took a hit this morning after the company skipped providing a forecast for the first time in more than a decade, sparking concern that performance may suffer later this year. CEO Tim Cook said Apple experienced a “very depressed” period from late March to early April amid the depths of the coronavirus pandemic, but saw a “pickup” in sales in the second half of April. Still, Apple managed to eke out growth reporting that sales came in at $58.3 billion, compared with $58 billion in the same period last year. “Amid the most challenging global environment in which we’ve ever operated our business we’re proud to say that Apple grew during the quarter,” Cook said on an earnings call with analysts. “We have great confidence in the long-term of our business. In the short-term, it’s hard to see out the windshield to know what the next 60 days look like, and so we’re not giving guidance because of that lack of visibility and uncertainty. It was a very unique quarter. I’ve never had anything quite like this. I hope to never have it again, but I’m incredibly proud of the company and what was achieved during that period of time.”
And Tesla shares are down nearly 12% this morning after CEO Elon Musk tweeted, “Tesla stock price is too high imo.” The tweet was followed by a series of bizarre statements from Musk who said he was “selling almost all physical possessions,” and sharing lyrics to the Star Spangled Banner. Musk previously sparked conflict with the SEC in August 2018 for tweeting that he wanted to take Tesla private at $420 per share and had secured the funding to do so. Musk has since agreed to submit his public statements about Tesla’s finances and other topics to vetting by the company’s legal counsel, though it’s unclear if Musk had such approval before his tweets on Friday.
Stocks We’re Watching
Soligenix Inc (NASDAQ: SNGX): Soligenix shares bounced 28% yesterday after the late-stage biotech announced that continued treatment with its SGX301 twice weekly for 12 weeks increased the positive response rate to 40% in its pivotal Phase 3 FLASH study for the treatment of early-stage cutaneous T-cell lymphoma (CTCL). “On behalf of everyone at Soligenix, I would like to again extend my sincere appreciation to the patients, families, investigators, and advisors involved in the pivotal Phase 3 FLASH study,” said Christopher J. Schaber, PhD, President and CEO of Soligenix. “We are extremely pleased with the study results, which demonstrate successful continued treatment with SGX301 and reinforces its potential to be a valuable and life-changing new therapy for patients suffering from early-stage CTCL, which is an orphan disease and area of unmet medical need.”