Plus, the FDA granted emergency use authorization for Abbott Laboratories’ COVID-19 antibodies test, oil is higher after Saudi Arabia said it would cut production by an additional 1 million barrels per day, and Constellation Brands got a downgrade from MKM Partners.
The major indexes opened mixed this morning with the Dow dropping 227 points, or 0.9%. The S&P 500 fell 0.6%, while the Nasdaq traded 0.1% higher.
The coronavirus has moved closer to the White House with Vice President Mike Pence’s press secretary, Katie Miller, testing positive for the disease. Miller is married to senior Trump adviser Stephen Miller, and a contact tracing effort has begun to test and quarantine those who came in contact with her. A spokesman for Pence said the VP would be back to work today as the Trump administration pushes ahead with plans to reopen the U.S. economy. Speaking of the economy, Trump’s economic team said this weekend that the unemployment rate likely has further to rise. Kevin Hassett told CBS’s Face the Nation that the unemployment rate may peak north of 20%, while Treasury Secretary Steven Mnuchin said it may already be closer to 25%.
In other coronavirus news, the FDA this morning granted emergency use authorization for Abbott Laboratories’ new coronavirus test that detects COVID-19 antibodies. Abbott said it plans to ship around 30 million tests in May, and expects to have the capacity to ship 60 million tests in June. “Having more options of highly reliable tests across our platforms will help healthcare workers and health officials as they conduct broad scale testing for COVID-19,” said Abbott CEO Robert Ford in a statement. U.S. officials and corporations nationwide have said more widespread testing for the coronavirus and antibodies is necessary to safely reopen the economy.
Oil prices were higher this morning after Saudi Arabia said it would cut production by an additional 1 million barrels per day in addition to the cuts agreed to by OPEC, bringing the Kingdom’s total cut to roughly 4.8 million barrels per day, in an effort to support global oil markets. “The Kingdom aims through this additional cut to encourage OPEC+ participants, as well as other producing countries, to comply with the production cuts they have committed to, and to provide additional voluntary cuts, in an effort to support the stability of global oil markets,” the Saudi press agency said in a statement. But even as oil starts this week on a good note coming off of its second straight positive week, prices are still well below their highs and recovery is far from guaranteed. “Despite the production curtailments that commenced this month, traders start to realize that the size of the supply-demand imbalance leaves little room for optimism,” said Rystad Energy’s Bjornar Tonhaugen. “Storages in the U.S. continue to fill up with crude and we are coming close to tank tops by the day.”
Constellation Brands shares are down slightly this morning following a downgrade from MKM Partners. MKM analyst Bill Kirk said in a note out today that Constellation shares could fall to $147 as the company’s Corona and Modelo beers will run out of stock, which could lead to lasting damage for Constellation. “Out of stock levels will get worse every day for the next 50 days,” Kirk wrote in the note of the famous beer brands, adding that Mexican imported beers “are among the most expensive non-Craft beer segments. “We believe out-of-stocks and a financial incentive could push consumers toward Premium Lights.”
And Under Armour shares are down more than 11% this morning after the athletic apparel maker reported a sales decline of 23% during its first quarter, with nearly two-thirds of the losses attributable to the coronavirus pandemic. First quarter losses totaled $590 million, or $1.30 per share, on sales of $930 million, compared to a profit of $22.5 million on sales of $1.2 billion in the same period last year. “During the first quarter, our results in January and February were tracking well to our plan,” said CEO Patrik Frisk. “Since mid-March, as the pandemic accelerated dramatically in North America and EMEA and retail store closures ensued, we’ve experienced a significant decline in revenue across all markets.” Under Armour CFO David Bergman added, “Although we do anticipate that our business will gradually reopen in the coming weeks and months, we believe there will be a number of challenges ahead for us and a greater global retail space, including a slow and progressive return in normalization, a highly promotional environment and significant uncertainty in bricks-and-mortar traffic and conversion as consumers return to stores.”
Stocks We’re Watching
PRA Group (NASDAQ: PRAA): PRA Group shares jumped as much as 40% on Friday after the debt collector reported first quarter results. PRA reported net income of $19.1 million and earnings or $0.42 per share in the first quarter, compared to net income of $15.2 million and earnings of $0.34 per share in the first quarter of 2019. “PRA Group began 2020 with very strong performance building on the momentum of record portfolio purchases in 2019, investments made over the last few years, and favorable industry trends. Global cash collections during the quarter were a record led by an increase in Europe after record portfolio purchases there last year,” said Kevin Stevenson, PRA president and CEO. ”In late March, as COVID-19 spread across the globe, we started to see an impact on cash production through a combination of reduced workforce and slightly decreased collection rates. We have implemented our normal consumer-friendly actions employed during times such as these and continue to work with our customers as necessary.”