Plus, weekly jobless claims came it at just under 3 million and Goldman Sachs says the unemployment rate could peak at 25%, Trump said he doesn’t want to talk to Chinese President Xi as tensions rise between the world’s two largest economies, and airlines are down after a trade group said demand for air travel is unlikely to recover until 2023.
Stocks were down to start Thursday with the Dow dropping 450 points, putting the index on track for its fourth straight day of losses. The S&P 500 and Nasdaq were both down around 1.7%.
Weekly jobless claims came in just shy of 3 million for the week ended May 9. The Labor Department reported 2.981 million new claims for unemployments benefit last week, brining the total losses amid the coronavirus crisis to 36.5 million. Goldman Sachs said it sees the unemployment rate peaking at 25%, up from a previous forecast of 15%, as “more workers will lose their jobs and a larger share of them will be classified as unemployed,” according to a note this week. The Goldman economists then see the unemployment rate remaining around 10% at the end of the year.
Stocks also pushed lower on trade worries as President Donald Trump said he doesn’t want to talk to Chinese President Xi Jinping right now and mused about eliminating the largest trading relationship in the world as tensions continue to mount over the coronavirus. Trump said in a Fox Business Network interview that while the two have “a very good relationship, right now, I don’t want to speak to him. I don’t want to speak to him.” While China is reportedly weighing voiding or renegotiating the “phase one” trade deal between the world’s two largest economy as tensions rise, Trump said, “We’re not going to renegotiate.” Trump also said Chinese hackers are attempting to steal intellectual property to get a COVID-19 vaccine first, but said the U.S. can prevent it. “We can stop them,” Trump said. “They’re goin to try doing it. I mean you can also stop doing business with them, that’s one thing.” In the interview, Trump added that he is examining removing Chinese companies listed on the NYSE and Nasdaq that don’t follow U.S. accounting rules. “We are looking at that very strongly,” Trump said while also cautioning that it could backfire. “Let’s say we do that, right,” Trump said, referring to removing such companies from U.S. exchanges. “So what are they going to do? they’re going to move their listing to London or someplace else.”
France slammed Sanofi’s plan to give its coronavirus vaccine to Americans first if it proves successful, with President Emmanuel Macron indicating he plans to meet with the drug maker next week to discuss the slight. The World Health Organization said in response to Sanofi’s statements that vaccines are “global public goods which belong to everybody around the world,” adding that, “As long as [the] virus is circulating in this inter-connected world, and until we have a safe and effective vaccine, everybody remains at risk.” Meanwhile, WHO chief scientist Dr. Soumya Swaminathan said it may take the better half of a decade before the coronavirus pandemic is under control. “I would say in a four to five-year timeframe, we could be looking at controlling this,” Swaminathan said, adding that a vaccine appeared to be the “best way out,” while warning there are lots of “ifs and buts” about safety, production, and equitable distribution.
Major airlines are down this morning after the International Air Transport Association (IATA) said that the coronavirus’ impact on air travel will be felt for many years to come, with passenger traffic not expected to rebound to pre-crisis levels until at least 2023. The trade association for the world’s airlines said that demand for air travel has dropped more than 90% in Europe and the U.S. since the start of the pandemic. Delta also said today that it is retiring its fleet of Boeing 777s, indicating it doesn’t expect a quick return to long-haul international travel as the coronavirus continues to impact demand. “Our principal financial goal for 2020 is to reduce our cash burn to zero by the end of the year, which will mean, for the next two to three years, a smaller network, fleet and operation in response to substantially reduced customer demand,” said Delta CEO Ed Bastian in a memo to staff. “With international travel expected to return slowly, we’ve also made the difficult decision to permanently retire our Boeing 777 fleet—18 aircraft—by the end of the year. Retiring a fleet as iconic as the 777 is not an easy decision – I know it has a direct impact on many of you who fly, crew and service these jets.”
And Norwegian Cruise shares are up 1.5% at the time of writing after falling more than -9% earlier in the trading day after the cruise line reported a first quarter adjusted loss of $0.99 per share, compared to earnings of $0.54 per share a year earlier. Norwegian said in a release this morning that it “has experienced rapid and significant impacts related to the COVID-19 global pandemic including significant softness in near-term demand and an elevated rate of cancellations for existing bookings.” Norwegian said it expects to post a loss for the second quarter as well, even as it continues to take bookings for later this year and into 2021 and beyond. “The COVID-19 outbreak has had a significant impact on the Company’s financial position and results of operation,” the release said. “If the temporary suspension of sailings is further extended, the Company’s liquidity and financial position would likely continue to be significantly impacted.”
Stocks We’re Watching
Aviat Networks Inc (NASDAQ: AVNW): Aviat shares rose as much as 47% yesterday after wireless transport solutions company reported fiscal third quarter 2020 results. Aviat President and CEO Pete Smith said of the quarter, “Third quarter revenue was up 13.6%, gross margins grew by 570 basis points and Adjusted EBITDA improved by $4 million compared to the fiscal 2019 third quarter. We continue to drive meaningful growth in North America, which was up 30% and while our International revenue declined in the third quarter, the Latin America and APAC regions were up, and the declines in other reported regions lessened. Our balance sheet remains strong and our cash position improved over $1 million sequentially and by $7.3 million since the fiscal year began. Overall, when you look at our progress throughout the full fiscal year, with everything we have faced including contractor/manufacturer issues, management changes and the COVID-19 pandemic, we are pleased with our results and market position. We remain on track to meet our guidance and deliver between $11 and $12 million of Adjusted EBITDA this fiscal year, with our eyes set on both top- and bottom-line growth next fiscal year. There are a lot of changes underway now and more to come that should open up new revenue streams and drive profitability which in turn, should lead to increased shareholder value.”