Plus, Trump threatened to permanently halt funding to the World Health Organization, major tech executives sent a letter to Congress urging another $1 trillion in relief for state and local governments, airlines are seeing bookings rise, and Pier 1 is seeking approval to wind down its business completely.
Stocks were mixed to start Tuesday with the Dow dropping 182 points, or 0.7%. The S&P 500 was down 0.3%, while the Nasdaq gained 0.3%.
A slew of retailers reported earnings this morning, showing a range of impacts due to the coronavirus. Walmart said that its e-commerce and store sales grew significantly in the first quarter as customers turned to the big-box retailer in droves to stock up amid the pandemic. Walmart’s e-commerce sales in the U.S. jumped 74% in the quarter, while same-store sales grew by 10%. However, despite this dramatic sales growth, Walmart said gross profit margins narrowed due to a shift to lower margin categories like food and toilet paper, while fulfillment costs eroded the profitability of online orders. Home Depot reported that while revenue rose 7.1% in the quarter, net income fell 10.7% as the home improvement retailer’s profits were weighed down by costs related to the coronavirus outbreak. Meanwhile, Kohl’s net sales tanked 43.5% in the first quarter as its stores were forced to temporarily shut down. “While we have a fast-growing digital business, it has only replaced a small portion of the sales loss from our entire store base,” said CEO Michelle Gass on the earnings call.
President Trump threatened to permanently cut off U.S. funding to the World Health Organization in a letter sent Monday. Trump slammed the WHO as a puppet of China and said that if the WHO “does not commit to major substantive improvements within the next 30 days, I will make my temporary freeze of United States funding to the World Health Organization permanent and reconsider our membership in the organization.” While he said the letter was self-explanatory, he gave no details about the reforms he’s seeking or what changes the WHO would have to make in order to unlock funding from the U.S. It’s also not immediately clear how Trump would withhold the funds, much of which are appropriated by Congress which the president does not have unilateral authority to redirect. China, meanwhile, said Trump’s letter was “full of insinuations” and aimed “to mislead the public and to achieve the purpose of stigmatizing China’s epidemic control efforts while shirking its own responsibility.”
Republican leaders are set to meet today to discuss their priorities for another coronavirus relief bill today following the House passage of a Democratic-led $3 trillion relief bill Friday night. House Minority Leader Kevin McCarthy said that leaders including Vice President Mike Pence, Treasury Secretary Steven Mnuchin, and Senate Majority Leader Mitch McConnell with be “looking at ways of where we can work together to move forward on what we do need” in a legislative package, adding that “liability protections would be the No. 1 think I would look at” for doctors and businesses. “No bill will pass without it,” McCarthy said. Meanwhile, top business leaders in California have sent a letter urging Congress to approve an additional $1 trillion in spending to help bolster state and local governments that are facing massive budget cuts amid the pandemic. The leaders said that without additional federal assistance, state and local services like childcare, job training, and small business support “will all be forced up on the chopping block.” The $1 trillion in funding “will protect core government services like public health, public safety, public education and help people get back to work. This funding will help our states and cities—and America’s economy—come out of this crisis stronger and more resilient,” according to the letter signed by executives form Disney, Salesforce, and Netflix, among others.
In a bit of good news for airlines, Southwest said today that new bookings are outpacing cancellations, marking a turning point in the pandemic that has devastated demand for air travel. While Southwest said that its May operating revenue will likely be down around 90% year-over-year, it is seeing a “modest improvement” in demand and bookings for June. Southwest is expected to cut capacity by up to 55% next month, and said that even with the reduction, it expects planes will be no more than 45% full. “The revenue environment remains uncertain and may require additional capacity reductions depending on passenger demand,” Southwest said. United echoed that sentiment, saying that it has seen “a moderate improvement in demand” for trips within the U.S. as well as some international destinations, adding that it is cutting capacity by 75% in July compared with a 90% year-over-year reduction planned for May and June. Both airlines’ shares are up on the news, with LUV shares up over 4% and UAL shares up around 2% this morning.
And Pier 1 Imports shares are down more than 60% today after the home goods retailer said it is seeking bankruptcy court approval to wind down its business entirely since it has been unable to find a buyer amid the coronavirus pandemic. Pier 1 CEO and CFO Robert Riesbeck said in a press release, “We are grateful to our dedicated and hardworking associates, millions of customers and committed vendors who have collectively supported Pier 1 for decades. We deeply value our associates, customers, business partners and the communities in which we operate, and this is not the outcome we expected or hoped to achieve. This decision follows months of working to identify a buyer who would continue to operate our business going forward. Unfortunately, the challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down.” As part of Pier 1’s closing, the retailer plans to sell its inventory and remaining assets, including its intellectual property and e-commerce business through a court supervised process.
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Deciphera Pharmaceuticals Inc (NASDAQ: DCPH): Deciphera shares jumped 10% yesterday after the biopharma announced that the FDA approved its QINLOCK (ripretinib) for the treatment of advanced gastrointestinal stroll tumor (GIST) in adult patients. “The FDA approval of QINLOCK is an exciting milestone for people with GIST who have been waiting for a new treatment option designed specifically for their disease,” said Steve Hoerter, President and CEO of Deciphera. “I would like to thank the patients, their families and caregivers, and the healthcare professionals who made the QINLOCK clinical studies possible. With their contributions and the dedication of the team at Deciphera, we are delivering on our promise to provide important new medicines for the treatment of cancer.”