Plus, ADP reported 2.76 million private payrolls were trimmed in May, Dr. Anthony Fauci warned a potential coronavirus vaccine may not provide long-term immunity, and another retailer looks poised to file for bankruptcy protection.
Stocks were higher to start Wednesday with the Dow adding 228 points, or 0.9%. The S&P 500 jumped 0.7%, while the Nasdaq gained 0.3%.
Large-scale protests continued across the U.S. last night. The calmer demonstrations were met with curfews, which in some places were ignored. President Donald Trump again urged police to “get tough” on protesters and warned that the National Guard “is ready” to be deployed to quell demonstrations in a series of tweets this morning. White House officials are still considering invoking the Insurrection Act of 1807 to make good on Trump’s threat to send U.S. military forces to cities to put down the demonstrations, and are also considering a primetime address to the nation by Trump from the Oval Office, though there are doubts that such an address would bring an end to the protests. Defense Secretary Mark Esper said today that he does not support sending active-duty troops to deal with the protests. “I don’t support invoking the Insurrection Act,” Esper said, adding that such a measure “should only be used as a matter of last resort and only in the most urgent and dire situations.”
ADP reported that businesses trimmed another 2.76 million workers in May as the coronavirus continued to impact the U.S. economy. The number was well-below expectations, with economists estimating 8.75 million coronavirus-related layoffs last month. “The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” said Ahu Yildirmaz, co-head of ADP Research Institute. “While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.” With the job loss numbers not as bad as expected, Mark Zandi, chief economist at Moody’s Analytics, said, “The good news is I think the recession is over, the COVID-19 recession is over, barring another second wave, a major second wave, or really serious policy errors,” adding that the bad news, however, is that “the recovery will be a slog until there’s a vaccine or therapy that’s distributed and adopted widely.”
Speaking of a coronavirus vaccine, White House health advisor Dr. Anthony Fauci said he worries about the “durability” of a potential vaccine, and said there’s a chance that it may not provide long-term immunity. “When you look at the history of coronaviruses, the common coronaviruses that cause the common cold, the reports in the literature are that the durability of immunity that’s protective rankest from three to six months to almost always less than a year,” Fauci said. “That’s not a lot of durability and protection.” Former FDA Commissioner Dr. Scott Gottlieb echoed Dr. Fauci’s comments, saying, “The expectation should be that this is going to be a seasonal vaccine. You’re going to need this shot regularly, and maybe annually.” Gottlieb also added that the use of tear gas to break up the ongoing protests across the U.S. has the danger of spreading the deadly coronavirus. “I am very concerned about the use of tear gas to break up these protests,” Gottlieb said. “When there is a respiratory disease pandemic occurring, the use of a chemical that causes people to cough violently can lead to more spread of disease.”
Tensions with China ratcheted up this morning as the Trump administration threatened to ban Chinese passenger airlines from flying to the U.S. beginning later this month. The move is a response to China prohibiting U.S. carriers from expanding service in the country in the wake of the COVID-19 outbreak. While both Delta and United Airlines have been pushing to return to more normal service in China after pausing service earlier in the year, the U.S. carriers have not received approval to do so from Chinese aviation authorities. “Our overriding goal is not the perpetuation of this situation, but rather an improved environment wherein the carriers of both parties will be able to exercise fully their bilateral rights,” said the U.S. Department of Transportation’s order. “Should the CAAC adjust its policies to bring about the necessary improved situation for U.S. carriers, the Department is fully prepared to revisit the action it has announced in this order.”
RTW Retailwinds shares are down more than -43% this morning after the owner of women’s clothing retailer New York & Company warned of a possible bankruptcy filing. In a filing with the Securities and Exchange Commission, RTW Retailwinds said that there’s “a substantial doubt” about the company’s ability to continue as inventory has piled up in stores and distribution centers over the past two months amid the coronavirus pandemic that has shuttered stores, with the inventory now “aged and significantly impaired.” “The company has already experienced substantial and recurring losses from operations, and such losses have caused a retained deficit of $164.6 million as of February 1, 2020,” RTW Retailwinds said in the SEC filing. “As such, the company has been considering available options, including restructuring its obligations or seeking protection under the bankruptcy laws… The company believes that seeking protection under the bankruptcy laws is probably.”
Stocks We’re Watching
Wayfair Inc (NYSE: W): Wayfair shares jumped 14% yesterday after Piper Sandler retail analyst Peter Keith issued a bullish upgrade on the stock. Keith reiterated his Overweight rating on the stock and boosted his price target to $225 – 23% higher than the current price. “We believe the last two months have improved Wayfair’s standings with suppliers, and allowed for significant new customers acquisition,” Keith wrote in a note. “We see shares as significantly undervalued for a high-growth, asset-light company that should be profitable going forward.”