Plus, stocks rebounded off yesterday’s lows but experts warn there’s more pain ahead in the near-term, Wynn resorts got a boost after an update on its Macau casinos, and American Airlines shares are up after the carrier said an uptick in demand could help it wipe out its cash burn by the end of the year.
Stocks rose to start Friday with the Dow climbing 506 points, or 2%. The S&P 500 gained 1.7%, while the Nasdaq added 1.8%.
Stocks rebounded this morning after yesterday’s sharp decline, the worst sell-off since March, though the major indexes are still on track to post their first weekly losses in four weeks and gains have faded later in the morning. “Yesterday’s selloff was so sudden and large that it could trigger a widening unease about the quality of the recent market rise, given the enthusiastic participation of novice traders on the way up and signs of speculative froth in low quality equity names,” said Saxo Bank chief economist and investment officer, Steen Jakobsen, in a note. “This is not a prediction, but a warning of heightened risk that only goes away if volatility quickly drops back lower.” Morgan Stanley Investment Management’s Andrew Slimmon echoed that sentiment, saying this morning, “Given the magnitude of the rally, it would shock me if we had a one day sell-off and that’s it. The stocks that are up the most from the lows are still the risk-on, high beta, value, small-cap stocks. They’re still the big winners and I would suspect that there’s more pain to come nearer-term before the market clears out kind of this excessive speculation that we’ve seen recently.”
The coronavirus outbreaks seen in states across the nation are not the feared “second wave” of the virus, but a continuation of the first wave, according to disease specialists. Former FDA Commissioner Dr. Scott Gottlieb said this morning that the uptick in cases in states including Arizona and Texas are happening in places that “never really got rid of the first wave. … They weren’t really that hard hit relative to other states during February, March. They had some infection, they had persistent infection. Now we are starting to see it go up as they reopen.” The scenario playing out now is a result a “patchwork” of responses to combat the spread of the deadly virus, which could, according to Dr. Eric Schneider, a health services researcher at The Commonwealth Fund, create “a kind of stuttering, endless loop” of coronavirus cases.
Wynn Resorts shares got a boost this morning after the casino operator gave an update on its Macau properties. Wynn said its Macau business should see operating revenues between $17.9 million and $19 million, while adjusted earnings before interest, taxes, depreciation, and amortization will be in the red with a loss of between $118.8 million and $126 million. JPMorgan analyst Joseph Greff reiterated his Overweight rating on the stock, noting that Wynn’s “update on Macau travel restrictions as a small, incremental positive, and move toward thawing currently in place travel restrictions.”
American Airlines shares are up more than 15% today after it said an uptick in travel demand is helping it shave down its daily cash burn to $40 million from $50 million, and said that it expects to wipe out cash burn by the end of 2020. American did reiterate its forecast that sees revenue in the second quarter dropping 90% from a year ago, though it said last week that it plans to add more flights, particularly in the domestic market. The airline, through June 8, has been flying an average of 129,000 passengers per day, with flights 62% full, though total capacity is down 70% from a year ago, however in May, the carrier flew 85,000 passengers per day with flights just 47% full. Despite the rise in demand, the number of people moving through U.S. airport checkpoints is down more than 80% from the same time last year, according to the TSA.
And Quicken Loans, the largest mortgage lender in the U.S., has filed its IPO prospectus confidentially, according to people familiar, and may go public as soon as next month. The company is working with Morgan Stanley, Goldman Sachs, Credit Suisse, and JPMorgan to manage the deal, and the targeted valuation is still being decided, but will likely be in the tens of billions of dollars. With mortgage rates falling to new lows amid the coronavirus crisis, Quicken Loans CEO Jay Farner said recently that March was the “biggest closing month in our company’s history – nearly $21 billion in mortgages closed,” adding that the company is estimating nearly $75 billion in mortgage applications in the second quarter, compared to $53 billion in the first.
Stocks We’re Watching
NantKwest Inc (NASDAQ: NK): NantKwest shares jumped as much as 36.7% higher yesterday after the clinical-stage biotech announced the publication of two peer-reviewed entries in the Journal of Immunotherapy of Cancer on studies conducted in collaboration with the National Cancer Institute examining the mechanism and functionality of its clinical-stage engineered natural killer (NK) cell lines, haNK, and first-in-class PD-L1 t-haNK, in terms of anti-tumor in treatment for refractory candy types. “These published studies provide important insight and validation for the mechanism and activity of our novel first-in-class engineered NK cells for use in notoriously difficult solid tumor types,” said Patrick Soon-Shiong, M.D., Chairman and CEO of NantKwest. “NK cells have the potential to kill tumor cells; however, the hypoxic nature of the suppressive tumor environment has been shown to curb primary NK cell function. These published data indicate that our engineered haNK cells remain active in hypoxic conditions, which may be an important new mechanism of its anti-tumor activity. In addition, our NK cells appear to be resistant even to acute hypoxia and are capable of maintaining tumor killing activity in conditions comparable to a suppressive tumor microenvironment.”