BP Just Said The Coronavirus Will Accelerate The Transition To Green Energy

Plus, volatility spikes on fears of global second wave of coronavirus cases, United Airlines said its using its frequent flyer program to back a new $5 billion loan, and Hertz shares plummet after the bankrupt car renter said its shares may be rendered “worthless.”

Stocks dropped to start Monday with the Dow felling 446 points, or 1.7%. The S&P 500 traded 1.1% lower, while the Nasdaq slipped 0.5% lower.

Fresh waves of selling are hitting the market as signs emerge that the world is seeing a second wave of coronavirus cases. Cases of the deadly virus are still rising in the U.S., while China and Turkey are seeing resurgences of cases after reopening their economies. And traders are betting there will be more volatility ahead for the market. The CBOE Volatility Index, otherwise known as the ‘Fear Gauge,’ has popped more than 11% to trade at 40.33 this morning, showing investors are worried about the near-term outlook for equities after the S&P 500’s more than 40% surge in less than two months after the coronavirus sell-off between February 19 and March 23. “We’re in the midst of a correction,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The coronavirus is spiking up again and that’s a problem. There was also over-exuberance in the market. The market was discounting a quicker economic rebound.”

Record numbers of new coronavirus cases are sweeping through the U.S.—in states including Alabama, Arizona, California, Florida, and Texas—as most states continue to push ahead with reopening, with many state health officials partly attributing the surge in cases to an increase in gatherings over the Memorial Day holiday weekend. Former FDA Commissioner Scott Gottlieb warned local outbreaks could “quickly get out of control” if states that are experiencing flareups in infections fail to take the necessary steps to address the spread of the virus. “We’re not going to be able to shut down the country again this summer. We’re probably not going to be able to shut down the country again this fall,” Gottlieb said today. “And so we’re going to need to try to isolate the sources of these outbreaks and take targeted steps. If we can’t do that, these will get out of control.”

Airline stocks are down this morning, with American Airlines shares down -4%, Delta down -3%, and United Airlines down nearly -5% as fears of a resurgence of the coronavirus weighs on both transportation stocks and the broader stock market. United said today that it is using its frequent flyer program to back a new $5 billion loan as the carrier looks to shore up its liquidity as the coronavirus pandemic continues to stifle demand. The carrier said it expects to have $17 billion in available liquidity by the end of the third quarter, thanks in part to an anticipated $4.5 billion federal loan under the CARES Act and the $5 billion term loan facility it has secured with its MileagePlus frequent flyer program.

BP Plc shares are down -3% today after it said this morning that it has lowered its oil price expectations through 2050, saying the aftermath of the coronavirus pandemic is likely to accelerate the transition to a lower carbon economy and energy system. The oil and gas company said it has been reviewing its portfolio and capital development plans as part of its goal to be a net-zero company by 2050 or sooner. BP said it now expects Brent crude futures to average around $55 a barrel from 2021 through 2050, a roughly 27% decline from what the company forecast in its annual report at the end of 2019. BP CEO Bernard Looney said in a statement that the coronavirus pandemic “increasingly looks as if it will have an enduring economic impact. We have reset our price outlook to reflect that impact and the likelihood of greater efforts to ‘build back better’ towards a Paris-consistent world. We are also reviewing our development plans. All that will result in the significant charge in our upcoming results, but I am confident that these difficult decisions—rooted in our net zero ambition and reaffirmed by the pandemic—will better enable us to compete through the energy transition.”

And Hertz Global Holdings shares are down more than -21% after the bankrupt car rental company filed for the sale of up to $500 million in common stock, while warning new investors they’re all but certain to be wiped out as the car renter’s common stock could be rendered “worthless.” Equity holders will not see a recovery from any bankruptcy plan unless those with more senior claims, including bondholders, are paid in full, Hertz said. And that would require “a significant and rapid and currently unanticipated improvement in business conditions,” the company said in its prospectus. Shares of the bankrupt car renter gained as much as 143% last Monday on speculation that the economy and travel are poised to rebound.

Stocks We’re Watching

Wrap Technologies Inc (NASDAQ: WRTC): Wrap Technologies shares are up nearly 6% today after the policing solutions company announced a new opening order of its BolaWrap products and accessories from a third major European country. “We are witnessing growing demand for our remote restraint solution by the international law enforcement community, especially in those countries where officers are not allowed to carry deadly weapons.” said Tom Smith, President at Wrap Technologies. “The international law enforcement market is 12 times the size of the US market. In contrast to the United States where each police agency decides whether or not to implement a new police tool, internationally, decisions to implement tools for law enforcement are generally made on the national level by individual entities. Our experience has been that demonstrations are followed by opening orders followed by much larger agency purchases. So, while the process may be longer, international order sizes are generally more significant.”