Plus, bank stocks are on the rise on reports of a change to the Volker Rule, the U.S. saw a record number of new coronavirus cases, last week’s jobless claims came in higher than expected, and Wirecard shares tanked after the troubled fintech filed for insolvency.
Stocks were lower in morning trading with the Dow falling 52 points, or 0.2%. The S&P 500 slid 0.13%, while the Nasdaq traded less than 0.1% lower.
Major bank stocks traded higher this morning after officials from the Federal Deposit Insurance Commission said on a call that they are loosening the restrictions from the Volker Rule, allowing banks to more easily make large investments into venture capital and similar funds. The reversal could free up an estimated $40 billion for Wall Street banks, though regulators did add a new speed bump that will limit the scale of margin that can be forgiven. JPMorgan, Citigroup, and Morgan Stanley all traded around 2% higher. The move aligns with the Trump administration’s push to roll back regulations put in place by previous administrations. The FDIC and the Office of the Comptroller of the Currency will soon vote on the rule changes, and the Federal Reserve will also have to sign off on the move.
The U.S. saw a record number of new coronavirus cases in a single day, with 45,557 new diagnoses reported yesterday, breaking the previous record from April 26 by more than 9,000 cases. Texas Governor Greg Abbott said the state is experiencing a “massive outbreak” as the hospitals in the state’s largest cities quickly run out of space to treat the influx of patients. Houston-area hospitals predict they will exceed intensive-care capacity as soon as today, while Abbott said the state would pause its reopening plan amid the surge in cases. In Nevada, Governor Steve Sisolak has issued an order mandating everyone in the state to wear face-masks in public. Still, former FDA Commissioner Dr. Scott Gottlieb said that policy changes in such hot spot states are unlikely to significantly impact the spread of COVID-19 at this point. “I think it’s going to be difficult now to get this under control,” Gottlieb said. “Whatever these states do right now is really going to help them in about two weeks, maybe a little bit longer than that. Whatever policy decisions they made a week or two ago, that’s what we’re seeing flow through right now.”
Initial jobless claims were higher than forecast for a second straight week with the Labor department reporting new claims were 1.48 million last week while economists had expected 1.32 million initial claims. Continuing claims declined to 19.5 million last week, the first reading below 20 million in two months. “Initial and continuing claims point to gradual improvement in the labor market,” said Gus Faucher, chief economist at PNC Financial. “Falling initial claims signal that the pace of layoffs is slowing, but it’s still extremely high.” Pantheon Macroeconomics chief economist Ian Shepherdson added, “The danger now is that claims rebound in other states where infections are rising rapidly, and people are starting again to stay away from restaurants and malls.”
Macy’s shares are down nearly -5% this morning after it announced it is cutting 3,900 corporate jobs—3% of its total workforce—in an effort to reduce costs as it struggles with the effects of the coronavirus pandemic. The department store chain said it expects to save around $365 million through the layoffs this fiscal year, and around $630 million on an annualized basis. “While the re-opening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales,” CEO Jeff Gennette in a statement. “We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward.”
Insolvent. Wirecard shares are down another -70% this morning after the beleaguered German payments company culminated its wild week with a filing for insolvency. The company’s management cited over-indebtedness as the reason behind the decision to seek court protection, and also said the company is considering whether the insolvency proceedings should also be applied to its subsidiaries. “With this step, Wirecard AG wishes to protect the appropriate interests of all parties involved with the company, including creditors, customers and employees,” Wirecard said in a statement.
Stocks We’re Watching
Vaxart Inc (NASDAQ: VXRT): Vaxart shares are up 43% this morning after the biotech announced that it has signed a Memorandum of Understanding with Attwill Medical Solutions Sterilflow, LP (AMS) affirming the parties’ intent to establish AMS as a resource for lyophilization development and large scale manufacturing including tableting and enteric coating for Vaxart’s oral COVID-19 vaccine. “We believe AMS’ experience coupled with its ability to manufacture a billion or more doses per year would be a beneficial addition to our group of CDMO partners and enable the large scale manufacturing and ultimate supply of our COVID-19 vaccine for the US, Europe and other countries in need,” said Andrei Floroiu, CEO of Vaxart Inc. “We believe our oral vaccines, generated on our proven platform, have the potential to offer superior protection against airborne viruses such as SARS-CoV-2 by triggering both mucosal and systemic immunity while being administered by a room temperature-stable tablet, an enormous logistical advantage in large vaccination campaigns.”