Plus, the unemployment rate fell to 8.4% in August, the WHO said it doesn’t expect the world will see large-scale coronavirus vaccinations until mid-2021, and Peloton announced a new lower-priced treadmill and a new premium bike model.
Stocks were lower to start Friday with the Dow sliding 200 points, or 0.7%. The S&P 500 fell 1.6%, while the Nasdaq dropped nearly 3%.
Tech stocks are down again this morning following the tech sector’s biggest one-day drop since March yesterday. Facebook shares are down 5%, Amazon is down 6%, Microsoft and Google-parent Alphabet are down more than 4%, and Apple shares are down 5.5% following its 8% fall yesterday that shaved $180 billion off the iPhone maker’s market cap, marking the largest one-day loss in value for any company ever. “We’ve had excessive valuations in the markets lately—particularly in the tech sector—and that needed to be corrected to some degree,” said Scott Knapp, chief market strategist at CUNA Mutual Group. “One needs to look no further than the recent irrational run-up in Tesla and Apple share prices after both companies announced a stock split to see overexuberance, especially among retail investors.” Essex Investment Management co-chief executive officer Nancy Prial said, “What we’re seeing here just a little bit of a reckoning. It’s too soon to say whether this is a pause that refreshes or whether this is the beginning of a more meaningful downturn in big tech. Most of these are great companies with really robust growth opportunities, but he stocks are very richly valued.”
Nonfarm payrolls increased by 1.37 million in August, taking the unemployment rate down to 8.4% – the first reading below 10% since the beginning of the coronavirus crisis. “We are still moving in the right direction and the pace of the jobs recovery seems to have picked up, but it still looks like it will take a while—and likely a vaccine—before we get back close to where we were at the beginning of this year,” said Tony Bedikian, head of global markets at Citizens Bank. “We continue to be optimistic that the economy has turned a corner and that we’ll continue to see steady progress.” Still, Evercore ISI’s Ernie Tedeschi said, “What’s concerting is that the pace of jobs growth is slowing down. If we had nothing but months like August going forward, it’d take another 8 months to get back to February levels, and longer to get back to our pre-COVID trajectory. But the risk is that jobs growth keeps slowing.”
On the stimulus front, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have agreed to work to avoid a government shutdown right before the election, and not let the stalemate over the next round of coronavirus relief hold up a vital stopgap spending bill. The informal agreement was mad during a Tuesday phone call between Pelosi and Mnuchin. “House Democrats are for a clean continuing resolution,” said Drew Hammill, Pelosi’s spokesman, referring to the temporary funding measure. The accord between Pelosi and Mnuchin could help to limit any financial-market turmoil spurred on by worries over a government shutdown in conjunction with the absence of stimulus.
The World Health Organization said it doesn’t expect widespread vaccinations against COVID-19 until the middle of next year. According to WHO spokeswoman Margaret Harris, none of the candidate vaccines in advanced clinical trials have so for demonstrated a “clear signal” of efficacy at the level of at least 50% sought by the WHO. “We are really not expecting to see widespread vaccination until the middle of next year,” Harris told a U.N. briefing in Geneva. “This phase 3 must take longer because we need to see how truly protective the vaccine is and we also need to see how safe it is. A lot of people have been vaccinated and what we don’t know is whether the vaccine works… at this stage we do not have the clear signal of whether or not it has the level of worthwhile efficacy and safety.” On the coronavirus treatment side, Novo Nordisk said it is exploring whether a new class of medicines that help people lose weight and control diabetes—GLP-1 drugs—also have the potential to fight COVID-19. “The early indication is that the GLP-1 class is actually beneficial in COVID-19,” said Novo Chief Scientific Officer Mads Krogsgaard Thomsen in an interview. “That’s not unexpected because this is the class of agents that target the risk factors for bad COVID-19 outcomes.”
And Peloton announced that it is preparing to launch a cheaper treadmill and a new high-end bike, while cutting the price of its existing bike to push demand as consumers continue to workout at home amid the coronavirus pandemic. The new treadmill, called Tread, will cost less than $3,000, compared with the current model’s price of $4,295. The existing model will continue to be sold as the company’s high-end offering and will be renamed the “Tread+.” The new high-end stationary bike, called Bike+, is expected to cost more than the current model which sells for $2,245. Peloton shares were down more than 4% on the news.
Stocks We’re Watching
Vuzix Corp (NASDAQ: VUZI): Vuzix shares are up 29% over the last week following the company’s announcement that Pixee Medical, and France-based medical company, had competed its first total knee replacement surgery guided by the Vuzix M400 AR Smart Glasses running the Knee+ solution, helping to provide real time navigation throughout the surgery while displaying essential augmented reality information in the surgeon’s field of view. “The team at Pixee Medical created an innovative path to bring the Vuzix M400 Smart Glasses into theoperating room to perform knee replacement surgeries and continues to make progress in the operating theater for a variety of uses. We look forward to supporting them in their worldwide distribution of this innovative AR solution,” said Paul Travers, President and Chief Executive Officer at Vuzix.