Plus, Tesla shares are down ahead of the electric vehicle maker’s Battery Day event, Carvana shares are up after it said it expects to post records in multiple categories when it announces third quarter earnings, and Coca-Cola is entering the hard seltzer space next year.
Stocks were higher to start Tuesday with the Dow adding 48 points, or 0.2%. The S&P 500 gained 0.4%, while the Nasdaq traded 0.2% higher.
U.S. coronavirus deaths surpassed 200,000. “Not only are these real people, but these are families that are suffering because they’ve lost loved ones, or they’re dealing with a loved one that has long-term health issues because of COVID-19,” said Dr. Syra Madad, senior director of the systemwide special pathogens program at the New York City Health + Hospitals. “We’re only seeing the tip of the iceberg. We’re only nine months into this pandemic.” As the coronavirus continues to wreak havoc, one expert says there’s too much hope being placed on finding a safe and effective vaccine. “I would see the vaccine as only helping” the situation, said Dale Fisher, professor of infectious diseases at the National University of Singapore (NUS) Yong Loo Lin School of Medicine. “It’s not going to be the fairytale (ending) everyone wants it to be where we’ll have an 100% effective vaccine and 100% of people will take it, and they’ll all receive it over the course of a month and we can go back to our way of life.” Fisher added that there’s a “pretty low benchmark” for the efficacy of a potential vaccine with the FDA saying in June that it expects “a COVID-19 vaccine would prevent disease or decrease its severity in at least 50% of people who are vaccinated.” Fisher added, “This means that for half the people that get the vaccine it wouldn’t work. Most people are expecting this to be 100% effective. So I think you need to have the non-pharmacological interventions, such as the mask wearing and the limiting of gatherings and things like that for a long time to come.”
Federal Reserve Chairman Jerome Powell pledged to continue to support the economy amid the coronavirus pandemic. In prepared remarks Powell will deliver today to the House Financial Services Committee, he reiterated the Fed’s commitment to helping the economy through the coronavirus-induced recession and what the central bank has done thus far. “We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy,” Powell said in his prepared testimony. “Economic activity has picked up from its depressed second-quarter level, when much of the economy was shut down to stem the spread of the virus. Many economic indicators show marked improvement. Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.”
Tesla shares are down nearly 6% this morning after CEO Elon Musk sought to manage expectations ahead of the electric carmaker’s hotly-anticipated Battery Day presentation tonight. Tesla is expected to announce a new type of battery cell today, and analysts had hoped that the technology could help the company maintain its edge over rivals in the electric vehicle space. “Important note about Tesla Battery Day unveil tomorrow,” Musk tweeted late yesterday. “This affects long-term production, especially Semi, Cybertruck & Roadster, but what we announce will not reach serious high-volume production until 2022.” Musk added, “We intend to increase, not reduce battery cell purchases from Panasonic, LG & CATL (possibly other partners too). However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 & beyond unless we also take action ourselves. The extreme difficulty of scaling production of new technology is not well understood. It’s 1000% to 10,000% harder than making a few prototypes. The machine that makes the machine is vastly harder than the machine itself.”
Carvana shares up more than 30% after the online used car marketplace said it expects to post records in several categories when it announces its third quarter results. Carvana has averaged about $1.1 billion in sales over the last four quarters and sold just over 55,000 retail units in the second quarter. “The momentum that we saw in the second quarter accelerated into the third, leading to record performance for Carvana in metrics that demonstrate strong progress both in growth and towards profitability,” said Carvana CEO Ernie Garcia in a statement. Also boosting the stock today is an upgrade by Goldman Sachs from Hold to Buy, with the firm saying it expects retail unit sales to hit 48% year-over-year in the third quarter, up 25% from the second. “Carvana’s scale and vertical integration position it best to drive the used auto category online for many years, in our view,” Goldman Sachs said in a note. “While tighter supply and operational challenges from COVID-19 weighed on growth in Q2, a loosening supply backdrop… and a re-acceleration in app downloads… drive our estimates higher while the stock has traded lower.”
And Coca-Cola CEO James Quincey said the beverage company is gearing up to introduce its first hard seltzer to the U.S. market next year. The new drink will be sold under the Topo Chico brand, a Latin America banner Coca-Cola purchased in 2017, and will thrust the company into a fast-growing category that it hasn’t had a presence in since the early 1980s. “I think what it does say is: Look, we’re going to follow the consumer,” Quincey told CNBC’s Jim Cramer in an interview on Monday. “I think these innovations that we’ve seen, including hard seltzer, are a trend of the consumer looking for new things, and if we want to be consumer-centric… then that’s what’s taking us to this opportunity.” Hard seltzer sales have risen to $3 billion in the U.S. over the course of the last year, according to Bump Williams Consulting Co., with Mike’s Hard Lemonade’s White Claw and Boston Beer’s Truly the biggest brands in the category.
Stocks We’re Watching
Roku Inc (NASDAQ: ROKU): Roku shares gained as much as 18% yesterday after NBCUniversal’s Peacock launched on the streaming platform. “Two primary benefits to Roku include top-end premium inventory and subsequent pricing leverage on its CTV premium ad bundles,” said Rosenblatt Securities analyst Mark Zgutowicz in a note, reiterating his Buy rating on Roku shares, “and leverage with other major media networks/carriage agreements including present discussions with AT&T/WarnerMedia for HBO Max premium and ad-supported subscription carriage/revenue share.”