Plus, jobless claims were worse than expected, Regeneron submitted an emergency use authorization request to the FDA for its antibody cocktail, and Morgan Stanley is buying Eaton Vance.
Stocks were higher to start Thursday with the Dow gaining 150 points, or 0.5%. The S&P 500 added 0.7%, while the Nasdaq traded 0.4% higher.
Jobless claims came in worse than expected, totaling 840,000 last week in another sign that the spike in job growth over the summer has cooled. Initial jobless claims fell by just 9,000 in the week ending October 3, as the prior week’s figure was revised higher by 12,000, the Labor Department reported. Continuing claims fell to 11 million in the week ended September 26. “The stubbornly high level of claims may already be starting to reflect the large corporate job cuts announced last week,” said Bloomberg economist Eliza Winger. “The report continued to exclude California’s numbers as the state put applications on hold for two weeks, announced on Sept. 19, to revamp its system.” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note, “Even as filings are declining, levels remain extraordinarily high. Employment growth has already slowed and without fiscal support that protected jobs, risks are skewed to the downside for payrolls going forward.”
Speaking of fiscal support, President Donald Trump said this morning that stimulus negotiators are “starting to have some very productive talks,” just days after his stunning decision to halt deliberations with top Democrats. “I shut down talks two days ago because they weren’t working out. Now they are starting to work out. We’re starting to have some very productive talks,” Trump said. “I said look we’re not getting anywhere: shut it down. I didn’t want to waste time. But in any event, we got back—both sides very capable—we got back, we started talking again. And we’re talking about airlines and we’re talking about a bigger deal than airlines. We’re talking about a deal with $1,200 per person, we’re talking about other things.” Unfortunately for airlines, House Speaker Nancy Pelosi said there won’t be a standalone bill for additional aid for carriers without a larger stimulus package, even as Trump has indicated his preference for a piecemeal approach to stimulus.
As U.S. cases of the coronavirus surpass 7.55 million, Health and Human Services Secretary Alex Azar said the U.S. government could have enough COVID-19 vaccine doses for every American as early as March. However, Azar’s estimate for when a vaccine will become widely available is unrealistic as it assumes an approval of a vaccine coming as early as this month even as the FDA laid out updated safety standards for COVID-19 vaccine makers that would make any approvals unlikely prior to the presidential election on November 3. In other news, Regeneron submitted an “emergency use authorization” request to the FDA for its COVID-19 antibody treatment. “If REGNCOV2 proves safe and effective in clinical trials and regulatory approvals are granted, Regeneron will manufacture and distribute it in the U.S. (beyond the initial U.S. Government supply) and Roche will develop, manufacture and distribute it outside the U.S.,” the company said.
IBM shares are up nearly 6% this morning after it said it would spin-off its IT infrastructure unit into a new publicly traded company to focus its legacy business more on cloud computing, a high-margin segment that has seen a boost as companies increasingly ramp up their digital shift. The separation of the new company, which is currently being called NewCo, will be completed by the end of 2021, and IBM will then manage and modernize client-owned infrastructures, which it says is a $500 billion market opportunity. “IBM will focus on its open hybrid cloud platform and AI capabilities,” said IBM CEO Arvind Krishna in a statement. “NewCo will have greater agility to design, run and modernize the infrastructure of the world’s most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders.”
And Morgan Stanley said today that it is buying asset management firm Eaton Vance for around $7 billion in a cash-and-stock deal. The deal marks Morgan Stanley’s second major acquisition this year following its purchase of E*Trade Financial. CEO James Gorman said of the deal, “Asset management has been an unsung hero inside Camp Morgan Stanley. We felt it was in a position to do something, and this was a natural evolution.” However, Gorman warned that the world shouldn’t expect any other big takeovers from the bank anytime soon. “We’ve just done two significant transactions. We need to absorb these businesses for the next several years,” Gorman said. “We are not about to make another announcement in four weeks or four months.”
Stocks We’re Watching
Ocular Therapeutix Inc (NASDAQ: OCUL): Ocular Therapeutix shares are up more than 2% today after the biopharma company announced topline Phase 1 clinical trial results for its OTX-CSI (cyclosporine intracanalicular insert) for the treatment of dry eye disease (DED). “The results of the Phase 1 clinical trial provide an early look at the safety, tolerability, durability, and potential biological activity of OTX-CSI,” said Michael Goldstein, MD, MBA, Chief Medical Officer. “While the study enrolled a small number of subjects and was open-label, the results seen thus far are very encouraging. Our novel intracanalicular insert delivered a consistent dose of cyclosporine without preservatives over approximately 12 weeks, in a manner we believe to be both less irritating to the ocular surface and also faster acting than current standard of care eye drop therapies. We believe that if approved by the FDA, OTX-CSI has the potential to become a highly differentiated treatment that would provide significant benefit to patients with dry eye disease and allow them a hands-free alternative to current therapies.”