Hammerstone’s Early Look
March 16, 2020|
Monday, March 16, 2020
U.S stock futures tumbled overnight, triggering circuit breakers once again as futures trade limit down around 4.5%, as drastic moves were made this weekend in an attempt to prevent the spread of the coronavirus, a pandemic that essentially shut down operations around the globe for individuals, jobs, sporting events and company daily business, as fear consumes markets and sentiment. Already feeling the impact on stock markets the last two weeks, major companies took action this weekend, with airlines cutting capacity and flights, while Apple and Nike shut down retail operations. The moves prompted the Federal Reserve to cut the federal funds rate target range by 100 basis points to 0%-0.25%, as the “effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,” the central bank said. In addition, the central bank promises over the next few months to lift its holdings of Treasury paper by $500B and holdings of MBS by $200B. Also, all principal payments from existing holdings will be reinvested. The move was coupled with coordinated central bank action around the global to try and stabilize markets. Treasury yields plunged in reaction to stock declines and the central bank coordinated efforts, as the 10-year yield plunged as much as 33bps to 0.62% before paring losses to around -0.7%. But news over the weekend of schools closing across the country, restaurants in some parts of the country being asked to close, business telling workers to work from home and the crippling effects to small business owners remains worrisome for the broader economy. In a startling stat, U.S. equities are coming off their first back-to-back 9% swings since the Great Depression as investors try to price the impact of a global pandemic. In Asian markets, The Nikkei Index dropped -429 points (2.46%) to around the 17,000 level, the Shanghai Index fell -98 points (3.4%) to 2,789 and the Hang Seng Index tanked -969 points (4%) to 23,063. In Europe, the German DAX is lower by over 700 points (nearly 8%) to move just under 8,500, while the FTSE 100 down about -350 points to hold just above the 5,000 level. Markets hope for good news on the containment of the virus as trials of a vaccine are being held today.
Market Closing Prices Yesterday
- The S&P 500 Index surged 230.38 points, or 9.29%, to 2,711.02
- The Dow Jones Industrial Average rose 1,985.00 points, or 9.36%, to 23,185.62
- The Nasdaq Composite spiked 673.07 points, or 9.35%, to 7,874.88
- The Russell 2000 Index advanced 87.20 points, or 7.77% to 1,210.13
Economic Calendar for Today
- 8:30 AM EST Empire Manufacturing for March…est. 4.9
- 4:00 PM EST Net Long-term TIC Flows for January…prior $85.6B
- Earnings Before the Open: CHMA, FCEL, HZN, NBEV, VUZI
- Earnings After the Close: ADES, COUP, HQY, RPAY
Other Key Events:
- American Academy of Allergy, Asthma and Immunology, 3/13-3/16 in Philadelphia
- Roth Capital 32nd Annual Conference, 3/15-3/17, in California
- The Trump administration extended a travel ban to Britain and Ireland to try to contain a pandemic that has shut down much of the daily routine of American life
- The Fed Reserve cuts the federal funds rate target range by 100 basis points to 0%-0.25%, as the “effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,” the central bank said. In addition, the central bank promises over the next few months to lift its holdings of Treasury paper by $500B and holdings of MBS by $200B. Also, all principal payments from existing holdings will be reinvested
- The Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank announced a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. The Federal Reserve stated: “These central banks have agreed to lower the pricing on the standing U.S. dollar liquidity swap arrangements by 25 basis points, so that the new rate will be the U.S. dollar overnight index swap rate plus 25 basis points.
- China’s economy plunged the first two months of the year as industrial output plunged 13.5% from a year earlier, retail sales tumbled 20.5% and fixed-asset investment slumped 24.5%. It’s the first time on record all three have seen contractions according to reports
- Coronavirus cases topped 166,000 worldwide as deaths topped 6,400. Italy’s government will meet today to pass a new package of measures after deaths jumped yesterday. Spain imposed a lockdown, Germany partially closed borders, Austria banned gatherings
- The Centers for Disease Control and Prevention issued a dramatic recommendation: Because large events can fuel the spread of the disease, it said gatherings of 50 people or more should be canceled or postponed throughout the country for the next eight weeks
- New York City will close the nation’s largest public-school system on Monday, sending over 1.1 million children home in hopes of curbing the spread of coronavirus, the city’s mayor announced Sunday, calling it a “very troubling moment” as he suggested ominously that more restrictions were inevitable.
Sector News Breakdown
- Monster Beverage (MNST) authorizes new $500M stock buyback
- Nike Inc. (NKE) is closing all retail stores in the U.S. and Western Europe to help slow the spread of the coronavirus.
- Urban Outfitters (URBN) said it has decided to close all stores globally until at least March 28, while e-commerce and subscription businesses will continue to operate
- Vail Resorts (MTN) will suspend the operations of all its North American mountain resorts and retail stores March 15-22 and will use that time to reassess approach for the rest of the season
- UAW, General Motors, Ford Motor Co. and Fiat Chrysler Automobiles will form a coronavirus task force to implement enhanced protections for manufacturing and warehouse employees at all three companies, according to a UAW statement.
Energy, Industrials & Materials
- TechnipFMC Plc (FTI), an oilfield services provider, shelved the plan to split up its two businesses, citing material changes in market conditions due to the coronavirus
- EQT Corp (EQT) cut its capital expenditure forecast for the full year as sees FY capital expenditure $1.08 billion to $1.18 billion, from prior view $1.15 billion to $1.25 billion and sees FY adjusted free cash flow $225 million to $325 million, from prior $200 million to $300 million
- Vermilion Energy (VET) cuts 2020 capital budget by c$80m-c$100m; revised capital budget C$350m to C$370m and cuts its monthly dividend to C2c from C11.5c
- Mosaic (MOS) announced its February sales revenue and sales volumes by business unit. Potash sales volumes for February 2020 were 489K tonnes, compared to 632K tonnes in February 2019, with sales revenues of $118M for February 2020, compared to $161M for February 2019
- The biggest U.S. banks JPMorgan (JPM), Bank America (BAC), Citigroup (C), Goldman Sachs (GS) among them will stop buying back their own shares, and will instead use that capital to lend to individuals and businesses affected by the coronavirus – Reuters
- Mall operators such as Macerich (MAC), Taubman (TCO, Tanger Outlets (SKT), Washington Realty (WPG), Simon Property Group (SPG), and Federal Realty (FRT) are among some of the REITs that could be further pressured amid the retailer store closures
- Teladoc Health (TDOC) said it is experiencing unprecedented daily visit volume in the U.S. as the novel coronavirus continues to spread globally. This week, patient visit volume spiked 50% over the prior week and continues to rise; said had been handling visit demand consistent with peak flu volumes, but on Wednesday began to see that number accelerate to as much as 15,000 visits requested per day.
- Ironwood Pharmaceuticals (IRWD) suspended personal interactions by customer-facing employees, including visits to physician offices, clinics and hospitals, through at least March 31.
- Inovio (INO) files $400M mixed securities shelf
- Pfizer (PFE) has made it mandatory for all customer-facing employees in the United States and Puerto Rico to work remotely
Technology, Media & Telecom
- Apple Inc. (AAPL) said Saturday it’s closing its hundreds of retail stores outside of Greater China until March 27 and is moving to remote work in order to help reduce the spread of coronavirus. Apple CEO Cook said that the “most effective way to minimize risk of the virus’s transmission is to reduce density and maximize social distance”
- Netflix (NFLX) and Disney (DIS) are pausing production on current movies on TV shows in an effort to prevent the spread of coronavirus
Transports & Gaming
- United Airlines Holdings Inc. (UAL) said that it is projecting March revenue will be $1.5 billion lower than a year ago, as the air carrier said there have been more than one million fewer passengers in just the first two weeks of the month as a result of the COVID-19 pandemic. United said it decided over the weekend to cut salaries of corporate officers by 50%, have held discussions with union leadership about how to cut payroll expenses and will announce on Monday that it will reduce capacity by 50% for April and May. Even with the cut in capacity, load factors are expected to drop into the 20% to 30% range
- American Airlines (AAL) will slash long-haul international flights by 75% because of the collapse in travel demand and government restrictions imposed to slow the spread of coronavirus
- Boyd Gaming (BYD) announces that four properties will be temporarily closed to the public due to local efforts to prevent coronavirus exposure
- Penn National (PENN) announced that pursuant to an order from the Indiana Gaming Commission it will temporarily suspend operations at Hollywood Casino Lawrenceburg and Ameristar East Chicago for a period of two weeks beginning Monday, March 16
- MGM Resorts International (MGM) said it will temporarily close MGM Springfield after Massachusetts Gaming Commission voted unanimously to temporarily suspend operation at the state’s three casino properties
- Wynn Resorts (WYNN) has decided to temporarily close Wynn Las Vegas and Encore to prevent the spread of the novel coronavirus effective March 17 at 6pm for two weeks, it says in an emailed statement.
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