Hammerstone’s Early Look
March 23, 2020|
Monday, March 23, 2020
U.S. stock-index futures hit limit-down soon after they began trading overnight, dropping by the most allowable overnight as the cases of coronavirus globally neared 340,000 and markets are not pleased amid the lack of government action to address the current and expected fallout from the COVID-19 pandemic. Futures tumbled after an important Senate vote on coronavirus rescue package failed to gain sufficient traction as the vote was 47 to 47, but needed 60 votes to proceed. Chuck Schumer said the $1.8T package was a large corporate bailout with no protections for workers and virtually no oversight. The bleak look to the week follows awful returns last week when the S&P 500 fell -15% in biggest weekly drop since October 2008, while the Dow Jones Industrial Average fell 17%. Given the most recent market plunge, the Dow is off 35.1% from its Feb. 12 peak, while the S&P 500 is 32% and the Nasdaq is down nearly 30% from their Feb. 19 peaks. Adding to the negative sentiment, a U.S. central bank official (Bullard) estimated that the unemployment rate could surge from just over 3% to 30% at its peak as businesses shutter in an effort to clamp down on the spread of the deadly illness. In Asian markets, The Nikkei Index gained 334 points to settle at 16,887, the Shanghai Index declined -85 points (3.1%) to settle at 2,660 and the Hang Seng Index plunged -1,108 points to 21,696. In Europe, the German DAX is down -325 points to 8,600, while the FTSE 100 is down over -200 points (4.3%) to trade under the 5,000 level.
Market Closing Prices Yesterday
- The S&P 500 Index dropped -104.47 points, or 4.34%, to 2,304.92
- The Dow Jones Industrial Average fell -913.21 points, or 4.55%, to 19,173.98
- The Nasdaq Composite slid -271.06 points, or 3.79%, to 6,879.52
- The Russell 2000 Index declined -44.86 points, or 4.24% to 1,013.89
Economic Calendar for Today
- 8:30 AM EST Chicago Fed Nat Activity Index for Feb
- Earnings Before the Open: None
- Earnings After the Close: PANL, RAVN, VISI
- Treasury Secretary Steven Mnuchin said Sunday that the Federal Reserve will play a key role in lending funds to businesses hurt by the coronavirus pandemic. “Working with the Federal Reserve — we’ll have up to $4 trillion of liquidity that we can use to support the economy,” Mnuchin told Fox News on Sunday
- President Donald Trump activated the National Guard to help respond to the coronavirus outbreak in California, New York and Washington. Trump said the Federal Emergency Management Agency would pay for the operations. The president said supplies, including respirators, N95 masks and gloves, would be deployed to states in the next 48 hours.
- Federal Reserve Bank of St. Louis President James Bullard told Bloomberg News during a Sunday interview that he is forecasting the U.S. unemployment rate to hit 30% in the coming months as the world continues to grapple with the coronavirus pandemic.
- Senators Mike Lee and Mitt Romney will self-quarantine after being exposed to Rand Paul, the Utah Republicans said. Lee said given his exposure to Paul, who has tested positive for COVID-19, the attending physician of the U.S. Congress advised a two-week quarantine.
- New York State now has more coronavirus cases than France or South Korea, with NYC the new epicenter of the COVID-19 outbreak in the U.S. The number of confirmed infections has soared to 15,168 according to data released by Gov. Andrew Cuomo
Sector News Breakdown
- Macys (M) suspends dividend and withdraws guidance
- Delta (DAL) suspended its capital return program, including the company’s stock repurchase program and the suspension of future dividend payments; entered into a $2.6 billion secured credit facility, enhancing the company’s liquidity; is also drawing $3 billion under its existing revolving credit facilities
- Kroger (KR) announced that it will provide one-time bonuses to hourly associates, while Amazon (AMZN) said hourly workers in its U.S. delivery network would receive double pay for every hour they work in excess of 40 each week, effective March 15 through May 9, as CEO Jeff Bezos said the outbreak will likely “get worse before it gets better.”
- Marriott International Inc. (MAR) plans to furlough thousands of corporate employees at its headquarters and other cities around the world, the company said
- Starbucks Corp. (SBUX) said it has closed most locations in the U.S. and Canada for two weeks and will pay workers for the next 30 days
- Gildan Activewear (GIL) is withdrawing 1Q, FY guidance due to the heightened uncertainty relating to the impacts of Covid-19
- DCP Midstream (DCP) to cut it dividend in half and 2020 growth capital program by 75%
- Occidental Petroleum Corp. (OXY) is nearing a settlement with Carl Icahn that would usher the activist investor into the oil producer’s board room, Dow Jones reported
- Royal Dutch Shell (RDSA) suspends buyback plan, lowers capex: announced a series of operational and financial initiatives that are expected to result in: reduction of underlying operating costs by $3-4 billion per annum over the next 12 months compared to 2019 levels; reduction of cash capital expenditure to $20 billion or below for 2020 from a planned level of around $25 billion; and material reductions in working capital
- Total SA (TOT) said that it is implementing an “action plan” in light of the decline in oil prices; measures include organic capital expenditure cuts of over $3 billion and lowering its net investments in 2020 to less than $15 billion; also entails increasing its operating costs savings for the year to $800 million from $300 million and suspending its $2 billion buyback plan for 2020
- Wells Fargo (WFC) will halt residential property foreclosure sales, evictions and involuntary automobile repossessions in response to the coronavirus pandemic; it also asked the Fed to temporarily or permanently lift an asset cap it introduced in the wake of a scandal over fake accounts, the Financial Times reported
- Tesla (TSLA) is in talks with Medtronic (MDT) on ventilators, which it’s on track to more than double weekly output
- Cepheid (CPHD) announced it has received Emergency Use Authorization from the U.S. Food & Drug Administration for Xpert Xpress SARS-CoV-2, a rapid molecular diagnostic test for qualitative detection of SARS-CoV-2
Industrials & Materials
- Airbus (EADSY) halts production and assembly activities at its plants in France and Spain for the next four days, as governments in both countries declared a state of emergency due to the coronavirus pandemic.
- Boeing (BA) CEO Dave Calhoun and Board Chairman Larry Kellner will forgo all pay until the end of the year, while the company suspends dividend, and pauses stock buyback until further notice
- Emirates, one of the world’s biggest long-haul airlines, said on Sunday it would stop nearly all passenger flights this week and cut staff wages by as much as half because of the coronavirus impact on travel demand
- Deere (DE) withdraws 2019 financial outlook citing Covid-19, says it will continue U.S. domestic operations as a federally designated essential critical infrastructure business
- Navistar (NAV) halts production at its Ohio plant and withdraws 2020 guidance over virus
Technology, Media & Telecom
- Netflix Inc (NFLX) said it will cut traffic by 25% on networks across Europe in a relief measure for internet service providers (ISPs) experiencing a surge in usage due to government shelter in place orders aimed at slowing the coronavirus outbreak
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