Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 3 Apr 2020, 8:59 AM

 

Wall Street Breakfast: The Rollercoaster Ride Continues

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Things are turning around fast again following a massive rally in the previous session, with Dow futures off by nearly 500 points and S&P 500/Nasdaq futures down by 1.9%. California has declared a state of emergency following the death of an elderly woman near Sacramento, while U.S. coronavirus cases climbed to 160 across 17 states and fatalities reached 11. Broader movements in the bond market saw the benchmark 10-year Treasury yield slip back under 1%, and following a cut from the Bank of Canada, official global interest rates reached an all-time low of just over 3%. Retail earnings are also on the radar today, with investors eyeing results from Costco (NASDAQ:COST), BJ's Wholesale Club (NYSE:BJ) and Kroger (NYSE:KR).

Massive revenue loss for airlines

Travel restrictions to contain the coronavirus are multiplying rapidly, with governments around the world adding selective arrival bans on visitors from afflicted nations and companies banning trips by their employees. Airlines will lose $63B to $113B in revenue for passenger traffic globally in 2020, depending on how the coronavirus spreads, according to the International Air Transport Association. On Feb. 20, IATA estimated the outbreak would cost carriers $29.3B in revenue. Premarket: AAL -3.6%, UAL -1.6%, DAL -2.3%, LUV -1.3%.
Go deeper: 'Capitalise On The Correction' by Exile of the Mainstream.

Flybe pushed over the edge

It's the industry's first big casualty of the coronavirus outbreak. British regional airline Flybe (OTC:FLYBF) has collapsed following a plunge in travel demand, putting around 2,400 jobs at risk amid a darkening forecast that could see some airports struggle and business travel restricted. Flybe was already in financial trouble and was rescued in mid-January, when shareholders agreed to invest more money alongside government support that was due to include a potential loan and a review of local flight taxes.

Pulling out of SXSW 2020

Apple (NASDAQ:AAPL) and Netflix (NASDAQ:NFLX) are the latest tech companies to pull out of the upcoming South by Southwest festival amid concerns about the spread of coronavirus. Apple had been set to premiere three new Apple TV+ originals at the event, while Netflix had planned to screen five films, including LA Originals. Others who have recently pulled out of SXSW 2020 include Amazon Studios (NASDAQ:AMZN), Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), TikTok, Mashable and Intel (NASDAQ:INTC), though officials say the show will go on.

Coronavirus updates

Amazon (AMZN) told employees in Seattle to avoid coming into their offices for the rest of the month after an employee tested positive and Washington state emerged as one of the hardest hit by the coronavirus. Facebook (FB) also confirmed that a contractor at its Seattle office was diagnosed with the disease and it would close that location until March 9. Visa (NYSE:V) is cutting costs and American Express (NYSE:AXP) reported a material slowdown in Asia travel spending as the virus starts taking a bite out of revenue, while Mastercard (NYSE:MA) is deciding whether to implement expense cuts, but doesn't have enough clarity yet on the severity of the situation.

Efforts to combat the virus

The U.S. House has passed a bill allocating $8B in emergency funds to combat the spread of the deadly virus, including $3B in vaccine research and $2.2B in prevention and preparedness efforts. The IMF also announced a $50B aid package and called for an all-out offensive to counteract the epidemic. New York Governor Cuomo confirmed five new cases, saying, "this is literally like trying to stop air," while Vice President Mike Pence will meet with face mask maker 3M (NYSE:MMM) in Minneapolis today to discuss supply chain issues.
Go deeper: 'The 1918 Spanish Flu And Stocks' by Ploutos.

Oil prices on watch

The familiar split between Saudi Arabia and Russia on how much to trim output has emerged as OPEC+ meets in Vienna. Looking to shore up prices hammered by the coronavirus outbreak, Riyadh is pushing for a cut of 1M-1.5M barrels per day in Q2 and to keep existing cuts of 2.1M bpd (which expire this month) in place until the end of 2020. Moscow has in the past shown reluctance during negotiations but has signed up at the last minute.

Simplifying capital rules

The Fed is retooling capital rules for the largest U.S. lenders, like JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), in one of the biggest changes to the post-crisis rulebook for Wall Street. It reduces the total number of capital requirements to eight from 13, "while maintaining the strong capital requirements that are the hallmark of the framework," according to Vice Chairman for Supervision Randal Quarles. The Fed held off on making some changes to stress tests, however, such as incorporating a dormant policy tool to combat credit crunches.

Self-driving drama

Anthony Levandowski has filed for bankruptcy, shortly after a court confirmed that he must pay $179M to Google (GOOG, GOOGL) over unfair competition and breaching legal obligations. Levandowski had been a key engineer in Google's self-driving project before starting his own company that was acquired by Uber (NYSE:UBER). While the moves ignited a multipronged fight over proprietary information and trade secret theft that is still raging, Waymo and Uber settled their lawsuit back in 2018. Bad timing? Uber said yesterday that its self-driving unit is open to using technology from competitors in the industry.

Disappearing 'fleets'

Twitter (TWTR) is starting public testing of "Fleets" - its take on the popular disappearing "Stories" format popularized by Snapchat (NYSE:SNAP) and copied to successful effect by Instagram (FB). Fleets differ from tweets in that they'll disappear after 24 hours; can't receive likes, replies or retweets; and otherwise won't be circulated through the network, or show up in Search or Moments. The company is starting testing in Brazil, TechCrunch notes, and will decide after a few months how to proceed to other global markets.

Wednesday's Key Earnings

Campbell Soup (NYSE:CPB) +10.1% raising output due to coronavirus.
Dollar Tree (NASDAQ:DLTR) -3.6% giving light guidance.
Marvell (NASDAQ:MRVL) +6.4% AH posting upside revenue forecast.
Splunk (NASDAQ:SPLK) -4.4% AH on weak outlook.
Zoom (NASDAQ:ZM) -5.7% AH despite Q4 beats, upside outlook.

Today's Markets

In Asia, Japan +1.1%. Hong Kong +2.1%. China +2%. India +0.2%.
In Europe, at midday, London -1.6%. Paris -1.6%. Frankfurt -1.6%.
Futures at 6:20, Dow -1.7%. S&P -1.9%. Nasdaq -1.9%. Crude +0.3% to $46.93. Gold +0.2% to $1646.60. Bitcoin +4.2% to $9102.
Ten-year Treasury Yield +2 bps to 1.97%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
6:30 PM Fed's Kaplan: "Trade Wars, Slowing Global Economy, and Monetary Policy"
8:00 PM Fed's Kashkari Speech
8:45 PM Fed's Williams: U.S. Economy and Monetary Policy

 

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