Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 10 Jul 2020, 7:55 AM


Wall Street Breakfast: Fears Of A Second Wave

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"The second wave has begun," said William Schaffner, a professor at the Vanderbilt University School of Medicine, outlining the need for social distancing and mask-wearing, though he "cannot imagine" a second shutdown due to the impact of the first one. Dallas Fed President Robert Kaplan also said Sunday that the U.S. economic recovery hinged on effective public health measures, and "right now, it's relatively uneven." S&P 500 futures (SPX) started the night off more than 3%, before paring losses to 1.5%, as the choppy trading continues following Thursday's brutal selloff and Friday's partial rebound.

Rising infections

Overseas markets also flashed red as investors questioned whether fresh coronavirus outbreaks could hold back the global economic recovery. More than 20 U.S. states are seeing a pickup in COVID-19 cases, Tokyo reported a jump over the weekend and a fresh outbreak in Beijing led officials to close the Xinfadi market. Chinese economic data, which showed a smaller rebound than expected in May, also weighed on sentiment, with retail sales falling for a fourth straight month and industrial output rising less than forecast.

Vaccine deals

AstraZeneca (NYSE:AZN) inked an agreement with Europe's Inclusive Vaccines Alliance - led by Germany, France, Italy and the Netherlands - to supply up to 400M doses of Oxford University's COVID-19 vaccine beginning in late Q4 (at no profit). The company also has agreements with the U.K., U.S., CEPI and Gavi, the Vaccine Alliance, to supply 700M doses, in addition to a deal with the Serum Institute of India to supply 1B doses to low- and middle-income countries. Reports overnight suggested Israel was in talks with Moderna (NASDAQ:MRNA) to purchase its COVID-19 vaccine, which will begin Phase 3 trials in July. AZN +1.7%; MRNA +6.4% premarket.

Latest bankruptcy

24 Hour Fitness Worldwide has filed for Chapter 11, unable to keep up with debt payments following an extended shutdown caused by the coronavirus pandemic. It's also permanently closing 100 locations, nearly a quarter of its gyms, casting a cloud over the recovery prospects for Planet Fitness (NYSE:PLNT) and Town Sports International (NASDAQ:CLUB). Roughly 28 of 100 U.S. gym members are expected to bail this year, according to trade group International Health, Racquet & Sportsclub Association. Related: Nautilus (NYSE:NLS) and Peloton Interactive (NASDAQ:PTON).

How to reopen, that is the question

As coronavirus cases spike nationwide, Utah and Oregon have put any further economic reopenings on hold, while states like Texas, Arkansas and Arizona pledged to keep going. It comes as California, which implemented the country's first statewide stay-at-home order, entered the most expansive phase of its gradual reopening Friday. Across the country, Governor Andrew Cuomo threatened to "reverse" reopening Manhattan and the Hamptons amid "rampant" coronavirus social-distancing violations.

BP reset its price outlook

BP (NYSE:BP) will take an estimated $13B-$17.5B in impairments and writedowns in the second quarter after revising its long-term price assumptions. What changed? "With the COVID-19 pandemic having continued during the second quarter of 2020 and oil prices staying low, BP now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period." In addition, BP "reset its price outlook to reflect that impact and the likelihood of greater efforts to 'build back better' towards a Paris-consistent world" as it aims to "become a net zero company by 2050 or sooner." BP -4.8% premarket.

Biggest increase in three years

The number of publicly accessible charging points for electric vehicles jumped 60% in 2019 to reach 862,118, according to the IEA's annual Global EV Outlook. Fast chargers accounted for 31% of the total, reflecting efforts to build critical infrastructure ahead of an expected boom for EVs, which accounted for just 1% of all vehicle sales last year. Along with Tesla (NASDAQ:TSLA), there are other charge point providers like Shell (RDS.A, RDS.B), Engie (OTCPK:ENGIY), E.ON (OTCPK:EONGY), Volkswagen (OTCPK:VWAGY) and ChargePoint, whose shareholders include Daimler (OTCPK:DDAIF), BMW (OTCPK:BMWYY) and Siemens (OTCPK:SIEGY).

Raising self-driving awareness

The shift toward a self-driving future may take a leap forward this week as the U.S. Department of Transportation launches the Automated Vehicle Transparency and Engagement for Safe Testing Initiative. It intends to provide "an online, public-facing platform for sharing automated driving system on-road testing activities," as there is currently no centralized database (for example, crash report requirements vary from state to state). Who is expected to take part? GM's Cruise, Uber (NYSE:UBER), Alphabet's Waymo (GOOG, GOOGL), Fiat Chrysler (NYSE:FCAU) and Toyota (NYSE:TM), along with states California, Florida, Michigan, Ohio, Pennsylvania and Texas.

Bankrupt share sale?

Hertz (NYSE:HTZ) -16.6% premarket after the car rental company won bankruptcy court approval to sell up to $1B in stock. Bankruptcy experts said the planned sale raises questions about whether a company under Chapter 11 should exploit equity markets for financing when the value of its shares, as with nearly all bankrupt issuers, is at significant risk of being wiped out. "Give them credit for creativity - trying to turn something potentially worthless into a pot of cash," added John Penn, a bankruptcy lawyer at Perkins Coie LLP who is not involved in the Hertz case.

Today's Markets

In Asia, Japan -3.5%. Hong Kong -2.2%. China -1%. India -1.6%.
In Europe, at midday, London -0.9%. Paris -0.8%. Frankfurt -0.8%.
Futures at 6:20, Dow -1.7%. S&P -1.5%. Nasdaq -1.3%. Crude -1.5% to $35.70. Gold -1.1% to $1718.80. Bitcoin -3% to $9135.
Ten-year Treasury Yield -3 bps to 0.67%

Today's Economic Calendar

8:30 Empire State Mfg Survey
11:00 Fed's Kaplan: "The Economic Impact of Covid-19 and How the Country Will Move Forward."
4:00 PM Treasury International Capital


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