Closing Stock Market SummaryThe stock market closed mixed on Thursday, as investors responded to another round of weak economic data by continuing to buy shares of technology companies while avoiding distressed sectors like financials and energy. The Nasdaq Composite rose 1.7%, while the S&P 500 (+0.6%) and Dow Jones Industrial Average (+0.1%) posted smaller gains. The Russell 2000 declined 0.5%.
Briefly, weekly jobless claims totaled 5.245 million (consensus 5.000 million), down 1.37 million from the prior week. Housing starts for March declined 22.3% m/m while building permits fell 6.8% m/m. The Philadelphia Fed Index for April plunged 43.9 points to -56.6 (Briefing.com consensus -25.0) for its lowest reading since July 1980.
The data was ugly like yesterday's, but unlike yesterday the stock market was more accepting of the data amid a tapering shock value. Regarding the economic outlook, investors were reminded today that the road ahead may not be as smooth as had hoped after New York extended its economic restrictions until May 15. The White House is expected to release a "flexible" guideline today for states to consider.
This viewpoint didn't dampen risk sentiment, but instead led investors into stocks that have outperformed this year: large-cap technology names like Amazon (AMZN 2408.19, +100.51, +4.4%), Microsoft (MSFT 177.04, +5.16, +3.0%), and many of the semiconductor stocks. The latter drew support from encouraging quarterly results and guidance from Taiwan Semi (TSM 52.40, +2.74, +5.5%).
These gains contributed the outperformance of the S&P 500 consumer discretionary (+1.9%) and information technology (+1.2%) sectors. The health care sector (+2.2%), though, advanced the most after Abbott Labs (ABT 96.00, +5.06, +5.6%) was the latest health care company to beat earnings estimates.
Interestingly, declining issues outpaced advancing issues in both the Nasdaq and NYSE despite the positive indication in the major indices. Laggards were found in areas that have underperformed this year, specifically the energy (-4.0%), financials (-1.7%), and industrials (-0.8%) sectors.
The industrials space was pressured by Boeing (BA 134.24, -11.74, -8.0%) and airline stocks after United Airlines (UAL 28.21, -3.65, -11.5%) provided shareholders a discouraging update. The company said it expects travel demand to remain suppressed for the remainder of 2020 and likely into next year, augmenting worries about a prolonged economic recovery.
U.S. Treasuries continued to show relative strength, pushing yields lower across the curve. The 2-yr yield declined one basis point to 0.19%, and the 10-yr yield declined three basis points to 0.61%. The U.S. Dollar Index increased 0.6% to 100.06. WTI crude declined 0.3% to $19.89/bbl.
Reviewing Thursday's economic data:
- Initial claims for the week ending April 11 were "only" 5.245 million (consensus 5.000 million), down 1.37 million from the prior week. Continuing claims for the week ending April 4, meanwhile, were 11.976 million, up 4.53 million from the prior week.
- The key takeaway from the report is that the labor market is wrecked right now; and gainful employment with gainful income, which is missing for so many, is what is needed to drive an economy that relies heavily on consumer spending.
- Housing starts declined 22.3% m/m in March to a seasonally adjusted annual rate of 1.216 million (consensus 1.300 million). Building permits were down 6.8% m/m to a seasonally adjusted annual rate of 1.353 million (consensus 1.297 million).
- Building permits were better than expected because of increases for multi-unit dwellings, yet the key takeaway for this leading indicator is that permits for single-unit housing were down between 6.4% and 20.2% across all regions.
- The Philadelphia Fed Index for April plunged to -56.6 (lowest since July 1980) from -12.7 in March.
Looking ahead, investors will receive the Conference Board's Leading Economic Index for March on Friday.
- Nasdaq Composite -4.9% YTD
- S&P 500 -13.4% YTD
- Dow Jones Industrial Average -17.5% YTD
- Russell 2000 -29.4% YTD
EXCLUSIVE-Hedge fund Elliott says stocks could fall 50% from Feb highs -letter - Reuters News
16-Apr-2020 15:40:00
By Lawrence Delevingne and Svea Herbst-Bayliss
BOSTON, April 16 (Reuters) - Billionaire Paul Singer’s Elliott Management said global stocks could tumble more -- ultimately losing half of their value from February's high -- as the world braces for the deepest recession since the 1930s-era Great Depression, according to a letter sent to clients on Wednesday and reviewed by Reuters.
The New York-based hedge fund firm, which controls $40.4 billion in assets and whose views on markets and economics are closely watched by investors, wrote that the sharp market decline seen between late February and late March "provided a heavy bookend to a dozen years of basically nonstop positive returns in global stocks, bonds and real estate."
And the rout is likely not yet over.
"Our gut tells us that a 50% or deeper decline from the February top might be the ultimate path of global stock markets,” the letter said.
The benchmark U.S. S&P 500 stock market index tumbled 36% over four weeks but reversed course and rallied 31% from the March 23 low, leaving it 16% below the high set on Feb. 19, Elliott wrote.
Elliott's portfolio managers have bought some stocks and bonds recently, but the firm said it was too soon to call an all-clear for markets.
"To us there does not appear to be a gilded cornucopia of shining bargains," the letter said.
The novel coronavirus erupted against a backdrop of record low interest rates coupled with record high leverage as markets were propped up by excessive government debt, the fund said.
Elliott, founded in 1977 by Singer, is known for its founder's relatively pessimistic economic views and for warning about economic dangers long before others see them.
It is also known for carefully protecting capital over decades with some of the industry's best returns. Its Elliott International fund gained 2.2% in the first quarter while its Elliott Associates fund was up 1.6%.
The average hedge fund lost roughly 8% percent during the same time, data from Hedge Fund Research show.
The firm said it hedged its portfolio with protection trades on credit, equities, rates and gold. This helped offset declines in distressed debt and equity trades.
A spokesman for New York-based Elliott Management Corp did not immediately respond to an email seeking comment.
While Elliott invests in a variety of instruments, it is especially well known as an activist investor that has pushed for changes at companies such as Twitter TWTR.N, SoftBank 9984.T and AT&T T.N.
The average activist hedge fund lost 33% in the first quarter, Hedge Fund Research data show.
Gapping down
In reaction to disappointing earnings/guidance:
- RAD -12.1%, LAKE -9.8% (reports Q4 results - notes "significant" interest globally in its products in the wake of the coronavirus outbreak), GPRO -4.9%, KEY -1.6%, MS -0.9%
Other news:
- ATHX -24.2% (prices 22.25 mln shares of common stock at $2.25 per share)
- CALA -14.8% (prices offering of 5 mln shares of common stock at $6.25 per shareg)
- RAD -11.5% (not seeing news, still looking for catalyst)
- UAL -3.3% (confirms will get $5 bln from US Treasury)
- ARCT -3% (stock offering)
- RDFN -1.9% (reports home-buying demand was down 25% yr/yr for the week ending April 13)
- CLDR -1.1% (Carl Icahn affirms lowered active stake of ~17.7%)
Analyst comments:
- TLRY -4.3% (downgraded to Underperform from Hold at Jefferies)
- SQ -3.2% (downgraded to Underperform from Mkt Perform at Raymond James)
- CIEN -2.4% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- TWTR -2.3% (downgraded to Neutral from Overweight at JP Morgan)
Gapping up
In reaction to strong earnings/guidance:
- LOVE +20.3%, BBBY +15.1% (reports Q4 upside), TSM +4.5%, ALLT +4.4%, BK +4%, BLMN +1.9%, NDLS +1.8% (reports Q1 system-wide comps declined 7.2%), BLK +1.8%, ASH +1.8%, ABT +0.5%
Other news:
- RCUS +50.2% (news reports that GILD is allegedly in discussions to purchase a stake in RCUS)
- AXDX +16% (announces collaboration agreement to distribute the BioCheck MS-FAST and SARS-CoV-2 tests), CGEN +13.4% (getting picked up as RCUS sympathy play as it also has an early-stage Tigit inhibitor)
- URGN +11.7% (receives FDA expedited approval for Jelmyto)
- VNDA +7.5% (enrolls first patient in ODYSSEY trial for severe COVID-19 pneumonia; also initiates study of role of genetic variation in COVID-19 infections)
- XP +7% (reports Q1 key retail performance indicators)
- CODX +6.8% (Co-Diagnostics COVID-19 test technology validated for use on saliva samples)
- LTRPA +5.9% (states that it is not aware of the reasons for the recent volatility in its stock price)
- KBR +4.8% (wins US Air Force contract)
- ACGL +2.4% (provides COVID-19 update; announces loss estimates)
- NVAX +2.1% (to commence Phase 1 vaccine trial COVID-19 with Nucleus Network)
- PFGC +1.1% (stock offering)
- COST +0.9% (increases dividend)
Analyst comments:
- JACK +4.9% (upgraded to Buy from Neutral at BTIG Research)
- AWK +3.7% (upgraded to Buy from Neutral at Goldman)
- FCX +2.5% (upgraded to Overweight from Equal Weight at Barclays )
- AGNC +2.1% (upgraded to Mkt Outperform from Mkt Perform at JMP Securities)
- CGC +1.8% (upgraded to Hold from Underperform at Jefferies)
Early premarket gappers
- Gapping up:
- RCUS +47.9%, URGN +17.9%, BBBY +12.4%, LTRPA +11.8%, VNDA +10.2%, CGEN +8.1%, AXDX +7.8%, XP +7%, KBR +4.8%, ALLT +4.4%, NVAX +3.1%, BLK +3%, BK +2.5%, NDLS +1.8%, COST +1.1%, RAD +0.8%, GILD +0.7%
- Gapping down:
- ATHX -23.9%, CALA -15.8%, LAKE -6.9%, PFGC -3.7%, GPRO -3%, UAL -2.7%, RDFN -1.9%, ARCT -1.6%, ACGL -1.3%, VIR -0.9%, KEY -0.5%
China’s Export Restrictions Strand Medical Goods U.S. Needs to Fight Coronavirus, State Department Says
Products made by 3M, Owens & Minor, PerkinElmer sit in warehouses; GE ventilator production line in Wisconsin nearly brought to a halt
New Chinese export restrictions have left American companies’ U.S.-bound face masks, test kits and other medical equipment urgently needed to fight the coronavirus stranded, according to businesses and U.S. diplomatic memos.
Large quantities of critical protective gear and other medical goods are sitting in warehouses across China unable to receive necessary official clearances, said some suppliers and brokers.
Health-care equipment maker PerkinElmer Inc., PKI 0.51% based in Massachusetts, is unable to ship 1.4 million test kits for Covid-19, the disease caused by the new coronavirus, from its Suzhou factory because it lacks a certification required by the new rules, according to a State Department memo reviewed by The Wall Street Journal.
A Shanghai vice mayor told Minnesota-based conglomerate 3M Co. MMM -3.32% that the city “relies on 3M’s locally produced N-95 respirators for its Covid-19 prevention efforts and lacks viable alternatives,” a second memo said. The official “signaled that lifting restrictions on distribution of the company’s masks would require instructions from Beijing,” the memo said.
PerkinElmer said it is working with the Chinese government to clear the test kits. 3M said it has received shipments from China and is working to coordinate more, though fewer planes are available than usual.
The policies were instituted this month, and Chinese officials have said they are intended to ensure the quality of exported medical products and to make sure needed goods aren’t being shipped out of China. Instead, they have created bottlenecks at a time of urgent need, according to the suppliers, brokers and the State Department memos.
China’s policies have “disrupted established supply chains for medical products just as these products were most needed for the global response to Covid-19,” according to one of the memos sent this week. The State Department didn’t respond to a request for comment.
The number of coronavirus cases in the U.S. and other countries is soaring, surpassing two million globally. Across the U.S., hospitals and local governments, as in many other countries, are running short of masks and ventilators to treat patients, protect medical workers and shore up emergency stockpiles.
“Every single day we don’t have the proper protective equipment is a new health-care worker exposed, is a new hole in the ship that is our current hospital system and ICU bed structure,” said Illinois Deputy Gov. Christian Mitchell, who is overseeing procurement for the state. He said at least one vendor told him to expect delays of six to 10 days for a shipment from China because of the new certifications.
Asked about the complaints of export problems, Foreign Ministry spokesman Zhao Lijian told reporters in Beijing on Wednesday that China wants to ensure the quality of exported medical products given their importance. “Countries across the world are all hunting for medical supplies, causing a big challenge for China’s efforts of quality control and regulation of export,” the Chinese Embassy in Washington said.
China is an almost irreplaceable supplier, making more than 40% of the world’s imports of masks, gloves, goggles, visors and medical garments, according to the Peterson Institute for International Economics.
In recent weeks the U.S. set up a task force among its diplomats in China to help American companies, states and the government procure and ship medical supplies such as masks, gloves and ventilators to the U.S., people familiar with the matter said. One of the people said there are signs the shipment bottlenecks are easing somewhat.
The logjams are adding to strained ties between the Communist government and the Trump administration, which have traded blame over the pandemic while also pledging to work together. President Xi Jinping, in a phone call last month, promised to help the U.S. in dealing with the pandemic.
China has been stung by criticism from the U.S. and others over its handling of the coronavirus. The Trump administration has particularly cited Beijing’s lack of transparency, which likely contributed to the virus’ spread.
To repair its image, China has tried to reshape perceptions about its role in the crisis, leveraging its manufacturing power to export crucial medical supplies to affected countries. Beijing was then hit with complaints from European countries about the quality of masks, gowns and other products they received.
The export restrictions then followed. Chinese customs prohibited the export of medical products without certifications from China’s National Medical Products Administration, even if the goods had been registered with the U.S. Food and Drug Administration. On Friday China added another hurdle, subjecting certain types of surgical protective gear and equipment—including ventilators and masks—to extra checks before they could be shipped overseas.
Printed circuit boards used in ventilators manufactured by General Electric Co. sat in a warehouse for five days because of confusion over the new rules, according to people familiar with the matter. Without the shipment, a GE ventilator production line in Wisconsin would likely have run out of parts and have to suspend work.
After days of negotiations between manufacturers, local authorities and a business association, the shipment finally left Shanghai in a plane bound for the U.S. on Sunday, they said.
Others are still stuck. Virginia-based health-care logistics firm Owens & Minor Inc. has a shipment of 2.4 million masks that meet Food and Drug Administration specifications stuck in a warehouse in Shanghai’s Pudong International Airport because the products lack the newly required certification, according to one of the State Department memos. It said hospital operator Emory Healthcare can’t get 100,000 N95 face masks and 40,000 isolation gowns out of China for the same reason.
Cellex Inc., a biotech company based in North Carolina that has received inquiries from at least four state governments eager to purchase their coronavirus antibody tests, hasn’t been able to fill orders without the Chinese certification, despite receiving an FDA emergency-use authorization on April 1, the memo said.
Owens, Emory and Cellex didn’t respond to requests for comment.
Suppliers said the urgent demand has created a “complete sellers’ market,” with prices changing daily as factories, inundated by offers, dictate minimum purchasing quantities and buying conditions.
“China’s between a rock and a hard place,” said Solomon Matzner, the Shanghai-based founding partner of BioAktive Specialty Products who assists U.S. and German institutions in sourcing KN95 masks. “They need to get as much product out as possible, but on the other hand, Chinese products are being criticized for quality.”
>>> Up
* ASML Raised to Buy at BofA; PT 325 euros
* Boozt Raised to Buy at Carnegie; PT 55 kronor
* C&C Raised to Hold at Berenberg; PT 182 pence
* Compass Raised to Outperform at Bernstein; PT 1,500 pence
* Dometic Raised to Hold at ABG; PT 55 kronor
* Enel Raised to Add at AlphaValue
* EUROB GA Raised to Overweight at JPMorgan; PT 70 euro cents
* Forterra Raised to Buy at Peel Hunt; PT 320 pence
* Getlink SE Raised to Buy at HSBC; PT 14.30 euros
* Ibstock Raised to Buy at Peel Hunt; PT 255 pence
* John Mattson Fastighetsforetagen Raised to Hold at Carnegie
* K2a Knaust & Andersson Fastigheter Raised to Hold at Carnegie
* Kungsleden Raised to Buy at Carnegie; PT 85 kronor
* Loomis Raised to Buy at Danske Bank Markets; PT 356 kronor (+)
* Matas Raised to Buy at Carnegie; PT 55 kroner
* Metso Oyj Raised to Buy at Pareto Securities; PT 30 euros (+)
* RBS Raised to Equal-Weight at Barclays; PT 130 pence
* Sandvik Raised to Buy at Pareto Securities; PT 175 kronor
* Simcorp Raised to Buy at Carnegie; PT 660 kroner
* SKF Raised to Buy at Pareto Securities; PT 175 kronor
* Sydbank Raised to Buy at SEB Equities; PT 107 kroner
* Swisscom Raised to Neutral at JPMorgan; PT 521 Swiss francs
* Uponor Oyj Raised to Hold at Handelsbanken; PT 9.60 euros
* Washtec Raised to Buy at HSBC; PT 45 euros
>>> Down
* ABB Cut to Hold at HSBC; PT 18 Swiss francs
* Air France-KLM Cut to Sell at Deutsche Bank; PT 3.50 euros
* Bouygues Cut to Neutral at Goldman; PT 34 euros
* Bpost Cut to Sell at SocGen
* Carlsberg Cut to Hold at Handelsbanken; PT 850 kroner
* Hikma Cut to Hold at Jefferies; PT 2,325 pence
* Intesa Sanpaolo Cut to Reduce at Oddo BHF; PT 1.80 euros
* Italgas Cut to Sell at Citi
* JD Sports Cut to Sector Perform at RBC; PT 570 pence
* J. Martins Cut to Neutral at CaixaBank BPI; PT 16.95 euros
* Klovern Cut to Hold at Carnegie; PT 16 kronor
* Kojamo Cut to Hold at Carnegie; PT 17 euros
* Lufthansa Cut to Sell at Deutsche Bank; PT 5.70 euros
* Nibe Cut to Sell at Pareto Securities; PT 120 kronor (+)
* Petra Diamonds Cut to Equal-Weight at Barclays; PT 3 pence
* Piraeus Bank Cut to Neutral at JPMorgan; PT 1.80 euros
* Sartorius Cut to Hold at LBBW; PT 245 euros
* Scandic Raised to Buy at Handelsbanken; PT 60 kronor
* SMCP Cut to Neutral at Goldman; PT 4.60 euros
* Snam Cut to Sell at Citi
* Stora Enso Oyj Cut to Hold at SEB Equities; PT 10 euros
* Terna Cut to Neutral at Citi
* Viafin Service Cut to Reduce at Inderes; PT 9.70 euros (+)
* Wallenstam Cut to Sell at Carnegie; PT 90 kronor
>>> Initiation
* Codemasters Rated New Buy at Panmure Gordon; PT 350 pence
* HelloFresh Rated New Hold at MainFirst; PT 29 euros
* Idorsia Rated New Buy at Citi; PT 33 Swiss francs
* Nacon Rated New Buy at Berenberg; PT 6.85 euros
>>> Call
* Barry Callebaut Profitability, Cash Remain Resilient: Vontobel (+)
* Citi Cuts Three Italian Utilities on Lower Inflation Scenario
* Heineken Is Most Exposed to Extended Alcohol Restrictions: Citi
* Hiscox Virus Losses Manageable, Brand Could Suffer: MS
* JD Sports Now Less Compelling, RBC Downgrades to Sector Perform
* Temp Staffing Firms Should Recover Quicker Than Permanent: RBC
* Zalando Faces 2Q Revenue Trough Before Things Get Better: RBC (+)