Friday, May 29, 2020
Ending May on an Up Note. U.S. stock indexes ended mostly higher Friday and booked sharp gains for the week and month, after a news conference from President Donald Trump on China turned out to be not as disruptive to trade and finance as had been feared. Equities have rallied this week, lifted by optimism over the easing of lockdowns put in place to contain the Covid-19 pandemic and economic relief efforts by the Federal Reserve and Congress. The Dow Jones Industrial Average finished 17.53 points, or less than 0.1%, lower at 25,383.11, but ended Friday well off its intraday nadir at 25,031.67. Meanwhile, the S&P 500 closed 14.58 points, or 0.5%, higher at 3044.31. The Nasdaq Composite Index surged 120.88 points, or 1.3%, higher to end at 9489.87. Stocks also booked sharp gains for the week and month. The Dow closed 3.8% higher for the week, while the S&P 500 gained 3%, and the Nasdaq notched a weekly advance of 1.8%. For the month, the Dow logged a 4.3% gain, the S&P 500 climbed 4.5%, while the Nasdaq marked a 6.8% return in May.

table-29May

Consumer Spending Fell Off a Cliff. Savings Data Offer Hope.

Investors on Friday got the most comprehensive look yet at what the American economy looks like when it is shut down. The picture is as ugly as economists have imagined.

Consumer spending, which makes up nearly three-quarters of U.S. gross domestic product, dropped 13.6% in April from March, when it had slid 6.9% from a month prior. The drop was the worst on record as spending on everything from autos to clothing and health care registered historic declines. There’s good news in the April report, however. First, it likely marks the bottom. Second, the savings rate more than doubled to 33% in April from 12.7% a month earlier. Like the drop in spending, the rise in savings hit a record.

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The Good News in the Latest Job Loss Figures

Another 2.1 million Americans filed for unemployment insurance last week, slightly more than expected, news that takes the number of jobs claimed by the coronavirus pandemic to more than 40 million.

But it’s not all bad news. In its weekly report, the Labor Department on Thursday said the latest figure on claims is down from 2.4 million in the previous week. That marks the eighth straight week-over-week fall, giving investors some relief that while joblessness remains extraordinarily high, the worst appears to be over.

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Renault to Cut Nearly 15,000 Jobs

Renault stock tumbled on Friday after the French car manufacturer unveiled plans to cut close to 15,000 jobs as part of a €2 billion cost-cutting plan.

The deep restructuring, which includes slashing production, is the latest move by an automobile maker to respond to the coronavirus pandemic, which has badly hit the industry. British car production plummeted 99.7% in April to the lowest level since World War II, with just 197 vehicles being made in the U.K., the Society of Motor Manufacturers and Traders said on Friday. Car makers produced 700,000 pieces of personal protective equipment instead, it added.

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Trump Declares War on Social-Media Companies

As expected, President Donald Trump on Thursday issued an executive order intended to strip legal protections provided to social-media companies like Twitter and Facebook under current federal law—a move likely to face immediate and extensive legal challenges from the companies it targets.

Tensions between Trump and the social-media sector have intensified over the past few days after Twitter appended fact-check notices to several of the president’s tweets on the topic of mail-in voting. Trump is a staunch opponent of allowing mail-in voting for the November presidential election, asserting that it will lead to widespread fraud, but multiple media outlets contend there is no evidence to support that claim. Attached to two of Trump’s tweets are blue links that read “Get the facts about mail-in ballots.”

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Costco Stock Is Down After Earnings. Here’s What Wall Street Is Saying.

Costco Wholesale stock slipped on Friday, as investors digested the discounter’s fiscal third-quarter earnings report. Costco reported better-than-expected profits and sales when it delivered its results after the close on Thursday. Yet the shares slipped after hours, and continued to decline on Friday.

Part of the problem is high expectations: Costco stock was up more than 5% going into the report, and the shares have long carried a premium valuation. In addition, its big-box peers turned in pretty positive reports last week, and Costco’s own previous results were fairly strong. But Costco is also seeing increased costs related to Covid-19, and its same-store sales were slightly below what some analysts were looking for.

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GE Warns Aviation Will Ding Cash Flow. Here’s What Wall Street Is Saying.

General Electric CEO Larry Culp struck a cautious tone regarding the aerospace industry at a recent investor conference. Things aren’t great for commercial aviation just now. That isn’t a surprise. Far fewer people are traveling by plane because of the pandemic. But the impact Covid-19 is having on GE cash flow sent shares lower Thursday. Now Wall Street is weighing in on what the new data points mean for the stock going forward.

Culp said that overall industry weakness would result in another earnings charge to write down the value of aftermarket service contracts. GE took a $100 million charge in the first quarter and the coming charge will be “in the hundreds of millions of dollars.”

That was bad news. What’s more, the company’s aircraft-leasing unit is seeing airlines defer aircraft deliveries. Overall, second-quarter industrial company cash flow—excluding GE Capital—will likely range from negative $3.5 billion to negative $4.5 billion, worse than Wall Street was expecting. Gordon Haskett analyst John Inch, for instance, was expecting negative $2.7 billion in second-quarter cash flow. He doesn’t see a near-term bounce back in business on the horizon.

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American Airlines Announces Deep Staff Cuts

American Airlines Group this week revealed plans to slash staffing by 30%—a sign that carriers may still need to make deep cost cuts to regain profitability.

American told employees on Wednesday that it’s planning to cut management and support staff by 30% and announced additional cost-saving measures, including pay cuts. “Running a smaller airline means we will need a management and support staff team that is roughly 30% leaner,” the airline said in a memo to employees.

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Disney Plans to Reopen Its Orlando Parks in July. What Investors Need to Know.

Walt Disney is planning to reopen its Orlando theme parks starting on July 11, the company said in a presentation to Florida’s local authorities Wednesday morning.

Tourism attractions located in Orlando, including Walt Disney World, Universal Studios, and SeaWorld, have shut their doors to the public since mid-March as the state fought the spread of the novel coronavirus. Now, as the local economy starts to reopen after a two-month lockdown, the park operators are ready to get up and running again.

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Novavax Is Starting Covid-19 Vaccine Trials

The small-cap vaccine specialist biotech Novavax said Tuesday morning that it had enrolled the first participants in a Phase 1/2 trial of its experimental Covid-19 vaccine.

Novavax said the initial stage of the study would involve 130 healthy participants at two different sites in Australia, and would study the effects of a two-dose regimen of the experimental vaccine at two separate dose sizes. The study is also testing the vaccine with and without a Novavax-designed adjuvant, which is meant to increase the effectiveness of the vaccine.

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Merck Dives Into Covid-19 Fray With Two Vaccines and One Antiviral

As the world’s drugmakers announced effort after effort to develop drugs and vaccines to confront the Covid-19 pandemic, the big pharma firm Merck had been conspicuous among its big pharma peers for its silence.

That changed on Tuesday morning, as the company unveiled a barrage of Covid-19 programs: Two experimental vaccines and one experimental treatment.

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