Barron’s Weekly Market Updates – April 3, 2020

Friday, April 3, 2020
Jobs Worries. U.S. stocks closed lower Friday as investors assessed the economic damage wrought by the coronavirus epidemic, after the Labor Department reported the U.S. economy lost more than 700,000 jobs in March, and that the unemployment rate rose to a near three-year high of 4.4%. The Dow Jones Industrial Average fell about 361 points, or 1.7%, to close near 21,052, the S&P 500 index fell 38 points, or 1.5%, to close at roughly 2489, and the Nasdaq Composite retreated 114 points, or 1.5%, to finish at about 7373. Elsewhere, oil prices continued to rise as optimism grew that deal to lower global production would soon be agreed upon. The gains helped to blunt Friday losses to the energy sector, which gained 5.3% this week and was the best performing S&P 500 sector.

U.S. Sheds 701,000 Jobs as Coronavirus Starts to Bite Businesses Across the Economy

Employers shed 701,000 workers in March, a number that vastly understates the impact the coronavirus has had on businesses and households because payrolls were measured before lockdowns began in earnest.

The Labor Department said Friday that the job losses were concentrated in leisure and hospitality, where payrolls fell by 459,000. But weakness was broader, with notable declines also in the health-care and social assistance, professional and business services, retail trade and construction industries.
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Oil Prices Pop Again on Hope for Coordinated Production Cut

Oil prices jumped again on Friday as it looked slightly more likely that there will be a coordinated global response to a glut of the fuel that has driven down the market.

The Wall Street Journal and other news outlets reported that OPEC plans to meet on Monday to discuss strategy. Plans are now being discussed around the world to curb production in light of the coronavirus outbreak. Brent crude futures jumped 13% to $33.75, while West Texas Intermediate futures climbed 8.8% to $27.75. WTI crude had fallen below $20 on Monday.
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Fed Cuts Rates to Zero as Financial-Crisis Tools Make a Comeback

3M got slammed by President Donald Trump over sending face masks abroad, but the industrial conglomerate has pushed back.

“Over the last several weeks and months, 3M and its employees have gone above and beyond to manufacture as many N95 respirators as possible for the U.S. market,” reads a Friday news release from the company. “Yesterday, the Administration formally invoked the Defense Production Act (DPA) to require 3M to prioritize orders from the Federal Emergency Management Agency (FEMA) for our N95 respirators.”
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After Criticism From Trump, 3M Hits Back

The European Central Bank announced on Wednesday night an extraordinary 750 billion euro asset-buying program to help the eurozone fight the consequences of the coronavirus outbreak and support “all citizens of the euro area through this extremely challenging time.”
After a late-night videoconference call, the ECB’s governing council made it clear that its new “pandemic emergency purchase programme” wouldn’t be constrained by the self-imposed limits of its previous and current quantitative easing policies.
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Under Armour to Furlough 6,600 U.S. Workers

Under Armour said it is furloughing 6,600 workers at its U.S. retail stores and distribution centers beginning April 12, citing the impact of the coronavirus pandemic.

Furloughed workers who are eligible for benefits will receive full health benefits for about two months, the company said Friday. Under Armour said its workers who continue to work at its distribution centers during the crisis will receive premium bonuses.
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Dividends of Large Banks Look Safe for Now

Dividend cuts and suspensions are mounting across many sectors as the coronavirus pandemic worsens.

Although the European Central Bank recently recommended that banks in that region suspend their dividends, there’s been no change in dividend policy by U.S. banking regulators. In the meantime, the payouts of the large banks look relatively safe for now, helped by their recent announcement to suspend buybacks.
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Chewy Stock Is Up on Booming Online Pet Food Sales. Dogs Are Happy, Too.

Economies are swooning and the markets are sputtering in the coronavirus pandemic, but at least the dogs are happy. Their humans are home, and in our house, at least, the dog is getting extra walks and extra belly rubs. If you’re a dog, life is good.

The online pet food purveyor Chewy provided some confirmation of that theory with its financial report for the company’s fiscal fourth quarter ended Feb. 2. The company posted revenue of $1.35 billion, up 35% from a year ago, slightly above consensus, and right at the high end of the company’s guidance range of $1.33 billion to $1.35 billion. The company’s adjusted Ebitda loss for the quarter of $5.8 million was narrower than the consensus forecast for a loss of $20 million.
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Corona Beer’s Maker Reports Solid Earnings

Demand for the Corona and Modelo premium brands of beer remained unslaked in the just-ended February fiscal year, said the brews’ owner Constellation Brands this morning. The Covid-19 pandemic has thrown confusion over the economy’s outlook, and the company has pulled its guidance, but Constellation says its “Pre-Covid” target was to grow beer sales at least 8% this year.

Constellation’s total sales of beer, wine and spirits for the February year was $9.1 billion, slightly ahead of the analyst consensus estimates tallied by FactSet. Including restructuring costs, and the losses from the partly owned cannabis producer Canopy Growth, Constellation had a net loss of $12 million, or 7 cents a share. Excluding those costs, earnings were about $1.9 billion, or $9.89 a share, compared with $9.34 in fiscal 2019. The consensus forecast for fiscal 2020 earnings per share had been for less than 9 bucks.
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Boeing Loses More MAX Jet Sales

An aircraft lessor withdrew an order for 75 Boeing 737 MAX jets Friday, the latest in a series of cancellations resulting from the coronavirus outbreak and the prolonged effort to win permission for the plane to resume commercial service.

“We have had ongoing conversations with Avolon regarding their 737 MAX portfolio and the impacts from the past year,” a Boeing spokesman told Barron’s in an emailed statement. “We have come to a mutual agreement to restructure Avolon’s MAX order book.”
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What New York City Says About the Nation’s Economic Slog Ahead

In one month, New York City has become the epicenter of the novel coronavirus outbreak in the U.S. Responsible for nearly a 10th of overall U.S. economic output, the city of more than eight million is all but frozen, as the restaurants and shops that line its streets are shuttered. Cars and taxis are empty, and lights are out across Broadway. Even the New York Stock Exchange, a symbol of American financial might, has shut its trading floor.

What is happening in New York City’s five boroughs and suburbs is both informative for other metropolitan areas across the country bracing for the stealthily spreading virus and indicative of how the U.S. economy will fare through the widespread business shutdown and beyond.
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Business Executives Offer Large Donations to Fight Covid-19

Some of the biggest names in the world of business have donated to fund research, pay for personal protective equipment for hospitals, and help victims suffering during the Covid-19 crisis. We’re keeping a running tally.

Among them is Bill Gates, co-founder of Microsoft, and co-founder and co-chairman of the Bill & Melinda Gates Foundation. He has contributed $100 million through the foundation to aid global detection, isolation, and treatment of the virus. Meanwhile, Jack Ma, co-founder and former executive chairman of Alibaba Group, has pledged $14 million through his Ma Foundation to help develop a coronavirus vaccine. He’s also donated testing kits and protective equipment to a slew of countries, including the U.S. and Italy.
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