Stock rally fizzles out: April 28, 2020

Zillow (Z) will give all of its employees the option to work from home through at least the end of 2020, even as some office locations may start phased reopenings in coming months.

Some areas of the United States have begun lifting stay-at-home orders and other restrictions meant to stop the spread of coronavirus, prompting companies in those areas to consider when and how to call employees back to the office. Some experts say that even as businesses reopen, if schools remain closed and childcare is hard to come by, employees could struggle to get back to work.

Zillow said in a statement it wants to give employees "the flexibility and visibility to manage their lives with work in these uncertain times."

The online home listing company employs around 5,200 people in 37 offices throughout 21 US states and Vancouver, British Columbia. It first asked all employees to work from home starting in the second week of March, though several office locations closed earlier that month.

Zillow said it will begin working on a phased reopening of its offices based on guidance from government officials, employee feedback and other factors, but the company said it expects it to be "a gradual process over many months."

The American economy has grown for 23 quarters in a row -- nearly six straight years of uninterrupted growth. Coronavirus almost certainly ended that streak last quarter, even though the pandemic didn't disrupt most US businesses until mid-March.

But the abrupt and nearly universal shutdown probably more than offset any economic growth from January and February. Businesses shut down and workers stayed home, while mass layoffs led claims for unemployment benefits to spike.

Economists surveyed by Refinitiv expect the US economy contracted at a 4% annualized rate, compared to a 2.1% growth rate in the fourth quarter of last year. It would be the first quarterly contraction since the first three months of 2014, and the worst drop since the first quarter of 2009, when the economy contracted by an annualized 4.4% rate in the midst of the financial crisis.

Read more about tomorrow's GDP report here.

TripAdvisor (TRIP) announced Tuesday that it will lay off 900 employees, or roughly 25% of its workforce, because of the coronavirus pandemic's impact on demand for travel.

More than 600 employees working in the United States and Canada and nearly 300 employees working outside those two countries will be affected.

The company also said it would put a "number" of employees on furlough for an unspecified time and shutter its San Francisco and Boston offices.

TripAdvisor's stock is down 40% for the year.

Investors in SmileDirectClub are celebrating the company's big legal victory Tuesday.

Shares of SmileDirectClub (SDC) soared almost 20% on heavy trading volume after the company announced that it received a patent from the United States Patent & Trademark Office for its SmileShop retail stores. This means that no other aligner company can duplicate this model for a period of 18 years.

SmileDirectClub competitor Align Technology (ALGN), which makes Invisalign, had already closed its own stores in 2019 following a legal ruling in favor of SmileDirectClub. Align's shares rose 4% Tuesday.

Now SmileDirectClub rival Candid will likely need to shut its retail outlets. SmileDirectClub said it is filing a cease-and-desist order to bar Candid from reopening its stores, which are currently closed because of the Covid-19 pandemic.

SmileDirectClub's stores have also been closed since March. But the company said Tuesday that it plans to "slowly reopen" its SmileShops in the United States, Canada, Germany, Australia, New Zealand, the UK and Ireland in May "as local governments begin to lift business restrictions."

Still, it's not clear when SmileDirectClub which went public last September, will ever be profitable. The company is expected to lose money this year and in 2021. That's a major reason why the stock has plunged nearly 30% this year and is down almost 75% from its IPO price.

Moody’s Investor Services warned that renewed lockdowns around the world could create an economic shock big enough to spark a deep financial crisis, analysts wrote in report released today. 

That crisis “would be far worse in scale and scope than the 2008-09 global financial crisis,” the analysts wrote. 

The ratings agency added that the likelihood of this scenario playing out is high “without a coordinated global effort to bring and keep the rate of infections down.”

Even if countries can avoid renewed lockdowns, the Moody’s analysts see the potential for “large-scale destruction of businesses and entire sectors, as well as a structurally high unemployment rate, a permanent loss of human capital, and persistent malaise in consumption and investment.” 

In particular, Moody’s notes that “activities that require a high degree of human contact, such as dining out, going to movie theaters, flying and using mass transit, is unlikely to fully normalize until the disease is eradicated, or a vaccine or an effective treatment is available.” 

“Many businesses will struggle to stay afloat in these conditions, and eventually some will close regardless of policy support to the economy,” wrote the analysts.

Harley-Davidson (HOG) is in talks with "major US banks" to access another $1.3 billion in liquidity, the company said Tuesday. It unsurprisingly reported a drop in sales for its iconic choppers in the first quarter as the global Covid-19 pandemic is hurting demand for motorcycles.

Shares of Harley-Davidson soared nearly 10% Tuesday as the company also unveiled a plan to conserve cash.

Harley-Davidson reported a 12% decline in American sales across the motorcycle industry in the three years before the coronavirus pandemic began, according to the company's most recent annual earnings statement.

Read more here.

That optimistic open didn't last long. An hour and a half into the trading day, stocks have given back all their gains.

The S&P 500 was down 0.1%, led lower by health care and technology stocks.

The Nasdaq Composite led losses, down 0.9%.

The Dow is still holding up the best. The index was last flat after briefly turning red. At its high, it was up 378 points.

Investors will have a lot to digest this week. With a string of company earnings plus important economic data including first-quarter GDP and a fresh look at jobless claims waiting in the wings, this week could go all sorts of ways.

The big three automakers – General Motors (GM), Ford (F) and Chrysler (FCAU)— have floated May 18 to the United Autoworkers Union as a possible date to restart some production in the US, according to a person familiar with discussions.

The date is a rough timeline for the automakers to meet satisfactory safety protocols for workers but could shift based on whether or not the companies meet appropriate safety standards and if suppliers are able to deliver parts and product, said the person with knowledge.

A return to work date is also contingent on pressure from union members from both sides – those who want to go back to work as soon as possible and those who are awaiting stringent safety protocols, added the source.

The United Autoworkers Union said a firm date has not yet been set but "the focus on any date would be in the best interest of the health and safety of our members, family and community," said Brian Rothenberg, a UAW spokesperson.

The May 18 date is a "reasonable target" added a second person familiar with plans but that "it’s a multi variable equation — supply base, NAFTA countries, UAW, and state governments," said the source.

The automakers’ US plants have been closed since March after fears of Covid-19 spreading among workers, who work in close proximity to one another. The three automakers would not comment on an official restart date of production.

A stay-at-home order for Michigan is in place until May 15 which would be a reason why people are looking at May 18, said a source close to the union. "UAW members would balk if they had to return to work before the official stay-at-home order was lifted," added the source.

The Wall Street Journal was the first to report the May 18 date.

American consumer confidence deteriorated further in April after taking an initial hit in March, according to data from the Conference Board.

The consumer confidence index stood at 86.9 in April, down from 118.8 in March. It was the lowest reading since June 2014.

Consumer's assessment of current business and labor market conditions dived to 76.4 from 166.7, marking the largest drop on record. The US jobs market has been taking it on the chin since lockdown measures took hold across the country and 26.5 million people filed for initial unemployment claims since mid-March.

However, the index measuring short-term expectations for income, business and labor market improved slightly.

"Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy," said Lynn Franco, senior director of economic indicators at The Conference Board.

That said, consumers were less optimistic about their financial prospects, Franco said, and that will have repercussions for the economy, which is heavily reliant on consumer spending.