US stocks finished a busy day in the green. Investors had to divide their attention between earnings, big tech CEOs testifying before Congress and the Federal Reserve’s monetary policy update in which the central bank warned of a slowdown in the recovery.
Stocks bounced higher after spending most of the day flat as a pancake. Investors were pleased with Jerome Powell hinting that more stimulus is on the way.
The Dow was up 150 points, or 0.6%. And that was the worst performer of the day.
The broader S&P 500 was up 1.2% and the Nasdaq soared 1.6% (probably more to do with that antitrust hearing than Powell, but with markets, who knows?)
Remember that superduperstrong economic rebound everyone was talking about in May and June? Yeah… that’s not going so hot right now.
Federal Reserve Chairman Jerome Powell said the Fed checks on some atypical measures of economic activity, such as debit and credit card spending, small business job growth, hotel occupancy, and restaurant, pharmacy and beauty salon shopping. They all tell the same story: Bad.
“What that data shows is that the pace of the recovery looks like it has slowed since the cases began that spike in June,” Powell said. “On balance it looks like the data are pointing to the slowing in pace in the recovery.”
Oh, and while you’re here, go check out CNN Business’ awesome new Recovery Dashboard, where you can see many of the data points Powell and his Fed buddies are looking at in real time. It has nifty charts and everything!
Federal Reserve Chairman Jerome Powell said Americans refuse to spend coins, taking them out of circulation – and the US Mint can’t make coins fast enough. The reason: You guessed it! Coronavirus.
America had enough coins before the pandemic, but as stores and banks closed, customers stopped spending and started hoarding their coins.
Powell said the Fed noticed the problem right away, and it is working with the US Mint to address the issue. It even formed a coin taskforce.
Although coin inventories are building up, the Mint is essentially a factory. And like any factory, when someone comes down with coronavirus, the factory has to close and sanitize everything for at least a day or so.
“It’s a significant issue. We’ve got a lot of resources on it. And we do feel like we’re making progress,” Powell said.
Federal Reserve Chairman Jerome Powell said he thinks the US government’s response to the massive recession has been strong and appropriate.
Yet he suggested it hasn’t gone far enough.
Although he noted that the economy has begun to recover because of the enormous spending on behalf of the government, he also noted that if you made $40,000 a year or less, you had a 40% chance of losing your job in April or May. So Congress needs to ensure that Americans are protected as the fallout continues.
Federal Reserve Chairman Jerome Powell said repeatedly today that uncertainty remains prevalent in the economy during the pandemic. But one thing that he’s confident of: The markets are working just fine.
So why re-up liquidity swaps and several other facilities aimed at keeping markets fluid? Because the tumultuous economic recovery could spread to markets if things take a turn.
The Federal Reserve left interest rates unchanged near zero in its monetary policy update Wednesday, and it once again reiterated that the economic recovery will depend on the path of the virus.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the central bank said in a statement.
Even though the economy was beginning to rebound after grinding to a halt during the pandemic lockdown in the spring, the level of economic activity was still well below the levels from the start of the year, the Fed said.
Fed Chairman Jerome Powell will hold a press conference at 2:30 pm ET.
The central bank Tuesday announced an extension to various pandemic lending facilities, including the main street lending facility that lends to small and medium-sized businesses. The facilities will now run through the end of the year.
On Wednesday, the bank also announced an extension of its temporary US dollar liquidity swap lines and the repurchase agreement facility for foreign and international monetary authorities until March next year. The Fed hopes the extension will ensure liquidity in dollar-funding markets around the world. The US currency is used in contracts around the world.
The CEOs of Amazon (AMZN), Apple (AAPL), Facebook (FB) and Google (GOOGL) are due to testify before Congress about whether their companies have abused their power and dominance in the online marketplace.
“I do think regulation is inevitable, higher taxes are inevitable,” Roger McNamee, co-founder of Elevation Partners, told Alison Kosik on the CNN Business digital live show Markets Now.
But this isn’t necessarily bad for investors, because monopolies are bad for innovation and entrepreneurship, he said.
While Apple is “clearly anti-competitve in its AppStore,” it doesn’t pose the same kind of risk to democracy as Google and Facebook, McNamee said. He was one of Facebook’s earliest investors but is now one of the company’s loudest critics. While these companies may have created enormous shareholder value and for consumers, “there have been huge harms to democracy,” he said.
Facebook faced an advertiser boycott this summer, which was successful to an extent, but in the end advertisers have no choice but to return to the platform, McNamee said – one of the issues with its monopoly.
“These companies have too much power,” he said.
The Federal Reserve is due to give its monetary policy update within the hour, followed by a press conference with Chairman Jerome Powell at 2:30 pm ET, which will be covered here.
“The Fed has pulled out all the stops, so we’re not expecting anything big,” said JPMorgan Asset Management global markets strategist Samantha Azzarello.
The central bank slashed interest rates to near zero in March and has launched a myriad of lending programs to support markets and the economy since then.
While investors are keeping their ears open for any indication on when the Fed might change its policies again, it “won’t be raising rates for a very long period of time,” Azzarello told Alison Kosik on the CNN Business’ digital live show Markets NowWe’re not anywhere near the point of raising rates.”
This is tricky for investors, because it means income will be hard to come by in many portfolios.
And conditions won’t change anytime soon. While earnings outlooks remain hazy, investors should have a better view on how corporate America is doing going into the fall.
That said, “we still think the market is still too positive, too optimistic,” Azzarello said, adding that she doesn’t expect earnings to be back at 2019 levels for another two years.
America will need another round of fiscal stimulus to help the economy weather the pandemic storm. But details in the next aid package are yet to be hammered out by Democrats and Republicans in Washington.
There are three big sticking points between the parties’ priorities, said Greg Valliere, chief US policy strategist at AGF Investments, on the CNN Business’ digital live show Markets Now
Local governments are “hurting, and they need some aid,” Valliere added. And House Speaker Nancy Pelosi “will not sign on to a bill” unless it provides at least $4 billion in aid, he said.
Failing to get a deal done would be a “public relations debacle,” he said, adding that both President Trump and Senate Majority Leader Mitch McConnell know that. There could be a piecemeal deal, but it wouldn’t cover all the areas that need help.
The Covid-19 pandemic has thrown America into a jobless crisis, with millions of people out of work as a result of the spring lockdown and restrictions on businesses. Tomorrow’s jobless claims report is expected to show a continuation of a worrying trend: benefit applications are rising again.
Last week’s report showed the first increase in first-time claims in 16 weeks, which appears to be more than a blip. Economists polled by Refinitiv expect tomorrow’s report to show 1.5 million initial benefit claims, up from 1.4 million in the week before. And those are only the numbers for regular unemployment benefits, not any of the measures the government introduced to combat the current crisis.
Continued jobless claims, which count people who have filed for benefits for at least two weeks in a row, are expected at 16.2 million, about flat from the prior week.
The Labor Department’s jobless claims report is due at 8:30 am ET Friday, alongside a first look at how the economy fared in the second quarter of the year.
It is expected to be the worst quarter on record, with economists predicting a 34.1% annualized drop in gross domestic product, the broadest measure of the economy.
The New York Stock Exchange halted the trading of Kodak (KODK) shares Wednesday morning – several times – after the former photography company’s stock rallied for a second day in a row.
The former photography leader, which now produces materials and chemicals, will be turned into a pharmaceuticals company. It’s receiving a lot of financial help for that shift in the form of a $765 million loan under the Defense Production Act, President Donald Trump said at a press conference Tuesday.
The company’s stock soared as much as 300% yesterday and was up more than 200% to $24.26 per share when trading was suspended just after 10 am ET. It was the fourth halt of the morning.
Kodak filed for bankruptcy in 2012 and emerged the following year.
Victoria’s Secret parent company L Brands (LB) said it’s cutting 15% of its corporate workforce, which amounts to roughly 850 jobs. Shares promptly soared 30% in early Wednesday trading.
L Brands, based in Columbus, Ohio, said it hopes to save $400 million annually with the job reductions and other cost-cutting efforts, including negotiating with landlords for rent relief.
The company is currently in the process of splitting Bath and Body Works and Victoria’s Secret into different companies.
US stocks kicked off higher on Wednesday ahead of a busy day for investors.
Tech CEOs are testifying before Congress about whether their companies have abused their power and dominance in the online marketplace and the Federal Reserve is giving its monetary policy update, all while earnings season is roaring on.
Best Buy (BBY) is the latest major retailer to announce it will stay closed on Thanksgiving.
Instead, Best Buy will bolster its digital options and offer seasonal deals “earlier than ever,” the company said late Tuesday.
That echoes plans from Walmart (WMT), Target (TGT) and Dick’s Sporting Goods (DKS). All have said within the past week that they too won’t be open on Thanksgiving and will begin holiday sales earlier in the year.
Retailers are rethinking their plans for the holiday shopping season as coronavirus cases rise, prompting concerns over crowds in stores.
General Electric is saying farewell to yet another business: Baker Hughes, the oil-and-gas giant it took over just three years ago.
A cash-strapped GE had already sold about $6.7 billion worth of its stake in Baker Hughes (BHGE) in two transaction in late 2018 and late 2019. And now, GE (GE) announced Wednesday, it plans to sell its remaining 36.8% stake.
That remaining stake is worth about $6 billion at current prices, and it will be sold on the open market over the next three years, GE said. That would fully exit GE from Baker Hughes, unwinding a deal that former CEO Jeff Immelt announced in October 2016.
It will use the proceeds to clean up its bloated balance sheet by paying down debt.
In recent years GE has sold multiple businesses it had held for a long time, including its locomotive division, a pharmaceuticals unit and even its 129-year-old light-bulb business.
Also on Wednesday, GE revealed another quarterly loss as the pandemic hit its aviation division.
“It seems apparent that GE’s fundamentals including cash flow challenges are likely to persist for many quarters/years with no obvious recourse as the company has largely sold what it can,” John Inch, analyst at Gordon Haskett, wrote in a note to clients Wednesday.
Boeing (BA) lost $2.4 billion over the past three months, the company revealed Wednesday. It’s just the latest sign of trouble for the aerospace giant as the COVID-19 pandemic continues taking deep cuts out of US business.
Wall Street wasn’t shocked. Investors already knew Boeing was only able to deliver 10 jets in the second quarter as it began ramping up production after its factory was shuttered by the pandemic, and analysts’ expectations for Boeing’s posted revenue and net loss were spot-on.
Steve Madden released bleak second-quarter results Wednesday morning.
The women’s footwear company is joining the mass of businesses that are struggling as the coronavirus continues to spread in the United States. Revenue decreased 68.2% to $142.8 million compared to $449.6 million in the same period of 2019.
As for Steve Madden’s wholesale business, revenue decreased 72.5% to $100 million in the second quarter of 2020 — this includes a 72.8% decline in wholesale footwear and a 71.5% decline in wholesale accessories and apparel.
“The revenue decline was driven by significant order cancellations resulting from the COVID-19 pandemic,” according to a press release from Steve Madden (SHOO). Shoes aren’t top-of-mind for American consumers who are stuck in their house as the virus continues to spread.
General Electric suffered another hellish quarter as the pandemic crushed its jet engine business.
The recession caused GE’s industrial businesses to burn through $2.1 billion during the quarter.
But in a sign of how low expectations are and how difficult the environment is, that was actually a slight improvement from the first quarter and better than Wall Street feared.
GE (GE) had previously warned it could burn through a staggering $3.5 billion to $4.5 billion because of the damage done by the health crisis. The company said it avoided that outcome in part by aggressively cutting costs. GE has laid off thousands of aviation workers during the pandemic.
GE posted an adjusted loss of 15 cents per share, missing estimates for 10 cents. That loss included more than $1.6 billion of writedowns in its jet-engine and financial businesses.
GE Aviation, which has been slammed by the severe downturn in air travel, swung to a loss of $680 million. Orders collapsed by 56%.
CEO Larry Culp said GE is planning for a “prolonged return” to pre-crisis activity in commercial aviation. But Culp also expressed confidence that GE can return to positive industrial free cash flow in 2021.
So, yeah, not much to report in stocksland this morning. The Fed concludes it policy meeting today, and it will release a statement at 2 pm ET. Investors are pretty confident that the Fed will be staying the course, so…
Here’s where things stand this morning:
