Dow tumbles as coronavirus and tariffs rattle investors: June 24, 2020

US stocks tumbled on Wednesday, ending sharply in the red. Investors worried about rising Covid-19 infection in parts of the country, quarantine requirements for intra-US travel and newly proposed tariffs on EU imports.

The three major stock indexes recorded their worst performance in nearly two weeks.

Apple continues to close its reopened stores around the United States as coronavirus cases spike, with seven retail outlets in Texas the latest to shut their doors.

“Due to current Covid-19 conditions in some of the communities we serve, we are temporarily closing stores in these areas,” the company said in a statement on Wednesday. “We take this step with an abundance of caution as we closely monitor the situation and we look forward to having our teams and customers back as soon as possible.”

The locations to close will be Highland Village, First Colony Mall, Houston Galleria, Memorial City, Willowbrook Mall, Baybrook and The Woodlands, Apple said.

The move comes days after Apple closed 11 stores across Florida, North Carolina, South Carolina and Arizona. All four states have experienced large spikes in coronavirus cases in recent days.

Texas is one of seven states seeing record hospitalizations, reporting more than 5,000 cases in a single day earlier this week.

Apple has 510 stores worldwide, 271 of which are in the United States.

It appears that the Zoom boom has room to run. Shares of the video conferencing company hit a new all-time high Wednesday, even as the broader market plunged.

Zoom (ZM) was one of just four companies in the Nasdaq-100 index in green as of late afternoon, along with T-Mobile (TMUS), biotech Gilead Sciences (GILD) and virtualization software firm Citrix (CTXS).

All 30 Dow stocks were in red and just 18 S&P 500 stocks (including T-Mobile, Gilead and Citrix) were higher.

Zoom and Citrix have been among the few beneficiaries of the slowdown in the broader economy as more people work from home. Zoom, with a market value of about $72 billion, is now worth more than nearly 85% of the companies in the S&P 500.

A group of US Senators, led by Democrat Brian Schatz of Hawaii, want America’s banks to stop paying dividends during the pandemic recession. The goal is to ensure they are able to absorb losses they might face.

The senators, which included Massachusetts Senator Elizabeth Warren, also urged the Federal Reserve in a letter to make sure the banks held enough capital to continue lending to struggling businesses.

The results of the Fed’s bank stress test, which assesses their capital buffers during crises, are due tomorrow.

This isn’t the first call for banks to stop paying out dividends. Former Fed Chair Janet Yellen is also in favor of a pause given the uncertainty the economy is facing.

The Covid-19 recession has made many businesses reliant on credit lines after the economy shut down in the spring to stop the spread of the virus.

Carnival, Royal Caribbean and Norwegian were the three worst-performing stocks in the S&P 500 Wednesday. Shares of each cruise company plunged about 10% as the broader market slid due to concerns about an increase in Covid-19 cases in several states.

But the cruise companies had their own company-specific reasons to explain the drops.

Carnival (CCL), which reported a $4.4 billion quarterly loss last week, had its credit rating cut to junk status by Standard & Poor’s late Tuesday. Moody’s had already slashed Carnival’s bond to below investment grade levels. Meanwhile, analysts at Barclays downgraded shares of Royal Caribbean (RCL) and Norwegian (NCLH) Wednesday to “equal weight” - essentially a lukewarm neutral rating.

In its report, S&P said that it expects “Carnival’s credit measures to remain very weak through 2021 because of its plans for a gradual reintroduction of capacity and our forecast for continued weak demand.” 

The future for cruise companies remains highly uncertain. It’s not clear when they will resume voyages – or even whether consumers will feel comfortable booking any trips. As a result, shares of Carnival and Royal Caribbean have each plummeted more than 60% this year while Norwegian has lost nearly three quarters of its market value in the same period.

Norwegian said last week it was canceling cruises that were tentatively planned for later this summer and will extend the suspensions through September.

Four items of bad news are weighing on the market today, says Mohamed El-Erian, chief economic adviser at Allianz: The IMF’s lower growth forecast, rising Covid-19 infections, proposed tariffs on $3.1 billion worth of EU imports, and a mandatory quarantine for anyone coming from high-infection rate states to New York, New Jersey or Connecticut.

“All this speaks to a weaker economy,” El-Erian told Alison Kosik on the CNN Business’ digital live show Markets Now.

That said, stocks are unlikely to retest the lows they hit in March, he said. With monetary and fiscal stimulus in high gear already, there is a backstop to the economy.

The Federal Reserve has moved to buy non-traditional assets including high yield bonds. Some are wondering whether the central bank will go as far as buying stocks to stabilize the market, but El-Erian believes this is unlikely.

Even the step to buy high yield bonds was still a bit of a head-scratcher because the long-term effects of such unprecedented steps are uncertain, he said.

Millions of Americans have been working from home for months as the coronavirus pandemic has shut down work life as we knew it.

In this new normal, messaging and conferencing companies like Slack (WORK) and Zoom (ZM) are flourishing because they’re ever more necessary. Slack’s revenues grew more than 50% in the last quarter.

That said, companies are struggling with an unprecedented economic environment.

“We don’t want global pandemics but it is accelerating a shift to digital transformation,” said Slack CEO Stewart Butterfield on the CNN Business’ digital live show Markets Now.

“It’s really a time of turbulence, he added. There is a “strong tail wind on one side, strong head wind on the other.”

The company is now launching “Slack Connect”, which allows different companies to communicate with each other using its channel-based platform, which is traditionally used for internal communications only.

“I think it will be a big step forward for how corporations communicate but also for security,” Butterfield said.

The stock market doesn’t like the escalation of Covid-19 infections across America’s Southern states one bit. New York, New Jersey and Connecticut will require anyone coming from areas with high infection rates to quarantine for 14 days. This doesn’t bode well at all for the reopening of the economy.

While investors initially worried about a second wave of infections in the fall, it seems these concerns could actually dominate the summer.

The Dow has now fallen more than 800 points, or 3.1%.

Investors are clearly downcast today.

The S&P 500 is down 2.9% and the Nasdaq Composite is down 2.6%.

As Covid-19 infections rise across some states, New York, New Jersey and Connecticut announced people coming from areas with high infection rates have to quarantine for 14 days.

Riskier investments like stocks are taking a nosedive today, but on the other end of the spectrum, safe haven bets are enjoying increased demand.

The US dollar, which has fully established its role as a safe haven currency during the US-China trade war, is up against most of its rivals today. The ICE US Dollar Index climbed 0.5% just before midday.

The euro, which is the dollar’s main rival, and the British pound have been hit particularly hard by the greenback’s climb.

One euro last bought $1.13, down 0.3%, while sterling fetched $1.24, down 0.8%.

It’s a quiet day on the US economic calendar today, but we won’t be so lucky tomorrow.

Another 1.3 million first-time claims for unemployment benefits are expected in tomorrow’s Labor Department report – the 12th-straight week that initial claims are falling. That’s not necessarily good news, given that they remain above the 1 million mark. Until the coronavirus pandemic, there has never been such an onslaught of claims in so short a time period.

Continued claims, which count people who have filed for unemployment benefits for at least two weeks in a row, are expected to number just below 20 million, a slight decline from the prior week’s 20.5 million.

The story in claims remains the same: while we are seeing improvement it will be a long road to recovery.

In addition to the jobless claims, the Bureau of Economic Analysis will publish its final reading of first quarter gross domestic product. In May, the GDP drop between January and March was revised down to 5% from a 4.8% decline in a preliminary report. No further revisions are expected in tomorrow’s final reading.

If you blink, you’ll miss it!

Stocks continue on their downward spiral as we’re approaching midday. The catalysts remain the same, but the selloff has worsened.

The Dow plummeted 645 points, or 2.5%, while the S&P 500 is down 2.4%.

The Nasdaq Composite fell 2.1%.

It’s shaping up to be the worst day for stocks in about two weeks.

The selloff continues and the Dow fell more than 500 points.

The index was down 530 points, or 2%, mid-morning. All Dow stocks continue to be in the red, with Boeing (BA) as the worst performer.

But the selloff is broad-based: all S&P sectors are in the red, too.

The S&P 500, the broadest measure of Wall Street, dropped 1.8%, while the Nasdaq Composite was down 1.3%.

Stocks have extended their losses in the first 30 minutes of trading, with the Dow falling 435 points, or 1.7%. Not a single Dow stock was in the green.

The S&P 500 was down 1.5% and the Nasdaq Composite – which recorded an all-time closing high yesterday – fell 1.3%.

Concerns about a second wave of Covid-19 infections coupled with trade tensions between the United States and the European Union are weighing on the market.

Cash balances of Black-owned firms decreased by 26 percent—double the typical US small business, according to a new JP Morgan Chase report measuring the impact of Covid-19 on small firms in March. 

The bank’s study is the latest piece of evidence that coronavirus and the subsequent recession affects the Black population disproportionately. 

“Black and Hispanic owned businesses are particularly vulnerable in this downturn in part because of the industries in which they are concentrated and in part because they were already in a weaker financial position prior to the pandemic,” said JP Morgan (JPM) in the report.

The bank cited research that small businesses in majority Black and Hispanic communities have less cash on hand and fewer resources to “withstand revenue shock.” 

In addition, minority-owned businesses comprise a “majority of personal services” — a sector that was hardest hit. 

US stocks ticked lower on Wednesday as multiple factors are weighing on markets.

Investors are grappling with rising Covid-19 cases in parts of the United States, as well as worries about a second lockdown. On top of that, America is reportedly looking to slap $3.1 billion of European imports with tariffs.

Gasoline consumption is more than halfway back to pre-pandemic levels.

The milestone helps explain one reason US oil has catapulted from negative $40 a barrel on April 20 to positive $40 today.

US gasoline consumption – the biggest swing factor for global oil demand – bottomed in mid-April when it was down an eye-popping 49% from 2019 levels, according to the Oil Price Information Service.

By the second week of June, when many health restrictions were lifted, US gasoline consumption was down just 22%, OPIS said. Gas demand was down only 15% in Indiana and 18% in Texas.

Not surprisingly, prices at the pump are rising as a result. A tank of regular gasoline cost an average $2.13 a gallon during the week ended June 22, up from the low of $1.77 in late April.

Demand could be further boosted by travelers preferring to take road trips over flying.

“But that will be offset by less commuting and more working from home, the cancellation of sporting events, still-high unemployment levels and possibly a second wave of the virus in the autumn,” Tom Kloza, global head of energy analysis at OPIS, said in the report.

The Puerto Rico Electric Power Authority, or Prepa, is no longer in charge of delivering the island’s power.

In a deal announced Monday, the Puerto Rico Public-Private Partnership Authority, a government corporation responsible for partnerships between the public and private sector, selected LUMA Energy along with Innovative Emergency Management to operate and maintain the US territory’s 18,000-mile power grid for 15 years.

LUMA is a joint venture between Houston-based Quanta Services (PWR) and Canadian Utilities Limited (CDUAF), which is owned by energy company ATCO (ACLLF).

Struggling Prepa became Puerto Rico’s public utility in 1979. It filed for bankruptcy in 2017 but continued to be at the center of controversy for entering a a $300 million deal with Montana-based energy firm Whitefish, which had only two employees, at the time Hurricane Maria hit the island. It took 11 months until power was restored.

Puerto Rico’s government declared itself unable to pay its sovereign debts in June 2015 and filed for the largest municipal bankruptcy in US history two years later.

Cue Cousin Eddie from National Lampoon’s Christmas Vacation. People want more recreational vehicles. And that’s good news for Winnebago.

Winnebago (WGO) reported sales that topped forecasts and a smaller than expected loss for its latest quarter Wednesday. Revenue still fell nearly 25% from a year ago as operations were suspended for a chunk of the quarter because of the Covid-19 pandemic. But CEO Michael Happe was upbeat about the future.

Happe said in the earnings release that “retail and wholesale demand for outdoor recreation products are both recovering and headed in a strong upward direction as the Covid-19 pandemic has impacted travelers’ views toward how they desire to spend their leisure time experiencing nature and the outdoors.” 

Shares of Winnebago fell about 3% in early trading following the news. But the stock has been a strong performer this year, soaring nearly 35% so far in 2020.  

GNC (GNC) has filed for bankruptcy, warning it will close up to a quarter of its stores and search for a buyer.

The 85-year-old vitamin and dietary supplement company has been saddled with nearly $1 billion of debt and has faced declining sales at its brick-and-mortar locations since before the pandemic.

However, GNC said that stay-at-home orders during the Covid-19 pandemic prevented the company from accomplishing its refinancing plans because of the abrupt “dramatic negative impact” on its business.

GNC will continue operating, but it will become a smaller company. It plans to close up to 20% of its 5,800 retail stores, which amounts to as many as 1,200 locations across the United States. GNC also sells its products in an additional 1,200 Rite Aid (RAD) stores.

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