US stocks closed in the green on Wednesday, with the S&P 500 recording its fourth day of gains in a row. Stocks had started the day mixed after the closure of the Chinese consulate in Houston, which fueled worries about US-China relations.
Earnings remain in focus, with Tesla (TSLA) and Microsoft (MSFT) reporting after the closing bell.
Wells Fargo lost money last quarter for the first time since the 2008 financial crisis. It’s the only big bank planning to cut its dividend. Its stock price has been cut in half this year.
And now – S&P Global Ratings has downgraded the troubled bank’s credit rating.
In a report issued Wednesday, S&P expressed concern about Wells Fargo’s (WFC) “weaker” earnings power, which will make it harder for the bank to cushion the blow from bad loans during the pandemic.
Wells Fargo declined to comment, but its earnings release last week revealed how much the bank is struggling right now. Sanctions from the Federal Reserve, imposed as punishment for Wells Fargo’s widespread consumer abuses, are making it hard for the bank to make money.
In its report S&P said Wells Fargo’s “ongoing regulatory challenges” and “earnings pressures in the midst of the economic downturn” have hurt the bank’s creditworthiness.
Goldman Sachs (GS) CEO David Solomon doesn’t take much solace in positive signals from economic data over the last several weeks. He foresees more pain ahead.
“I’ll think you’ll see poor economic numbers,” said Solomon during a virtual discussion hosted by the Economic Club of New York on Wednesday. “We’re going to run with very, very high unemployment for an extended period of time.”
Solomon said travel and recreation industries – including restaurants and entertainment –are among the biggest losers that will suffer for an extended period of time. Solomon specifically mentioned Disney (DIS), saying the company will feel the impact of the pandemic for a “long time.”
Thursday is almost here, when the weekly jobless claims report is released and economists and the rest of us can see how the labor market may be recovering.
Tomorrow’s data might not be what the experts are hoping for. The report expected to show that another 1.3 million Americans applied for first-time unemployment benefits last week, the same number as in the week prior.
A resurgence in infections and a rollback of reopening plans in several states is making it difficult for people to re-enter the labor force following the pandemic lockdown.
Continued claims, which count people who have applied for benefits for at least two consecutive weeks, are expected to slip to 17.1 million from 17.3 in the week before, highlighting once again that America’s job market will not be repaired any time soon.
The November presidential election is edging closer but markets, which traditionally the more conservative candidate, might sway in the other direction this year.
“I don’t think Wall Street necessarily wants the president to win,” Anthony Scaramucci, founder and managing partner at SkyBridge Capital, told Alison Kosik on the CNN Business digital live show Markets Now.
“I think Wall Street has been fatigued by the president,” said Scaramucci, who served briefly as the president’s communications director.
Former Vice President Joe Biden is more likely what people want, he said, even though investors traditionally prefer politicians who are pro-deregulation and pro-business. But President Donald Trump has fractured America’s international alliances, and that’s bad for business, Scaramucci said.
The stock market has bounced back from its lows and tech and communications companies have been leading gains.
But just because we’ve seen a rally doesn’t mean it’s too late to get in on the game, said Brian Belski, chief investment strategist at BMO Capital Markets, on the CNN Business digital live show Markets Now. And the reason is “simply because they’re the best positioned companies right now,” he said.
The likes of Microsoft (MSFT), Apple (AAPL), Google (GOOGL) and Netflix (NFLX) are the emerging leaders of structural changes in society.
The biggest worry is a potential additional wave of Covid-19 infections heading into the fall, Belski said.
Best Buy (BBY) is one of the few retailers capitalizing off the pandemic.
In its most recent earnings report, released late Tuesday, the company said overall sales have grown 15% since stores reopened in mid-June and online sales stores jumped 155% in the first quarter and are still growing in the second.
Best Buy boasted that it retained “approximately 81% of last year’s sales during the last six weeks of the quarter,” which encompassed part of March and all of April. While in-store shopping was halted, most locations remained open for curbside pickup and Best Buy’s website continued to operate.
Computer, phones and appliances were strong sellers for its home-bound customers. Best Buy has about 1,000 stores.
Its shares soared nearly 10% in early trading.
A collection of four public interest groups wants the Federal Reserve to reject Morgan Stanley’s planned $13 billion purchase of E-Trade.
The groups said in a release that the the acquisition plan “poses real risks to competition and financial safety” and that the Fed has “no business waving through yet another merger that makes one of our nation’s biggest banks even bigger.”
They also released a public letter addressed to Federal Reserve Chairman Jerome Powell arguing that Morgan Stanley has a troublesome past including “repeated legal violations that harm customers and investors, and investments that harm society show that it is already ‘too big to manage.’”
The letter was endorsed by the American Economic Liberties Project, Demand Progress Education Fund, Income Movement and Public Citizen.
The acquisition, announced in February, shows Morgan Stanley’s interest in catering to everyday consumers, especially as beginner-focused trading apps like Robinhood rise in popularity.
Morgan Stanley (MS) and E-Trade (ETFC) said they were hopeful the merger would be approved by regulators and shareholders by the fourth quarter of 2020.
US stocks kicked off mixed on Wednesday as earnings season is roaring on and investors are yet again concerned about US-China relations. The Nasdaq Composite managed to open in the green.
Washington ordered China to “cease all operations and events” at its Houston, Texas, consulate, which Beijing called an “unprecedented escalation”.
After serving as Wells Fargo’s finance chief under four different CEOs, John Shrewsberry is planning to retire from the troubled big bank after 22 years at the company.
Wells Fargo (WFC) announced Tuesday that it has hired Mike Santomassimo, a former JPMorgan Chase (JPM) and BNY Mellon (BK) exec, to become the San Francisco bank’s new CFO in the fall.
The shuffle marks the latest step by Wells Fargo boss Charlie Scharf to remake the company’s C-suite after years of scandal. Scharf overlapped with Santomassimo at both BNY Mellon and JPMorgan.
Since joining Wells Fargo last fall, Scharf has hired a slew of former executives from JPMorgan, including: public affairs chief Bill Daley, COO Scott Powell, wealth and investment management boss Barry Sommers, consumer lending CEO Mike Weinbach and sales oversight and management lead Michael Cleary.
The CFO switch comes days after Wells Fargo reported awful results, marked by its first quarterly loss since the 2008 financial crisis.
Shrewsberry, who had been CFO since May 2014, said he personally recommended Santomassimo as his replacement.
A lot is riding on the pandemic recovery going well. But the New York Federal Reserve’s weekly economic index showed that the rebound might be in trouble.
The index – which is composed of data points including the labor market, consumer behavior and goods production – ticked lower for the first time since hitting its pandemic low-point in late April.
One data point doesn’t make a trend, but it’s notable nonetheless.
Before Covid-19 hit, the index stood at a modestly positive number – at the end of February, it was 1.5%. But since the outbreak and subsequent lockdown, the weekly indicator has been in negative territory. On Tuesday, it stood at -6.9%, down from -6.1% last week. If this level of the index persists for the whole quarter, it would imply a similar year-over-year drop in gross domestic product in that quarter.
Pfizer and BioNTech jointly announced that they will supply the US government with 100 million doses of Covid-19 vaccine once approved and developed.
The companies said they reached an agreement with the US Department of Health and Human Services and the Department of Defense: The government will pay $2 billion when they receive the first 100 million doses, and it can buy up to 500 million more doses afterward.
The drug companies warned that they still need to study their vaccine candidate. But if those studies are successful, they believe they can request “some form” of regulatory approval, including Emergency Use Authorization as early as October 2020. On that timeline, they believe they can manufacturer 100 million doses by the end of 2020 – and 1.3 billion doses by the end of 2021.
Americans will receive the vaccine for free, the companies said.
Pfizer’s (PFE) stock rose 5% in premarket trading. BioNTech (BNTX) was up 6%.
The United States government has abruptly ordered China to “cease all operations and events” at its consulate in Houston, Texas, according to the Chinese Foreign Ministry, in what it called an “unprecedented escalation” in recent actions taken by Washington.
The tit-for-tat escalation in US-China tensions is giving investors PTSD about the trade war.
Here’s where things stand this morning:
US stocks closed mixed on Tuesday, as investors await more company earnings in addition to news about the economic recovery and efforts to find a Covid-19 vaccine.
Margaret Keane has been in the credit card business for 40 years and she’s seeing something she never expected: There’s mass unemployment, yet Americans are paying their bills on time.
In normal times, that’d be good sign of financial responsibility. But in the pandemic era, it may just be the calm before the storm.
Keane, the CEO of Synchrony Financial, the nation’s biggest store credit card company, told CNN Business Americans will have trouble staying current on their credit card bills once generous forbearance programs and the $600 boost to unemployment benefits fade away.
United Airlines (UAL) lost $1.6 billion last quarter — a three-month outcome that was slightly better than analysts’ dire expectations.
Still, the company’s revenue was down nearly 90% compared with what it was bringing in a year ago. It’s just the latest evidence that the air travel industry is facing a devastating financial outlook with no end in sight as Covid-19 cases spike in some areas of the United States.
United emphasized in a press release that it’s been able to slow the rate at which it is burning through cash, even as many of its planes remain in storage and ticket sales have slumped.
Snapchat’s spike in users from coronavirus lockdowns has begun to taper off, despite a pause in reopening across many states forcing people to continue staying home.
“At the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate,” Derek Andersen, chief financial officer of Snapchat’s parent company Snap (SNAP), said during its second quarter earnings call Tuesday.
“This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”
Snap’s daily active users were 238 million for the three months to June, an increase of 17% from the same period last year but just shy of the company’s estimate of 239 million during its last earnings call in April. It was also slower year-on-year growth than the 20% recorded in the previous quarter.
The company’s stock fell 6% in premarket trading.
Coca-Cola (KO) is on an operation to take out some “zombies.”
The beverage giant, fresh off announcing the shutdown of longtime juice smoothie brand Odwalla, is considering dumping other “zombie brands” — or those that aren’t growing — to help cut costs, Coke’s CEO James Quincey said on the company’s second-quarter earnings call Tuesday.
During the past few months, Coca-Cola — like other major consumer goods companies — streamlined its product offerings and zeroed in on its larger and best-selling brands to help ease the strain on supply chains. Coca-Cola is now doubling down on those efforts.
In Coca-Cola’s second quarter, which ended on June 26, the company saw sales drop 28% to $7.2 billion.
