1. Stocks tumble as virus resurgence fears take hold
2. Every sector of the S&P 500 is in the red
3. 1.5 million Americans filed for unemployment last week
4. Recovery rally extinguished Markets Today
It's been about three months since thast last 30% drop (the quickest in history) and we saw a glimpse of it today. By the close, the DJIA shed 6.9%, while the Nasdaq and S&P 500 fell 5.2% and 5.7%, respectively.
Fed Chair Jay Powell said the Fed's fears about the uncertainty of the recovery and the troubling unemployment rate. Add to that a resurgence in COVID-19 cases in states like Arizona and Texas that seemed to have the virus under control, and sentiment has clearly melted.
Today's sell-off was reminiscent of those in March. Given the spike in volatility, this tantrum is not even close to being complete.
• Another 1.54 million Americans filed for unemployment benefits in the week ending June 6. This was slightly lower than analysts expected and down 355,000 from the previous week. Initial jobless claims have decelerated for 10 consecutive weeks. The total number of initial claims for the last 12 weeks is 44 million. Continuing claims were at
20.93 million in the week ending May 30.
• Debt surged and household net worth tumbled in the first three months of the year as the initial impact of the coronavirus pandemic hit, according to Federal Reserve data released Thursday. Total domestic nonfinancial debt jumped by 11.7% to $55.9 trillion, the Fed said in its quarterly statement on domestic financial accounts. Debt had increased
by 3.2% in Q4 of 2019.
• Disneyland park and Disney California Adventure park will reopen on July 17, the 65th anniversary of Disneyland opening. A theme park reservation system will be used, and parades, meet and greets, and nighttime spectaculars will be cancelled. Hotels will reopen on July 23. These plans are dependent on state and local government
approvals.
• Lufthansa says it will cut 22,000 jobs as it struggles to deal with the slump in air travel caused by the coronavirus pandemic. The carrier predicted a slow recovery in demand and expected to have about 100 fewer aircraft after the crisis.
• Regeneron Pharmaceuticals has begun the first clinical trial of its investigational dual antibody drug for the prevention and treatment of COVID-19. It is designed to also help protect against viral escape (mutant forms of the virus that evade the therapeutic's blocking action).
• Dutch company Just Eat Takeaway is gobbling up Grubhub in an all-stock transaction worth $7.3 billion. The combined group is the world’s largest online food delivery company outside of China and processed approx. 593 million orders in 2019, with more than 70 million combined active customers globally. Uber reportedly offered Grubhub shareholders
a higher amount.
• Amazon is stopping police use of its facial recognition technology for one year. "We’ve advocated that governments should put in place stronger regulations to govern the ethical use of facial recognition technology, and in recent days, Congress appears ready to take on this challenge," it said in a blog post.
• The European Union plans to file formal antitrust charges against Amazon over the e-commerce company’s treatment of third-party sellers, according to The Wall Street Journal. The charges could be officially filed as early as next week.
• Delta said in a filing that it expects Q2 revenue to be down 90% year-over-year and is negotiating with lenders to avoid defaulting. American Airlines told shareholders it expects to fly 40% of its total pre-coronavirus capacity in July and its cash burn rate is down to $40 million per day this month. U.S. airlines flew 3 million people in April,
a 96% drop from last year and the lowest since 1974, according to the Transportation Department.
What's Next?
Trends tend to stay in motion until their course is altered by news or an unforeseen development that changes sentiment. We have been riding a wave of positive sentiment for the past six weeks as good news on vaccines and the reopening of global economies emboldened investors to take on more risk.
We haven't had really good vaccine news in awhile, and the unemployment numbers continue to belie a robust recovery. If we see more spikes in a resurgence of the virus, silence on the vaccine front, and more jobless claims, this will be our trend for awhile.
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