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The growing optimism over the phased reopening of businesses in some states and other countries, as evidenced by the rallies in the U.S. and some international stock markets on Monday, has been only slightly tempered by continued concerns over the lack of adequate testing for the COVID-19 virus.
Georgia will allow movie theaters to reopen as of Monday, and restaurants can have limited dine-in service, after hair salons, gyms, bowling alleys and tattoo parlors were allowed to reopen on Friday. Oklahoma also allowed hair and nail salons, pet groomers and spas to reopen as of Friday. Some other states are loosening up shutdown orders to allow certain business to reopen this week.
Don’t miss: These states are loosening economic shutdown orders; Texas expected to announce new rules soon.
New York Gov. Andrew Cuomo said Monday that he would like to start the “unpause” process on May 15, but will extend the pause in certain parts of the state and in certain industries. “Be smart,” he said in his daily press briefing.
This optimism helped drive the Dow Jones Industrial Average US:DJIA up about 300 points in midday trading, and the S&P 500 index US:SPX up nearly 1.5%. Among individual stocks, shares of beauty salon operator Regis Corp. US:RGS got a boost from the opening of hair salons in some states.
Some disappointing results from a much-anticipated trial of a COVID-19 treatment did little to dampen investor enthusiasm.
In Europe, shares also surged, as Italy’s lockdown is set to be eased beginning May 4, France is expected to present an exit strategy on Tuesday, and while the U.K. didn’t announce plans to end the lockdown, Prime Minister Boris Johnson returned to work after being hospitalized with the COVID-19 virus.
The optimism comes after Vice President Mike Pence said last week that the coronavirus pandemic could largely be behind us by Memorial Day weekend. It also comes despite calls from members of the Trump administration that indicated the lack of testing — which is among the biggest concerns among health care experts — could continue for some time and social distancing will likely remain in place for months.
When Dr. Deborah Birx, the coronavirus response coordinator for the Trump administration, was asked on NBC’s “Meet the Press” on Sunday about Pence’s comments, she said that while the latest data “gives us great hope,” she expected “social distancing will be with us through the summer.”
Birx was also asked to respond to concerns over the lack of testing, she said the current form of live virus testing will “carry us certainty through the spring and summer,” but that a “breakthrough” but that wouldn’t be enough. “We have to have a breakthrough,” Birx said.
Birx’s comments are an example of the mixed messages from members of the Trump administration, which suffered a tumultuous week following suggestions by President Trump to try injecting disinfectants as a potential cure for the COVID-19 virus. That led to Trump tweeting that the daily White House briefings on the coronavirus weren’t worth the time and effort.
Also read: White House aims to shift Trump’s public focus from coronavirus to economy.
The White House canceled a coronavirus briefing scheduled for Monday at 5 p.m. Eastern, to mark the third day without the event.
Latest case tallies
There are now 2.99 million cases of COVID-19 globally and 207,518 people have died, according to the latest data aggregated by Johns Hopkins University. At least 876,043 people have recovered. The U.S. has the highest case toll in the world at 967,585 and the highest death toll at 54,931. Within the U.S., New York City remained the epicenter with 17,280 death.
Spain continues to lead in Europe in the number of cases with 229,422, while Italy leads in deaths with 26,644. The U.K. has 154,038 cases and 20,732 deaths. Those are all well ahead of China, which has 83,912 cases and 4,637 deaths.
Meanwhile, 5,441,079 people have been tested in the U.S., led by the 805,350 tested in New York, followed by 526,084 in California and 344,613 in Florida.
Medical Developments
Regeneron Pharmaceuticals Inc. US:REGN and Sanofi US:SNY reported less-than-promising results from a mid-stage trial testing their rheumatoid arthritis drug Kevzara in COVID-19 patients. An ensuing Phase 3 trial will continue; however, it has been redesigned to only include patients defined as critical, including those requiring mechanical ventilation, high-flow oxygenation, or to be cared for in an intensive care unit, given that sicker patients seemed to show some improvement while taking the drug. The late-stage trial will also now only include a higher dose of the drug (400 milligrams) and the placebo. (The mid-stage trial included a lower dose of 200 milligrams, as well.) “Even in a pandemic setting, it’s both crucial and possible to obtain controlled data in adequately-sized trials,” Regeneron co-founder George Yancopoulos said in a statement. “We await results of the ongoing Phase 3 trial to learn more about COVID-19, and better understand whether some patients may benefit from Kevzara treatment.”
Merck & Co. Inc. US:MRK announced a COVID-19 collaboration with the Institute for Systems Biology (IBS), a research organization. The aim is to identify molecular mechanisms of infections caused by the novel coronavirus. Merck has received funding from the Biomedical Advanced Research and Development Authority to support the research. As part of a scientific trial included in the collaboration, researchers plan to analyze blood samples and nasal swabs of 200 patients who have tested positive for COVID-19 and are being cared for at Swedish Medical Center in Seattle by collecting them several times. “Understanding the molecular characteristics of SARS-CoV-2 infection, and of the immune response to this virus, is essential to the development of effective interventions,” Dr. Roger Perlmutter, president of Merck Research Laboratories, said in a statement.
What are companies saying?
Apple Inc. US:AAPL is planning to push back production of its new iPhone models due for release later this year by about a month, The Wall Street Journal reported, citing people familiar with the matter. The delay is due to weakened global demand during the coronavirus pandemic and disruption in the Asian supply chain, the paper reported. Apple is planning four new iPhone models this year, some with 5G connectivity. The phones will vary in price and size and will feature organic light-emitting diode, or OLED, screens. The company typically releases its new model iPhones in mid-September. Apple declined to comment on the report.
General Motors Co. US:GM suspended its dividend and stock repurchase program to help preserve cash amid the coronavirus pandemic. GM last paid a quarterly dividend of 38 cents a share on March 5. Based on Friday’s stock closing price of $21.95, the annual dividend rate had implied a dividend yield of 6.92%, compared with the implied yield for the S&P 500 of 2.08%. Among other moves to strengthen liquidity, GM extended $3.6 billion under its three-year revolving credit agreement to April 2022.
Callaway Golf Co. US:ELY warned of a first-quarter profit and sales miss, as retail sales “significantly slowed” in March as shelter-in-place orders were implemented in response to the coronavirus pandemic, but said it expects the sport to bounce back quickly. The company expects revenue of $438 million to $443 million, down from $516 million a year ago, and below the FactSet consensus of $482 million. Earnings per share is expected to decline to 27 cents to 31 cents from 50 cents, which would miss the FactSet consensus of 38 cents. The company’s e-commerce business has been exceeding expectations, and its golf and apparel business in China has rebounded more than expected in April. In the U.S., the National Golf Foundation estimates suggest about half of the golf courses are currently open. Callaway expects the sport of golf to “come back quickly” as it is commonly viewed as a safe and healthy outdoor activity that people can enjoy while observing social distancing.
Aluminum sheet maker Arconic Inc. US:ARNC expects first-quarter revenue of $1.6 billion, down about 12% from the year-earlier period, due to disruptions in the automotive, commercial transportation and aerospace markets caused by the coronavirus pandemic. The FactSet consensus is for revenue of $3.4 billion. Arconic split into two stand-alone companies – Arconic Corporation and Howmet Aerospace Inc. — on April 1 and the guidance is based on preliminary unaudited financial results from Howmet reported on April 14. The company’s China facilities are now back to normal product, while its Russian packaging facility is running at full operations due to strong end-market demand. The company’s New York facility resumed operations on April 20 and the Tennessee plant is expected to ramp up activity this week.
Big Lots Inc.’s US:BIG month-to-date and quarter-to-date same-store sales are positive, with sales accelerating over the past two weeks. Big Lots is considered an essential retailer. The retailer will continue to pay hourly store workers and distribution staff an additional $2 per hour, and has added new staff protocols like daily health screenings and limiting the number of shoppers in stores at one time.
Aon PLC US:AON is cutting the salaries of its executives and most of its employees, and suspending its stock repurchase program, as it looks to preserve financial flexibility amid the COVID-19 pandemic. The professional services company’s named executives will take a 50% salary cut, while 70% of employees will take a 20% salary reduction. The company also curtailed spending on contractors and third-party vendors and has reduced discretionary expenses related to client service. Aon intends to preserve its dividend.
Ammunition and outdoor recreation equipment maker Vista Outdoor Inc. US:VSTO expects to beat fiscal fourth-quarter adjusted earnings expectations, after seeing “strong demand” within its commercial ammunition, cycling and outdoor cooking categories. Sales are expected to be within guidance ranges. However, net earnings will be negatively impacted as it expects to take an impairment charge. Separately, the company appointed Sudhanshu Priyadarshi as its chief financial officer, replacing Mick Lopez, who was CFO the past two years.
Domtar Corp. US:UFS will temporarily lay off 400 employees as it plans to idle its Hawesville, Kentucky paper mill starting May 5th. The packaging paper company expects the mill’s H1 paper machine to restart in June and the H2 machine to remain idled until July. Including the idling of its Kingsport, Tennessee mill and of its paper machine at its Ashdown, Arkansas mill, the company expects production capacity to be reduced by about 227,000 tons of uncoated freesheet paper, which should bring inventory to appropriate levels. “Throughout the COVID-19 pandemic, we have been actively monitoring the impacts to our business and taking methodical steps to optimize capacity in the current environment,” said Chief executive John Williams.
Norwegian Cruise Line Holdings Ltd. US:NCLH experienced “substantial impacts” to bookings since the COVID-19 pandemic led to suspensions of all its cruises. After a strong first to months of the year, the cruise ship operator said as of April 17, advanced bookings for the rest of 2020 were “meaningfully lower” than a year ago, with pricing down in the low single-digits percentage range. Among some actions the company has taken to help mitigate the impact of the pandemic, it reduced marketing expenses, shortened the workweek, reduced salaries, paused 401(k) match contribution, suspended travel for shoreside employees and identified $515 million of capital expenditure reductions. The company withdrew its first-quarter and full-year financial guidance.
