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The number of cases of the coronavirus that causes COVID-19 climbed above 3.5 million on Monday, as President Donald Trump and senior members of his administration continued to lash out at China, where the virus was first reported late last year.
U.S. Secretary of State Mike Pompeo told ABC on Sunday that he has seen “enormous evidence” that the virus originated in a laboratory in Wuhan, China, although he declined to offer any details. U.S. intelligence agencies said last week that the virus wasn’t “man made or genetically modified.”
Speaking at a virtual town hall on Fox News with the Lincoln Memorial as a backdrop, Trump said “I think they made a horrible mistake and they didn’t want to admit it.”
A four-page Department of Homeland Security intelligence report dated May 1 and obtained by the Associated Press said that Chinese leaders “intentionally concealed the severity” of the pandemic from the world in early January. They did so to stock up on the medical supplies they would need to respond to it, the AP reported.
China informed the World Health Organization of the outbreak on Dec. 31. It contacted the U.S. Centers for Disease Control and Prevention on Jan. 3 and publicly identified the pathogen as a novel coronavirus on Jan. 8.
The growing tensions between the U.S. and China weighed on U.S. stocks Monday, with the major indexes falling sharply.
“For markets – the true threat is that the diplomatic war of words – could quickly spiral into a de facto Cold War on trade. President Trump is already hinting that if the Phase One deal does not show results he will impose a new series of tariffs on Chinese goods and escalate the conflict further,” said Boris Schlossberg, managing director of BK Asset Management, in a note. “It’s this political risk with its myriad economic implication amidst the devastation of the pandemic that the market may be completely underestimating.”
Trump used the Fox town hall to push for the U.S. to reopen, although he acknowledged that older people should continue to self-isolate. The president wants schools and colleges to reopen in September, although he speculated that some older teachers may have to wait for a vaccine. Trump said he expects a vaccine to be ready by year-end. Health experts and scientists have said a vaccine may take 12 to 18 months to be developed.
The Senate resumed work on Monday, under a regime of social distancing and other public-safety measures to guard against the spread of the virus. The House remains in recess until rules on engaging safely can be determined.
Individual states continued their efforts to reopen with Florida and Ohio easing restrictions. In Florida, restaurants in most parts of the state can resume sit-down service from today at 25% capacity indoors and with social distancing outdoors.
Retailers can reopen at 25% capacity. Elective surgeries can resume. Hair salons and other personal services as well as gyms remain closed. The new rules don’t cover the state’s three most populous counties: Miami-Dade, Broward and Palm Beach, where most of the state’s COVID-19 illnesses have been.
In Ohio, offices, warehouses, manufacturers and construction companies can reopen May 4. Retailers and service businesses can open on May 12, and customers must wear face masks. All are subject to social-distancing rules. Dining in a restaurant remains off-limits. Hair and nail salons as well as gyms remain closed.
For more, read:States start to reopen, ending coronavirus lockdowns: Texas leads slew of states on Friday, more to follow on Monday
Latest tallies
There are now 3.53 million cases of COVID-19 worldwide and at least 248,025 people have died, according to data aggregated by Johns Hopkins University. More than 1.13 million people have recovered.
The U.S. has the highest case toll at 1.16 million and the highest death toll at 67,781. Spain has the highest number of cases in Europe at 217,466 and 25,264 deaths. Italy has 210,717 cases and 28,884 deaths, the highest number of fatalities in Europe.
The U.K. has 187,842 cases and 28,520 deaths. France has 168,925 cases and 24,900 deaths. Germany has 165,745 cases and 6,866 deaths. Russia has passed Turkey in case numbers with 145,268 cases and 1,356 deaths.
Turkey has 126,045 cases and 3,397 deaths, followed by Brazil with 101,826 cases and 7,051 deaths. Iran has 98,647 cases and 6,277 deaths. China as 83,965 cases and 4,637 deaths.
There was good news from New Zealand overnight when it recorded a full day with no new cases of the virus for the first time since the start of the outbreak. The director general of health Ashley Bloomfied said it was an “encouraging” result, as the Guardian reported.
Hard-hit Italy began to lift restrictions that have been in place since March, allowing a limited number of shops and businesses to reopen with strict rules on customer numbers and on hygiene. In Austria, thousands of garden centers, home-improvement stores and small shops are allowed to open their doors, but must observe careful rules on social distancing.
What’s the latest medical news?
The FDA late Friday granted an emergency use authorization to Gilead Sciences Inc.’s GILD, -0.73% remdesivir, a decade-old experimental therapy first tested on Ebola disease patients, as a COVID-19 treatment. The authorization means that the drug can be used by hospitalized patients with suspected or laboratory-confirmed cases of COVID-19 outside of clinical trials or on a compassionate use basis.
Read:The COVID-19 pandemic has three directions, and all point to new cases well into 2021
The antiviral drug was widely considered a front-runner in the rush to find viable treatments for a disease. It is the first new drug to get an EUA, a type of authorization that the FDA is using during the pandemic. The regulator in March authorized chloroquine and hydroxychloroquine to be repurposed for some COVID-19 patients though both drugs have previously been approved to treat other diseases, like malaria.
On Sunday, the FDA followed up with an EUA for Roche Holding’s ROG, +0.64% antibody test. The Swiss company says its test is 100% accurate in detecting antibodies and 99.8% accurate at ruling them out. Antibodies typically offer immunity against a virus, but it remains unclear whether COVID-19 is behaving like a normal virus.
What are stocks telling us?
Airline stocks took a drubbing on Monday, after investing guru Warren Buffett said he has bailed on the industry, which has been hit especially hard as fleets are grounded and passengers stay away. Buffett told shareholders at his virtual annual meeting on Saturday that he has sold his large states in four air carriers, American Airlines Group Inc. AAL, -10.05%, Delta Air Lines Inc. DAL, -8.89%, Southwest Airlines Co. LUV, -7.49% and United Airlines Holdings Inc. UAL, -8.90%
The pandemic made him realize he was “wrong” about the airline business, Buffett said. The airlines posted big losses for the first quarter and detailed the number of shares they were obligated to offer the U.S. government for accepting financial assistance through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
There was bad news for Walt Disney Co. DIS, -3.45%, in the shape of a downgrade from MoffettNathanson analyst Michael Nathanson to neutral from buy.
“Our analysis makes it clear to us that Disney is in for a long stretch of significant negative revisions as estimates catch up to the grim reality,” Nathanson wrote as he updated his estimates, which are now below the consensus view for revenues, earnings before interest and taxes (EBIT), earnings per share, and free-cash flow.
“Our Disney downgrade is also an admission that we believe the economic impact on the company will be longer than most anticipate, especially given the risks of a second wave of infections after reopening.”
While Nathanson said that Disney could get a pass on its fiscal 2020 results and “to some degree” its fiscal 2021 numbers, he also cut his fiscal 2022 forecast due to incremental risk and uncertainty.
What are companies saying?
J.Crew Group Inc. filed for chapter 11 bankruptcy protection on Monday with a $400 million debtor-in-possession loan from its lenders, a special lending facility used in bankruptcies. The retailer of preppy clothes said its lenders have agreed to restructure its debt and convert $1.65 billion of debt into equity.
J.Crew has struggled for some time as its fashions have moved in and out of style and as it struggled with a huge burden taken on as part of a $3 billion leveraged buyout by private equity back in 2010.
Other retailers that are expected to file for bankruptcy include J.C. Penney JCP, -1.24% and Neiman Marcus. Energy companies are also viewed at being at risk of collapse, given the double whammy of turmoil in oil markets and low demand for energy during lockdowns.
Elsewhere, companies continued to announce bond deals to bolster balance sheets and to offer updates on how they plan to return to work once the peak of the crisis has passed.
Here’s the latest on what companies are saying about COVID-19:
• Avis Budget Group Inc. CAR, +2.59% is planning to offer $400 million of senior secured notes that mature in 2025 in a private offering. The car rental company said proceeds will be used for general corporate purposes.
• Carnival Corp. CCL, +0.68% swung to positive territory Monday, after the cruise ship operator announced its plan to “phase in” a resumption of its North America service, beginning Aug. 1. Operations will resume with eight ships, Carnival Dream, Carnival Freedom and Carnival Vista from Galveston, Texas; Carnival Horizon, Carnival Magic and Canrnival Sensation from Miami, Florida; and Carnival Breeze and Carnival Edison from Port Canaveral in Florida. All other cruises will be canceled through Aug. 31.
• Dave & Buster’s Entertainment Inc. PLAY, -15.79% said Jefferies LLC has agreed to purchase $100 million of its stock. The company will use the proceeds of the deal to bolster its balance sheet, as needed during the coronavirus pandemic which has shuttered its outlets, including using it for general corporate purposes or to repay debt. The operator of restaurants centered around game playing and sports said it has granted Jefferies an option to purchase an additional 15 million shares.
• Denny’s Corp.’s DENN, -11.39% first-quarter same-store sales fell 6.3%. Same-store sales each week for the month of April fell between 72% (week ending April 22) and 79% (week ending April 1). As of May 1, nearly three-quarters of Denny’s locations (74%) were operating as largely or entirely for takeout and delivery. Denny’s restaurants are a mix of company-owned and franchised. The company has put franchisee relief measures in place, including deferment of royalty and advertising fees. It has also taken a number of cost-saving steps, including reduced staffing at its restaurants and pay cuts for the board, executives and management. As of May 1, Denny’s had $51.1 million of cash and equivalents. The company has $43.6 million left from its $338 million revolving credit facility.
• General Electric Co.’s GE, -4.72% Aviation business unit is planning “permanent” job cuts that will bring its total workforce reductions to 25% in 2020. The cuts come as global commercial airline traffic in the second quarter is expected to drop by about 80% from levels seen in early February as a result of the pandemic. “Our aircraft manufacturers have announced reduced production schedules that will extend into 2021 and beyond reacting to the projected prolonged recovery,” said GE Aviation Chief Executive David Joyce in a business update. “While extremely difficult, I am confident this is the required response to the continued contraction of the industry, and its protracted recovery.” GE said last week when it reported first-quarter results that Aviation was developing a plan to cut costs by $1 billion and implement $2 billion of cash actions this year, including anticipated job cuts. GE expects the plans to be ready “over the coming months.”
• Lowe’s Cos. LOW, +1.26% is making a second “special payment” to workers during the month of May, with full-time staff receiving $300 and part-time and seasonal workers getting $150. It’s the second bonus the home-improvement retailer has offered. This bonus program will cost $80 million, bringing the total payments to workers and to communities to $250 million. Starting Monday, Lowe’s will also require all workers to wear face masks. Other coronavirus-related measures taken inside stores include the installation of plastic shields to protect customers and workers and a redesign of store layouts to encourage social distancing.
• MGM Resorts International MGM, -2.33% has completed a previously announced offering of $750 million worth of debt. The 6.750% senior notes are due 2025. That compares with the five-year Treasury note that yields 0.358%. The casino operator plans to use the proceeds from the debt offering for general corporate purposes and to increase its liquidity position.
• Performance Food Group Co. PFGC, -3.01% reported a fiscal third-quarter adjusted profit that was well above expectations, although revenue came up short of forecasts amid the negative effects of the pandemic. The company has furloughed 3,500 employees, deferred 25% of senior management’s base salaries, discontinued share repurchases, raised $349 million in the equity markets and $275 million in the fixed-income markets and drew $400 million from its $3.0 billion credit facility.
• Southwest Airlines Co. LUV, -7.49% will join other airlines in requiring passengers and customer-facing employees to wear face masks, starting May 11, amid safety concerns during the pandemic. The air carrier will provide a face covering to passengers who don’t bring their own. Starting May 2, Southwest will reduce temporarily the total number of passengers seated on its planes, and boarding and deplaning procedures will be modified to maintain social distancing. Smaller groups of 10 people at a time will be allowed to board sequentially by boarding position. The company is suspending in-flight beverage and snack service. Southwest’s move to require face masks follows announcements by rivals, including American Airlines Group Inc. and Alaska Air Group Inc. ALK, -6.70%
• Spirit AeroSystems Holdings Inc. SPR, -6.10%, a Boeing Co. BA, -4.66% and Airbus EADSY, -1.95% supplier, is laying off about 1,450 hourly and salaried employees in its Wichita, Kansas, facilities as demand for commercial aircraft has plunged amid the pandemic. Spirit had announced voluntary layoffs earlier this week. The employees affected on Friday are expected to leave the company on May 15, Spirit said. The company plans to lay off some more employees in other sites working in commercial aviation, but defense work hasn’t been affected. Spirit makes the 737 Max fuselage and other components, and both Airbus and Boeing have announced lower production rates for commercial aircraft due to the impact of COVID-19 on the aviation industry. “In addition to reducing employment, we are taking other initiatives to lower costs and preserve liquidity, which included raising $1.2 billion in high yield secured second lien bonds in April,” Chief Executive Tom Gentile said in a statement. Some 700 employees are detailed to a temporary special project making medical devices, a task expected to last through October or longer. Spirit did not provide more details on the project, saying it will have more to share “in the near future.”
• Starbucks Corp.’s SBUX, -2.71% credit rating was downgraded to BBB from BBB+ at Fitch Ratings, citing the coffee seller’s high debt leverage amid a “significant business interruption” from the pandemic. Fitch said the rating outlook is negative, which warns of further potential downgrades. Starbucks’s credit rating is now two notches above “junk” territory at Fitch. The downgrade follows Starbucks’s proposed $3 billion debt offering and disappointing fiscal second-quarter earnings. The negative outlook reflects the downturn in discretionary spending caused by the pandemic, which Fitch expects “could extend well into 2021.”
• Tyson Foods Inc. TSN, -8.18% reported fiscal second-quarter earnings and sales that missed expectations. Tyson’s portfolio of brands includes the namesake, Jimmy Dean and Hillshire Farm products. The company expects global demand for its meat and prepared foods to grow throughout the COVID-19 outbreak. “Operationally, we have and expect to continue to face slowdowns and temporary idling of production facilities from team member shortages or choices we make to ensure operational safety,” the company said in the earnings release. “The lower levels of productivity and higher costs of production we have experienced will likely continue in the short term until the effects of COVID-19 diminish.” Last week, President Trump ordered meat plants to remain open, and spoke with Tyson Foods Chief Executive Noel White as well as other food industry leaders. Concerns have risen about a meat shortage due to plant closures from the coronavirus outbreaks.
• Uber Technologies Inc. UBER, -3.06% is planning to discontinue operations for its Eats food delivery business in seven countries as of June 4. Those markets are the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine. This action won’t affect the company’s ride-hailing business in those regions. Uber is transferring Uber Eats business operations in the United Arab Emirates to Careem, its wholly-owned subsidiary that mainly conducts operations in the Middle East. “These decisions were made as part of Uber’s ongoing strategy to be in first or second position in all Eats markets by leaning into investment in some countries while exiting others,” the company said in an 8-K filing with the Securities and Exchange Commission. Uber disclosed that the “discontinued and transferred markets” accounted for 1% of gross Uber Eats bookings in the first quarter.
