America’s growth streak is set to end. Nobody told traders
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Good morning. Stocks and oil are trading higher as we await today’s big GDP numbers.
Let’s see where investors are putting their money.
- The major indices are mixed, with Hong Kong and Shanghai trading up. Tokyo is down.
- Starbucks announced it’s opened most of its China stores, but sales are down there 25%.
- The Asia-facing bank Standard Chartered flagged nearly $1 billion in bad loans, but it’s bullish on China’s prospects for reopening the economy.
- European bourses came out of the gates a bit higher. Germany’s DAX was up about 0.2% in the first half-hour of trading, before slumping a bit.
- To company news now . . . the carnage in aviation is truly historic. Today, IAG, the parent of British Airways, announced it would lay off 12,000 workers and warned that it will take “several years” before the business recovers. Bayer shares were trading down 4% this morning even after CEO Werner Baumann won overwhelming backing from shareholders to stay on and fight the mountain of Roundup lawsuits.
- In something of a surprise, Fitch downgraded Italy to one level above junk. The spread against German bunds, a key indicator, remains somewhat stable.
- The Dow, S&P 500 and Nasdaq futures point to a solid open. But beware: yesterday’s rally faltered on lousy corporate results and gloomy coronavirus data.
- The number of U.S. coronavirus cases topped 1 million yesterday. What’s worse, the number of Americans who’ve died of COVID-19 (58,365) has now exceeded the number of U.S. military deaths in the Vietnam War (58,220). So much for that prediction, back in February, that the number of cases would dip to virtually zero.
- Ford forecasts a quarterly loss of more than $5 billion—$2 billion above analysts estimates. It was down about 4% in after-hours trading.
- Alphabet, Google’s parent, is up about 1% in after-market trade, as I type. It posted a revenue beat yesterday, but the worst is yet to come. “The second quarter will be a difficult one for our ad business,” CFO Ruth Porat said without elaborating. Fortune‘s Danielle Abril unpacks the results here.
- Reminder: we’ll be covering the big GDP data announcement, due out one hour before the opening bell. Economists predict Q1 output fell 4% on an annualized rate, it’s biggest drop-off since 2009, and breaking a streak of 23 straight quarters of growth.
- Gold is down, as is the dollar.
- Crude continues to rebound. WTI futures were trading around $14/barrel, more than 30% above Tuesday’s lows. Brent too is higher, trading above 23 bucks per barrel. While that’s good news for oil traders, the volatility remains.
“Not out of the woods”
Even after yesterday’s losses, the S&P 500 has climbed nearly 30% from its 2,191.86 low. And, perhaps more importantly, it’s been fairly stable of late. The day-to-day ups and downs are fairly measured—far from those crazy spikes and plunges we saw at the end of March and early April.
Still, dark clouds are on the horizon.
So says bear-in-chief Jeffrey Gundlach, CEO of DoubleLine. The “bond king” went on CNBC on Monday to give an interview that’s still being dissected.
“I’m certainly in the camp that we are not out of the woods. I think a retest of the low is very plausible,” Gundlach told CNBC viewers. “I think we’d take out the low.”
He thinks investors are underestimating the significance of the 26 million-plus American layoffs reported in the last month. The oil markets portend deeper economic pain. And, he grumbles that the Fed, in its highly controversial move to buy junk debt, is propping up questionable assets such as the ETF, LQD.
And so, he said on Monday, he’s shorting the S&P at 2,863. Yesterday, the S&P closed at . . . yep, 2,863. “I think downside easily [points] to the lows or beyond,” he added.
Investors have so far largely shrugged off the parade of underwhelming corporate results and the jobs numbers. Up next is the GDP figures. But even those won’t tell the full picture as the bigger economic damage will be this quarter.
But a lot of market watchers are looking hard at that 2,863 number. It will be tested—possibly as soon as 8:30 a.m ET today.
I’m long overdue with an update on the Canadian FX puzzle I floated here a few weeks back. To recap: my wife’s foundation got a funding commitment from a Canadian donor. But that posed a dilemma—they wondered: when’s the best time to convert the CAD to euros?
They were also looking for the most efficient, low-cost and timely way to bring the money to Italy before distributing to their development projects around the world.
Many of you suggested they open a CAD-denominated bank account. They followed your advice to a T, and now would like to thank the BS community for their expert advice.
She also gave me an update on where the money is going. They’ve drawn up a shortlist of projects across 35 countries, mostly in the global south. The focus of their work is on empowering girls, women and children who are affected by poverty, domestic violence, exploitation and trafficking migration, to name a few challenges. The funds will help re-start the many programs that have been impacted by the COVID-19 emergency.
The pandemic is causing them to—to steal a word from business schools—pivot. Some of the small businesses will shift to the production of protective medical gear that can be distributed locally. There will also be COVID-19 education courses and a renewed push to promote small-scale and family farming, and build up the local food supply chain in many of the regions where their operations run. These projects are built by locals and managed locally, a development model that has a more pronounced effect on the ground.
To repeat, they’ve asked me to thank you for your advice.
Have a nice day, everyone. I’ll see you here tomorrow.
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Quote of the day
These are impersonation scams by thieves seeking to steal bank account or other sensitive data.
That’s the IRS, which has had to issue fresh warnings about a spike in phishing scams aimed at stealing stimulus checks from Americans. According to Bolster, an online security firm, there has been a dramatic spike—to more than 150,000—in the number of websites trying to steal data or provide misinformation to consumers. Fortune provides some helpful tips on how to avoid being duped.
A reminder: We’ve got another webinar/q&a this week: Fortune executive editor Adam Lashinsky will chat today with tech analyst Gene Munster of Loup Ventures about how he sees the investing environment playing out in these crazy times.
Date and time: Wednesday, April 29, at 10:00 Pacific/1:00 Eastern. 30 minutes duration.
registration link: https://us02web.zoom.us/webinar/register/WN_09HTHFKxT-yqQPjrjkGvAg