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July 17, 2020, 6:11 a.m. EDT

Coronavirus update: Global COVID-19 cases climb to 13.6 million after record one-day tally of 230,400 new infections

Bank of America and Morgan Stanley beat earnings estimates despite pandemic, while Domino’s gets boost from at-home diners

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By Ciara Linnane, MarketWatch

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A universal flu vaccine would get rid of the need for annual flu vaccination, the organizations said in a news release.

See also: This new study shows how well a coronavirus vaccine must work before we can stop social distancing

What’s the economy saying?

The number of Americans applying for jobless benefits fell slightly in the second week of July to a post-pandemic low of 1.30 million, but the grudgingly small decline points to ongoing stress in the labor market as the economy struggles to cope with the latest coronavirus outbreak, MarketWatch’s Jeffry Bartash and Greg Robb reported.

New applications for unemployment compensation, a rough gauge of layoffs, fell 10,000 in the seven days ended July 11 to 1.30 million from a revised 1.31 million in the prior week, the Labor Department said Thursday. The figures are seasonally adjusted.

Economists polled by MarketWatch had forecast 1.24 million new claims. These figures reflect applications filed the traditional way through state unemployment offices.

An unadjusted 928,488 people also applied for benefits through a temporary federal-relief program.

Initial jobless benefit claims have stalled since mid-June when they hit 1.57 million. An economic rebound in May and June has lost momentum in July amid a fresh wave of coronavirus cases that has forced many states to either reimpose partial lockdowns or pause reopening plans.

The latest setback is expected to put more people out of work again and delay the return of others to their jobs, making it harder for the economy to recover. Economists say Washington has to extend emergency unemployment benefits and increase other aid to prevent the situation from getting worse.

“The trend in initial jobless claims has now just about stopped falling; next week could easily see an increase, for the first time since March, in the wake of the continued gradual reimposition of restrictions across the South and parts of the West,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Separately, sales at U.S. retailers posted a big increase in June for the second month in a row, but that trend too may be sapped by the rise in new cases. Retail sales climbed 7.5% last month following a record 18.2% increase in May, the government said Thursday . Economists polled by MarketWatch had forecast a 5.4% increase.

“Retail sales may have had a strong showing for June, but that’s old news given how quickly the coronavirus resurgence is beating up the economy,” said Robert Frick, corporate economist at Navy Federal Credit Union.

What are companies saying?

Morgan Stanley and Bank of America were the latest big banks to post earnings and they showed the same trend as other banks of strong trading and investment banking fees, offset by the need to set aside huge provisions for potential loan losses.

Banks are warnings that they may be facing a wave of defaults as companies struggle in the pandemic.

There was more upbeat news from Domino’s Pizza, which has been thriving during lockdown periods and as consumer eat at home more. Johnson & Johnson beat profit and sales estimates for its latest quarter, amid strong demand for drugs.

Cowen downgraded Walt Disney Co.’s /zigman2/quotes/203410047/composite DIS +1.23%  stock on concerns that its parks and film business will be disrupted for longer than investors anticipate, and Citi reiterated a sell rating on Tesla Inc. /zigman2/quotes/203558040/composite TSLA +5.04% , after its massive year-to-date rally, which has come even as its main plant in Fremont, California was shut down for much of the last quarter.

“What hasn’t changed, in our view, is the lack of evidence to support the recent narrative in the stock-namely that Tesla is already experiencing seemingly ‘unlimited’ demand that’s decoupled from autos, that traditional & emerging competitors stand little chance, that FSD/AV [fully self-driving technology] is industry leading and that Tesla should be valued vs. large Tech names,” analyst Itay Michaeli wrote in a note to clients.

“It is tough to fight the momentum, but it’s even tougher to construct a fundamental risk/reward framework that makes sense here (particularly with COVID-19 risks), even if one is constructive on Tesla the company.”

Elsewhere, companies offered updated guidance and outlined ways they are managing liquidity in the pandemic, among other issues. /zigman2/quotes/205029460/composite MMM -0.09%  

Here’s the latest news about companies and COVID-19:

• 3M Co. /zigman2/quotes/205029460/composite MMM -0.09%  , the maker of Post-it Notes and industrial products, has filed 18 lawsuits and shut down thousands of deceptive websites and social media posts as it moves to prevent COVID-19 fraud and profiteering. The company is working with law enforcement agencies to help protect the public against those parties who are exploiting the strong demand for its products, which include N95 masks and other equipment. “The schemes we shut down were not only unlawful, they also endangered lives and wasted precious time and resources by diverting buyers from legitimate sources of much-needed respirators,” Denise Rutherford, senior vice president of corporate affairs said in a statement. 3M has created hotlines and websites for consumers to report suspected fraud and has published pricing information for N95 masks to help them avoid inflated prices. The company has won 6 temporary restraining orders and 4 preliminary injunction orders from courts that halted unlawful actions, said the statement.

• Abbott Laboratories /zigman2/quotes/203724446/composite ABT +2.51% reported second-quarter profit and revenue that beat expectations and provided an upbeat full-year outlook. For 2020, the company expects adjusted EPS of “at least” $3.25, above the FactSet consensus of $2.90. “We’re a leader in the global COVID-19 testing efforts, we’ve continued to advance our pipeline and, importantly, we saw significant improvements in growth trends throughout the quarter in the business areas that were initially most impacted by the pandemic,” said Chief Executive Robert Ford.

• Alcoa Corp. /zigman2/quotes/200686102/composite AA -1.28% reported a narrower second-quarter loss and sales were slightly ahead of expectations. The company made progress on its continuing asset review in preparation for potential sales and cost-cutting goals related to the pandemic. It increased its liquidity after completing the sale of $750 million worth of bonds on Monday, at a 5.5% coupon rate that was lower than any of its previous debt issuance. “Despite challenging market conditions, our team has lowered production costs, increased output, maintained stable shipments, and improved our balance sheet,” Chief Executive Roy Harvey said in a statement. “We continued to make progress in executing our strategic actions and 2020 programs, and we finished the quarter with a cash balance of nearly one billion dollars.”

• American Airlines Group Inc. /zigman2/quotes/209207041/composite AAL +4.42% sent notices to 25,000 workers -- about one-fifth of its workforce -- about potential furloughs as the airline copes with what it calls slackening demand for air travel during the pandemic. American, which is prohibited from slashing jobs or pay rates through Sept. 30 under terms of $25 billion in federal payroll support, also urged employees to take buyout and early retirement packages before being forced to cut their jobs. The airline, which reported an 80% plunge in June revenue, says it will be overstaffed by 20,000 when federal aid expires Oct. 1.

• Separately, American Airlines Group Inc. and JetBlue Airways Corp. /zigman2/quotes/207639051/composite JBLU +2.04% announced a partnership aimed at creating more options for travelers in the Northeast U.S., to give the more choices across the airlines’ domestic and international routes. The partnership includes an agreement that proposes code-share and loyalty benefits for flight offerings in New York and Boston. The partnership will allow American to launch service from New York’s JFK airport to Tel Aviv and to Athens, and the JFK to Rio de Janeiro flight will return as a daily route in winter 2021, and will allow JetBlue to add flights in New York’s LaGuardia Airport and New Jersey’s Newark airport and grow its presence at JFK.

• Bank of America Corp. /zigman2/quotes/200894270/composite BAC +0.64%  posted net income of $3.5 billion, or 37 cents a share, in the second quarter, down from $7.3 billion, or 74 cents a share, in the year-earlier period. The number was weighed down by a $4 billion build in loan loss provisions during the coronavirus pandemic. Revenue fell to $22.3 billion from $23.1 billion. The FactSet consensus was for EPS of 28 cents and revenue of $21.8 billion. “Strong capital markets results provided an important counterbalance to the COVID-19-related impacts on our consumer business,” Chief Executive Brian Moynihan said in a statement. Net interest income fell 11% to $10.8 billion, driven by lower interest rates. Noninterest income rose 5% to $11.5 billion, buoyed by strong capital markets results. Sales and trading revenue rose 28% to $4.2 billion, as FICC (fixed income, currencies and commodities) revenue climbed 50% to $4.2 billion and equities revenue rose 7% to $1.2 billion. Investment banking fees rose 57% to a record $2.2 billion, amid record capital raising by companies seeking to bolster liquidity during the pandemic.

• Charles Schwab Corp. /zigman2/quotes/201281754/composite SCHW +1.69% reported a second-quarter profit that topped expectations but revenue that fell why, as the pandemic created a “myriad challenges” for its clients. Total client assets as of the end of June were $4.11 trillion, up 11% from a year ago. “We grappled with the ongoing health crisis, a contracting U.S. economy, and sustained pressures on interest rates, yet there were some encouraging signs as the quarter progressed, including domestic equity markets recovering to pre-pandemic levels,” said Chief Executive Walt Bettinger.

• Domino’s Pizza Inc. /zigman2/quotes/201587798/composite DPZ +1.16% reported second-quarter earnings and revenue that far exceeded expectations during the pandemic. U.S. same-store sales grew 16.1%, and international same-store sales rose 1.3%. The FactSet consensus was for domestic growth of 11.9% and a global rise of 0.7%. As of June 14, Domino’s had $248 million in cash and equivalents and $4.17 billion in total debt. The company borrowed $158 million under its variable funding notes during the quarter “as a precautionary measure.”

• Bankrupt department store retailer J.C. Penney Co. Inc. /zigman2/quotes/204684963/composite JCPNQ -0.26% announced a company restructuring that includes 152 store closures and a head count reduction of 1,000 workers across corporate roles, management and internationally. J.C. Penney filed for bankruptcy protection in May after which Cowen analysts forecast the company would have to shutter 25% of its locations. J.C. Penney has 90,000 employees, according to FactSet and, as of February 2020, had 850 locations in the U.S. and Puerto Rico.

• J.Jill Inc. /zigman2/quotes/201911627/composite JILL -8.78% reached an agreement with lenders to extend a forbearance period to July 23 to give the company more time to complete negotiations. “We are making progress with the negotiations and expect a resolution soon,” Interim Chief Executive Jim Scully said in a statement. The Quincy, Mass.-based women’s clothing retailer entered the forbearance agreements in June after falling out of compliance with certain covenants on its asset-based lending facility and term loans during pandemic. “The uncertainty created by recent events generate scenarios that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued,” the company said in its 10k filing published in June.

• Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +0.68%  reported second-quarter profit and sales that beat expectations, and raised its full-year outlook. Consumer health sales fell 7.0% to miss expectations, while pharmaceutical sales grew 2.1% to slightly top expectations and medical device sales dropped 33.9% but was above expectations. “Our second quarter results reflect the impact of COVID-19 and the enduring strength of our pharmaceutical business, where we saw continued growth even in this environment,” said Chief Executive Alex Gorsky. The company raised its 2020 guidance ranges for adjusted EPS to $7.75 to $7.95 from $7.50 to $7.90 and for sales to $79.9 billion to $81.4 billion from $77.5 billion to $80.5 billion

• Morgan Stanley /zigman2/quotes/209104354/composite MS +0.92%  reported a second-quarter profit that rose above expectations, amid strength in the trading and investment banking businesses. Net income increased to $3.20 billion, or $1.96 a share, from $2.20 billion, or $1.23 a share, in the year-ago period. The FactSet consensus for earnings per share was $1.12. Revenue 30.9% to $13.41 billion. Noninterest revenue grew 28% to $11.81 billion, to beat the FactSet consensus of $9.36 billion and net interest income rose 31% to $1.60 billion to top expectations of $985.2 million. Within noninterest revenue, trading revenue soared 71% to $4.68 billion and investment banking revenue jumped 35% to $2.14 billion. “The second quarter tested the model and we performed exceedingly well, delivering record results,” said Chief Executive James Gorman. “This builds on the momentum of a very strong first quarter, while more than 90% of our employees continue to work from home, demonstrating the ongoing operational resilience of our platform.”

• Norwegian Cruise Line Holdings Ltd. /zigman2/quotes/204183397/composite NCLH +13.67% is offering $250 million of stock in a syndicated deal. J.P. Morgan, Citigroup, Goldman Sachs, Barclays, Mizuho Securities and UBS are joint book-runners on the deal. Proceeds will be used for general corporate purposes. Cruise operators have been hit hard by the coronavirus pandemic, which has halted all sailings due to the high risk of passengers becoming infected in close quarters.

• Penske Automotive Group Inc. /zigman2/quotes/209561848/composite PAG +0.17% preannounced expectations of a surprise second-quarter profit, citing a “significant improvement” in operations during June. Based on the performance of its U.S. and U.K. retail automotive dealerships and its used vehicle supercenter, Penske expects to report EPS of 52 cents to 57 cents, which compares with the FactSet consensus for a loss of 16 cents a share. All of its U.S. retail automotive dealerships are open after closing during the pandemic. Strong sales of used units in June led to combined U.S. and U.K. operations generating a profit that was more than double that of the period last year. “Our performance in June is the result of a strong operational focus to control costs, manage vehicle inventory, and maximize gross profit,” said Chief Executive Rob Penske.

• Sleep Number Corp. /zigman2/quotes/203019104/composite SNBR +0.87% reported a steep drop in second-quarter revenue caused in large part by the pandemic. The mattress company’s revenue tumbled 20% to $284.9 million from $356 million a year ago. Analysts surveyed by FactSet had expected sales of $251 million.

Additional reporting by Tim Rostan and Jaimy Lee

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N/A
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$ 47.04
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N/A
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$ 46.31
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N/A
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Ciara Linnane is MarketWatch's investing- and corporate-news editor. She is based in New York.

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