Tests trending better:

‘False Dawn’ Recovery Haunts Virus Survivors Who Fall Sick Again

(…) “Everyone’s trying to figure this out,” said Yvonne Maldonado, an infectious diseases professor at Stanford Medical School. “What happens when people have been sick and infected — are we going to consider them immune and, therefore, not susceptible at all? Or are they immune and serve as potential points of infection for other people?” (…)

There’s “a lot of unknowns and uncertainty in the development of individual immunity,” said Kentaro Iwata, a professor of infectious diseases at Japan’s Kobe University. “Development of antibody inside the body is not necessarily development of immunity against this disease.” (…)

• Florida Begins Reopening After Virus Lockdown Florida is joining the U.S. states and countries around the world starting to reopen, as the global number of confirmed cases from the coronavirus pandemic crossed 3.5 million with nearly a quarter-million deaths.
• Japan extended its nationwide state of emergency until May 31, with Prime Minister Shinzo Abe saying the measures need more time to reduce infection rates. Abe said experts would re-examine the situation around May 14 and that the government was prepared to remove some areas from the state of emergency early, if possible.
• Most EU countries have probably seen a peak in the initial wave of infections but governments shouldn’t drop their guard, according to Andrea Ammon, Director of the European Centre for Disease Prevention and Control. “Overall, the non-pharmaceutical interventions, such as stay-at-home policies and physical distancing measures have reduced the transmission and the 14-day incidents by 45% compared to April 8,” she told the European Parliament’s environment and health committee on Monday.
• Russia added 10,581 new coronavirus cases over the past day, taking total infections in the country to 145,268. Monday’s net increase is in line with the 10,633 new cases reported on Sunday, though the 7.9% increase in total cases is slowest gain since Friday.
• FDA Authorizes Emergency Use of Remdesivir for Covid-19 Patients The Food and Drug Administration’s move came after researchers reported that the Gilead drug shortened the recovery times in people who have fallen ill from the new coronavirus.
• Roche Virus Antibody Test Wins FDA Approval for Emergency Use The Swiss health-care giant says its test has proven 100% accurate at detecting Covid-19 antibodies in the blood, and 99.8% accurate at ruling out the presence of those antibodies.
• Why the Coronavirus Is So Confusing A guide to making sense of a problem that is now too big for any one person to fully comprehend

PANDENOMICS

U.S. Manufacturing PMI: Sharpest contraction in output in series history due to COVID-19 impact

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Indexâ„¢ (PMIâ„¢) posted 36.1 in April, down from 48.5 in March and the previously released ‘flash’ figure of 36.9. The headline reading was the lowest for just over eleven years, despite being buoyed by the greatest deterioration in suppliers’ delivery times since data collection began in May 2007 (ordinarily a signal of improving manufacturing demand but currently the result of virus-related supply constraints). (…)

New orders decreased at the most marked pace since January 2009, as customers reportedly cancelled or postponed orders amid a broad-based contraction in consumer and business spending. Domestic and foreign client demand declined, with new export orders falling at the quickest rate in the series history. (…)

Ongoing uncertainty and fear surrounding the longevity of lockdown procedures led business confidence to slump to a series low in April. Firms were pessimistic regarding the outlook for output over the coming year on average for the first time in the series history (since July 2012), with companies reportedly struggling to plan for their short-term futures. (…)

Firms partially passed lower input prices on to clients through a further and faster decrease in factory gate charges. The fall in output prices was the steepest since data collection began in May 2007. (…)

Smaller firms are being hit the hardest, and also reporting the highest job losses, but large firms are also seeing the sharpest downturn on record. (…)

• The number of California unemployment claims now exceeds the number of jobs the state created during the recovery from the Great Recession. Another wave of layoffs likely will occur as many small and medium-sized businesses are unable to secure financial relief.
• One-third of California’s workers — many with college degrees — make $15 per hour or less. The COVID-19 pandemic has laid bare that our old “booming” economy did not work for everyone. With the Band-Aid now ripped off, we have a unique opportunity to address decades of neglect to strengthen our economy with public investments that not only secure our survival but ensure equity and shared prosperity. (CA Controller B.T. Yee)
• Call It Hero Pay or Hazard Pay, Essential Workers Want More of It As businesses across two dozen states start to reopen after coronavirus shutdowns, some companies are reassessing the bonus pay for hourly employees who have been going into work through the pandemic.
• As Restrictions Ease, Economic Rebound Remains Elusive Workers and consumers have been slow to resume their pre-pandemic routines in South Carolina, Georgia, Tennessee and other states where lockdowns are easing, data on local traffic and hours worked suggest
• Trump, offering support to lockdown protesters, says it’s safe for states to reopen He also projected that the U.S. death toll may be as high as 100,000, scaling up his earlier estimate of 65,000.
• President Donald Trump promised more federal assistance is coming for Americans put out of work by the outbreak and vowed to press ahead with reopening the economy. He said he won’t agree to pass further stimulus measures without a payroll tax cut.
• Global Brands Need China’s Consumers to Spend. They Might Have to Wait. Companies from Lego to Domino’s Pizza report signs of a bounceback in China compared with recent months. But a full return to normal will be harder as many in the country have lost jobs or income, or want to save more.
• China imported 42.6 million metric tons of oil in April, about the same as a year earlier despite a sharp slowdown in its economy, according to data provider Refinitiv. That is equivalent to about 307 million barrels.
• Fannie Mae Income Drops as More Homeowners Suspend Mortgage Payments Mortgage finance giant Fannie Mae reported a steep drop in income as it set aside more money for expected loan losses, and it projected further trouble ahead as more Americans suspend payments on their home loans.
• Italy’s retailers association forecast consumer spending in the country will drop 8% this year. Three-quarters of the 84 billion-euro ($92 billion) drop will be due to bars and restaurants, hotels, clothing and shoes and cars and motorbikes, Confcommercio said. Their assumption is a full return to normal on Oct. 1, according to an emailed statement.
• Banks to book more than $50bn against bad loans
• Saudi Outlook Cut to Negative at Moody’s as Reserves Tumble
• Saudi Stocks Slump as Minister Warns of ‘Painful’ Measures Ahead
• Saudi Aramco fell more than 5% on Sunday. It’s down about 15% from its December IPO.

PANDEMONIUM

This is really getting messy:

Trump Seeks to Pin Virus Blame on China, Yet Reprisal Is Uncertain 

(…) The president tweeted Friday that some U.S. television networks are “Chinese puppets,” while his super-political action committee unleashes anti-China ads and his top economic adviser issued his own warning.

“They have a lot to answer for, they’re going to be held accountable,” Larry Kudlow told CNBC on Friday. “How, what, when and why” is up to the president, he said.

(…) a growing majority of Americans — two-thirds, according to the Pew Research Center — now have an unfavorable view of China.

The president’s own internal polling has shown a large appetite — beyond his own voter base — for a tougher stance toward China, according to an official who asked not to be identified discussing the data. Trump is also under pressure to change course, as his own polling has taken a distinct negative turn, the person said. (…)

• Pompeo Says There is Evidence Virus Came From Wuhan Lab U.S. Secretary of State Mike Pompeo said he has seen “enormous evidence” that the novel coronavirus originated in a laboratory in Wuhan, adding fuel to a point of tension between the U.S. and China.

Note: I felt I had to emphasize this WSJ piece, because there is a pretty big difference between what one knows happened (called facts) and what one thinks happened (called unsubstantiated suspicions). This is not about what Biden did or did not here.

(…) During a Fox News appearance Sunday night, President Trump suggested China engaged in a coverup because it was embarrassed. “I think they made a horrible mistake and they didn’t want to admit it,” he said.

“We’re going to be giving a very strong report as to exactly what we think happened,” Mr. Trump said of questions about a Wuhan lab. “I think it will be very conclusive.” (…)

Intelligence officials last week said they continued to examine the origins of the virus and determine whether the outbreak began through contact with infected animals or if it was the result of a lab accident.

China has repeatedly denied any links between the outbreak and any lab, and no evidence has publicly emerged to support the lab theory. (…)

On April 30, the same day the Office of the Director of National Intelligence released its statement on its inquiry, Mr. Pompeo told WHO radio in Des Moines, Iowa, that U.S. officials didn’t yet know precisely where the coronavirus first started infecting people. “We don’t know if it came from the Wuhan Institute of Virology. We don’t know if it emanated from the wet market or yet some other place. We don’t know those answers,” Mr. Pompeo said.

The State Department didn’t immediately respond to a request for comment on whether Mr. Pompeo had since been provided new information. (…)

• An editorial in China’s Global Times said he was “bluffing” and called on the United States to present its evidence.
• Pompeo stopped short of alleging that the virus was man-made, saying he had “no reason to” disagree with a report by the Office of the Director of National Intelligence that ruled out genetic modification of the pathogen. Pompeo declined to say whether China intentionally released the virus.
• “These are not the first times that we’ve had a world exposed to viruses as a result of failures in a Chinese lab,” Pompeo said.
• Earlier Sunday, the Associated Press reported that U.S. officials believe China covered up the extent of the outbreak, in part, to stock up on medical supplies needed to respond to the virus.
• China has questions to answer about how quickly it made the world aware of the extent of the coronavirus crisis, U.K. Defense Secretary Ben Wallace said. “China needs to be open and transparent about what it learned and its shortcomings, but also its successes,” he said.

Trump administration pushing to rip global supply chains from China: officials

(…) “We’ve been working on [reducing the reliance of our supply chains in China] over the last few years but we are now turbo-charging that initiative,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State Department told Reuters.

“I think it is essential to understand where the critical areas are and where critical bottlenecks exist,” Krach said, adding that the matter was key to U.S. security and one the government could announce new action on soon.

The U.S. Commerce Department, State and other agencies are looking for ways to push companies to move both sourcing and manufacturing out of China. Tax incentives and potential re-shoring subsidies are among measures being considered to spur changes, the current and former officials told Reuters. (…)

“This moment is a perfect storm; the pandemic has crystallized all the worries that people have had about doing business with China,” said another senior U.S. official.

“All the money that people think they made by making deals with China before, now they’ve been eclipsed many fold by the economic damage” from the coronavirus, the official said. (…)

The United States is pushing to create an alliance of “trusted partners” dubbed the “Economic Prosperity Network,” one official said. It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said.

The U.S. government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward,” Secretary of State Mike Pompeo said April 29.

These discussions include “how we restructure … supply chains to prevent something like this from ever happening again,” Pompeo said. (…)

Colombian Ambassador Francisco Santos last month said he was in discussions with the White House, National Security Council, U.S. Treasury Department and U.S. Chamber of Commerce about a drive to encourage U.S. companies to move some supply chains out of China and bring them closer to home. (…)

Many U.S. companies have invested heavily in Chinese manufacturing and rely on China’s 1.4 billion people for a big chunk of their sales.

“Diversification and some redundancy in supply chains will make sense given the level of risk that the pandemic has uncovered,” said Doug Barry, spokesman for the U.S.-China Business Council. “But we don’t see a wholesale rush for the exits by companies doing business in China.” (…)

City’s proclamation requiring face masks in stores and restaurants is amended after threats of violence

(…) “In the short time beginning on May 1, 2020, that face coverings have been required for entry into stores/restaurants, store employees have been threatened with physical violence and showered with verbal abuse,” Stillwater City Manager Norman McNickle said in a statement. “In addition, there has been one threat of violence using a firearm. This has occurred in three short hours and in the face of clear medical evidence that face coverings helps contain the spread of Covid-19.” (…)

• Ohio Gov. Mike DeWine (R), an early proponent of strict statewide social distancing, said he had reversed course on requiring Ohioans to wear masks because people “were not going to accept the government telling them what to do.”
• The Looming Civil-Liberties Battle

(…) The issue of mandating face masks deserves special attention. When Gov. Cuomo announced an executive order that all New Yorkers must wear masks in public, he argued, “You don’t have a right to infect me.” This isn’t a weak argument. The counterargument is also strong: Whose burden is it to show that a person is contagious in the first place? And if people aren’t contagious, on what grounds can the government force them to wear masks? Ultimately, we may not be able to escape the “immunity passports” that Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, cited as a possibility “under certain circumstances.” (…)

White House coronavirus task force coordinator Deborah Birx on Sunday called protesters who defy stay-at-home orders and crowd together without masks “devastatingly worrisome.”

SENTIMENT WATCH

Buffett Says ‘American Magic’ Will Overcome Virus Uncertainty Berkshire Hathaway’s annual meeting kicked off Saturday with Warren Buffett offering reassurance that the U.S. economy will recover steadily from the coronavirus pandemic.

(…) “We’ve faced tougher problems, and the American miracle, the American magic, has always prevailed,” he said in livestreamed remarks, adding that it would do so again. (…)

“You can bet on America, but you are going to have to be careful on how you bet. Simply because markets can do anything,” he said.

Mr. Buffet said Berkshire sold about $6.5 billion of stock in April. (…)

Mr. Buffett said the firm wants to do something big, but it hasn’t found the right fit. “We haven’t seen anything attractive,” he said. (…)

Mr. Buffett said the current crisis is very different from the 2008 financial crisis, in part because the banking industry is in better shape and not the source of the issue. For now, he isn’t particularly worried about banks or Berkshire’s bank investments.

“I don’t see special problems in the banking system, no,” he said. (…)

Mr. Buffett also said he was personally looking forward to flying again, though he “may not fly commercial.” (…)

Speaking of flying, commercial or not…

Investors Say They Are Flying Blind

(…) Many investors say they hesitate to jump back into the market when so much remains unclear, but they also fear missing out if stocks keep climbing. (…)

Meanwhile, more than 160 companies in the S&P 500—from Target Corp. TGT -1.38% to Harley-Davidson Inc. HOG -6.60% to Molson Coors Beverage Co. —have withdrawn or suspended their financial guidance, according to Wells Fargo Securities. On a recent earnings call, Evan Greenberg, the chief executive of Chubb Ltd., said that while the insurance company doesn’t give forward guidance, the economic crisis sparked by the pandemic will affect business, though “the degree of revenue impact is simply unknowable.” (…)

Analysts forecasting results for individual companies expect S&P 500 profits to decline 18% this year, according to FactSet (…) Some big banks have predicted sharper declines, with Bank of America forecasting earnings will tumble 29% in 2020 and Goldman Sachs Group Inc. anticipating a 33% drop. (…)

The S&P 500 is trading at similar levels on a trailing and forward basis at 19.4 and 20.46 times earnings, respectively. That compares with the five-year averages of 20.18 and 16.92. (…)

EARNINGS WATCH

From Refinitiv/IBES. Really just for the record.

Through May 1, 275 companies in the S&P 500 Index have reported earnings for Q1 2020. Of these companies, 67.6% reported earnings above analyst expectations and 28.7% reported earnings below analyst expectations. In a typical quarter (since 1994), 65% of companies beat estimates and 20% miss estimates. Over the past four quarters, 74% of companies beat the estimates and 19% missed estimates.

In aggregate, companies are reporting earnings that are 2.8% above estimates, which compares to a long-term (since 1994) average surprise factor of 3.3% and the average surprise factor over the prior four quarters of 5.2%.

Of these companies, 63.1% reported revenue above analyst expectations and 36.9% reported revenue below analyst expectations. In a typical quarter (since 2002), 60% of companies beat estimates and 40% miss estimates. Over the past four quarters, 59% of companies beat the estimates and 41% missed estimates.

In aggregate, companies are reporting revenue that are 1.5% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.5% and the average surprise factor over the prior four quarters of 1.1%.

The estimated earnings growth rate for the S&P 500 for 20Q1 is -12.7%. If the energy sector is excluded, the growth rate improves to -11.9%. The estimated revenue growth rate for the S&P 500 for 20Q1 is 0.2%. If the energy sector is excluded, the growth rate improves to 1.4%.

The estimated earnings growth rate for the S&P 500 for 20Q2 is -37.8%. If the energy sector is excluded, the growth rate improves to -32.3%.

Note that IBES estimates are currently for EPS to decline 20.2% in 2020 and rise 28.2% in 2021 to $168.00. And another 13% to $190 in 2022, if you care and believe nothing happened.

Companies listed on the pan-European STOXX 600 are currently expected to report a 40% decline in earnings in the second quarter. (Reuters)

TECHNICALS WATCH

Lowry’s Research says that “the weight of evidence (…) suggests the strong probability the market has embarked on a new major move higher in the rally from the Mar. 23, 2020 low. (…) however, recent short-term overbought readings suggested a rally that was at risk of a pullback. Whatever the extent of a pullback in the days ahead, the amount of evidence stacked in favor of a new primary uptrend for the market suggests that a pullback should serve as an interruption and not as the termination of the uptrend in place since market’s Mar. 23 low.”

Pretty clear “buy-the-dip” advice.

Personally, at 19.8 on the R20 P/E at today’s pre-opening of 2800, I don’t feel like dip buying at all given all the knowns, known unknowns and unknown unknowns, if you can follow me…

Why Health Care Is No Investor Panacea in This Downturn

For starters, health care accounted for nearly half of the sharp first-quarter decline in gross domestic product in the first quarter.

A survey of hospital systems by an industry trade group found more than half of respondents had less than six months worth of cash on hand. Analysts at Oppenheimer conducted a separate survey of 68 U.S. hospital chief financial officers, including 10 located in Covid-19 hot spots. Almost 80% of respondents said elective surgeries are on hold at their local hospital or system. (…) Nearly half of those surveyed by Oppenheimer expected capital spending budgets to drop 10% or more in 2021. Then there is the reality that some health spending is discretionary and therefore unlikely to be immune from economic pressures. (…)

• A Dismal Outlook for Oil Squeezes the Industry Exxon Mobil posted its first loss in decades, as it and rival Chevron said they would cut spending and reduce production, signaling that the impact of the pandemic may hang over their businesses for much of 2020.
• NBCUniversal Weighs Significant Layoffs at Media, Entertainment Units Comcast’s NBCUniversal is reviewing operations across its portfolio of media and entertainment properties as part of a cost-cutting effort that could result in a significant reduction of staff, people familiar with the matter said.