Wall Street Breakfast: What Moved Markets This Week

What drove the plunge?

Besides risks to global supply chains, travel restrictions and profit warnings, many are seeing other dangers as part of a worsening economic picture. “The risk to the global consumer is the real problem. Starbucks (NASDAQ:SBUX) and Apple (NASDAQ:AAPL) can reopen their stores in China, but few people will go into them,” said Michael O’Rourke, chief market strategist at JonesTrading. Uncertainty about the U.S. presidential election’s outcome is also starting to drive markets, while even before the selloff this week, equities were being measured at lofty valuations.
Go deeper: ‘Quantitatively Combining 7 Ways To Beat The Market’ by Ploutos.

Sounding the profit alarm

Sentiment was also dented by more corporate warnings, with AB InBev (NYSE:BUD) announcing it lost $170M in profits during the first two months of 2020 because of the coronavirus, as well as Microsoft (NASDAQ:MSFT) joining Apple (AAPL), HP (NYSE:HPQ), PayPal (NASDAQ:PYPL) and Mastercard (NYSE:MA) in saying it would miss guidance for the current quarter. Trouble in the travel and tourism sector is also set to continue after Booking Holdings (NASDAQ:BKNG) cautioned that room nights booked would drop 5% to 10% in the first quarter, while noting difficulty in forecasting the future.
Go deeper: Shareholders Unite says a recession is looming.

Masks run short

The Trump administration is considering invoking special powers through a law called the Defense Production Act of 1950 to rapidly expand domestic manufacturing of protective masks and clothing to combat the coronavirus. “We will have the ability to tell corporations, ‘No, you change your production line so it is now 80% of the N95 masks and 20% painter masks,” White House sources told Reuters. The biggest producers of face masks in the United States include 3M (NYSE:MMM) and Honeywell (NYSE:HON). Shares of Alpha Pro Tech (NYSEMKT:APT), another N-95 maker, has surged over 600% since the beginning of the outbreak.
Go deeper: Congress asked for $2.5B in coronavirus funding.

Pressure mounts on Fed

Reinforcing other central bank officials’ recent comments, Fed Vice Chairman Richard Clarida said the central bank is keeping a close eye on how coronavirus will affect the global and U.S. economies. The outbreak is likely to have a “noticeable impact on Chinese growth… and could spill over to the rest of the global economy,” he said at a speech in Washington, DC. As the 10-year U.S. Treasury bond yield fell into uncharted waters, dipping below 1.3% for the first time, forecasts on monetary policy began to shift. CME Group futures now suggest at least a 41% chance the Fed will cut rates in March, a 77% chance the central bank will move by April and a 90% chance of a cut by June.
Go deeper: Markets price in ECB rate cut by December.

Disney’s 7th CEO

In a shock announcement late Tuesday, Bob Iger stepped aside as Walt Disney’s (NYSE:DIS) chief executive officer, handing the reins of the world’s biggest entertainment company to theme parks head Bob Chapek. While Iger will stay to direct the company’s creative endeavors as executive chairman through 2021, the news confused Wall Street, sending the shares down 3.6%. Disney’s future is supposed to be streaming, not theme parks, and media industry insiders almost unanimously expected streaming chief Kevin Mayer to be Iger’s successor.
Go deeper: ‘Every Investor Should Consider Holding Disney As Part Of Their Portfolio’ by Tech Junkie.

Virgin loss

Virgin Galactic’s (NYSE:SPCE) Q4 net loss widened to $73M from a year-ago loss of $46M, in the space company’s first results as a publicly traded company. The figures, coupled with some Wall Street downgrades, triggered shares to drop as much as 40% throughout the week. The space firm also said it received 7,957 registrations of interest in flight reservations during the quarter, and will begin collecting $1,000 deposits to secure a place in line as seats become available. While Virgin Galactic didn’t offer any updates on its spaceflight timetable, it previously said it aimed for a first commercial flight later this year with Richard Branson on board.

Amazon Go Grocery

Diving deeper into the U.S. grocery industry, Amazon (NASDAQ:AMZN) opened its first full-size, cashierless store in the Capitol Hill neighborhood of Seattle. The 10,400 sq. ft. location has been five years in the making, and will stock roughly 5,000 items, including fresh produce, meats, bakery treats and alcohol. It incorporates the same technology found in the two dozen or so Amazon Go locations, and will source some items similar to Whole Foods, which it paid $13.7B for in 2017.
Go deeper: ‘2020 Will Be Amazon’s Comeback Year’ by D.M. Martins Research.

Smallest GE workforce since WWII boom

General Electric (NYSE:GE) shed almost 78,000 employees in 2019, or more than a quarter of its workforce, as divestitures left the conglomerate with the same number of personnel as it had in 1951. GE sold its oil and gas business to Baker Hughes (NYSE:BKR) in 2017 but kept a majority stake until last year, while its transportation business was merged with Wabtec (NYSE:WAB) in early 2019, transferring those workers. “Our work is by no means finished, but we are on the right path,” CEO Larry Culp wrote in his second annual letter to shareholders.
Go deeper: Revenue from GE’s Life Sciences division continues to stagnate, writes Shock Exchange.

DoorDash takes step toward IPO

Valued at $13B during its last funding round in November, DoorDash (DOORD) confidentially filed for an IPO with the SEC, however, not too many other details were offered. The draft registration statement didn’t indicate a price range or number of shares that DoorDash wants to offer, and there was no proposed date for the offering. DoorDash has overtaken Grubhub (NYSE:GRUB) as the top digital food delivery company in the U.S., taking 38% of monthly food delivery sales in January vs. 31% for Grubhub.

Surge in streaming

Streaming accounted for 80% of recorded-music sales in 2019, marking the industry’s fourth consecutive year of growth, according to a report from the Recording Industry Association of America. In fact, with revenue of $8.8B in 2019, streaming alone was larger than the entire U.S. recorded-music market in 2017. That includes premium subscription services, like Spotify (NYSE:SPOT), Apple Music (AAPL) and Amazon Music, ad-supported on-demand services, such as YouTube (GOOG, GOOGL) and Spotify’s ad-supported tier, and streaming radio services such as Pandora and Sirius XM (NASDAQ:SIRI).

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