Stocks are falling for a second day in a row after Federal Reserve Chairman Jerome Powell said the economic outlook is uncertain and downside risks are significant, echoing warnings issued yesterday by Dr. Anthony Fauci regarding the risks of trying to get non-essential businesses back open too soon. Powell, who shared his view that “the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems," also pushed back against negative rates in the U.S., which is an idea being championed by President Trump. Meanwhile, House Democrats have proposed a $3 trillion virus relief bill that combines aid to state and local governments with more direct cash payments to households. The market took a further leg lower after noon as David Tepper of Appaloosa Management spoke on CNBC and expressed his view that only 1999 represented a more overvalued market than today.
ECONOMIC EVENTS: In U.S. data, the Producer Price Index report for April followed yesterday's CPI lead with a 1.3% record decline for the headline and a 0.3% drop for the core PPI.
Fed Chair Jerome Powell, in a speech on current economic issues at the Peterson Institute for International Economics, said that "the scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II." The head of the central bank added: "A loan from a Fed facility can provide a bridge across temporary interruptions to liquidity, and those loans will help many borrowers get through the current crisis. But the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems. Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery."
TOP NEWS: Shares of Royal Caribbean (RCL) are down 5% near noon after the cruise line operator announced that it has commenced a private offering of senior secured notes for an aggregate principal amount of $3.3B. The notes and the related guarantees will be secured by 28 of the company's vessels and material intellectual property of the company, Royal Caribbean noted. The company expects to use the net proceeds from the offering to repay some of its other debt and expects to use the remainder net proceeds for general corporate purposes, which may include repayment of additional indebtedness.
Shares of peer Norwegian Cruise Line (NCLH) are also 7% lower after Wells Fargo analyst Timothy Conder downgraded that stock to Equal Weight from Overweight with a price target of $14, down from $70. Following last week's capital raise, Norwegian is well positioned through 2021 to endure what will likely be a "volatile elongated industry recovery" that will keep cruise equities in broad trading ranges, Conder tells investors.
Las Vegas Sands (LVS) announced the company will discontinue its pursuit of integrated resort development in Japan, with Sands Chairman and CEO Sheldon Adelson stating that "the framework around the development of an IR has made our goals there unreachable."
MAJOR MOVERS: Among the noteworthy gainers was WW (WW), which rose 5% after Jefferies analyst Stephanie Wissink initiated coverage of the stock with a Buy rating and $32 price target. Also higher were United Natural Foods (UNFI) and Progyny (PGNY), which gained a respective 41% and 23% after reporting quarterly results.
Among the notable losers was Spirit Airlines (SAVE), which fell 15% after Raymond James analyst Savanthi Syth downgraded the stock to Market Perform from Outperform. Another stock moving lower following an analyst downgrade, to continue its weakness since its earnings report earlier this week, is Coty (COTY), which was cut to Neutral from Outperform with a $5 price target by Exane BNP Paribas analyst Mikheil Omanadze. Also lower were Infinera (INFN) and 8x8 (EGHT), which dropped 23% and 25%, respectively, after reporting quarterly results.
INDEXES: Near midday, the Dow was down 489.00, or 2.06%, to 23,275.78 , the Nasdaq was down 197.25, or 2.19%, to 8,805.30 , and the S&P 500 was down 54.15, or 1.89%, to 2,815.97 .
Royal Caribbean
-2.48 (-6.82%)
Norwegian Cruise Line
-0.955 (-8.62%)
Las Vegas Sands
-1.48 (-3.22%)
Coty
-0.635 (-14.63%)
WW
+0.99 (+4.22%)
United Natural Foods
+7.25 (+46.65%)
Progyny
+4.9 (+24.15%)
Spirit Airlines
-1.39 (-14.71%)
Infinera
-1.35 (-23.24%)
8x8
-5.34 (-26.04%)