Wall Street oscillates amid COVID-19 spikes, muted data

NEW YORK (Reuters) – Wall Street struggled for direction on Thursday as investors weighed a resurgence in coronavirus infections and the possibility of a new round of shutdowns against data that suggested the U.S. economy might not bounce back with quick, V-shaped recovery. A range-bound S&P 500 see-sawed through much of the session and was last in negative territory, joining the blue-chip Dow in the red. The tech-heavy Nasdaq was essentially flat. “It’s not unusual after huge moves to trade sidewise,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “It’s a continuing evaluation of the sustainability of improvement at these rapid levels.” “(Investors) don’t want to sell and they don’t want to buy, so you have days like this,” Carlson added. Initial jobless claims declined slightly last week to a still-bruising 1.51 million, according to the Labor Department. The number was worse than consensus, and continuing claims remain stubbornly high at 20.54 million, suggesting the labor market has a long road to recovery. While several U.S. states have reported surges in new COVID-19 cases after re-opening their economies, President Donald Trump insisted the United States would not enact a new round of restrictions to curb the pandemic’s spread. The Dow Jones Industrial Average fell 136.7 points, or 0.52%, to 25,982.91, the S&P 500 lost 8.39 points, or 0.27%, to 3,105.1 and the Nasdaq Composite added 0.09 points, or 0%, to 9,910.63. Of 11 major sectors of the S&P 500, five were in positive territory, with energy and consumer staples seeing the largest percentage gains. Real estate was the clear laggard. Grocery chain Kroger Co beat quarterly earnings estimates and said it expects to exceed its 2020 same-store sales outlook. But the company did not reaffirm or provide new 2020 forecasts, and its shares fell 5.4%. Shares of Spotify Technology SA jumped 13.8% after the music streaming company inked a deal with AT&T Inc’s Warner Brothers and DC Entertainment to add popular DC Comics character podcasts to its library. Cruise operator Carnival Corp fell 2.8% after reporting a record $4.4 billion quarterly loss after pandemic-related write-downs. Biogen Inc dropped 7.6% after a U.S. district court ruled in favor of generic drugmaker Mylan NV in a patent dispute. Mylan NV rose 2.2%. Industrial services provider Team Inc plunged 17.1% after missing quarterly earnings estimates amid falling demand. Declining issues outnumbered advancing ones on the NYSE by a 1.23-to-1 ratio; on Nasdaq, a 1.10-to-1 ratio favored advancers. The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite recorded 72 new highs and four new lows.

Lufthansa investor Thiele seeks talks with German government: Handelsblatt

FRANKFURT (Reuters) – Lufthansa’s (LHAG.DE) biggest shareholder, German billionaire Heinz Hermann Thiele, has reached out to Berlin politicians for talks, Handelsblatt said, the latest step in a standoff over the airline’s 9 billion euro ($10.1 billion) bailout. Lufthansa shareholders need to approve the rescue package but Thiele, who has ammassed a 15% Lufthansa stake, has criticised bailout terms and is raising more cash by selling down 760 million euros worth of shares in rail and commercial vehicle supplier Knorr-Bremse (KBX.DE). Thiele and Knorr-Bremse declined to comment. The entrepreneur is against Germany taking a stake of up to 20% in the airline, terms which Lufthansa and the German government have agreed to as part of the planned rescue of the company. Lufthansa fears that Thiele’s lack of approval for a bailout deal could bring down the rescue package at next week’s Annual General Meeting on June 25.

Tesla wants to start building a new U.S. vehicle plant this summer

DETROIT (Reuters) – Electric vehicle maker Tesla Inc (TSLA.O) wants to start building a new and large vehicle assembly plant in the southwestern United States as early as the third quarter of this year, the company told Texas officials in documents made public this week. But the company is still pitting Texas and Oklahoma against each other in an effort to secure tax breaks, the documents show. Tesla told officials in Travis County, Texas, that the automaker wants to invest about $1 billion to build a four million to five million square foot vehicle assembly plant employing 5,000 people on what is now a cement operation near Austin, but it needs tax breaks to make the site competitive with an alternative location in Oklahoma, according to documents filed with Texas officials. The Austin-American Statesman reported details of the company’s filings. Tesla’s sole U.S. vehicle assembly plant in Fremont, Calif., covers 5.3 million square feet – a large plant, but not large enough for the growing company. Tesla has had to build cars under a tent adjacent to the plant. Tesla Chief Executive Elon Musk clashed with California officials after Alameda county officials ordered the Fremont factory to halt production and comply with coronavirus stay-at-home orders that took effect in March.

Trump to nominate lawyer Crenshaw to fill SEC Democratic commissioner slot

WASHINGTON (Reuters) – The White House announced on Thursday that President Donald Trump intends to nominate Caroline Crenshaw to fill a Democratic vacancy at the U.S. Securities and Exchange Commission (SEC). Crenshaw, a senior SEC attorney, would fill a commissioner slot that has been vacant since February, when Rob Jackson, whom Crenshaw advised, left to return to his teaching post. If confirmed by the Senate, Crenshaw would help balance out the top markets regulator, where there are currently two Republican commissioners and one Democratic commissioner, Allison Lee. The SEC is chaired by Jay Clayton, an independent who frequently votes with Republicans. Reuters reported that Crenshaw was expected to be nominated for the post in January. She declined to comment on Thursday on the nomination. Crenshaw has been employed at the SEC since 2013 and is a judge advocate in the U.S. Army Judge Advocate General’s Corps. She previously worked under another Democratic commissioner at the SEC, Kara Stein, who left in January. Her nomination will now be considered by the Republican-controlled Senate, which is already considering the re-nomination of Hester Peirce, a Republican SEC commissioner, to serve a second term that expires in 2025. “Crenshaw is smart, knowledgeable, incredibly hard-working, and dedicated to the cause of promoting investor protection and market integrity. Plus, she knows the agency inside and out. We couldn’t have asked for a better nominee,” said Barbara Roper, the director of investor protection for the Washington-based Consumer Federation of America.

U.S. labor market improvement stalling; second wave of layoffs seen

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits fell last week, but the pace of decline has stalled amid a second wave of layoffs as companies battle weak demand and fractured supply chains, supporting views that the economy faces a long and difficult recovery from the COVID-19 recession. The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy’s health, sketched a picture of a distressed labor market even though employers hired a record 2.5 million workers in May as businesses reopened after shuttering in mid-March to slow the spread of COVID-19. At least 29 million people are collecting unemployment checks. Stubbornly high joblessness could stifle the nascent signs of economic recovery that had been flagged by a record jump in retail sales in May and a sharp rebound in permits for future home construction. Federal Reserve Chair Jerome Powell told lawmakers this week that “significant uncertainty remains about the timing and strength of the recovery.” The economy fell into recession in February. “The recent sightings of green shoots for economic growth are going to fade in a hurry if workers can’t return to the jobs they lost during the pandemic recession,” said Chris Rupkey, chief economist at MUFG in New York. “Over 20 million out of work without a paycheck is a lot of spending missing from the economy.” Initial claims for state unemployment benefits fell 58,000 to a seasonally adjusted 1.508 million for the week ended June 13. Data for the prior week was revised to show 24,000 more applications received than previously reported, bringing the tally for that period to 1.566 million. Economists polled by Reuters had forecast claims dropping to 1.3 million in the latest week. The 11th straight weekly decrease pushed claims further away from a record 6.867 million in late March. Still, claims are more than double their peak during the 2007-09 Great Recession. Claims fell most notably in Florida and California, but rose in Texas and Washington state. “Labor market problems have shifted away from mass closings and layoffs in immediate response to shutdown orders, and toward still-catastrophic numbers of new layoffs related to the long-term, reverberating effects of a recession,” said Andrew Stettner, senior fellow at The Century Foundation in New York. A separate report from the Philadelphia Fed on Thursday showed labor market conditions remained depressed in June at factories in the mid-Atlantic region even as manufacturing activity in the region that covers eastern Pennsylvania, southern New Jersey and Delaware rebounded sharply. Stocks on Wall Street were trading mostly lower. The dollar gained versus a basket of currencies. U.S. Treasury prices were higher. MILLIONS ON UNEMPLOYMENT ROLLS From manufacturing, retail, information technology and oil and gas production, companies have announced job cuts. State and local governments, whose budgets have been shattered by the COVID-19 fight, are also cutting jobs. Economists expect an acceleration in layoffs when the government’s Paycheck Protection Program, part of a historic fiscal package worth nearly $3 trillion, giving businesses loans that can be partially forgiven if used for wages, runs out. The PPP was credited for a drop in the number of people receiving benefits after an initial week of aid from a record 24.912 million in early May. But these so-called continued claims, which are reported with a one-week lag, also appear to have since stalled. The claims report showed continuing claims dropped 62,000 to 20.544 million the week ending June 6, suggesting companies were gradually recalling workers. Initial claims covered the week during which the government surveyed establishments for the nonfarm payrolls component of June’s employment report. Economists, however, cautioned claims were no longer a good predictor of job growth. Some believe states are still processing applications filed in the last three months after systems were overwhelmed by the unprecedented volume. The government has expanded eligibility for unemployment benefits to include the self-employed and independent contractors who have been affected by the COVID-19 pandemic, including through lost employment, reduced hours and wages. These workers do not qualify for the regular state unemployment insurance. They must file under the Pandemic Unemployment Assistance (PUA) program. States are also processing applications for workers who have exhausted their regular benefits under a program funded by the government. Applications under these two programs are not included in the initial claims count. Filings for PUA increased 66,063 to 760,526 last week. About 29.2 million people were receiving unemployment benefits under all programs during the week ending May 30, the latest available data, compared to 29.5 million in the prior period. Unemployment checks for millions will run out at the end of July, a fiscal cliff that could undercut the recovery. “Fiscal policy will have to step up once again,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “Otherwise household incomes will fall sharply and much of the current rebound will fade.” 

LATAM Airlines says operations to plunge 50% by year’s end

SANTIAGO (Reuters) – LATAM Airlines Chief Executive Roberto Alvo said on Thursday he expects the region´s largest carrier to be operating at half of pre-pandemic levels by the end of 2020, and that a full recovery was unlikely for at least 3-4 years. LATAM filed for U.S. bankruptcy protection last month, aiming to restructure $18 billion in debt. It was the world’s largest airline to date to seek an emergency reorganization due to the coronavirus pandemic. Alvo said the company plans to file a $2 billion plan with the U.S. bankruptcy court in the coming days to address the crisis.

Ford’s redesigned F-150 pickup will offer greater connectivity, sleeper seat

DETROIT (Reuters) – Ford Motor Co (F.N) next week will show the next generation of its brawny F-150 pickup truck that offers a new sleeper-seat feature and over-the-air software updates in a machine Ford is counting on to help pay off coronavirus-related debts. The new F-150, part of the best-selling vehicle line in the United States, accounts for $50 billion in annual revenue, and a significant share of Ford’s annual profit. While Tesla Inc (TSLA.O) and General Motors Co (GM.N) have moved faster on over-the-air software upgrades and high-speed in-vehicle data networks, the new F-150 will bring such technology squarely into the mainstream. The new truck, expected to launch later this year, is a critical plank in Chief Operating Officer Jim Farley’s plan to slash $5 billion in warranty costs, speed Ford’s push into vehicle connectivity and add to the No. 2 U.S. automaker’s already-strong position in the North American commercial vehicle market. Ford has borrowed more than $20 billion to ride out the economic shock from the coronavirus pandemic. Profit from the new F-150 will be key to paying that money back. Ford is not taking big risks with the exterior look of the new truck given its sales dominance, instead focusing on improving the interior, according to those who have seen it. Ford is scheduled to publicly show for the first time the new F-150 online on June 25. “It’s really about technology and productivity,” Farley said at a Deutsche Bank conference on June 10. One prominent feature will be the lay-flat passenger seat like those seen in first-class cabins on some planes, said a person familiar with the plans who asked not to be identified. “You can basically live in the truck,” the person said. Ford’s nicer interior, including a larger display screen, follows a similar move by Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) with its new Ram truck, which received enthusiastic reviews for its stylish interior and optional 12-inch display screen. “Ram taught everybody a little bit of a lesson,” said Rhett Ricart, owner of Ricart Ford in Columbus, Ohio. “The old 5-inch screen for your navigation and radio controls is gone. They’re all going to be 10-, 12-, 15-inch screens. That was started by Tesla.” The F-150’s new electrical architecture will allow Ford to provide over-the-air updates to key modules controlling the vehicle, replacing trips to the dealership. The new truck’s connectivity also will help Ford boost sales to commercial customers, and reduce warranty costs, Farley told investors. The F-Series truck has been around since 1948, while the F-150 debuted in 1975. Sales of the current version have remained strong despite its age, and the new model could help Ford hold or even build its position in the segment, said Sandy Munro, chief executive of Michigan-based consulting firm Munro & Associates. “If they add the same stuff as what Ram did and if they can add more stuff like Tesla’s doing, there’ll be a gigantic gap between Ford, and Ram and Chevy,” he said. The key for Ford will be to avoid the kinds of costly production problems that hobbled the launch of the new Explorer SUV last year. Ford acknowledged it erred in trying to launch the Explorer and Lincoln Aviator simultaneously while breaking in a new assembly line at its 95-year-old plant in Chicago. Farley has been visiting the plants in Dearborn, Michigan, and Kansas City, Missouri, that will build the new F-150. Despite delays related to the virus, he said the launch is in “really good shape.”

Kroger says demand easing after coronavirus stockpiling

(Reuters) – U.S. supermarket chain Kroger Co (KR.N) stopped short of raising its annual forecasts on Thursday, saying a coronavirus-driven surge in demand for essential goods was fading as American households reconsider what they have on their shelves. Demand for fresh produce, meat and soups surged in March and April, and wide-ranging stockpiling in the health crisis forced the grocer to put purchase limits on cold, flu and sanitary products, as well as beef and fresh pork at certain stores. Reporting on a bumper first quarter, the supermarket group said that it now expected to beat earlier forecasts, which projected a rise of more than 2.25% in same-store sales and earnings of between $2.30 and $2.40 per share this year. But it did not give a new forecast and said growth in second quarter earnings would be partially offset by investment and pressure on its fuel business after the collapse in oil prices. Its shares, up 13% this year, fell 5%. “Investors might be slightly jittery from Kroger not quantifying its FY20 outlook,” CFRA Research analyst Arun Sundaram said. Digital sales skyrocketed 92% in the first quarter ended May 23, compared with the previous quarter’s 22% increase, as more consumers opted for Kroger’s delivery and pickup services. Overall same-store sales, excluding the impact of fuel prices, rose 19%. Kroger said same-store sales growth was trending in the mid-teens range so far this quarter, as customers cook more at home. “Customers are still stocking up, but to a lesser degree than during the shutdowns … We do expect sales to continue to taper as the quarter progresses,” said Chief Financial Officer Gary Millerchip. The results showed sales rose 11.5% to $41.55 billion, versus an average estimate of $40.72 billion. Excluding one-time items, Kroger earned $1.22 per share, beating market estimates of $1.09.

Wirecard investor DWS says has sold down position, considering legal action

LONDON (Reuters) – Asset manager DWS, the fund management arm of Deutsche Bank, said it has further sold down its position in embattled German technology company Wirecard and was considering legal action. On Thursday Wirecard’s auditor refused to sign off its 2019 accounts over a missing $2.1 billion, sending its shares down 60% and wiping 8 billion euros($8.97 billion)off its value. DWS said at the close on Wednesday that it had already cut its actively managed position in the company by around 60% and by the close on Thursday “no longer holds any material position in actively managed funds”. “Following today’s news we will continue to fulfill our fiduciary duty to investors: we are analyzing the situation and are considering legal action,” it said.

U.S. gasoline demand recovery falters as refiners ramp up output

NEW YORK (Reuters) – A recovery in demand for gasoline in the United States, the world’s largest market for the motor fuel, hit a plateau last week as coronavirus cases surged in some states, undercutting refiners’ efforts to ramp up low fuel production. Gasoline consumption inched lower last week after three straight weeks of rises, according to Energy Information Administration data on Wednesday. Product supplied of gasoline – a proxy for demand – eased 30,000 barrels per day to 7.9 million bpd amid a spike in new infections in six states. The dip in demand follows five consecutive weeks of increases in refining rates. Refiners last week ran at 73.8% of capacity, the highest since early April, EIA said. “Refiners might have declared victory a little early and it’s going to be problematic,” said John Kilduff, a partner at Again Capital Management in New York. GRAPHIC: Gasoline demand eases, refiners increase run rates tmsnrt.rs/30TJfxz U.S. refiners have been playing catch-up to the demand-depressing effects of the coronavirus since it started. In March, as government-imposed lockdowns cut travel, a gasoline supply glut emerged with margins to refine crude into gasoline falling to the lowest in more than a decade. Refiners lowered output and gasoline inventories last week eased to 257 million barrels, EIA data showed. Stockpiles, however, are still far higher than year-ago levels of 233.2 million barrels and not too far off the record high of just over 263 million in April. GRAPHIC: U.S. gasoline stockpiles ease in latest week tmsnrt.rs/3dhQyBz Gasoline margins RBc1-CLc1 have improved, to $13.39 a barrel on Thursday, though still the lowest seasonally since 2010, Refinitiv Eikon data showed. Refiners could oversupply the market again, not only because of unreliable domestic demand, but because of shaky demand elsewhere, said Matt Smith, director of commodity research at Clipper Data. Mexico, the leading destination for U.S. gasoline exports, is importing 183,000 bpd of gasoline, half the pace it was last June, Smith said. Diesel exports to Mexico also are down by half. “Refinery runs are going to have to remain in check as we move through the summer,” Smith said.