“Investment success doesn’t come from “buying good things,” but rather from “buying things well.” – Howard Marks

1. Moderna Covonavirus Caccine Shows Early Signs of Viral Immune Response — the results are just a sample from the small, first study designed to look at the safety of the shot in human volunteers, and should be viewed with caution. But they showed no major safety worries, a key first hurdle since a vaccine would be given to millions of otherwise healthy people. A vaccine is considered a crucial step toward lifting social-distancing measures and safely reopening economies, schools and events around the globe. The new coronavirus, known as SARS-CoV-2, has infected more than 4.7 million people and killed over 300,000, spurring a global race by drugmakers, academic institutions and governments to find a vaccine. The company is moving ahead with plans for a larger test to pick a dose of the vaccine and further study its effectiveness, as well as a phase 3 test with many thousands of patients.
2. U.S. Raises Ante in Vaccine Race With $1.2 Billion for Astra — the U.S. pledges as much as $1.2 billion to AstraZeneca Plc to help make the University of Oxford’s Covid vaccine. The U.S. has backed projects underway at Johnson & Johnson, Moderna Inc. and France’s Sanofi, fueling concerns that other parts of the world could fall behind. Some doubts have been raised about the potential effectiveness of the Oxford vaccine after early results in monkeys were released. While the shot may have protected animals against severe infections, the results were weak compared with those of a test of a vaccine under development by Sinovac Biotech in Beijing.
3. Millions More American Filed for Unemployment Benefits — jobless claims for regular state programs totaled 2.44 million in the week ended May 16, Labor Department reported. The prior week’s figure was revised down by 294,000 to 2.69 million after a clerical error by Connecticut labor officials inflated the overall nationwide figure. The median estimate in a Bloomberg survey of economists called for 2.4 million claims in the latest week. That means nationwide claims under the program — which expands unemployment benefits to those not traditionally eligible, such the self-employed and gig workers — were actually about half of the reported 2.23 million figure.
4. Argentina Braces for Ninth Default — after five months in office grappling with recession, 50% inflation and a crash in the unofficial peso rate, Fernandez is trying to strike a deal with bondholders over the coming weeks to prevent even worse chaos. Although there’s no 2001-style panic, Argentines have been quietly preparing for the worst. Savers have withdrawn $1.2 billion in dollar deposits over the past 20 business days. Demand for dollars is so high that the illegal exchange rate has widened to nearly twice the official rate, which is anchored by currency controls.

The week ahead — Economic data from Econoday.com:

“Prices are too high” is far from synonymous with “the next move will be downward.” Things can be overpriced and stay that way for a long time . . . or become far more so.” – Howard Marks

1. New Jersey, Connecticut Moves Toward Reopening — Retail businesses will be allowed to offer curbside pickup starting May 18, and restrictions will lift on non-essential construction work, Governor Murphy stated. Also, Connecticut will begin to reopen May 20 and test 42,000 a week. Connecticut Governor Ned Lamont said the chief executives of some large companies have told him that telecommuting could help them save money by cutting office space by as much as 30%, signaling what may be a national shift by businesses.
2. Fed Chairman Powell Warns of Broad Virus Danger, Discourages Negative Rates — Federal Reserve Chair Jerome Powell stated The U.S. economy faces unprecedented risks from the coronavirus if fiscal and monetary policy makers don’t rise to the challenge. Powell and his colleagues on the policy-setting Federal Open Market Committee have taken dramatic measures to shelter the U.S. economy during the coronavirus pandemic. They have cut their benchmark interest rate to nearly zero, engaged in open-ended bond buying and begun rolling out emergency lending programs as U.S. unemployment has soared to levels not seen since the 1930s Great Depression. Powell acknowledged the negative rate speculation but said such a move was not being considered, though he stopped short of completely ruling the tool out as an option in the future.
3. U.S. Jobless Claims Climbs to 2.98 Million Brings Virus Sum to 36.5 Million — Initial jobless claims in state programs totaled 2.98 million in the week ended May 9, Labor Department figures showed Thursday, following 3.18 million the prior week. With the latest numbers, a total of 36.5 million applications for unemployment insurance have been filed since the virus began shutting down businesses in mid-March. Connecticut reported a surge to about 298,700 from 36,100 the prior week — dwarfing any other state change.
4. Retail Sales Crater by a Record 16.4% as Spending Slumps Amid Coronavirus Lockdowns — revenue at retailers and restaurants fell 16.4% from the prior month, almost double the 8.3% drop in March which was previously the worst in data back to 1992, according to a Commerce Department report. With the coronavirus pandemic keeping most Americans stuck at home and unemployment the highest since the Great Depression era, people sharply reduced their spending in the month. The retail sales report, meantime, showed all but one of 13 major categories decreased, led by a 78.8% drop at clothing stores and a 60.6% decline at electronics and appliance outlets. The only category to record a gain was nonstore sales — including online sellers such as Amazon.com — which increased 8.4%.
5. Trump Administration Moves to Cut Huawei Off From Global Chip Suppliers — the Trump administration moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China. The rule change is a blow to Huawei, the world’s no. 2 smartphone maker, as well as to Taiwan’s TSMC, a major producer of chips for Huawei’s HiSilicon unit as well as mobile phone rivals Apple and Qualcomm. The United States is trying to convince allies to exclude Huawei gear from next-generation 5G networks on grounds its equipment could be used by China for spying.

The week ahead — Economic data from Econoday.com:

“Being too far ahead of your time is indistinguishable from being wrong.” – Howard Marks

1. Hertz May File for Bankruptcy — Hertz may file for bankruptcy as talks with creditors go down to the wire, people familiar said. The company added FTI Consulting, a bankruptcy specialist, to its roster of advisers. Shares dropped 21% pre-market. Neiman Marcus is close to a bankruptcy deal with lenders led by PIMCO that would slash its debt load by more than half in exchange for control of the company, people familiar said. Also, JC Penney has filed for bankruptcy protection.
2. American Meat Workers Are Starting to Quit With Plants Reopening — At a JBS USA plant in Greeley, Colorado, absenteeism is running as high as 30%. Before the pandemic, it was about 13%. The company is paying about 10% of the workforce — people deemed vulnerable — to stay home. Meat plants have been at the nexus of coronavirus hot spots across America’s rural heartland. The disease spread through plants in March and April as companies struggled to adapt their workplaces to new rules dictated by the pandemic. As absenteeism persists, the U.S. is at risk of continued meat shortages and higher prices, even after President Donald Trump signed an executive order to keep plants running.
3. U.S., China Trade Chiefs to Speak on Progress in Implementing a Phase-One Deal — the planned phone call will be the first time Liu and Lighthizer speak officially about the agreement since it was signed in January, just before the global coronavirus pandemic hit the world’s two biggest economies and upended global supply chains. The deal called for Liu and Lighthizer to meet every six months, making next week’s call slightly ahead of schedule. According to the text of the agreement signed earlier this year, China has agreed to buy an additional $200 billion in U.S. goods and services over two years compared with 2017’s level.
4. U.S. Jobless Rate Surges to 14.7% in Worst-Ever Labor Reversal — employers cut an unprecedented 20.5 million jobs in April and the unemployment rate more than tripled to 14.7%.
Joblessness now stands at the most since the Great Depression era of the 1930s after the coronavirus pandemic brought the U.S. economy to a standstill. As recently as February, the rate stood at just 3.5%, the lowest level in five decades. White House adviser Kevin Hassett stated unemployment may peak “north of” 20% in May or June before the economy starts to come back from coronavirus-related shutdowns in the second half of 2020.
5. FDA Approves New Covid-19 Antigen Test — the emergency use authorization, the first ever by the FDA for a Covid-19 antigen test — was granted to San Diego-based Quidel Corp. late Friday, according to a notice from the agency. “It’s a very rapid test that could be used in a doctor’s office,” former FDA Commissioner Scott Gottlieb said Sunday on CBS’s “Face the Nation.” “Doctors now have about 40,000 of these Sophia machines already installed in their offices” where they are used to test for strep throat and flu. Each test will probably cost about $5, with results available within minutes

The week ahead — Economic data from Econoday.com:

“The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing—these factors are near universal. Thus they have a profound collective impact on most investors and most markets. The result is mistakes, and those mistakes are frequent, widespread and recurring.”
― Howard Marks

1. Data From Gilead Virus-Drug Trial ‘Good News’ — Gilead gave a shot in the arm to markets with positive data from a drug trial for its Covid-19 treatment, remdesivir. Infectious-disease expert Anthony Fauci said the early results offered “quite good news.” The FDA plans to announce emergency-use authorization for the drug as early as Wednesday, the NYT said. As for a vaccine, the Trump administration is organizing a Manhattan Project-style effort to develop one and have 100 million doses ready by year-end, people familiar said.
Operation Warp Speed will unite pharmaceutical companies, government agencies and the military in an aim to cut the development time by as much as eight months.
2. Job Losses Deepen in Pandemic With U.S. Tally Topping 30 Million — Millions more Americans filed for unemployment benefits last week, sending the six-week total above 30 million since the coronavirus pandemic began to shutter businesses across the country. Initial jobless claims totaled 3.84 million in the week ended April 25 following 4.44 million in the prior week, according to Labor Department figures Thursday. Economists had projected 3.5 million claims.
3. Roche Covid-19 Antibody Test Gets Emergency FDA Approval — The Swiss giant expects production of the test to reach the high double-digit millions by June and pass the 100 million monthly threshold later this year. The test looks for antibodies in blood that have been raised to fight off the virus that causes Covid-19. Roche’s version runs on a high-volume instrument that can produce a single result in 18 minutes and as many as 300 results in an hour, the company said in a statement Sunday after receiving emergency authorization from the U.S. Food and Drug Administration.
4. Trump Presses to Reopen U.S. — Trump repeated his aim that the U.S. would have a coronavirus vaccine by year’s end, an extremely ambitious deadline that the president said doctors have urged him not to promote. He also said the economy would fully rebound in the fourth quarter of 2020 and the beginning of next year. In a virtual town hall staged symbolically at the Lincoln Memorial Sunday evening, Trump said he hopes to return to his raucous political rallies in packed arenas in the final months of his campaign for re-election. He complained that some states “aren’t going fast enough” to ease public health restrictions.

The week ahead — Economic data from Econoday.com: