Market Brief: May 13, 2020

In a virtual conversation with Peterson Institute for International Economics President Adam Posen on Wednesday morning, Powell said that the Fed would instead continue relying on other tools in its arsenal, including forward guidance.

The market’s early verdict on the government’s new rules appears to be that it’s too little, too late. Shares of United Airlines were down almost 10% near midday Wednesday. Delta Air Lines and American Airlines slumped more than 8% and Southwest Airlines was off 6%. United’s stock, around $20.40, was trading below its March lows and below its lowest closing price since Dec. 10, 2012. The stock has lost more than 16% in the past three trading days and is down more than 76% this year.

The maker of network services, videoconferencing tools, and security software reported third-quarter net income of $2.8 billion, or 65 cents a share, as revenue declined 8% to $12 billion from $12.96 billion in the year-ago period. After adjusting for stock compensation and other effects, Cisco reported earnings of 79 cents a share, up slightly from 78 cents a share a year ago. Analysts surveyed by FactSet had projected adjusted earnings of 71 cents a share on revenue of $11.9 billion on average, though those expectations have come down significantly since Covid-19 began to spread across the globe.

Alameda County, home to the Tesla’s flagship Fremont, Calif., plant, said in a statement Tuesday that “we have agreed Tesla can begin to augment their Minimum Business Operations this week in preparation for a possible reopening as soon as next week.”

With stock buybacks waning, how companies manage their dividends “will take on new importance as investors make judgments about equity valuations,” concludes a note by investment research firm DataTrek Research. The note’s author, Nicholas Colas, refers to a “social aversion” toward buybacks, which until recently had been a popular way for large U.S. companies to return capital to shareholders.

The trade group’s Purchase Index, which measures the weekly volume of applications for loans to acquire a home, increased 11% for the week ending May 8 from the week prior, on both a seasonally-adjusted and unadjusted basis. It’s the fourth week-over-week increase since applications started rising in mid-April.

On Tuesday, The Wall Street Journal reported that the two companies were in talks on a deal for Uber to acquire Grubhub in a stock deal that would issue 2.15 Uber shares for each Grubhub share. Wednesday morning, Uber announced plans to sell $750 million of senior notes due 2025, with proceeds targeted “primarily for working capital and other general corporate purposes, which may include potential acquisitions and strategic transactions.”

The trading floor—an area that has propped up profits this year as lenders’ profits slid because of billions put aside to cover Covid-19 related losses—felt the brunt of these cuts, according to new figures from data provider Coalition.

For the first quarter of 2020, Tencent grew its revenue by 26% year over year to 108 billion Chinese yuan ($15.3 billion), better than the 101 billion yuan expected by analysts polled by FactSet. Earnings attributable to stockholders hit 28.9 billion yuan, up 6% from the year-ago period. Diluted earnings came in at 2.99 yuan per share, beating analysts’ consensus expectations for 2.35 yuan.

A similar proposal last year failed, and Exxon won a court case over related issues last year. But Exxon is facing growing scrutiny about its role in climate change—and moves by other oil companies will only add to the pressure. While the last shareholder proposal failed, it won a higher percentage of the vote than it did the year before.