Tuesday, July 28, 2020
Washington DC gets the market’s attention today, as Senate Republicans on Capitol Hill have unveiled their long-awaited stimulus package to replace the CARES Act, which expires at the end of this week. Also, the Fed begins a two-day session regarding forward monetary policy in the U.S., culminating in a presser from Fed Chair Jay Powell on the state of the domestic economy. Meanwhile, COVID-19 cases continue to rise country-wide, and Q2 earnings season keeps heating up.
The HEALS Act, brought to the Senate floor by GOP leader Mitch McConnell yesterday, spends another trillion dollars on economic stimulus as the U.S. continues to grapple with the raging pandemic. However, we see spending for individuals being scaled notably back from the CARES Act’s $600 per week down to just $200 through September, to be augmented by 70% of pre-coronavirus salaries. There will also be the familiar $1200 direct payments to individuals ($2400 for couples) making under $75K per year.
Further, the Paycheck Protection Program (PPP) will be extended for companies with fewer than 300 employees and revenues down 50%. No less than $100 billion will be set aside for seasonal businesses hard-hit by the pandemic, with $105 billion going to schools (provided they agree to open their doors) and another $16B for state testing programs for COVID-19. Yet some conservatives in the party are less interested in spending another trillion dollars in stimulus, meaning there may be strife intra-party — even before House and Senate Democrats bring their (much larger, and already passed) relief bill, called the HEROES Act.
For the Fed, there is zero chance of a rate change, and speculation is we’ll not see an interest rate hike for 18-24 months, depending on economic realities. Predictions that the Fed’s balance sheet will top $9 trillion by next year around this time infers more Fed accommodation to the economy, as well. These may include familiar policies such as Quantitative Easing (QE), perhaps caps on bond yields. We shall achieve better clarity when Powell speaks publicly Wednesday afternoon.
Q2 Earnings at a Glance
Pfizer PFE posted mixed results for its latest quarter, beating earnings estimates by 14 cents to 78 per share on $11.8 billion, which slipped beneath the Zacks consensus by 0.63%. These figures pale from the year-ago 80 cents per share and $13.26 billion in sales a year ago. Of course, these Q2 numbers do not include the $2 billion or so dedicated by the U.S. government for the company’s COVID-19 vaccine being developed with German-based BioNTech BNTX, once the candidate has passed all 3 phases of testing. For more on PFE’s earnings, click here.
McDonald’s MCD put up a mixed Q2 as well, but in reverse: earnings of 66 cents per share missed estimates by a solid dime, while $3.76 billion in quarterly revenues topped expectations by 1.73%. The fast-food giant has only outperformed the Zacks consensus once in the past four quarters. Shares are down 1.5% in today’s pre-market, trading just about exactly flat on the year. For more on MCD’s earnings, click here.
3M MMM is another major company reporting ahead of the opening bell that put up marginally mixed results: earnings of $1.78 per share beat estimates by a penny (way down from $2.20 per share a year ago), while $7.18 billion in sales for the quarter missed expectations by 1.27% (down nearly $1 billion from Q2 2019). Shares are down another 2.6% on the news; the Minnesota industrial giant had already been trading down 7.5% year to date. For more on MMM’s earnings, click here.
After today’s close, we’ll get new earnings results from Starbucks SBUX, eBay EBAY, Visa V and a host of other companies. Currently, pre-markets are in the red: Dow -100 points, the Nasdaq -45 and the S&P 500 -10.
Mark Vickery
Senior Editor
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