Dow falls after huge rally, Walmart up, Mnuchin & Powell highlights

Airlines fall again, banks slide

Wall Street stands empty as people stay away from the area due to the coronavirus on March 30, 2020 in New York City.

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10:45 am: Mnuchin: ‘We are fully prepared to take losses’

Treasury Secretary Steven Mnuchin said Tuesday the Treasury and the Federal Reserve are “fully prepared to take losses” on the remaining capital from the coronavirus bailouts. Mnuchin said before the Senate Banking Committee he is prepared to distribute the entire $500 billion appropriated to help struggling businesses impacted by the coronavirus pandemic. — Fitzgerald, Wilkie 

10:08 am: Congressional testimonies begin

Federal Reserve chairman Jerome Powell and Treasury Secretary Steven Mnuchin’s testimonies to the Senate Banking, Housing and Urban Affairs Committee have started. The remarks will become a quarterly event surrounding the CARES Act, the $2 trillion federal stimulus package. Watch the live broadcast here. — Fitzgerald 

9:47 am: Stay-at-home trade reappears, Dow slips in early trading

Stay-at-home stocks resumed their outperformance in the opening minutes of trading on Tuesday, with Amazon, Netflix and Facebook helping the Nasdaq gain 0.3%. Walmart also rose about 2% following its quarterly earnings report.

The Dow meanwhile fell more than 100 points in the opening minutes of trading on Tuesday following Monday’s 900-point rally. Declining stocks outnumbered gainers 24 to 6 on the 30-stock index. The KBW Bank Index was also down 2.3% after bank stocks surged on Monday. —Pound

9:30 am: Stocks open little changed ahead of Congressional testimonies

Major stock indexes opened nearly flat on Tuesday as investors awaited testimony from Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin. The Dow was 90 points, or 0.4%, lower in early trading, while the Nasdaq rose by less than 0.1% and the S&P 500 fell 0.25%. —Pound

9:09 am: Housing starts post worst monthly decline on record 

Housing starts tumbled 30.17% to a seasonally adjusted annual rate of 891,000 units last month, a five year low, the Commerce Department said on Tuesday. The drop was also the biggest monthly decline on record since the government started tracking the data in 1959. Meanwhile, building permits fell 20.8% in April for their worst month since July 2008 when permits fell 21.95%. The decline in home construction starts underscored the coronavirus’ impact on the U.S. housing market and broader economy. –Li, Francolla

8:58 am: Southwest says it’s seeing some demand improvement

Shares of Southwest Airlines jumped more than 4% during premarket trading after the company said in a filing that it’s seeing a modest improvement in bookings for June. The airline is expecting capacity to decrease between 45% and 55% for June, with operating revenue down 80% to 85%. For May, Southwest now forecasts an 85% to 90% decline in revenue, versus prior estimates of a 90% to 95% decline. “The Company’s month-to-date net positive bookings represent a reversal in the net negative booking trends experienced during the majority of March and April 2020, where trip cancellations outpaced new passenger bookings,” the filing said. Shares of the airline have slid 50% this year. —Stevens

8:56 am:  Fed chiefs at May testimonies have a history – remember the ‘taper tantrum’ 

Market pros are watching every nuance in the testimony of Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin before the Senate Banking Committee. They are set to discuss the policy response to the coronavirus emergency.  BMO rate strategist Jon Hill reminds us that former Fed Chairman Ben Bernanke was appearing before the Congressional Joint Economic Committee on May 22, 2013, when he started the ‘taper tantrum’  market sell-off.  In response to a question, Bernanke said: “If we see continued improvement and we have confidence that that’s going to be sustained then we could in the next few meetings…take a step down in our pace of purchases.” Hill doesn’t expect the same from Powell. “I don’t expect anything like that to come out, but it’s theoretically a live possibility. These are big names -Powell and Mnuchin.  They do have the opportunity to move markets,” he said. The 10-year yield was at 0.73% ahead of the testimony, and the next level to watch is 0.75%, the intraday technical peak going back to April 15. —Domm

8:42 am: SunTrust hikes Peloton target to Street high

SunTrust Robinson Humphrey analyst Youssef Squali raised his price target on Peloton to $60 per share from $52. Squali said in a note to clients that guidance from the company on its fitness subscriptions are too conservative and that it would be growing even faster if it could deliver its physical products more quickly. The price target is more than 37% above where trading closed on Monday and is the highest among major analysts on Wall Street, according to FactSet. Shares rose 3.5% in premarket trading. —Pound

8:23 am: Single stocks see record outflows last week, says Bank of America 

Last week, when the S&P 500 experienced its worst week in two months and dropped 2.3%, clients at Bank of America sold $4.8 billion in U.S. equities, the firm said. The selling was driven by the largest outflows from single stocks in the firm’s data history since 2008. “All three client groups (hedge funds, institutional and private clients) sold equities at near-record levels. Institutional clients were the biggest sellers, while hedge funds have the longest selling streak (five weeks),” said Bank of America Securities equity and quant strategist Jill Carey Hall. —Fitzgerald

8:21 am: Moderna falls after new stock offering

Shares of Moderna were down 6% in premarket trading after the biotecth company announced that it was raising $1.3 billion with a secondary stock offering. The offering, which is being run by Morgan Stanley, was priced at $76 per share, 5% below where shares closed on Monday. The stock spiked nearly 20% on Monday following news that Moderna’s coronavirus vaccine candidate was showing positive results in early trials. —Pound

8:10 am: Kohl’s net sales drop by more than 40%

Shares of Kohl’s rose 1% in premarket trading, bouncing back from earlier losses, after reporting results for its fiscal first quarter. The company reported an adjusted loss of $3.20 cents per share and $2.16 billion in revenue, both missing Wall Street estimates, as net sales dropped by more than 40%. The retailer said it ended the quarter with $2 billion in cash and another $500 million in a credit revolver. The stock rallied 7.3% on Monday. —Pound

8:08 am: Oil prices rise ahead of contract expiration

The West Texas Intermediate contract for June delivery jumped on the contract’s final day of trading, gaining 91 cents, or 2.86%, to trade at $32.73 per barrel. Tuesday’s move builds on recent strength, which has seen oil post three straight weeks of gains. On Monday WTI surged 8.12% to settle at $31.82, the highest level in more than two months. Steep production cuts as well as an increase in demand as states reopen economies are fueling the rally, although prices are still well below the more than $60 oil fetched at the beginning of the year. International benchmark Brent crude traded 20 cents higher at $35.01 on Tuesday, while the WTI contract for July deliver rose 24 cents to $31.87. –Stevens

7:58 am: Mnuchin, Powell to face Senate over emergency lending programs 

The U.S. Treasury Secretary and the Chairman of the Federal Reserve will appear via video-conference before the Senate Banking Committee on Tuesday at 10 a.m. ET to answer questions on how they are appropriating $500 billion in crisis lending programs. Congress earlier this year made those funds available through its $2 trillion economic relief package known as the CARES Act. The Treasury received $46 billion to direct assistance to airlines and other bruised industries with another $450 billion earmarked to cover losses in the Fed’s lending program. Senators will likely grill Treasury Secretary Steven Mnuchin on how much risk the department is willing to accept on its investment in the Fed’s lending apparatus and the implications of losing a significant portion of those funds allocated by Congress. Fed chief Jerome Powell, meanwhile, could face questions about when the Fed’s lending facilities will be functional and whether lawmakers need to provide additional funding to mitigate the fallout from the current economic downturn. In prepared remarks that Powell will deliver to lawmakers, Powell says the Fed is “committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response.” — Franck

7:50 am: Walmart climbs after reporting rapid rise for e-commerce

Shares of Walmart gained 3.8% in premarket trading after the retailer reported its first-quarter earnings, showing increases in same-store sales and e-commerce. The company’s online orders in the U.S. rose 74% compared with the same quarter last year. Walmart reported $1.18 in adjusted earnings per share on $134.6 billion in revenue. Analysts expected $1.12 in earnings per share on $132.8 billion in revenue, according to Refinitiv. —Pound

7:46 am: Home Depot misses profit expectations in the first quarter

Shares of Home Depot fell about 2% during Tuesday’s premarket trading after the company missed earnings expectations in the first quarter thanks to higher coronavirus-related costs. For the quarter the company earned $2.08 per share, which was below the $2.27 analysts had been expecting. Same-store sales jumped 6.4%, beating consensus estimates of a 4.4% rise. Revenue came in at $28.26 billion, which was also higher than the expected $27.54 billion. The company said that coronavirus-related expenses – such as increasing paid time off for hourly employees – totaled $640 million, or 60 cents per share. —Stevens

7:45 am: Jamie Dimon: Coronavirus is a ‘wake-up call’ for more inclusive economy 

JPMorgan Chase CEO Jamie Dimon said in a memo that the economic crisis sparked by the coronavirus should be used to make for a more inclusive economy. “It is my fervent hope that we use this crisis as a catalyst to rebuild an economy that creates and sustains opportunity for dramatically more people, especially those who have been left behind for too long,” Dimon said. “The last few months have laid bare the reality that, even before the pandemic hit, far too many people were living on the edge.” Dimon’s memo comes ahead of the bank’s annual shareholder’s meeting. —ImbertSon

7:25 am: Stock futures flat after 900-point Dow rally in previous session

U.S. stock futures pointed to a pause on Tuesday following sharp gains during Monday’s session. Dow Jones Industrial Average futures traded just 11 points higher, or 0.04%. Dow futures were initially dragged down by a 2.1% drop in Home Depot shares during premarket trading. However, those losses were offset by a 4% gain in Walmart shares. S&P 500 futures dipped 0.1% while Nasdaq 100 futures gained 0.2%. On Monday, the Dow and S&P 500 logged in their best day since early April, with the Dow rallying more than 900 points. The S&P 500 gained 3.2%. —Imbert

—With reporting from Hugh Son, Tom Franck, Maggie Fitzgerald, Patti Domm, Yun Li and Gina Francolla. 

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