March 2, 2021

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Stocks post worst drop in seven sessions; Grubhub spikes on takeover reports

Stocks erased earlier gains and fell Tuesday, as investors continued to eye states’ reopening plans and mulled recent corporate earnings results.

[Click here to read what’s moving markets heading into Wednesday, May 12]

The three major indices posted their largest one-day drop in seven sessions, with each falling at least 1.89%. The Nasdaq’s drop broke a six-session winning streak, which had been the index’s longest so far this year.

Market participants also eyed the start of the Federal Reserve’s program to purchase corporate debt exchange-traded funds, which kicks off Tuesday.

Earlier, U.S. equity futures traded lower during the overnight session following a Fox Business report that the Trump administration was seeking to keep federal employee retirement funds from being invested in Chinese equities, raising concerns that tensions would rise between the two countries.

In New York, the domestic epicenter of the virus, Governor Andrew Cuomo said certain regions of the state will be ready to begin to resume business operations later this week, including construction, retail with curbside pickup, drive-in theaters and certain recreational activities. Total hospitalizations in the state declined again on Monday, Cuomo said during Tuesday’s press conference, and new deaths of 195 were a tick higher than the day before.

The reopenings, however, will not yet apply to New York City, which Mayor Bill De Blasio said Monday would likely extend into June. On the other side of the country, Los Angeles County’s stay in place orders will also likely be extended through July, according to the county’s public health director.

In earnings statements and calls so far for the latest reported quarter, some executives highlighted a pick-up in consumer demand for goods and services from the doldrums of March, sparking hopes that business conditions were becoming at least somewhat less grim for some major corporations. These glimmers of optimism, however, mostly came alongside massive plunges in quarterly operating results, suggesting a return back to prior levels will take time.

Marriott International (MAR), a company in one of the hardest-hit industries as the pandemic all but wiped out global travel, said in an earnings statement Monday that “lodging demand in most of the rest of the world has stabilized, albeit at very low levels,” with occupancy in North America around 20% over the past two weeks. Marriott’s revenue per available room, which measures both room prices and occupancy levels, was down 90% in April.

Late last week, Uber (UBER) CEO Dara Khosrowshahi said during an earnings call that the ride-hailing company began seeing a sustained pick-up in demand for rides in mid-April, with growth up most substantially in states including Georgia and Texas, which have already begun reopening their economies.

Separately, the CEO of online real estate database Zillow (Z) last week said during the company’s earnings call that “the real estate market is predominantly open, and it’s clear that we have passed peak fear.”

4:04 p.m. ET: Dow, S&P, Nasdaq erase gains in worst day in 7 sessions

Here were the main moves in markets as of 4:04 p.m. ET:

  • S&P 500 (^GSPC): -60.20 (-2.05%) to 2,870.12

  • Dow (^DJI): -457.21 (-1.89%) to 23,764.78

  • Nasdaq (^IXIC): -189.79 (-2.06%) to 9,002.55

  • Crude (CL=F): +$1.65 (+6.84%) to $25.79 a barrel

  • Gold (GC=F): +$7.60 (+0.45%) to $1,705.60 per ounce

  • 10-year Treasury (^TNX): -4.8 bps to yield 0.6780%

3:11 p.m. ET: Stocks turn around and decline

Here were the main moves in markets, as of 3:11 p.m. ET:

  • S&P 500 (^GSPC): 2,909.19, down 21.13 points (-0.72%)

  • Dow (^DJI): 24,078.88, down 143.11 points (-0.59%)

  • Nasdaq (^IXIC): 9,155.13, down 37.25 points (-0.41%)

  • Gold (GC=F): +$7.90 (+0.47%) to $1,705.90 per ounce

  • 10-year Treasury (^TNX): -4.3 bps to yield 0.683%

1:28 p.m. ET: Grubhub issues statement in response to reports of possible takeover, saying company is ‘always looking at value-enhancing opportunities’

Grubhub issued a statement Tuesday afternoon in response to earlier media reports of a possible takeover by Uber. Trading of Grubhub shares was halted for a second time during Tuesday’s session ahead of the press release.

“While our policy remains to not comment on specific market rumors, we want to reiterate our views with respect to M&A-related matters given the current level of recent speculation,” it said in the statement.”

“We remain squarely focused on delivering shareholder value. As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities,” it added. “That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”

1:00 p.m. ET: 10-year auction brings out the buyers

In spite of the vast sea of red ink and debt Uncle Sam is pumping out to rescue the economy from the COVID-19 crisis, investors turned out in droves to buy 10-year debt, which were sold at a yield of .70% and a bid to cover ratio of 2.69. According to Peter Boockvar at Bleakley, that was well above the 12-month average of 2.41.

In short, if investors are nervous about federal spending and the national debt, they sure aren’t showing it. As Boockvar wrote:  

Bottom line, it’s a new world where a yield of .70% brings out the buyers in an aggressive fashion. While this yield is still below the implied inflation rate of 1.10%, buyers seem solely focused on defense. I’ve said before, the Treasury market seems to be focused on what they think the degree of economic improvement will be while the stock market is more trading off the direction. 

12:51 p.m. ET: Stocks hold gains, but is the optimism overdone?

Markets are flat heading into the final trading hours of the session, still underpinned by hopes that reopenings will help grease the wheels of a recovery. Tech stocks are leading the charge.

Here were the main moves in markets, as of 1 p.m. ET:

  • S&P 500 (^GSPC): 2,926.06, down 4.26 (-0.15%)

  • Dow (^DJI): 24,220.96, flat (-0.00%)

  • Nasdaq (^IXIC): 9,228.58, up 36.24 (+0.39%)

  • Crude (CL=F): +$1.44 (+5.97%) to $25.58 a barrel

  • Gold (GC=F): +$6.60 (+0.39%) to $1,704.60 per ounce

  • 10-year Treasury (^TNX): -0.8 bps to yield 0.718%

Markets are pricing in the possibility that the state-by-state reopenings will put the economy back on a path toward faster growth — even though the current quarter is overwhelmingly expected to contract at a historic rate. Liz Ann Sonders at Charles Schwab told Yahoo Finance on Tuesday that investors are pricing in “a pretty close to best-case scenario” about growth.

11:10 a.m. ET: Grubhub surges 25% after trading halt, following report of potential takeover by Uber

Shares of Grubhub (GRUB) surged more than 25% to more than $58 per share after a trading halt due to volatility.

The sharp move higher came after Bloomberg reported Uber (UBER) had made an offer to acquire the company, according to the report citing unnamed people familiar with the matter.

Grubhub declined to comment to Yahoo Finance on the report of the deal. And Uber spokesperson did not immediately return a request for comment.

11:00 am. ET: Luckin dumps top executives over growing sales scandal

Last year this time, Luckin Coffee (LK) was viewed as an emerging challenger to Starbucks (SBUX). All that came apart about a month ago, when the company was implicated in a scandal over allegedly inflated sales, which sent its stock into a freefall (it’s since been halted).

On Tuesday, the controversy came to a head as the Chinese-based company fired both its CEO and COO, and placed at least six others on suspension or leave, Luckin said in a filing.

The coffee chain is vowing to continue to cooperate with authorities in a case that’s being viewed through the lens of an increasingly antagonistic US-China bilateral relationship.

“The Company has been cooperating with and responding to inquiries from regulatory agencies in both the United States and China,” Luckin said. “The Company will continue to cooperate with the Internal Investigation and focus on growing its business under the leadership of the Board and current senior management.”

9:41 a.m. ET: Trump calls for California to allow Tesla to resume operations at Fremont facility

President Donald Trump, a vocal advocate for states to reopen their economies as quickly as possible, took to Twitter Tuesday morning advocating for California to allow Tesla (TSLA) to open its Fremont facility.

While California Governor Gavin Newsom said that some industries, including manufacturing, would be allowed to resume operations in the state late last week, he also left it up to individual counties to decide whether to enforce more stringent stay in place measures for a longer period of time. Alameda County, where Tesla’s Fremont factory is located, has extended its stay in place order through at least May 31.

The decision spared the ire of Tesla CEO Elon Musk, who filed a complaint with the U.S. District Court in San Francisco over the weekend and threatened to relocate operations out of the state. Tesla has already re-started production at the Fremont factory as of earlier this week, defying Alameda County orders.

9:32 a.m. ET: Stocks open higher

Here were the main moves in markets, as of 9:32 a.m. ET:

  • S&P 500 (^GSPC): +13.92 points (+0.48%) to 2,944.24

  • Dow (^DJI): +139.5 points (+0.58%) to 24,361.49

  • Nasdaq (^IXIC): +51.63 points (+0.56%) to 9,243

  • Crude (CL=F): +$1.44 (+5.97%) to $25.58 a barrel

  • Gold (GC=F): +$6.60 (+0.39%) to $1,704.60 per ounce

  • 10-year Treasury (^TNX): -0.8 bps to yield 0.718%

8:30 a.m. ET: Consumer prices extend declines in April, dropping by most since 2008

The U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) sank 0.8% month over month in April after a 0.4% decline in March, matching expectations, according to consensus economist data compiled by Bloomberg.

The decline in the headline index was led by a 20.6% decline in the gasoline index. However, apparel, motor vehicle insurance, airline fares and lodging away from home also posted steep monthly declines as well.

An index tracking prices for food at home posted its largest monthly increase since February 1974.

7:11 a.m. ET Tuesday: Stock futures turn slightly positive

Here were the main moves in markets, as of 7:11 a.m. ET Tuesday:

  • S&P 500 futures (ES=F): up 3.5 points, or 0.12%, to 2,926.25

  • Dow futures (YM=F): up 46 points, or 0.19%, to 24,170.00

  • Nasdaq futures (NQ=F): up 14.75 points, or 0.16%, to 9,293.75

  • Crude (CL=F): +$1.34 (+5.55%) to $25.48 a barrel

  • Gold (GC=F): +$8.80 (+0.52%) to $1,706.80 per ounce

  • 10-year Treasury (^TNX): -0.7 bps to yield 0.719%

6:00 a.m. ET Tuesday: Small business optimism dips further in April amid virus concerns

The National Federation of Independent Business (NFIB) Small Business Optimism index dipped further in April to 90.9 from March’s 96.4, “with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months,” according to a statement Tuesday morning.

An index tracking small businesses’ expectations for real sales in the next six months plunged 30 points to a net negative 42%, hitting the lowest level on record in the survey’s 46-year history. But at the same time, owners’ reports of expectations for better business conditions in the next six months increased by 24 points, to recover after drop of 17 points in March.

“Presumably this divergence captures the idea that the overall economy can’t get much worse, so the future has to be better than the past, but business owners remain very depressed about their own position,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note Tuesday. “The details show hiring plans down to an eight-year low, while capex [capital expenditures] plans dropped to a 10-year low.”

6:08 p.m. ET Monday: Stock futures flat

Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:08 p.m. ET:

  • S&P 500 futures (ES=F): up 0.25 points, or 0.01%, to 2,923.00

  • Dow futures (YM=F): up 14 points, or 0.06%, to 24,138.00

  • Nasdaq futures (NQ=F): up 12.25 points, or 0.13%, to 9,291.25

NEW YORK, NY – MAY 11: A person explains how the food line operates for food donated by SOMOS, in partnership with World Central Kitchen and Maestro Cares Foundation on May 11, 2020 in the Elmhurst neighborhood in the Queens borough in New York City. Some people who waited since 6 am stated that this Monday food distribution is popular because raw fruits and vegetables to cook are given out, not only pre-made meals. (Photo by Stephanie Keith/Getty Images)

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