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Investors bet on testing, treatments for restart of U.S. economy – TheChronicleHerald.ca

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By Sinéad Carew

(Reuters) – Investors are pinning their hopes for the reopening of the U.S. economy on the potential for wider availability of testing for COVID-19 cases and on drug trials for treatments of the deadly disease but said, until there is concrete progress in these areas, further stock market gains may be limited.

Much of the S&P 500’s .SPX> almost 27% advance above its March 23 low has been due to hopes that massive U.S. fiscal and monetary support would dampen the economic blow from stay-at-home orders designed to contain the coronavirus pandemic.

But recently, the index has reacted to reports about trials and in particular Gilead Science’s remdesivir experimental treatment for COVID-19, the respiratory illness caused by the new coronavirus. Remdesivir, which previously failed as a treatment for Ebola, is designed to keep a virus from replicating and overwhelming a patient’s immune system.

This volatility highlights investor impatience for indications of when state and Federal authorities might start to ease stay-at-home orders and get people back to work.

So far there are no approved treatments or vaccines for the disease which has killed over 190,000 people globally, according to a Reuters tally. The disease has infected more than 928,000 people and killed more than 52,000 in the United States alone, according to the latest data from the U.S. Centers for Disease Control and Prevention.

“Any sentiment around a therapy is really moving markets because it shapes expectations for a return to normalcy which would be needed to get an economic recovery started,” said Shawn Cruz, manager of trader strategy at TD Ameritrade in Jersey City, New Jersey.

The S&P added to gains on Friday after the lead investigator in a U.S. government trial of remdesivir told Reuters the trial may yield results as early as mid-May.

But on Thursday the index temporarily pared gains after a report Gilead’s drug failed a trial the drugmaker itself deemed inconclusive because the study was ended early. On April 17 investors were encouraged after medical news publication STAT reported rapid improvements in COVID-19 patients in one hospital studying the drug.

While Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut is encouraged by the number of researchers working on coronavirus treatments, he is cautious about the stock market’s near-term prospects.

“The only thing that pushes us above this range in a sustainable way is a therapeutic solution or a vaccine that allows us to return to the pre-crisis level of business,” he said. “I think we’ll get a medical solution. The big question is the time frame. The longer it takes it becomes harder (for the economy) to snap back and rebound.”

While there are more than 70 vaccines in development for coronavirus, Manulife Investment Management’s Steven Slaughter, who manages a roughly $3.5 billion dedicated healthcare fund said he expects development of a successful vaccine to take at least 12-18 months compared to the average vaccine development time of 5-7 years.

Then it could be years before pharmaceutical companies can produce enough to vaccinate the world’s entire population.

But Slaughter is optimistic at least some treatment will be validated in trials in the next three to six months, and said this would give officials “more latitude to restart the economy.”

He said there are four main types of treatments being tested by companies including Gilead, Takeda Pharmaceutical 4502.T>, Regeneron Pharmaceuticals and Alexion Pharmaceuticals that all hold some promise.

While treatments may not necessarily slow transmission of the disease, they could help doctors control the severity of infections, easing pressure on intensive care units (ICU).

“If we can take a patient that otherwise would’ve spend 2-3 weeks in an ICU bed out of that ICU bed in 2-3 days that has an enormous beneficial impact on our ability to handle outbreaks or to handle a potential second wave of infections,” he said.

In the meantime officials should at least look for greater availability of tests that can detect virus infections and for ways to track and trace people who might have been exposed, before easing lockdowns, some strategists said.

“What will be more critical will be the testing capacity and the efficacy of track and trace programmes,” said Salman Ahmed, chief investment strategist at Lombard Odier Investment Management. Test developers include Abbott Laboratories and Roche Holding .

Since much of the U.S. population has been told to stay at home and many businesses have been on pause since the middle of March, investors have already accounted for dismal earnings and a massive U.S. economic decline in the second quarter.

But recent S&P gains seem to imply a huge improvement in the economy in the third quarter, according to Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“There will be a vaccine and treatments for COVID-19 but people are underestimating the amount of time it takes for them to reach the market,” said Tuz. “If there are disappointments in three areas – vaccine, treatment and testing – we could back track some in the market.”

(Reporting by Sinéad Carew in New York; Additional reporting by Sujata Rao-Coverly and Tommy Reggiori Wilkes in London; Editing by Alden Bentley)

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Why the stock market is outperforming the economy: Morning Brief – Yahoo Canada Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Tuesday, May 26, 2020” data-reactid=”16″>Tuesday, May 26, 2020

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET.&nbsp;” data-reactid=”17″>Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Subscribe” data-reactid=”18″>Subscribe

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Corporate profits look better than expected, the economy looks worse than expected” data-reactid=”19″>Corporate profits look better than expected, the economy looks worse than expected

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="During the early days of the coronavirus pandemic, economic and market forecasters were flying blind.” data-reactid=”20″>During the early days of the coronavirus pandemic, economic and market forecasters were flying blind.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Accelerating numbers of confirmed COVID-19 cases along with sudden lockdowns around the globe made it impossible to estimate with any accuracy the kind of impact economies and businesses would see.” data-reactid=”21″>Accelerating numbers of confirmed COVID-19 cases along with sudden lockdowns around the globe made it impossible to estimate with any accuracy the kind of impact economies and businesses would see.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As preliminary March data — which captured the earliest impacts of these lockdowns — started to trickle in, forecasters were quick to slash their expectations. Economists predicted depression-like numbers and the financial market pros predicted earnings would crash.” data-reactid=”22″>As preliminary March data — which captured the earliest impacts of these lockdowns — started to trickle in, forecasters were quick to slash their expectations. Economists predicted depression-like numbers and the financial market pros predicted earnings would crash.

Now, after two months and many economic and earnings reports later, two narratives have emerged: the U.S. economy as a whole is in worse shape than expected, and the profits of America’s biggest corporations are doing better than expected.

<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The economy looks worse” data-reactid=”24″>The economy looks worse

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Following the releases of April economic numbers, including dismal jobs numbers and disastrous retail numbers, economists revised their forecasts even lower.” data-reactid=”25″>Following the releases of April economic numbers, including dismal jobs numbers and disastrous retail numbers, economists revised their forecasts even lower.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="On May 12, Goldman Sachs cut its GDP forecasts and while warning the unemployment rate would spike to 25%. The same day Goldman cut its forecasts, Credit Suisse economists made similar cuts while warning “a longer growth slump will outlast fiscal relief.”” data-reactid=”26″>On May 12, Goldman Sachs cut its GDP forecasts and while warning the unemployment rate would spike to 25%. The same day Goldman cut its forecasts, Credit Suisse economists made similar cuts while warning “a longer growth slump will outlast fiscal relief.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="BofA economists lowered their GDP estimates last Wednesday, warning that GDP in Q2 would fall at a 40% rate while saying the recession will be “unlike anything we have seen in modern history.”” data-reactid=”27″>BofA economists lowered their GDP estimates last Wednesday, warning that GDP in Q2 would fall at a 40% rate while saying the recession will be “unlike anything we have seen in modern history.”

And just on Friday, JPMorgan economists cut their 2021 GDP forecasts while warning the unemployment rate would stay above 10% through at least the end of the year.

<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Big companies are doing better” data-reactid=”29″>Big companies are doing better

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Through Friday, 97% of S&amp;P 500 (^GSPC) companies had announced their Q1 financial results, including many retailers whose quarters went through April.” data-reactid=”30″>Through Friday, 97% of S&P 500 (^GSPC) companies had announced their Q1 financial results, including many retailers whose quarters went through April.

And these numbers have mostly been better than expected.

“Although aggregate earnings are beating estimates by +2.6%, ex-Financials, earnings are surpassing expectations by +7.1%, with 65% of companies exceeding their lowered projections,” Credit Suisse’s Jonathan Golub wrote on Friday.

To be clear, it looks like earnings per share will have been down by around 14% in Q1. But the takeaway is that analysts were expecting worse.

“Expectations were -10.5% at the end of March, and -25.3% when 1Q reporting season began,” Golub added.

These better-than-expected earnings results help, in part, explain the rebound in the stock market.

The U.S. economy appears to be in worse shape than expected. (AP)
The U.S. economy appears to be in worse shape than expected. (AP)

<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Bigger companies cash in as their smaller competitors struggle” data-reactid=”47″>Bigger companies cash in as their smaller competitors struggle

We’re aware that Corporate America is a part of the U.S. economy, and so these stories aren’t mutually exclusive. Still, these diverging narratives call attention to the fact that big companies have massive advantages in the current environment as everyone else struggles to keep up.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With many small businesses shuttered and tens of millions of Americans workers headed to the unemployment office, government stimulus checks have made their way to big retailers like Amazon and Walmart, which both reported blowout quarterly numbers.” data-reactid=”49″>With many small businesses shuttered and tens of millions of Americans workers headed to the unemployment office, government stimulus checks have made their way to big retailers like Amazon and Walmart, which both reported blowout quarterly numbers.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“The stimulus might as well be called the Amazon and Walmart shareholder act,” NYU professor Scott Galloway said to Yahoo Finance. “There are some unintended consequences here. The strong are getting stronger.”” data-reactid=”50″>“The stimulus might as well be called the Amazon and Walmart shareholder act,” NYU professor Scott Galloway said to Yahoo Finance. “There are some unintended consequences here. The strong are getting stronger.”

For Galloway, what’s happening in business now was inevitable. “The future doesn’t look any different. It’s just being accelerated faster… After 11 years of a bull economy, a lot of these small businesses quite frankly just shouldn’t be around. And they have to adapt and reshape.”

However, many would contend that it’s unreasonable for all businesses to have prepared a financial buffer for a pandemic that led to an unexpected, fragmented, government-mandated, months-long economic shutdown.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“We let big box retailers stay open because they sell essential goods, but they also sell the same nonessential goods that small stores — who were forced to close — normally do,” Gary Cohn, former director of the National Economic Council recently tweeted. “We can’t let this run small stores out of business and need to make sure we level the playing field.“” data-reactid=”57″>“We let big box retailers stay open because they sell essential goods, but they also sell the same nonessential goods that small stores — who were forced to close — normally do,” Gary Cohn, former director of the National Economic Council recently tweeted. “We can’t let this run small stores out of business and need to make sure we level the playing field.“

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="By Sam Ro, managing editor. Follow him at @SamRo” data-reactid=”58″>By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Economy” data-reactid=”60″>Economy

  • 8:30 a.m. ET: Chicago Fed National Activity Index, April (-4.19 in March)

  • 9 a.m. ET: FHFA House Price Index month-on-month, March (+0.6% expected, +0.7% in February)

  • 9 a.m. ET: S&P CoreLogic CS 20-City home price index MoM SA, March (0.3% estimated, 0.45% in February); S&P CoreLogic CS 20-City YoY NSA, March (3.4% estimated, 3.47% in February)

  • 10 a.m. Conference Board Consumer Confidence, May (87.5 expected, 86.9 in April)

  • 10 a.m. ET: New Home Sales, April (500,000 expected, 627,000 in March); New Home Sales month-on-month, April (-20.3% expected, -15.4% in March)

  • 10:30 a.m. ET: Dallas Fed Manufacturing Index, May (-73.7 in April)

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Earnings” data-reactid=”68″>Earnings

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Pre-market” data-reactid=”69″>Pre-market

  • 6:55 a.m. ET: AutoZone (AZO) before market open

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="READ MORE” data-reactid=”72″>READ MORE

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Editor’s note: Morning Brief will be observing Memorial Day. We will return Tuesday, May 26.” data-reactid=”83″>Editor’s note: Morning Brief will be observing Memorial Day. We will return Tuesday, May 26.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.” data-reactid=”85″>Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For tutorials and information on investing and trading stocks, check out&nbsp;Cashay” data-reactid=”87″>For tutorials and information on investing and trading stocks, check out Cashay

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Include question period in Phase 2 of Manitoba's economy restart, NDP says – CBC.ca

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If restaurants, pools and gyms can reopen in the next sweeping phase of Manitoba’s reopening plan, so should a democratic institution holding the government to account, the Official Opposition says.

NDP Leader Wab Kinew wrote to Dr. Brent Roussin and the premier on Monday, arguing the restoration of regular sitting days of question period should be included in Phase 2 of the economy restart, like the many eateries and recreation centres that can soon open their doors.

No date is attached to the second phase yet. 

“The democratic functions of the Legislative Assembly are an essential part of our province,” the letter reads.

“Other provincial legislatures and Parliament are ensuring that regular sittings of their Houses will take
place in June and during the summer.”

Another edition of question period will occur on Wednesday, but no additional dates have been set. The legislature normally goes on summer recess in early June.

Sittings limited during pandemic

The legislature usually meets four days a week throughout much of spring, but sittings were indefinitely suspended by the COVID-19 pandemic in mid-March. 

There has since been one emergency meeting to pass COVID-19 legislation and three question periods in May. 

While negotiations between party house leaders for extra sitting dates have happened, no plan has been ironed out.

“It seems odd to me that when we look at Phase 2, I might be able to get a tattoo on my way to the gym after which I visited a patio, but I wouldn’t be able to hear the Premier answer accountability questions in Question Period,” Kinew said.

On Monday, the Liberals called for sittings every Monday to Thursday in June.   

House Leader Jon Gerrard says the existing sittings, conducted with a reduced number of MLAs, demonstrate the legislature can function under physical distancing and sanitation requirements.

“We have seven weeks of work to make up, and unless we go back with more sitting days, it is not going to get done,” Gerrard said in a news release.

“We should be sitting in June and September to make sure that the PCs have to justify and defend their agenda in public.” 

A number of Progressive Conservative MLAs are seen in the legislature in March 2020. (Gary Solilak/CBC )

Premier Brian Pallister was non-committal last week when asked about more question periods.

“I understand the job of opposition parties is to do what the opposition is trying to do here now,” he said in a media briefing.

“That being said, we’re focused in the middle of a pandemic on the recovery of our province and we’re also focused on being available in an appropriate manner, in a safe manner, here in the legislature and always to answer questions that the opposition and you in the media may have.”

The government said Monday that the health department is comfortable with the physical distancing measures in place for question period. Any additional sitting dates must be negotiated between the parties. 

During the pandemic, Manitoba legislators are meeting more frequently than their counterparts in other provinces. 

The Saskatchewan and Nova Scotia legislatures haven’t been recalled since mid-March. New Brunswick has only met once to consider COVID-19 legislation and Prince Edward Island will resume sitting tomorrow. 

The Manitoba NDP, however, says the provinces representing the vast majority of the population — including Ontario, Quebec, Alberta and British Columbia — have sitting dates in June. 

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Singapore cuts 2020 GDP outlook again as virus batters economy – TheChronicleHerald.ca

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By Aradhana Aravindan and John Geddie

SINGAPORE (Reuters) – Singapore downgraded its 2020 gross domestic product forecast for the third time on Tuesday, the trade ministry said, as the bellwether economy braces for its deepest ever recession.

The city-state lowered its GDP forecast to a contraction range of -7% to -4% from the prior range of -1% to -4%.

Singapore’s economy shrank 0.7% year-on-year in the first quarter and 4.7% on a quarter-on-quarter, a less severe decline than advance estimates, although officials and analysts warned of more pain ahead.

“There continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery,” said Gabriel Lim, permanent secretary at the ministry of trade and industry.

Following the news, the central bank chief economist Ed Robinson said monetary policy remains unchanged and will next be reviewed in October, as planned.

Singapore also downgraded its 2020 forecast for non-oil domestic exports to -4.0% to -1.0%, from -0.5% to 1.5% previously.

Exports have been a rare bright spot for the economy in recent months mainly due to a surge in demand for pharmaceuticals.

Analysts expect the trade-reliant economy to see a deeper contraction in the second quarter due to a two-month lockdown, dubbed a “circuit breaker” by authorities, in which most workplaces closed to curb the spread of the novel coronavirus.

The city-state has among the highest number of infections in Asia and has said that easing of the lockdown from next month will only be done gradually.

“The downward revision…implies a significant deterioration in the second-quarter momentum due to the circuit breaker period as well as a weak recovery trajectory,” said Selena Ling, OCBC Bank’s head of treasury research and strategy.

The government first flagged the possibility of recession in February when it cut its 2020 GDP forecast to -0.5% to 1.5%, from 0.5% to 2.5% previously.

Singapore’s finance minister is set to deliver the latest in a string of multi-billion-dollar economic packages to offset the hit to businesses and households from the pandemic later on Tuesday.

(Reporting by John Geddie, Aradhana Aravindan and Fathin Ungku; Editing by Sam Holmes)

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