Market Morning: Airline Coronavirus Fever, Gold Jumps on Fed Speak, Though UPS Unfazed

Market Morning

Airline Stocks Plummet Over Coronavirus Fever Fever

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Coronavirus is taking its toll, if not on actual people (it’s pretty mild so far), then on airline stocks. United Airlines (NASDAQ:UAL) in particular is being smashed, down 16% since news of the Wuhan outbreak broke. Airline traffic has plummeted as travelers to Asia fear being infected. American Airlines (NASDAQ:AAL) has taken the step of suspending flights from Los Angeles to Shanghai and Beijing. Air India and Seoul Air have followed suit, suspending all flights to China entirely.

Apple’s (NASDAQ:AAPL) suppliers in China have delayed reopening factories that closed during the Chinese New Year. They will open, preliminarily, on February 10, assuming the virus is contained by then. Starbucks (NASDAQ:SBUX) expects to take a hit from store closures in China. Over 2,000 of its 4,292 stores have closed in the People’s Republic so far, as nobody’s in the mood for a cup of coffee these days, all being pretty wired as it is on news of the outbreak.

Gold Jumps on Fed Statement as Powell Talks $60B Monthly QE

Gold (NYSEARCA:GLD) had a bit of a jump teasing $1,580 and now above that at time of writing. Federal Reserve Chair Jay Powell in his testimony to Congress yesterday used the phrase “running smoothly” in reference to the Fed’s current purchases of $60 billion of US Treasuries every month, but which is not being referred to as “quantitative easing” for some reason that nobody can quite figure out. He also said that the size of daily repo operations (overnight lending operations, over and above the $60B monthly purchases) will eventually be “adjusted”. No word on whether this means higher or lower, though chances are probably higher considering the direction things have been going lately. He also said he “wanted to underscore” that he will let inflation rise above 2%, in case anyone was worried that the dollar would maintain too much purchasing power and trigger the end of the world as we know it, and now we should feel fine.

“We wanted to underscore our commitment to 2% not being a ceiling, to inflation running symmetrically around 2% and we’re not satisfied with inflation running below 2%,” Powell said of his inflation targets.

FT adds that investors are “scurrying” to gold due to negative-yielding debt, which has been around for quite a while already, raising the question as to why the scurrying is happening specifically now.

Amigo Jumps After It Dumps on Sale News

Amigo Holdings (LSE:AMGO.L), a firm specializing in payday loans, climbed nearly 10% yesterday only 3 days after news that it was looking for a buyer caused shares to plummet to new lows. Amigo has been in the news of late in response to a plan by British gambling regulators to ban the use of credit cards in the gambling industry by April. This could force some gambling business Amigo’s way. Amigo has been London’s worst-performing IPO in three years as regulators have hammered its business. Regulators fear that payday loan users are insolvent, making Amigo’s business inherently unstable. This, of course, is Amigo’s problem, and it is why interest rates are so high in these cases, since they compensate for the higher risk of default inherent in those who need payday loans.

According to Dean, CEO of Payday loan firm Wageme, “In our current financial climate, people in need of instant cash cannot rely on long approval duration by high-street lenders. Instant payday loans are a kind of loan specifically intended to help those who find themselves in need of sudden cash.”

Tesla Shuts Down China Factory

Tesla (NASDAQ:TSLA) is also exercising caution as the spread of Wuhan coronavirus intensifies. Vehicle production in China will be delayed now. A planned ramp-up in production will be put off by about 10 days for the Model 3 due to the shutdown. Tesla earnings topped Wall Street estimates though and shares are yet again at right near all time highs again. The company expects to deliver over half a million cars this year, and has put all the bears in their place.

UPS Though Doesn’t Seem To Mind, Yet

United Parcel Service (NYSE:UPS) doesn’t seem to be bothered by the whole Wuhan thing, at least not yet. It announced yesterday that it aims to more than double weekend deliveries in 2020 in order to satisfy e-commerce demand. UPS started delivering on Sunday at the beginning of the year, noting that e-commerce orders specifically spike on the weekends when people are home and surf-shopping. Saturday service began back in 2017 but it’s not enough to cover demand. Average volume of weekend deliveries in the US has doubled since 2013 as online sales volumes have surged 127%. Meanwhile, Amazon accounts for about 20% of total UPS business, so speed is the key if they want to keep it. Amazon delivered 3.5 billion packages independently last year.



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