Tuesday's Headlines

1. Global markets rally as virus declines in Asia and Europe

2. U.S. Congress considers additional $1-2 trillion stimulus bill

3. Small business optimism shrinks to historic levels

4. Americans focus on home improvement projects

5. The magic of compound interest

Image courtesy: Alexander Hassenstein / Getty Images

Markets Today

Global markets are extending yesterday’s rally as investors’ appetite for stocks seems to be increasing as more data shows a leveling or decline in COVID-19 cases and fatalities in Asia and Europe. South Korea reported less than 50 new cases for the second day running, and China also recorded no new deaths as of April 6 for the first time since January when it made those figures public. U.S. markets rallied nearly 8% on Monday and futures are pointing to gains of 3-4% this morning. Oil prices are up 3% as OPEC+ is set to meet later this week to agree on production cuts to stabilize prices.

There may be a new $1-2 trillion spending bill on the table for U.S. Congress to consider (More below). It directs more funding at back-stopping U.S. small businesses and direct payments to individuals who qualify. It’s day three of the CARES Act being put to the test as tens of thousands of small businesses apply for $350 billion of PPP (Payroll Protection Program). As of Monday morning, the SBA had processed 124,000 loans totaling $36 billion, from over 2,300 lenders. The Federal Reserve also announced it is launching a small business lending financing program. More stimulus may be necessary as small businesses optimism fell to its lowest level in history.

Financial markets will turn faster than the on-the-ground economy in cities and small towns around the world where most people work. It's already happening.

Headlines

U.K. Prime Minister Boris Johnson was moved to intensive care Monday evening after his coronavirus symptoms worsened. His key responsibilities, including coordinating the country's response to the disease, will be performed by foreign secretary Dominic Raab.
Japan's President Shinzo Abe has declared a state of emergency due to the rapid spread of the coronavirus. He also unveiled a stimulus package worth almost $1 trillion as restrictions on movement and businesses are set to increase and the economy will suffer.
Auto insurers are refunding hundreds of millions in premiums to customers as driving reduces. Allstate Corp said it would return a total of $600 million with customers receiving 15% of their April and May premiums. American Family Insurance is returning a total of $200 million.
The Kraft Heinz Company said "very strong consumer demand" due to the COVID-19 outbreak will boost its Q1 2020 net sales by 3% and organic net sales by 6%. The company does not expect the full benefit from incremental sales in the quarter to flow through to net income/(loss) from continuing operations, Adjusted EBITDA(1), or earnings per share due to added expenses to meet this accelerated growth and other headwinds previously disclosed.
Samsung expects operating profit of $5.23 billion and sales of $44.9 billion in Q1 2020. Both figures are increases from the same quarter last year and were included in the tech giant's earnings guidance released today.
Boeing has stopped all airplane production in the U.S. The company has announced it is shutting down its South Carolina plant and extending the Washington plant shutdown indefinitely.
A potential COVID-19 vaccine developed by Inovio Pharmaceuticals, INO-4800 DNA, is being tested on humans. It's the second vaccine to enter this stage of clinical trials after Moderna's mRNA-1273. Shares in Inovio are set to continue rising today after jumping 9% yesterday.
The Federal Reserve said it would create a new program to finance loans that banks and other lenders make through the government’s emergency small-business lending program. The move will free up financial firms to make more loans guaranteed by the Small Business Administration’s Payroll Protection Program, part of a $2.2 trillion economic relief package.
Airbnb says private equity firms Silver Lake and Sixth Street Partners are investing $1 billion in a combination of debt and equity securities. The company said the funds will go toward its longterm work to support its community of hosts and its long-term stays and experiences products.

The Big Story

More Stimulus on the Horizon

Investors may have another reason to celebrate besides signs we’re beating the virus – leaders in Washington say they are ready to start work on the next stimulus bill and there appears to be some bipartisan thawing after public sparring.

House Speaker Nancy Pelosi reportedly told other Democrats and former Federal Reserve Chair Janet Yellen on a conference call it has to be $1 trillion or more. Bloomberg reports that Pelosi wants the bill to replenish funds for programs established in Congress’s $2.2 trillion virus relief bill, additional direct payments to individuals, extended unemployment insurance, more resources for food stamps and more funds for the Payroll Protection Plan that provides loans to small businesses.

There was no mention of infrastructure, which she talked about last week. This is most likely a compromise to stick to issues directly related to the crisis rather than a broader agenda, as Republicans complained about last week. Senate Majority Leader Mitch McConnell previously advocated a wait-and-see approach. He said Pelosi's push was "premature" and she should "stand down," but he has recently signaled he is open to working on a new bill. On Friday, he told Associated Press "there will be a next measure" and it "should be more a targeted response to what we got wrong and what we didn’t do enough for — and at the top of the list there would have to be the health care part of it."

White House officials have also discussed a payroll-tax cut, a capital-gains tax cut, creating 50-year Treasury bonds and a waiver that would clear businesses of liability from workers who contract COVID-19, according to Fox Business.

Congress is currently adjourned and lawmakers won't return to Washington until April 20, so a bill could be possibly be enacted in May.

Image courtesy: 20th Century Fox Home Entertainment/ Giphy

The Big Number: 142%

That's the increase in demand for professionals to mow and trim lawns during March, according to data released by Thumbtack, an online platform that connects over 10 million customers with local small businesses.

The company says there's been a dramatic drop in activity last month, especially in San Francisco (-61%), San Jose (-60%) and New York (-40%). Worst hit are event services (DJs, caterers, entertainers) and other categories that involve interaction. What's interesting, however, is the rare categories we're seeing increases in. It's mainly in the home as people tackle the projects they can while social distancing.

Outdoor landscaping and design +44%
Tree trimming and removal +20%
Central air conditioning installation or replacement +33%
Concrete installation +8%
Fence and gate installation +4%

Home improvement retailers like Home Depot and Lowe's remain open during the lockdowns, and there's other evidence that people are looking to complete home projects while hunkered in their houses. There's this interview with a Pittsburgh Lowe's employee who complained people are buying "gallons and gallons of paint. They’re buying mulch. They’re buying flowers. They’re buying blinds, home decor items and they’re not coming in for essentials." Workers in different parts of the country have complained that Lowe's is still promoting its spring Black Friday sale and driving crowds to its stores. Research and Markets identified "home and garden" as one of the areas seeing growth amid the outbreak. It's unclear whether any of this is enough to help offset losses expected of these firms.

April is Financial Literacy Month

The magic of investing really comes down to two words: Compound Interest.

Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. Thought to have originated in 17th century Italy, compound interest can be thought of as "interest on interest," and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.