Thursday's Headlines

1. Global markets unchanged as unemployment claims spike in the US

2. OPEC+ in virtual meeting on oil production cuts

3. Disney+ gets 50 million subscribers in 5 months

4. When portfolio rebalancing makes good sense

Image courtesy: Victor J. Blue / Getty Images

(Programming note: U.S. markets are closed for Good Friday tomorrow and we are going to take the day off as well. We are back with you on Monday. Stay safe and enjoy the long weekend.

Deb & Caleb)

Markets Today

Global markets are flat to lower this morning, except for Australia, where the ASX 200 is up over 3.5% as banks lead the way down under. India's stock market has also entered a technical bull market, rising 20% from its lows on March 23. India has implemented the world’s biggest lockdown to contain the spread of the virus, and the government has unveiled a $22 billion fiscal stimulus package along with other support measures to shore up the economy. U.S. futures are rising as the Federal Reserve announced a new $2.3 trillion lending facility for small and medium sized businesses.

6.6 million Americans filed for unemployment in the past week, far more than the 5 million expected (More below). The layoffs have been concentrated in the travel and hospitality sector, but more retailers are shedding workers as sales disappear due to quarantines and social distancing. The pressure is on in Washington for more stimulus measures from Congress. The Federal Reserve made its move this morning, and it will likely not be the last.

Headlines

Oil prices were higher ahead of the OPEC+ meeting to discuss production cuts. Previous talks collapsed after Russia rejected OPEC's steep cuts proposals and ended a three-year alliance. The country is willing to cut output by 1.6 million barrels per day, according to Bloomberg. Much is at stake for U.S. shale firms which need prices to rise in order to remain profitable. The G20 group energy ministers will meet Friday.
The Federal Reserve announced a set of new programs Thursday that will provide $2.3 trillion in loans to reach small and midsize businesses and U.S. cities and states. "The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible," said Fed Chair Jay Powell in a statement.
The Producer Price Index in the U.S. for final demand fell 0.2% in March, as prices for final demand goods dropped 1.0 percent and the index for final demand services moved up 0.2%. The final demand index advanced 0.7% for the 12 months ended in March.
Vermont Senator Bernie Sanders suspended his campaign for president, effectively ending his presidential run, and setting up former Vice President Joe Biden to face President Donald Trump in November. Sanders also said he would remain on ballots and continue to collect delegates so that he could push the Democrats closer to his vision for America.
Starbucks cut its Q2 2020 earnings forecast by half and withdrew its full year guidance due to the COVID-19 crisis. In a new SEC filing, the world's largest coffee chain said it saw a 50% decline in comparable store sales in China for the quarter. In the U.S., sales began declining mid-March and were down 60-70% during the last week of the month when 44% of stores were operating.
Costco shares are down in pre-market trading after March sales results disappointed investors. Net sales were $15.49 billion, which is an increase of 11.7% from $13.87 billion last year. Comparable sales increased 9.6% with e-commerce sales jumping 48%.
The Bank of England will directly finance the U.K. government's spending on the coronavirus health crisis as costs mount. This arrangement to provide additional liquidity through the Ways and Means facility will be temporary and short-term, the government will continue to use bond markets as its primary source of funds, and the amount will be repaid before the end of the year, said the press release.
Google’s Cloud Platform suffered an outage yesterday which also took down Snapchat, Gmail and Google's smart home unit, Nest. Google says the issue was resolved in 90 minutes and stemmed from its Cloud IAM (Identity and Access Management) service.
Only 69% of U.S. apartment households paid rent in April, according to The National Multifamily Housing Council (NMHC), a landlord trade group. This is down 82% from April last year and 81% last month. Click here for more information on rent relief.

Image courtesy: Mobius / Giphy

The Big Story

Disney+ Subscribers Almost Double in 2 Months

Disney says its streaming platform has over 50 million paid subscribers in the world just five months after it first launched in the U.S. on Nov. 12. The service, which competes with the likes of Netflix, Hulu, YouTube and Amazon Prime, is now available in over a dozen countries and has benefited from stay-at-home orders in Europe, Asia and North America. The total number of paid subscribers has grown 75% since February 3 when CEO Bob Iger told investors it stood at 28.6 million. This is very impressive considering the company originally expected to reach 60 million to 90 million global subscribers by the end of 2024. For comparison, Netflix had 167 million subscribers at the end of 2019. It surpassed 50 million subscribers in 2014, seven years after it introduced streaming. DIS shares are up 4% in pre-market trading.

It's important to note that Verizon gave 12 months of free Disney+ to certain customers and these users accounted for 20% of the total back in February. Also, Disney says it already has approximately eight million subscribers in India. The service was actually integrated with an Indian platform called Hotstar on April 2, which is estimated to have around 2 million paying subscribers. Hotstar is owned by Star India, which Disney acquired after its merger with 21st Century Fox a year ago. All Hotstar users were automatically upgraded to Disney+ and will be charged higher rates upon renewal, at which point they may opt out.

Image courtesy: eMarketer

Quarantines have lifted screen time limits, freed up schedules and there's no live sports on either, which means people at home are looking for new content online more than ever. The growth in viewership and subscribers is likely to be across the board, but especially focused on platforms with low penetration. Jeffrey Katzenberg's star-studded Quibi saw 300,000 mobile downloads on its launch day in the U.S. and Canada, according to Sensor Tower.

But there are a few things to keep in mind. People could choose to cancel their subscriptions as disposable incomes dry up. Ad-supported platforms will suffer cuts in revenue. Productions have also been halted, which means companies will start running out of new exciting inventory in the next few months. For Disney specifically, its streaming platform is not profitable and the jump in subscribers won't offset what COVID-19 is going to cost its other businesses this year. Theme parks and theaters are shut. Cruises have stopped. ESPN will have to rely on archival content. Companies are going to cut their advertising budgets and its networks will suffer.

Read more:

Netflix Stock Could Hit New Highs in 2020

Image courtesy: US Department of Labor

The Big Number: 6.6 Million

That's how many Americans filed for unemployment last week, according to the Labor Dept. It's higher than the 5 million expected, and it brings the three-week total of new unemployment claims to close to 16 million. That's nearly 10% of the U.S. labor force, and those numbers are expected to climb.

The layoffs had been concentrated in the travel and hospitality sectors, as expected, but the Labor Dept's latest report shows a rapid rise in restaurants and bars, as well as health care and social assistance jobs.

1.3 million people who dropped out of the labor force due to layoffs say they were unable to look for work in the past week due to social distancing restrictions. The largest increases in initial claims for the week ending March 28 were in California (+871,992), New York(+286,596), Michigan (+176,329), Florida (+154,171), Georgia (+121,680), Texas (+120,759), and New Jersey (+90,438). The largest decreases were in Nevada (-20,356), Rhode Island (-8,047), and Minnesota (-6,678).

April is Financial Literacy Month

You shouldn't wait for markets to fall to rebalance your portfolio, but now is as good a time do it, as any. Rebalancing is the process of realigning the weightings of a portfolio of assets. Rebalancing involves periodically buying or selling assets in a portfolio to maintain an original or desired level of asset allocation or risk.

For example, say an original target asset allocation was 50% stocks and 50% bonds. If the stocks performed well during the period, it could have increased the stock weighting of the portfolio to 70%. The investor may then decide to sell some stocks and buy bonds to get the portfolio back to the original target allocation of 50/50.

Read more: