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Big Day for Data: GDP, Jobless Claims, Novartis, Durable Goods & More

Thursday, May 28, 2020

What had seemed like a real dearth of major economic data ahead of regular trading this week at last has made up for it with a vengeance this Thursday. New reads on Q1 GDP, Durable Goods and, of course, Initial Jobless Claims all hit the tape an hour before the bell. In addition, a new COVID-19 vaccine candidate is in the works, airlines are planning to lay off significant staff, and President Trump looks to involve the FCC in writing new social media rules.

First, the obligatory Thursday Initial Jobless Claims came in right in-line with expectations at 2.123 million, down from the unrevised 2.44 million the previous week, and well off the lows we saw in the last week of March, which reached a whopping 6.87 million new unemployment applications in one week. In fact, since that nadir, new claims have come down steadily every week.

Continuing Claims dipped, as well — from 25.073 million to 24.912 million the week before last. This is the first week we’ve seen a decline in longer-term claims since the “stay at home” plan to thwart the pandemic took effect.

While we may also be able to temper this jobless claims news — after all, at 2 million-plus per week, we’re still about 10x the average on a normal week — with knowledge that the U.S. economy has already started to reopen, there is evidence that may not translate into instant re-hiring. We saw some of the biggest initial claims rises in the states that have had the most aggressive reopenings, such as Florida, Texas and Georgia. Clearly, our climbing back to a normal domestic economy will take more than simply flipping a switch.

Speaking of job losses, American Airlines AAL this morning announced it will be cutting 30% of its management and administrative staff. This would amount to about 5,000 positions. The company will be offering job buyouts through June 10th, presumably using some of that $5.8 billion American received in federal stimulus that had been earmarked for retaining employment.

Delta Air Lines DAL also has a plan to roll out buyouts, with details yet to be determined. This also brings to mind job cuts we’ve seen at Boeing BA of late, although the good news for the aircraft manufacturer is that it is resuming production of its beleaguered 737 MAX.

Gross Domestic Product in 1st quarter 2020 (Q1 GDP) fell in its first revision, from -4.8% initially reported to -5.0% on today’s read. This was led by a big down-swoop in Consumption, which was down 6.8% in the quarter. Seasonally, Q1 usually shows a drop from Q4 holiday season; this time around, the pandemic put a hard stop on economic activity, though not until the last month of the quarter. Whatever the second and final revision to Q1 GDP winds up being in the weeks to come, the figures for Q2 2020 will surely be much worse.

Durable Goods Orders for April were predictably lousy, though better than anticipated: -17.2% was 100 basis points better than analysts were looking for, though still down from the downwardly revised -16.6%. Ex-Transportation, this number moves up significantly to -7.4%. In the 28-year history of Durable Goods monthly reports, the record low was still -18.8%, from 6 years ago.

Novartis NOV has joined Harvard University — including Mass Ear & Eye and Mass General — in attempting to bring about a vaccine for COVID-19. The pharma company’s gene therapy unit, known as AveXis, will utilize adeno-associated virus to deliver genetic code as antibodies to the disease, similar to the process of gene therapy. Novartis looks to start human trials sometime in the second half of 2020.

Finally, an executive order is expected from President Trump today, asking the Federal Communications Commission (FCC) to write rules of engagement for social media usage — specifically, when to remove content or take action versus violations. It would require the U.S. Attorney General to work with state attorneys general to enforce the new rules. The government would also review ad spending on social media platforms. As a result, Twitter TWTR fell 4% in pre-market trading, while Facebook FB was down 2.2%.

Mark Vickery
Senior Editor

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