The largest truck maker in the world hasn’t made any trucks. Is that a problem?
The company is Nikola, the trucking startup named after the same famous inventor as Tesla. Stock in Nikola rose an incredible 104% Monday, more than doubling in one day. What’s more, shares are up another 8% in premarket trading Tuesday, giving the company a market value of about $29 billion. That’s larger than heavy-duty truck makers such as Paccar and Traton who sell hundreds of thousands of trucks a year.
Nikola doesn’t sell any trucks yet. The company went public last week and doesn’t even have Wall Street analyst coverage yet. On Monday, Nikola founder, Trevor Milton, tweeted about taking in reservations for the company’s light-duty truck called ‘Badger’ starting in late June. Its medium-duty truck is due in 2021, and a heavy-duty truck in 2023.
If there is a lesson for investors, it’s that sometimes the market action can matter more than fundamentals. At least in the short-term.
New Findings on Covid-19 Transmission
Asymptomatic carriers rarely transmit Covid-19. That’s what a World Health Organization official said at a press conference Monday.
- Dr. Maria Van Kerkhove said that, based on WHO data, it is “very rare” that an asymptomatic person transmits the disease to a second person.
- It’s important to note that Dr. Van Kerkhove made a distinction between people that are “truly asymptomatic” and those that actually had mild symptoms or developed symptoms.
- “They’re not ‘COVID’ symptoms, meaning they may not have developed fever yet,” she said. “They may not have had a significant cough, or they may not have shortness of breath, but some may have mild disease.”
What’s Next: The comments were cheered by those hoping to reopen global economies sooner rather than later. Dr. Van Kerkhove said contact tracing is effective, and noted that if we could follow symptomatic cases and isolate them, there would be “a drastic reduction in transmission.”
A Surge of Covid-19 Cases
California and a host of other U.S. states are seeing a surge in the number of reported Covid-19 cases, according to data collected by Johns Hopkins University. The increase comes as every state in the country has, to some degree, loosened its social distancing guidelines.
- New York has managed to dramatically decrease the number of cases in the state. On Sunday, the state conducted 58,000 Covid-19 tests and just 702 came back positive.
- Cases, and more worryingly, hospitalizations are rising in Texas. A week after the governor allowed bars to reopen at half-capacity, the state had more Covid-19 patients in hospitals than at any time since the pandemic began.
- In Arizona, where cases have risen sharply since the stay-at-home order ended in mid-May, the former director of the state’s Department of Health Services said Monday that new lockdown orders could be needed if the “disturbing” trend continues.
What’s Next: The lockdowns implemented by states were a dramatic public health achievement, even if they were tardy and incomplete. London’s Imperial College estimates that lockdowns prevented 60 million people from being infected. However, as Johns Hopkins University epidemiologist Jennifer Nuzzo told the Washington Post, “the lockdowns were a pause button, not a cure.”
The End of the U.S Expansion
It’s official: The longest economic expansion in U.S. history is over. After a record-setting 128-month long expansion, the American economy officially entered a recession in February, the National Bureau of Economic Research’s Business Cycle Dating Committee said Monday.
- The recession began as the coronavirus pandemic first began to hurt economic growth in February.
- The economic contraction worsened significantly and extremely rapidly in March, becoming particularly acute in the middle of the month as state after state put in place lockdowns to contain the spread of the disease by closing schools and businesses around the country.
What’s Next: The economy now faces twin challenges in the form of direct damage from shutdowns and the longer-term reduced demand and job losses caused by the recession itself. The former may largely resolve itself as lockdowns are lifted. The latter could be more difficult to confront, particularly if policymakers feel less compelled to act urgently.
Here Comes the Fed
Jerome Powell and company are set to meet for their first regularly scheduled meeting since the pandemic wreaked havoc on the U.S. economy. Previously, the Federal Reserve Open Market Committee held emergency meetings to cut rates to zero and put in place a host of other emergency measures.
- There’s no expectation that the Fed will raise rates anytime soon, but it might hint at when, or under what economic or financial market conditions, it might contemplate raising rates in the future.
- The Fed is also likely to bring back its Summary of Economic Projections, where it publishes its forecasts for a variety of economic data points.
- The Fed announced Monday it would further loosen the terms of its “Main Street Lending Facilities” program, which is targeted at small to midsize businesses.
“America’s central bankers have shown that they won’t wait for a scheduled meeting to act decisively, so any new policies unveiled Wednesday will more likely be tweaks to existing programs rather than genuine innovations.” —Matthew C. Klein, Barron’s
What’s Next: In the past few months, Americans have lived through a remarkable period of economic trauma. While the damage is significant, it’s not immutable, and the Fed may, in typically muted central-banker speak, say what should be done to fix it.
France Showers Billions on Aerospace Industry
French Finance Minister Bruno Le Maire announced state aid worth a total of 15 billion euros ($17 billion) for the country’s aerospace industry, which includes plane maker Airbus and defense electronics companies Thales, Safran and Dassault. “100,000 jobs are threatened in the coming months” in the industry, Le Maire said Tuesday.
- The plan includes direct equity investment by the government, a debt moratorium, part-time unemployment schemes and a fund to invest in the industry’s small and mid-size companies.
- The state will also subsidize research, and enroll the industry in the bid to produce a carbon-free airplane by 2035.
- .The French central bank said on Tuesday it forecast the country’s GDP to sink this year by 10% in a central (and 16% in a worst case) scenario. The debt-to-GDP ratio would shoot up to 120% with unemployment topping 11.5% in mid-2021.
What’s Next: It’s raining billions on Europe’s industry as governments wake up to the reality of a post-lockdown recovery that will be weaker and take longer than initially forecast. As European Union state aid rules have been shelved during the crisis, governments are rushing in to help and protect.
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—Newsletter edited by Stacy Ozol, Mary Romano, Matt Bemer, Benjamin Levisohn