The Market Is in the Eye of the Hurricane. 5 Things to Know Today. - Barron's

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The stock market is often used as a gauge for what’s going on in the world—but the market isn’t always cut out for that job.

Take Monday. Stocks barely budged. But Monday wasn’t boring. Vice President Mike Pence self-isolated after one of his aides tested positive for the coronavirus then ended the self-isolation. Tesla’s Elon Musk said he would open his Fremont factory even if it meant he’d get arrested. The Fed was gearing up to enter the market to buy ETFs. Yes, ETFs.

The market as a proxy for life has shortcomings over longer time horizons, too. If an investor had ignored their portfolio since January, they would be forgiven if they believed nothing much happened over the past four-plus months. The Nasdaq Composite is up 2.9% year to date, including dividends. Of course, the index dropped 33% from its high before rising 40% to arrive at 2.9%. Definitely not boring.

Tuesday is shaping up to be another boring day in the markets. Stock futures are barely budging. Less market volatility is a welcome respite for investors who can use the break, perhaps.

Just don’t assume nothing’s happening in the real world.

—Al Root

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Musk Dares California to Arrest Him

Tesla’s (TSLA) opposition to California’s stay-at-home order took a bizarre turn Monday as founder and CEO Elon Musk announced that the car makers’ California plant was up and running, in contravention to Alameda Country rules. He tweeted that “If anyone is arrested, I ask that it only be me.”

• Tesla’s Fremont, Calif., factory has been closed since March 23.
• Before Musk said the plant was reopened, Tesla filed a lawsuit with Alameda County and threatened to move its California production to Nevada or Texas. 

What’s Next: Musk’s theatrics drive home that by and large, lockdown orders have not required much if any police enforcement. That could change depending on whether other executives follow Musk’s lead. As with many things, it’s hard to imagine another public company CEO doing what Musk is doing now, but state and local officials are likely to come under tremendous pressure from business owners to speed up reopenings.

—Ben Walsh

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A Local ‘Dr. Fauci’ Resigns

Weld County, Colo., is an example of what pressure to speed up reopenings looks like. The county has one of the country’s worst industrial outbreaks at a meatpacking plant and the county’s top health official, Dr. Mark Wallace, resigned after his pleas for more resources and rules to protect workers were rebuffed by county officials.

• Rather than implement a testing and tracing program, local officials focused on the need to “reopen” the economy.
• While Dr. Wallace had the authority to close down the plant. But to actually pull that off, he needed the cooperation of other officials, such as the sheriff.

“Despite their national importance, these newly anointed field commanders [like Dr. Wallace] remain at the mercy of the kinds of pressures that have always buffeted small-town bureaucrats.” – Matt Smith, Barron’s reporter who broke the story

What’s Next: A wave of resignations by local health officials is coming, Teresa Anselmo, the executive director of the Colorado Association of Local Public Health Officials, said. Anselmo says she’s been taking calls from health officials who are being pressured and threatened to reopen despite the health consequences of doing so.

At the national level, Dr. Anthony Fauci and other top medical experts will testify before a Senate committee today at 10 a.m. The New York Times reports that Dr. Fauci will warn the senate of the dangers of reopening too quickly.

—Ben Walsh

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New York Will Start to Open Up

The state is starting to come “out the other side” of its coronavirus crisis, Gov. Andrew Cuomo said Monday, and some regions upstate will start opening up on Friday, May 15. The number of new hospitalizations and deaths have now dropped to levels not seen since the state’s initial lockdown order was issued on March 18.

• The three regions that will begin partially reopening on May 15 are the Finger Lakes, the Mohawk Valley, and the Southern Tier. 
• Additional regions will reopen as they meet a set of seven criteria, such as declining hospitalizations for two weeks, a specific level of testing and tracing capacity, and excess hospital capacity.

• Earlier on Monday, Mayor Bill de Blasio said that New York City won’t be lifting its lockdown. “We’re clearly not ready yet,” de Blasio told reporters during his daily press conference.

What’s Next: New York City still has a long way to go before its ready to begin relaxing social distancing, particularly in terms of testing capacity and excess hospital space. The city’s lockdown will continue into June, de Blasio said, and then “we’re potentially going to be making changes if we can continue our progress.” 

—Ben Walsh

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More Masks in the West Wing

There were a lot more masks at Monday’s White House press briefing after a directive that officials must wear them inside the building. President Donald Trump, who is tested for the virus regularly, did not.

• Last week, two people working in the White House tested positive for Covid-19, according to The Wall Street Journal.
• When asked if business owners may be worried about re-opening, given the virus had made it into the White House, Trump noted the White House has a lot of visitors.
• “Normally you wouldn’t do that,” Trump said. “But, because we are running a country—we want to keep our country running—we have a lot of people coming in and out.”

What’s Next: Trump also said $11 billion in funds—part of the Coronavirus Aid, Relief, and Economic Security Act—will soon go to states, territories, and tribes to improve testing. Testing capabilities, experts say, will be key rolling back Covid-19 restrictions.

—Connor Smith

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Global Car Crash

Toyota (TM), the world’s largest car manufacturer, said Tuesday that it expects operating profit to fall by 80% to ¥500 billion ($4.65 billion) and revenue to fall by by 20% in the fiscal year ending in March 2021. The Japanese group added that the “wide-ranging, significant and serious” coronavirus pandemic, which cut demand for new cars throughout the world, means that “weakness will continue for the time being.”

• Toyota however expects sales to jump back to their 2019 level as soon as next year.

• Reuters earlier reported that the Japanese group is readying to slash production in America by nearly a third.
• Volkswagen (VWAGY), the world’s second-largest car maker, reported earlier that operating profit declined by 80% in the first quarter of the year.

What’s Next: Both groups remain profitable. But striking a note of cautious optimism, Volkswagen, which sells about half its production in China, said last week that sales there are on the rebound, notably due to an upsurge of first-time buyers scared away from public transports on health grounds.

—Pierre Briançon

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