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Market Snapshot: Dow up 200 points midday in bumpy trade, partially recovering Thursday’s losses

U.S. stock benchmarks held in positive territory midday Friday, but traded well off their opening peaks, as Wall Street attempted to recapture losses from the sharpest selloff for the market since mid-March on Thursday.

How are benchmarks faring?

The Dow Jones Industrial Average
US:DJIA
gained 202 points, or 0.8%, to trade at around 25,330 early afternoon after earlier touching an intrasession peak at 25,965.55 and a low at 25,183.

Meanwhile, the S&P 500 index
US:SPX
was up 12 points, or 0.4%, at about 3,014, off its intraday peak at 3,088 but also off its low at 3,003.10. The Nasdaq Composite Index
US:COMP
climbed 27 points, or 0.3%, to roughly 9,520, after briefly slipping into negative territory at 9,485.04.

On Thursday, the Dow closed down 1,861.82 points, or 6.9%, to 25,128.17, the S&P 500
US:SPX
was down 188.04 points, or 5.9%, to finish at 3,002.10, and the Nasdaq Composite
US:COMP
ended down about 527.62 points, or 5.3%, at 9,492.73, one day after charting a record above 10,000.

All three indexes saw their sharpest one-day drops since March 16 on Thursday. The S&P 500 and the Dow finished at their lowest levels since May 26, while the Nasdaq ended at its lowest since May 29, according to Dow Jones Market Data.

For the week, the Dow is down 7.3%, the S&P 500 was on track to lose 6.6%, while the Nasdaq was off 3%.

What’s driving the market?

Investors are assessing the state of the stock-market’s 10-week rally, a day after equity indexes registered a bruising decline prompted by fears of a resurgence in the coronavirus pandemic in the U.S. and a bleak economic outlook from the head of the Federal Reserve.

Indeed, the International Monetary Fund’s Gita Gopinath said that the global economy is recovering more slowly than expected and faces “significant scarring,” Bloomberg News reported. In a video released Friday but recorded June 4, Gopinath said the IMF will release updated growth projections on June 24 that will likely be worse than April projections for a global contraction of 3%, if the disease lingers.

Fears of an emerging second wave of the epidemic in the U.S. persist, with Reuters reporting that half a dozen states, including Texas and Arizona, are facing rising infections of COVID-19. Arizona, Utah and New Mexico all posted rises in new cases of 40% or higher, while Florida, Arkansas, South Carolina and North Carolina saw cases rise by more than 30% for the week ended June 7, on a rolling seven-day basis, according to Reuters.

Richmond Federal Reserve Bank President Tom Barkin on Friday, during a webcast panel discussion sponsored by the Virginia Tech Office of Economic Development, said that the pandemic could have effects that last beyond the next couple of months and cautioned that some of the millions of jobs that have been lost during the viral outbreak may never return, echoing similar remarks made by Fed Chairman Jerome Powell on Wednesday.

Some analysts characterize the rebound Friday from Thursday’s slump as unlikely to be sustainable.

Naeem Aslam, chief market analyst said that it “is normal to experience some bounce next day.”

“I suspect the bounce is a dead cat bounce because the sentiment is further dented by the fresh comments by the chief economist of the IMF who said that the world economy is growing much slower than the anticipation and the scars of the coronavirus pandemic may linger for much longer,” he said.

However, bullish investors don’t believe Thursday’s downturn signaled a unraveling of the trend higher for U.S. equities.

“The big question is where do we go from here. We had been saying for some time that we expected some corrections, but that the downside had become more limited given a still-bearish consensus, high cash levels, and a broadening rally,” wrote Esty Dwek, head of global market strategy, at Natixis Investment Managers, in emailed remarks Friday.

“We maintain this view and for now, do not believe this is the start of a new collapse,” Dwek wrote, also advocating that investors should be cautious in the road ahead.

In U.S. economic reports, a reading import prices for May rose, up 1%, by the most in more than year, marking the largest gain since February 2019, the Labor Department reported. Meanwhile, the University of Michigan’s consumer sentiment index showed an increase to a reading of 78.9 from 72.3 in May.

Meanwhile, a report on economic growth in the U.K. showed that gross domestic product contracted by a record 20.4% in April, highlighting weakness in Europe and one of the region’s hardest hit by the epidemic.

Which stocks are in focus?
  • American Airlines Group Inc. shares
    US:AAL
    are in focus Friday after the company announced a series of business updates in a filing with the Securities and Exchange Commission as its demand trends and cash-burn trajectory improve. Shares were surging 15%.

  • Other airline stocks were also sharply higher, including Delta Air Lines Inc.
    US:DAL
    , up 9%, and United Airlines Holdings Inc.
    US:UAL
    rising 14%.

  • Dick’s Sporting Goods Inc. shares
    US:DKS
    jumped 7% in Friday trade after the athletic retailer said it was bringing back its dividend program.

  • Bankrupt auto rental company Hertz Global Holdings
    US:HTZ
    wants to sell as much as $1 billion in stock to take advantage of its recent rally, the Wall Street Journal reported, citing the company’s lawyers. Its shares were up 47% Friday.

  • Azek Co.
    US:AZEK
    surged 23% in opening trade after the maker of sustainable building materials priced its public offering late Thursday.

  • Caterpillar Inc.
    US:CAT
    was downgraded to market perform from outperform at BMO Capital Markets on concerns about the impact of tight budgets on the industrial machinery company’s comeback. Its shares ticked down 0.1%.

  • Shares of Calvin Klein parent company PVH Corp.
    US:PVH
    were the biggest loser in S&P 500 Friday, down nearly 10% after reporting earnings on Thursday.

How are other assets faring?

Oil prices gave up slight early gains on Friday. West Texas Intermediate
US:CLN20
was off 5 cents, or 0.1%, at $36.29 a barrel on the New York Mercantile Exchange, after marking the worst one-day slide since April 27.

The greenback traded up 0.6% but was poised for a near-flat finish on the week against its major rivals, as gauged by the ICE U.S. Dollar index
US:DXY.

In precious metals, August gold
US:GCM20
on Comex rose 5 cents or less than 0.1%, at $1,732.50 an ounce after jumping 1.1% on Thursday.

The 10-year Treasury note yield
BX:TMUBMUSD10Y
rose 4.7 basis points to 0.70%. Bond prices move in the opposite direction of yields.

In global equities, the Stoxx Europe 600 index
XX:SXXP
closed at 354.06, up 0.3% after ending Thursday down 4.1%, while the FTSE 100 index
UK:UKX
closed at 6,105.18, up 0.5% following its 4% Thursday plunge.

In Asia, Japan’s Nikkei
JP:NIK
fell 0.8%, the China CSI 300
XX:000300
finished 0.2% higher and Hong Kong’s Hang Seng Index
HK:HSI
closed off 0.7% lower. South Korea’s Kospi index
KR:180721
fell 2% after a 0.9% decline in the previous session.

—-

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It’s official: U.K. won’t require an extension of Brexit talks, even as negotiations with EU hit gridlock

The U.K. reiterated Friday, two weeks before the expiration of a deadline upon which it had to make its intentions clear, that it would not seek an extension of the current “extension period” that binds the country to the European Union until Dec. 31.

“We have informed the EU today that we will not extend the transition period,” U.K. Cabinet Office Minister Michael Gove tweeted. “The moment for extension has now passed.”

The government separately said that it would delay implementing full-scale border controls for goods entering Great Britain from Europe, originally scheduled to start Jan. 1, until July. Controls will instead be gradually introduced in three phases — in January, April and July — to take into account the pressures on businesses triggered by the COVID-19 pandemic.

The U.K.’s final decision not to request an extension is in line with the consistent position of the prime minister, Boris Johnson, who had Parliament translate his electoral promise into law last year after the December general election.

The U.K. legally left the EU on Jan. 31 but has been since then in a “transition period” with the same rights and obligations of any member state — save for a presence in institutions where decisions are being made.

Before Gove’s announcement, the Welsh and Scottish first ministers had written to Johnson demanding an extension, which the European Union has said it is open to.

Opinion: ‘No-deal’ Brexit raises its ugly head again

The EU and U.K. are currently negotiating a treaty on their future relationship, with talks seemingly at a dead end. Major disagreements persist on future access to the U.K.’s fishing waters and on the “level playing field” requested by EU negotiators in areas such as state aid, competition law, and labor and environmental regulations.

The U.K. separately began negotiating a free-trade agreement with the U.S. on May 5.

Chief EU negotiator Michel Barnier wrote in May to indicate that the European Union was open to extending negotiations, but said on Twitter on Friday that the commission “took note of U.K.’s decision not to extend.”

“To give every chance to the negotiations, we agreed to intensify talks in the next weeks and months,” he added.

Read:Pound slips as lead U.K. negotiator says little progress made in Brexit talks

Friday’s announcement increases the likelihood of the transition period ending with a “no-deal Brexit,” meaning an exit from the European Union without an agreement in place.

“By ruling out any extension decision now, the U.K. is basically saying that transition ends this year,” Michael Dougan, professor of European law at the University of Liverpool, told MarketWatch.

“The chances of reaching a meaningful deal, ready to enter into force by 1 January 2021, appear very slim, i.e. given the fundamental differences between the EU and U.K. positions and bearing in mind the unprecedented nature of the task at hand as well as the time scale available,” he said.

Johnson is expected to meet European Commission President Ursula von der Leyen and other EU leaders on Monday to discuss the disagreements and try to jump-start Brexit talks.

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Coronavirus update: Global case tally tops 7.5 million as countries push ahead toward phased reopenings — with mixed results

The number of global cases of the coronavirus that causes COVID-19 climbed above 7.5 million on Friday, as countries around the world continued to lift restrictions on movement with mixed results.

France has seen no increase in new cases of the illness a full month after ending a strict lockdown, and health authorities say there are 933 patients in intensive-care units across the country, a steep decline from the peak of 7,148 seen in April, the Guardian reported. France is expected to lift its state of emergency on July 10.

Denmark, Austria and Germany are also moving ahead with phased reopenings as new case numbers continue to fall. But other countries, including Pakistan, Brazil and Russia, are still seeing sharp increases from day to day. Pakistan had a record number of new cases this week, and, given challenges in its health-care system, its true numbers are expected to be higher than official data show.

In the U.S., Florida also saw its highest number of cases in a single day on Friday, exceeding the record set a day ago. The Sunshine State counted 1,902 new cases of COVID-19, according to the health department, after 1,698 new infections on Thursday, as the New York Post reported.

That’s almost 20% higher than the previous one-day record of 1,419 cases, recorded just last Thursday.

Florida was an early hot spot in the U.S. but also moved early — on May 4 — to lift restrictions on movement, against the advice of health-care experts and public health officials. The loosened restrictions allowed people to flock to the beach, some of which were packed over the Memorial Day weekend.

Another 22 states are still seeing increases in new infections, according to a New York Times tracker, including Arizona, Texas, California and Louisiana.

Read now:Asymptomatic transmission of coronavirus appears to be worse than SARS or influenza — 5 reasons you should care

President Donald Trump said he will resume his campaign rallies starting next Friday in Tulsa, Okla., as the Associated Press reported — that’s another state that loosened restrictions on movement early. Gov. Kevin Stitt, a Republican, has placed no limits on crowds gathering, which health experts say is a one of the main risk factors in viral spread.

Trump’s Tulsa gathering will take place on a key date and in a symbolic place for black Americans, as Tulsa was the site of a horrifying race massacre on May 31 and June in 1921; white mobs killed up to 300 black people. And June 19, known as Juneteenth, is traditionally celebrated as the anniversary of slavery’s end in the U.S.; it marks the day Abraham Lincoln’s Emancipation Proclamation was read by Gen. Gordon Granger to freed slaves in Texas, the last state in which slaves were freed.

For more, read: Black leaders call Trump’s Juneteenth rally in Tulsa ‘a slap in the face’

Sen. Kamala Harris, a California Democrat and former presidential candidate, tweeted her criticism of the Tulsa rally plan:

Trump’s campaign has warned attendees that they must assume all risks related to exposure to COVID-19 and agree not to hold the president and his re-election campaign liable for injury or illness.

Meanwhile, in another sign that many Americans are wary of gathering in large numbers while the pandemic continues to rage, Walt Disney Co.
DIS,
+0.98%

has become the subject of a Change.org petition protesting its announcement that it will reopen the Disneyland and Disney California Adventure theme parks on July 17, with significant operational changes. Those southern California theme parks have been closed to the public since March 14 as a result of the coronavirus pandemic.

For more, read:‘Disneyland reopening schedule looks like the unsafest thing ever’: Thousands sign petition asking to delay July opening

“Many people have lost loved ones due to this pandemic and by reopening the parks they are endangering cast members and guests to be exposed to COVID-19,” the petition reads in part. The petition also notes concerns about the potential for a second wave of COVID-19.

Latest tallies

There are now 7.54 million confirmed cases of COVID-19 worldwide, and at least 422,062 people have died, according to data aggregated by Johns Hopkins University.

At least 3.6 million people have recovered.

The U.S. has the highest case tally in the world at 2.02 million and the highest death toll at 113,883.

Brazil has 802,828 cases and 40,919 fatalities, the data show. Russia has 510,761 cases after a steep increase overnight, and 6,705 fatalities.

India has passed the U.K. by case number, with 297,535 cases and 8,498 deaths.

The U.K. has 292,862 cases and 41,364 deaths, the highest death toll in Europe and second highest in the world after the U.S.

See now: The U.K. economy collapsed by a record 20.4% in April

Two early European hot spots: Spain has 242,707 cases and 27,136 deaths, and Italy has 236,142 cases and 34,167 deaths.

Peru, France Germany, Iran, Turkey Chile, Mexico, Pakistan, Saudi Arabia and Canada are next and are all ahead of China, where the illness was first reported late last year. China has 84,220 cases and 4,638 deaths.

Read:‘We have glimmers of hope’ — scientists testing whether coronavirus survivor plasma can prevent infection in others

What’s the economy saying?

The cost of goods imported into the U.S. rose in May for the first time since the coronavirus throttled the economy, reflecting a rebound in oil prices and signaling that a bout of deflation after the pandemic may be coming to an end, as MarketWatch’s Jeffry Bartash reported.

The price index for U.S. imports climbed 1% last month to mark the first increase since January.

Excluding energy, import prices rose a much smaller 0.1%, the government said.

Even after May’s increase, import prices are 6% lower compared with a year earlier. The pandemic has delivered a massive blow to global trade, reduced demand for a variety of goods and services, and forced many companies to cut prices to try to drum up sales.

Separately, U.S. consumer sentiment climbed to 78.9 in early June from 72.3 as reopening eased some worries.

What are companies saying?

The IPO market showed renewed resilience on Friday, after four deals priced at the top or above their price ranges and companies issued more shares than originally planned, with two of them, outdoor-building-materials maker Azek and vaccine producer Vaxcyte seeing rises of about 20% from their pricing levels in trading debuts.

See now:Azek is going public: 5 things to know about the maker of decking, patio and other outdoor products

CNBC reported that mortgage lender Quicken Loans is planning an IPO, and data-mining company Palantir Inc. is preparing to confidentially file for a deal, according to a Reuters report. Palantir was founded by VC Peter Thiel, and does data-mining work for the Trump administration.

In other news, building products maker Johnson Controls International PLC said it will resume its share buybacks in the fourth quarter, after halting them at the peak of the pandemic to preserve cash. And sporting retailer Dick’s Sporting Goods said it is resuming dividend payments.

Elsewhere, companies continued to offer updates on their businesses and plans to reopen and to discuss bond deals.

Here are the latest things companies have said about COVID-19:

• American Airlines Group Inc.
AAL,
+14.49%

announced a series of business updates in a filing with the Securities and Exchange Commission as its demand trends and cash-burn trajectory improve from the worst of the pandemic. The company expects second-quarter revenue and total system capacity to be off by 90% and 75%, respectively, from a year earlier. American Airlines has cut $13.5 billion from its operating and capital budgets for the year through “significant cost reduction actions” around marketing, maintenance, events, training, airport facilities, and other areas. The company has “passed the peak in cash refund activity” as flight demand has started to improve. That’s helped American Airlines’ cash burn rate improve to an estimated $40 million a day for the month of June, from a peak of more than $100 million a day during April. The company is hoping to reduce its cash-burn rate to about zero by the end of the year “as expected demand conditions continue to improve and its cost initiatives continue to gain traction.”

• Centene Corp.
CNC,
+1.16%

raised its full-year earnings guidance to reflect its current expectations for membership, revenue and medical utilization trends during the pandemic. The managed care company is now expecting full-year per-share earnings of $3.06 to $3.20 and adjusted EPS of $4.76 to $4.96. The company expects full-year revenue to range from $109.5 billion to $111.9 billion. The current FactSet consensus is for full-year EPS of $4.72 and revenue of $110.7 billion.

• Dave & Buster’s Entertainment Inc.
PLAY,
+9.22%
,
the entertainment and dining chain, reported a fiscal first-quarter loss amid lower sales caused by coronavirus. Dave & Buster’s reported a loss of $43.5 million, or $1.37 a share, compared with net income of $42.4 million, or $1.13 a share, in the year-ago quarter. Revenue tumbled 56% to $159.8 million from $363.6 million a year ago. Analysts surveyed by FactSet had expected a loss of adjusted earnings of 77 cents a share on sales of $167.8 million.

• Dick’s Sporting Goods Inc.
DKS,
+6.82%

is bringing back its dividend. On June 10, the company declared a dividend of $0.3125 per share payable on June 30 to shareholders of record as of the close of business on June 22. The dividend program had been suspended as part of the measures taken to preserve liquidity after the coronavirus spread in the U.S. and stores were shuttered. Dick’s Sporting Goods expects to reopen nearly all of its stores by June 30, will bring back “substantially” all of its associates from furlough and will restore pay, except for certain executives.

• JetBlue Airways Corp.’s
JBLU,
+7.74%

credit rating was downgraded further into “junk” territory at S&P Global Ratings, which cited an expected “substantial cash flow deficit” in 2020 as the pandemic has resulted in a steep decline in airline traffic. The rating was cut to B+, which is now four notches into speculative-grade. The outlook is negative, which warns of possible further downgrades. “While the company is reducing capacity and some associated costs, and benefits from the steep decline in oil prices, we expect these to continue to be more than offset by much weaker traffic levels,” S&P said.

• Johnson Controls
JCI,
+1.33%

plans to resume share buybacks in its fiscal fourth quarter. Like many companies, Johnson Controls suspended buybacks during the coronavirus pandemic as it moved to preserve cash given the uncertain economic outlook. The company has about $735 million available under its current authorization for 2020 and $3.1 billion in the full program.

• Lululemon Athletica
LULU,
-4.48%

reported fiscal first-quarter profit that was above Wall Street expectations but sales were a miss. The yoga-wear maker ended the quarter with $823 million in cash and equivalents, and a borrowing capacity of $398 million. Online sales were a highlight of the quarter, up 68% and making up half of the company’s total sales in the three-month period. “Our strong digital business demonstrates the strength of our guest connection,” Chief Executive Calvin McDonald said in a statement. Lululemon didn’t provide fiscal 2020 guidance thanks to “rapid and continuous developments” related to the pandemic’s impact on its business. It also did not provide same-store sales figures, saying they wouldn’t represent true business trends due to the closures.

• Party City Holdco Inc.
PRTY,
+26.06%

announced a possible deal that would reduce the company’s debt by 25% and raise $100 million in capital. The retailer made the announcement as it posted weaker-than-expected quarterly earnings as the pandemic hurt sales. “[T]o support our ongoing transformation initiatives, we recently announced an agreement with certain of our bondholders to support a set of transactions that, if consummated, is expected to reduce the company’s debt by over 25% and raise approximately $100 million in new capital,” said CEO Brad Weston. The deal would be with 54% of holders of Party City’s 6.125% senior notes due 2023 and 6.625% senior notes due 2026. Party City began to reopen stores on May 1, and 85% of locations are now in operation with measures taken to prevent the spread of coronavirus, including the addition of signage to encourage social distancing and restrictions on the number of customers in a store at one time. For the remainder of 2020, the company will shutter 21 stores and open two stores, with another 10 planned new stores moved to 2021.

• PVH Corp.
PVH,
-9.89%
,
owner of the Calvin Klein and Tommy Hilfiger brands, reported results below the Wall Street consensus due to the pandemic. A majority of its stores and wholesale customer stores were closed for an average of six weeks worldwide in the quarter because of the pandemic, and that it hoped to have more than 85% of its stores open by mid-June. Still, PVH expects its revenue decline in the second quarter to be “ more pronounced than in the first quarter.

Coronavirus Update: U.S. Cases Top Two Million, Stocks Drop on Fed Plans

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Sentiment Recovers but Has No Immunity to This Virus

Americans aren’t feeling quite as glum now as they were last month. So long as the economy remains in the grips of Covid-19 crisis, though, their optimism will face limits.

The University of Michigan on Friday said that in a preliminary reading its consumer sentiment index rose to 78.9 in June from 72.3 in May. Both components of the index, one based on what people surveyed say the economy is like now and the other on what they expect it will be like 12 months from now, gained.

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Aluminum Glut Revives Financial Crisis-Era Storage Trade

Wall Street banks and investors are joining commodity traders in stockpiling aluminum, an unconventional way to make money at a time when returns on bonds are historically low.

The pandemic hit the aluminum market hard by triggering a downturn in the auto and aerospace industries, two big buyers of the metal. A surfeit of metal pushed benchmark aluminum prices down 12% this year, to $1,582 a metric ton on the London Metal Exchange.

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U.S. Stocks Rise After Sharp Selloff

U.S. stocks recovered some ground Friday, a day after suffering their worst rout since March, but were still poised for weekly losses.

The Dow Jones Industrial Average was up 321 points, or 1.3%, paring gains of as much as 837 points shortly after the opening bell. The index slid 6.9% on Thursday on concerns about an uptick in coronavirus cases and the pace of the economic recovery.

The…

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Deep Dive: Seven stock picks from a five-star money manager’s ‘disruptive’ portfolio

Alex Ely, manager of the $1.9 billion Delaware Smid Cap Growth Fund, says disruptive companies that have taken market share in the coronavirus crisis will continue to do well because they’re fundamentally “better, cheaper, faster.”

“We invest in disruptions,” Ely said in an interview April 28. “They are technologically induced or induced by innovation. When that foundational change happens, there is a secular change in that industry for years to come, sometimes decades to come.”

The advantage of this approach is that the forces driving change are so strong that they continue or are even enhanced by economic upheaval.

“Yes, it matters that there is a crisis, but over the long run, it doesn’t matter what happens. These things will continue on. A young person is not going back to a bank branch,” he said.

Trends and examples of stocks

Here are innovation trends and seven stocks that the Delaware Smid Cap Growth Fund
US:DFCIX
owns. “Smid” cap refers to small- and mid-cap. The portfolio is concentrated, with only 35 stocks.

Virtual health care

The Delaware Smid Cap Growth Fund holds Teladoc Health
US:TDOC,
which Ely called “the leading telemedicine company in the market today, in terms of size and the number of patients.” On April 14, Teladoc previewed its first-quarter results and said it was providing 20,000 virtual medical visits a day, which was a 100% increase from the first week of March.

In addition to companies that facilitate remote visits (video conferences) with medical professionals, “there are also companies that will do diagnostics out of your home, or track insulin, blood pressure, heart beat rate, etc., all remotely and more accurately than you would with a one-time analysis from a doctor in a doctor’s office,” Ely said.

Alex Ely, manager of the Delaware Smid Cap Growth Fund


Alex Ely

One example of a company providing this type of service is iRhythm Technologies
US:IRTC,
which according to Ely “has the best technology for monitoring your heart.” IRhythm uses patches to monitor and collect data to determine whether you have an irregular heartbeat. This allows a physician to monitor millions of heartbeats continually, providing a larger and more accurate data set than traditional monitoring techniques.

Communications and software as a service

RingCentral
US:RNG
provides unified communication services to companies, including voice, video, text messaging and social media, across all types of devices. The company’s software-as-a-service model allows integration with various custom and third-party applications.

Everbridge
US:EVBG
provides critical event-management services, coordinating emergency messages across various platforms for various government entities and companies.

Okta
US:OKTA
provides could-based identity authentication software for enhanced, convenient network security.

Mobile financial services

EHealth
US:EHTH
provides a marketplace for consumers to select health insurance and Medicare plans. “Instead of calling an insurance agent, you get your insurance online through ehealth. They are able to provide better pricing,” Ely said.

High-quality foods and drinks

One holding of the Delaware Smid Cap Growth Fund that may surprise you is Boston Beer
US:SAM,
the brewer of Sam Adams Beer. What attracted Ely to the stock was the rapid growth of Boston Beer’s Truly Hard Seltzer group of products, which are “ gluten-free, with only 2 grams of carbs per serving. It is perceived as healthier than beer,” according to Ely.

“Their beer sales are actually about flat right now, but their seltzer sales are up dramatically. It now makes up half their business, growing at 100% a year,” he said.

Significant outperformance

Here’s a chart showing the performance of the Delaware Smid Cap Growth Fund’s Class A shares against its benchmark, the Russell 2500 Growth Index, as well as the S&P 500, for five years through April 28:


FactSet

The performance figures above exclude any sales charges and are after expenses.

With the broad indexes declining this year as so much of the economy has been harmed by the coronavirus shutdown, you might be interested in seeing how well the fund performed during the long bull market. Here’s the same comparison for five years through the end of 2019:


FactSet

That’s remarkable performance, especially when you consider the dominance of passive index strategies. The fund is rated five stars by Morningstar, the financial-research firm’s highest rating.

Innovation trends

Ely is the chief investment officer for small/mid-cap growth equity at Macquarie Investment Management, which is the subadviser for the Delaware Smid Cap Growth Fund.

He further explained the type of long-term industry trends he looks for.

One example is mobile banking, which has been enabled by technological development and the build-out of 4G (and eventually 5G) communication networks. We’re still at an early stage for mobile banking and payments. “There are still 90,000 bank branches in the United States, and they are still growing. Half will go away within the next 10 to 15 years,” Ely said.

To describe the staying power of disruptive innovation, he looked way back: “In the ’80s and ’90s, during that period of expansion, some of the disruptions were PC innovation, with Microsoft
US:MSFT,
and Intel
US:INTC,
and big box stores, such as Walmart
US:WMT
and Home Depot
US:HD.
The point of naming these examples is when you had the crash of ’87 or the ’90-’91 recession, you don’t get rid of your PC and bring back a typewriter.”

Even before the coronavirus crisis, it was obvious that media streaming and mobile financial services were “better ways of doing things,” and that virtual health care “was better than going to a doctor’s office,” Ely said.

Fund holdings

Here are the top 10 holdings of the Delaware Smid Cap Growth Fund as of March 31:

Company

Ticker

Share of portfolio

Total return – YTD

Total return – 2019

RingCentral Inc. Class A

US:RNG 5.3%

32%

105%

Boston Beer Co. Inc. Class A

US:SAM 5.3%

22%

57%

EHealth Inc.

US:EHTH 5.2%

15%

150%

NovoCure Ltd.

US:NVCR 5.2%

-14%

152%

iRhythm Technologies Inc.

US:IRTC 4.6%

48%

-2%

Okta Inc. Class A

US:OKTA 4.5%

28%

81%

SiteOne Landscape Supply Inc.

US:SITE 4.4%

-5%

64%

YETI Holdings Inc.

US:YETI 4.1%

-23%

134%

Everbridge Inc.

US:EVBG 4.1%

49%

38%

Teladoc Health Inc.

US:TDOC 4.0%

116%

69%

Source: FactSet

Don’t miss:This one niche of the sagging real estate market is growing rapidly

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If you’re skipping your mortgage payments, watch out for this costly mistake

How will I pay my mortgage?

That’s the question facing millions of Americans as stay-at-home orders have caused many people to lose their jobs or income. Lawmakers have stepped in to provide homeowners with a lifeline by requiring lenders to provide forbearance — a way to defer mortgage payments — to any mortgage borrower with a federally-backed home loan.

So far, 3.5 million mortgage borrowers have requested forbearance, representing nearly 7% of all mortgages nationwide, according to the latest data released Monday by the Mortgage Bankers Association, an industry trade group. That means millions of homeowners can now skip or make reduced monthly payments on the home loan for up to one year.

“While the pace of job losses have slowed from the astronomical heights of just a few weeks ago, millions of people continue to file for unemployment,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “We expect forbearance requests will pick up again as we approach May payment due dates.”

Calling your lender and requesting forbearance is just the first step in the process. “Forbearance is not forgiveness,” said Karan Kaul, a research associate at the Urban Institute, a nonprofit policy group, told MarketWatch earlier this month. “You still owe the money that you were paying, it’s just that there’s a temporary pause on making your monthly payments.”

Eventually, borrowers will need to work out a repayment plan with their lender. And borrowers need to be careful that they don’t agree to a repayment plan they cannot afford.

Fannie Mae
FNMA,
-1.74%

and Freddie Mac
FMCC,
-3.37%

put out guidelines on Monday reminding homeowners that they don’t have to make a balloon payment the end of their forbearance period.

“We want every homeowner who is struggling because of this pandemic to know they have mortgage options,” Fannie CEO Hugh Frater said in the statement Monday. “We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so.”

Freddie Mac CEO David Brickman similarly encouraged “homeowners facing hardship to work with their servicer to identify the plan that’s appropriate for their unique situation.”


‘We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so.’


— Fannie Mae CEO Hugh Frater

With a balloon payment, also known as reinstatement or a lump-sum payment, a borrower would repay the entire amount they owed from the forbearance period all at once.

“It really isn’t helping somebody if they get a four-month deferral but have to make a lump sum payment, and they’ve been out of work for four months,” said Rick Sharga, a mortgage industry veteran and founder of CJ Patrick Company, a real-estate consulting firm. “That’s just deferring failure rather than helping somebody succeed.”

As Americans have requested forbearance, some have complained that their mortgage servicer offered a balloon payment option as a repayment option. But this isn’t the only way to pay back the money you owe.


‘It really isn’t helping somebody if they get a four month deferral but have to make a lump sum payment, and they’ve been out of work for four months. That’s just deferring failure rather than helping somebody succeed.’


— Rick Sharga, a mortgage industry veteran and founder of CJ Patrick Company

Here are consumers’ repayment options after forbearance

For starters, borrowers can request a payment deferral modification. With this, the balance they did not pay during the forbearance period would be tacked onto the end of the loan. The duration of the loan would be extended — so someone who received forbearance for six-months on a 30-year mortgage would now be debt-free after 30.5 years.

Alternatively, a consumer can opt for a repayment plan where they would gradually pay off the money they owe in addition to their monthly mortgage payments. With this option, the duration of the loan would not be extended, but monthly payments would increase.

For those who are still facing financial trouble at the end of forbearance, they can reach out to their mortgage lender to request a loan modification. This would reduce the monthly payment amount for the loan.

“All those terms are negotiable,” Sharga said. “Be diligent, be steadfast and try and stand your ground.”

In most cases, the servicer will try to contact homeowners 30 days before the forbearance plan is scheduled to end to determine which repayment option works best for them at that time. Borrowers can also proactively request this information from their servicer.

Borrowers also can ask their servicer who owns their mortgage, because home loans are often sold to investors. “Knowing who the owner of the loan is will provide the borrower with information to research what options are available from that entity,” said Andrea Bopp Stark, an attorney with the National Consumer Law Center. Servicers must respond to these requests within 10 days, she said.

“If the servicer does not respond, the borrower should send another letter and seek legal assistance,” Bopp Stark said. “The servicer could be held liable for actual damages and up to $2,000 in statutory damages for a failure to respond.”

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Need to Know: Retiring in 10-20 years? Here’s your best approach to stocks right now, says top U.S. financial adviser.

For Thursday, we’ve got earnings news ahead from Apple, Amazon and Gilead, the latter of which has been fueling optimism with its own COVID-19 treatment.

After that it is goodbye April, which is set to deliver the best gains for the S&P 500
US:SPX
since 1974. Equities have been looking past the bad news — more than 3 million coronavirus infections worldwide and tanking global economies for starters — to hopes for a treatment and the reopening of economies.

There are lots of gloomsters out there, but a few optimists as well, like Ameriprise private wealth adviser Kimberlee Orth, who was ranked No. 2 in the U.S. among her female peers in 2019 by Barrons. Our call of the day is packed with her advice for those 10 to 20 years away from retirement, and who might be feeling uneasy about pandemic damage to their investments.

“If you were already in the stock market on Feb. 1 or March 1 or April 1, and you watched the market go down and those resources are allocated to a long-term goal and your risk tolerance is still suitable, there’s no need to change that because the market is eventually going to go back up,” says Orth.

Orth says she likes stocks right now and thinks prices look good relative to where they were three months ago. “Sectors we like are technology, consumer cyclicals, pharma, and sectors where it may be a little early are airlines, cruises, hotels and restaurants. All of this is going to be wrapped around changing consumer behavior,” she says.

Among other strategies she is discussing with clients are dollar-cost averaging, the practice of investing a set amount into stocks at regular intervals, thereby spreading out risk. “This could be a real opportunity with the volatility in the market,” she says.

Orth says Ameriprise started preparing clients for a downturn last fall, selling out of positions and making sure they had enough cash on hand for any near-term purchases. For example if you need a car on May 30, start getting the cash ready, she says.

“We’re going to get through this eventually. The market will go back up at some point, when the economy and the world start to recover. It’ll change, but it will get better,” Orth says.

The market

Grim economic data is denting the Dow
US:DJIA,
S&P 500
US:SPX
and Nasdaq Composite
US:COMP
while oil
US:CL
prices are on the rise.

Europe stocks
XX:SXXP
edged lower, with the European Central Bank leaving key interest rates unchanged, and President Christine Lagarde warning that the eurozone economy could fall by as much as 12% in 2020, with French and GDP numbers out earlier worse than expected. Asia markets tracked Wall Street gains.

The chart

Will stocks retest those March lows? Maybe not, says our chart of the day from Invesco’s global market strategist Brian Levitt. Out of eight recession bear markets, Invesco found not only did that not happen on four occasions, but stocks were on average 57% higher three years later.


Bloomberg/Invesco

The buzz

The number of Americans filing for jobless claims amid the pandemic rose another 3.8 million to a a cumulative 30 million. Personal income and consumer spending also tumbled. Still to come is the Chicago purchasing managers index.

Upbeat results from Microsoft
US:MSFT
US:MSFT,
Facebook
US:FB,
and electric-car maker Tesla
US:TSLA
are boosting those shares. Twitter
US:TWTR
and McDonald’s
US:MCD
are also up on earnings. Apple
US:AAPL,
Amazon
US:AMZN
and drug maker Gilead
US:GILD
due after the close.

Royal Dutch Shell
US:RDS
UK:RDSA
reduced its dividend for the first time in 80 years and shares slumped.

Opinion:Musk vs. Zuck: A tale of two CEOs acting much differently during a pandemic

The Trump administration has reportedly set up “Operation Warp Speed” to fast-track a coronavirus vaccine and President Donald Trump has lashed out against China over the pandemic. Los Angeles will offer free virus tests, but forget about California’s beaches.

Random reads

Some die-hard New Yorkers now say they may never go back.

Teenagers of Reddit on what defines their generation.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Follow MarketWatch on Twitter, Instagram, Facebook.

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My Retirement Plan Is You

Sian-Pierre Regis, 35, is used to living with roommates. For the past 10 years, he has split the rent on his apartment in the Chelsea neighborhood of Manhattan with two (in some cases, three) friends. But in June, he’s getting a co-tenant of a different sort: his 78-year-old mother, Rebecca Danigelis.

“I don’t think either of us expected to be in this situation,” said Mr. Regis, a freelance filmmaker. His mother worked for over 40 years as a hotel housekeeper, rising to a management position, until her job was abruptly eliminated three years ago.

Since then, she has lived off her slim retirement savings (she liquidated most of her 401(k) to pay Mr. Regis’s college tuition in 2002) and whatever part-time cleaning jobs she could find. When the coronavirus pandemic hit, she again was out of work, and at the end of May, the lease on her subsidized housing in Boston will expire. She can’t afford the rent.

“I don’t know what she could have done better, or how she could have prevented this,” Mr. Regis said. “She worked long hours, never called in sick and cleaned houses to make extra money when she wasn’t at her hotel job. She had no vices.”

Still, as a single parent raising two children, she struggled to save. “When she lost her job, she had $600 in her savings account,” he said. “She had nothing to fall back on.”

Nothing except her son, that is. Which makes Mr. Regis one of the growing number of millennials who are supporting their parents financially and, in some cases, giving them a place to live. Known as the reverse-boomerang effect, the phenomenon of parents moving in with their adult children, often for financial reasons, is on the rise. According to a Pew Research Center analysis of population data, 14 percent of adults living in someone else’s home in 2017 were a parent of the head of household, up from just 7 percent in 1995. And this trend is expected to balloon in the coming decades as baby boomers leave the work force but can’t afford to support themselves.

Expressed in starker terms, the Center for Retirement Research at Boston College has predicted that half of today’s workers will not have enough savings to sustain their standard of living when they retire. According to the AARP Public Policy Institute, one in five Americans will be over the age of 65 by 2030 (compared with one in seven in 2017), “and our nation will face a severe shortage in accessible and affordable housing to meet their needs.”

Enter the resurgence of multigenerational housing, when adults from at least two generations share the same home. After declining to its lowest point in 1980, multigenerational housing is now close to its 1950 peak, representing 20 percent of the total American population in 2016, according to another Pew analysis.

While that trend is largely driven by 20-somethings living with their middle-aged parents, Pew researchers found that older adults were also significantly more likely to be living with their grown children in recent years than they were in the 1990s.

Younger Americans should take this pattern seriously, says Georgia Lee Hussey, a financial planner in Portland, Ore., who has clients across the country. “Most of my clients have at least one parent that needs to be factored into their financial plan,” she said. “What’s tricky is that for some families, it can be unexpected. Especially in white American culture, people over 60 are often uncomfortable talking about their finances, and ashamed to ask their children for help.”

And don’t underestimate the power of denial. Ms. Hussey noted that many baby boomers watched their own parents enjoy an era of heartier pension plans and lower health care costs. Now, many Americans work hard all their lives but still don’t have enough savings to retire. “Then, suddenly their child realizes, ‘Oh, I’m going to have to take care of dad,’” she said. “It can lead to some incredibly difficult conversations.”

Image
Credit…Winnie Au for The New York Times

For Dulcinea Myers-Newcomb, 45, that realization happened when her 80-year-old father came to visit her and her two children, ages 8 and 14, in Portland — and then never left. “He said, ‘So, I’m not really visiting. I live here now,’” she said. “I knew that my father did not ever plan for this phase in his life, but my husband and I were not prepared for him to move in as soon as he did.”

To make room for their new housemate, Ms. Myers-Newcomb, a real-estate agent, arranged to install what is known as an accessory dwelling unit — a secondary apartment built on a single-family residential lot — in their small backyard. But the price — about $110,000 — put the family in a tight spot. Like many Americans, she and her husband were already sandwiched between lingering student debt and trying to save for their own retirement. They took out a home equity line of credit to cover the costs, and her father contributes just under $1,000 a month to help with the bills.

“I hope my kids don’t have to do this for me someday, but I think it’s beautiful that our children see that we’re taking care of our elders,” Ms. Myers-Newcomb said. “I’m seeing it more and more in my work, too: people my age and younger taking in their parents.”

For other families, the topic was never taboo.

“My parents were pretty explicit that my siblings and I were their retirement plan,” said Ka Po Lam, a 28-year-old treasury analyst who works for a bank in New York City. His family moved to the United States when he was a young boy, and he started giving half his take-home pay to his father at age 15, when he got his first job at McDonald’s.

“Being from Hong Kong, it’s part of our culture to help the family,” he said. “As immigrants, both my parents worked manual labor jobs. They don’t get Social Security. The traditional ways to afford retirement aren’t really available to them.”

Mr. Lam now sends about $800 a month to his parents, who live with his older sister in Boston. “I’m basically paying double rent — mine and my parents’ — so I manage money pretty carefully,” he said. For a while, he had a second job at a coffee shop to earn extra cash on weekends — a different lifestyle from most of his banker colleagues’, but he’s not complaining. “It’s not something I hide,” he said. “As much of a burden as that can be, I find validation in the fact that I can provide for my family.”

Still, financial responsibility for aging parents can be daunting no matter how much planning you do, said Athena Valentine Lent, 34, a program manager for a nonprofit in Phoenix, Ariz. “I’m Latina, and multigenerational households are normal in our culture,” she said. “I always knew my dad would come to live with me someday, and I’ve worked hard to prepare, but it’s still not easy.”

Although her father is only 53, she expects that a combination of his health and financial issues will put him on her doorstep within the next five years. “I have a ‘dad fund,’ and I put a couple hundred dollars a month in it,” she said. “It affects a lot of my life decisions. If my partner and I decide to buy a house, it will have to be big enough for my dad to live there with us. It’s a lot to think about, especially since I’d like to have children of my own in the next couple of years.”

To make matters more complicated, her father takes care of his mother, Ms. Lent’s grandmother. “So I wouldn’t just be taking care of him. I would also take in my grandma, and possibly my aunt too, because she also lives with them,” she said. “Sometimes we don’t just inherit our parents — we inherit entire families.”

These early reverse-boomerang pioneers are laying important groundwork, said Rodney Harrell, the vice president of family, home, and community at the AARP. “As it becomes more normalized for older adults to live with their grown children, I think it will get easier for everybody,” he said. “If your neighbor builds an accessory dwelling unit, or has their parents living with them, you might realize it’s a viable option for you and your family, too.”

That’s certainly been the case for Mr. Regis. “At first, I felt really lost. My situation was foreign to my closest friends, the people I’d gone to college with,” he said. But when he made a documentary film about his mother’s experience, “Duty Free,” the response was huge. “When we released the trailer for the film, I heard from so many people, my own age and younger, who said, ‘Thank you for making this. My mom just moved in with me, too, and I would do anything for her.’”

He also sees a silver lining. “In our country, the elderly become invisible. We don’t see them, and we don’t feel like we need to help them,” he said. “But they have so much to give, and maybe, if they live in our homes with us, people will realize that more.”