The Wall Street Journal - 04.03.2020

© 2020 Dow Jones & Company. All Rights Reserved. ***** THE WALL STREET JOURNAL. Wednesday, March 4, 2020 |B1

TECHNOLOGY: HONEYWELL TO INTRODUCE A QUANTUM COMPUTER B4

S&P3003.37g2.81% S&PFINg3.73% S&PITg3.79% DJTRANSg2.90% WSJ$IDXg0.43% LIBOR3M 1.314 NIKKEI (Midday)21156.99À0.35% See more at WSJ.com/Markets

BUSINESS & FINANCE

BUSINESS NEWS

Impossible Foods cuts

the price of products

as the meatless rivalry

heats up.B2

RETAIL

Erik Nordstrom takes

sole reins as CEO of

the family-owned

company.B3

atePharma. Last year, sales were

nearly twice that figure, though

still well short of the $1 billion a

year that drug makers consider

to be “blockbuster” sales.

Saxenda is the world’s best-

selling obesity drug, competing

with such medicines as Xenical,

made by Roche Holding AG, and

Please turn to page B2

ized medical plans. Sales of the

drug—which can cost $1,000 a

month in the U.S.—have taken

off, albeit from a small base.

After Saxenda was approved

in 2014, analysts forecast that

its U.S. sales would top $250

million by 2020, according to a

compilation of estimates by

market-research firm Evalu-

The world’s biggest insulin

maker is betting it can unlock

a multibillion-dollar market

that has largely eluded the

drug industry: obesity.

Denmark’sNovo NordiskAS

makes one of the world’s few

approved drugs aimed specifi-

cally at battling obesity, but

weight-loss treatments are typi-

cally a tough sell.

Many doctors are convinced

that lifestyle changes, not drugs,

are a better answer. The sector

is also relatively new: Obesity

was first recognized as a dis-

ease by the American Medical

Association in 2013. Many in-

surers still don’t cover obesity

drugs and some previous treat-

ments didn’t win approval or

were withdrawn from the mar-

ket after problems arose.

Despite those hurdles, Novo

Nordisk says it has persuaded

some big employers to cover its

drug, Saxenda, in their custom-

The firm says it has persuaded some big employers to cover Saxenda.

CARSTEN SNEJBJERG/BLOOMBERG NEWS

BP

–40%

• 20%

Chevron

Exxon

Mobil

Royal

Halliburton DutchShell

Devon

Energy

Cimarex

Energy

Diamondback

Energy

Valero

Phillips66 Energy

Share-priceandS&P 500peformance, year to date

Sources: FactSet (crude-price, share-price and index performance); U.S. Commodity Futures Trading Commission (net bets)

Net bets on higher

U.S. crude prices, weekly

300,000

0

100,000

200,000

contracts

Sept. 2019 Jan. ’20

Futures-price and index performance

Brent

crudeoil

S&P500

S&P500

energy

sector

CDCsaysit

expectsvirus

tospreadinU.S.

Firstcoronavirus

deathreported

intheU.S.

WorldHealthOrganization

declaresoutbreakaninternational

public-healthemergency.

Chinareportsthe

firstdeathfrom

coronavirus.

5

• 25


• 20


• 15


• 10

–5

0

%

Jan. 2020 Feb. March

Since

S&P 500

record

other groups, losing 7.4% in the

past five sessions while the

broader index fell 4%. The sec-

tor also lagged behind stocks

and U.S. crude Tuesday, finish-

ing down 3.1% compared with

the index’s 2.8% decline.

Investors are still trying to

gauge the magnitude of the vi-

rus’s hit on oil demand, as the

epidemic picks up outside

China. The epidemic has al-

ready tamped down oil de-

mand, with countries taking

steps to dissuade or restrict

travel to and from China, the

world’s top importer of crude,

as well as other countries expe-

riencing a bump in cases.

“There’s a lot of uncertainty

about energy demand right

now,” said Rob Thummel, se-

nior portfolio manager at en-

ergy investment firm Tortoise.

Energy stocks are closely

tied to oil prices, which have

fallen more than 20% this year.

Last week, U.S. crude futures

suffered their biggest percent-

age drop since the financial cri-

sis. They rose Monday and

again on Tuesday after the Fed-

eral Reserve cut its benchmark

interest rate to mitigate the vi-

rus’s hit on the economy. By

the end of the day, prices had

trimmed most of their intraday

gains.

Even before the coronavirus

epidemic, investors were skit-

tish about the sector, which has

been the worst performer in

the S&P 500 for the past two

years. Producers have promised

Please turn to page B13

Worries about fallout from

the coronavirus are pummeling

already-battered energy stocks,

upending a nascent recovery

that followed a spate of better-

than-expected earnings and

dividend increases and signal-

ing the magnitude of investors’

concern about the virus’s effect

on crude demand.

Energy shares in the S&P

500 have fallen significantly

more than the broader index’s

BYSARAHTOY

Energy Shares’ Rebound Is Derailed

Costco WholesaleCorp.’s

website was sold out Monday

in the New York City area of

several items such as Jif peanut

butter and Kraft Macaroni &

Cheese. Meanwhile, Ama-

zon.comInc. warned customers

of its Prime Now same-day gro-

cery service in San Francisco,

Seattle and other cities that de-

livery availability might be lim-

ited.

Economists say it is too soon

to know how much the virus

might affect consumer spend-

ing but that it could upend sup-

ply chains and cause some

product shortages, especially as

retailers run out of Chinese-

made goods already stocked in

warehouses.

On Tuesday, Target reported

comparable sales, which in-

clude stores and digital chan-

nels operating for at least 12

months, rose 1.5% during the

quarter ended Feb. 1. The re-

sults were in line with a warn-

ing the company issued in Jan-

Please turn to page B5

TargetCorp.,Kohl’sCorp.

and other retailers that posted

lackluster holiday results must

now confront the uncertainty

caused by the coronavirus epi-

demic, which could help or hurt

sales in the coming months.

Executives at Target and

Kohl’s said Tuesday that the

impact from the virus has been

muted so far.

“As of today, we haven’t

seen a large impact on our

business or outlook,” Target

Chief Financial Officer Michael

Fiddelke told analysts. He said

the retailer hasn’t seen any-

thing that would cause its 2020

results to differ from its longer-

term trends.

In recent days, grocers have

logged strong sales as some

consumers stock up on food

and other staples. The epidemic

could also speed the shift to

online ordering as people avoid

visiting stores.

BYSARAHNASSAUER

ANDSUZANNEKAPNER

Epidemic Clouds Sales

Picture for Retailers

bank actions helped prevent a

collapse of the financial system,

the Fed is now grappling with a

different threat: a disease

whose ultimate impact is still

unknown.

“Fiscal authorities need to

best, the Fed’s move will help

deliver some reassurance to

traders while officials figure

out a more specific fiscal re-

sponse to the coronavirus. Un-

like during the financial crisis,

when extraordinary central-

U.S. stocks and government

bond yields slid Tuesday after

the Federal Reserve’s interest-

rate cut failed to assuage

money managers fearful of the

economic fallout from the coro-

navirus epidemic.

The Fed’s move sparked a

frenzy of trading. Stocks ini-

tially shot higher, propelling

the Dow Jones Industrial Aver-

age up more than 350 points.

But within 15 minutes, stocks’

initial gains gave way to up-

and-down trading—with the

BYAKANEOTANI

be the ones that lead the way,”

said Joseph Brusuelas, chief

economist at RSM US LLP,

which has lowered its forecast

for U.S. gross domestic product

growth to 1% for the first quar-

ter. “Monetary policy is not

well positioned to address sup-

ply shocks,” he said.

Meanwhile, investors are

bracing for the likelihood of a

rise in coronavirus cases in the

U.S.

“We’re still telling our cli-

ents to expect volatility,” said

Solita Marcelli, deputy chief in-

vestment officer for the Ameri-

cas at UBS Global Wealth Man-

agement. “Right now there are

too many unknowns about the

Please turn to page B13

mortgage rates to student

loans, briefly slid below 1% to a

record. It settled at 1.005%.

The market’s moves showed

the extent to which investors

have become worried that cen-

tral-bank action alone won’t be

enough to prevent a drop-off in

consumer spending and busi-

ness investment.

Many money managers had

been looking for the Fed to do

exactly as it did Tuesday. They

argued that the worsening epi-

demic justified the Fed taking

action before its scheduled pol-

icy meeting—something that

hadn’t been done since the fi-

nancial crisis in 2008.

At the same time, investors

noted that the rate cut won’t

provide any more clarity on the

economic toll the coronavirus is

likely to take on the U.S. At

blue-chip average and Treasury

yields tumbling after Fed Chair-

man Jerome Powell in a press

conference acknowledged the

limits of the central bank’s ac-

tions. “We do recognize the

rate cut won’t reduce the rate

of infection,” Mr. Powell said,

adding that he believed the

move would “provide a mean-

ingful boost to the economy.”

The Dow fell 785.91 points,

or 2.9%, to 25917.41, swinging

as much as 1,378 points from

its high to its low point. The

S&P 500 lost 86.86 points, or

2.8%, to 3003.37 and the Nas-

daq Composite fell 268.07

points, or 3%, to 8684.09.

As investors fled riskier as-

sets, they turned to the safety

of Treasurys. The yield on the

10-year U.S. Treasury note, a

benchmark for everything from

Stocks Fall, Treasury Yields Set New Low

Ten-year government

note briefly falls below

1% for the first time

after Fed rate cut

to its books and quadrupled

its debt load.

After the deal, Newell failed

for years to meet its debt-re-

duction targets. Nonetheless,

it was until recently allowed

to keep its coveted invest-

ment-grade status, The Wall

Street Journal reported last

year. Newell was downgraded

to junk-bond status by rating

firm S&P Global Inc. in No-

vember.

Moody’s still rates Newell

the lowest rung of investment

grade, a group that has

swelled in recent years.

The volume of corporate

bonds downgraded to junk,

known as fallen angels, hit

$30 billion last month—more

than the previous 18 months

combined, according to ana-

lysts at Bank of America. One

example:Kraft HeinzCo., was

downgraded last month by

Fitch Ratings and S&P, in-

stantly making it one of the

largest high-yield borrowers,

according to Deutsche Bank

AG.

High-yield bonds are taking

a hammering, as the outlook

on the economy has soured in

the wake of the spreading cor-

onavirus epidemic. Investors

have been yanking money

from high-yield bonds at a re-

cord pace.

Please turn to page B2

The Securities and Ex-

change Commission is investi-

gating sales and accounting

practices atNewell Brands

Inc., the consumer-products

company said.

The federal investigation is

another setback for the maker

of Rubbermaid containers and

Sharpie markers as it tries to

turn around its fortunes under

a new leadership team.

The SEC issued a subpoena

to Newell in January after

making several informal re-

quests for information, the

company said in a securities

filing after the stock market

closed Monday.

Representatives of Newell

and the SEC declined to com-

ment on the investigation.

One focus of the probe,

Newell said, is its treatment of

goodwill—the premium a com-

pany pays when it buys an-

other for more than the value

of its net assets. The SEC’s

subpoena relates primarily to

the company’s “sales practices

and certain accounting mat-

ters” from the start of 2016

onward, the company said.

Newell wrote down more

than $9 billion of goodwill and

trade names in 2018, one of

the biggest goodwill impair-

ments that year, according to

valuation firm Duff & Phelps

LLC. Newell at the time said

most of the write-down re-

flected a decline in its market

value.

The impairment was tied to

Newell’s troubled 2016 acqui-

sition of rival Jarden Corp. for

about $20 billion, which

added $8.3 billion of goodwill

BYJEANEAGLESHAM

ANDGUNJANBANERJI

Newell Brands

Faces SEC Probe

On Accounting

Glut Takes a Toll on the Oil-and-Gas Sector

U.S. Treasury yields Tuesday

Source: FactSet

1.2

0.9

1.0

1.1

%

Tuesday 10 a.m.

Federal-funds

rate cut

10-year

Three-month

INSIDE

BYDENISEROLAND

Insulin Maker Novo Nordisk

Wagers on Weight-Loss Drug

 Heard on the Street: Rate

cuts no miracle cure............ B14

$20B

How much the company paid

to acquire Jarden in 2016