10 BARRON’S August 3, 2020
REVIEW
26,428.
Dow Industrials:-41.
Dow Global Index:+1.
0.54%
10-year treasury note:-0.
THE PRICE: A BIG LOSS
Big Tech on Stage
Stocks seesawed, as earnings season
rolled on. Congress chastised the
CEOs ofAlphabet,Apple,Face-
book, andAmazon.com, but their
shares rose after the Federal Reserve
left rates near zero. On Thursday, the
big techs reported banner earnings
(well, all but Alphabet); but the shares
fell on stimulus fears and a second
straight week of rising jobless claims.
For the week, the Dow industrials
edged down 0.2%, to 26,428.32; the
S&P 500 ticked up 1.7%, to 3271.12;
and the Nasdaq Composite popped
another 3.7%, to 10745.27.
Yawning Hole
The U.S. gross domestic product
plunged an annualized 32.9% in the
second quarter, the largest drop since
1947, when records began to be kept.
The actual quarterly decline came in
at a lower, but still steep, 9.5%.
A Hot Covid July
Some 21 states still had rising Covid-
infections, and the death toll raced past
153,000. Florida passed New York for
the second most cases, behind Califor-
nia. Texas, with hospital beds scarce,
still debated masks and shutdowns.
Three Major League Baseball teams
reported cases; threatening the barely-
begun season, National Security Ad-
viser Robert O’Brien and Rep. Louie
Gohmert of Texas tested positive; and
former presidential candidate Herman
Cain died of Covid. Vaccines from
ModernaandPfizerbegan Phase 3
trials.Alphabetwill keep workers at
home until July 2021. Europe feared a
second wave, and the European Cen-
tral Bank asked banks to suspend divi-
dends until January.
The Stimulus Gap
Still-divided Senate Republicans fi-
nally released their coronavirus relief
bill, as million of Americans began
losing federal unemployment benefits.
The $1.1 trillion plan included more
$1,200 stimulus checks, funds for
schools and testing, and reduced di-
rect unemployment payments. Talks
began with Democrats, who passed a
$3.4 trillion House relief bill several
months ago. Senate Majority Leader
Harley Plans
Its Comeback
Accelerating into a turnaround, iconic U.S. motorcycle
makerHarley-Davidsonlaid out plans for a dramatic
restructuring—while reporting dramatic losses.
“A total rewire is necessary to make Harley-Davidson
a high-performance company,” said recently named
CEO Jochen Zeitz. To arrest a multiyear sales skid, Har-
ley said it would eliminate 30% of its product line to
focus on best-sellers, while slashing inventories at deal-
ers by a third to support prices.
The disclosures put hard numbers on a restructuring
investors have cheered. Harley stock doubled off the
March bottom to a recent $30, but fell 9.5% to $26.49 on
Tuesday morning, after the company reported earnings.
Zeitz slashed unit shipments by 59% year over year, cut-
ting Harley’s revenue by 53%, to $670 million for the June
quarter, and producing a $92 million loss. Almost half
came from restructuring, including 700 layoffs.
The sales drop was larger than analysts expected. In a
note, Wells Fargo’s Tim Conder said he would maintain
his Equal-Weight rating. “While optimistic for new cost
savings initiatives to enhance operating margins,” he
wrote, “we remain cautious given ongoing structural chal-
lenges.” Harley said it has enough liquidity—almost $
billion—and is well within its loan covenants.
Covid-19 exacerbated a long slide in motorcycle popu-
larity. But the plan to shrink dealer shipments seems to
be working. The company said 2020 bikes were selling at
sticker prices, while used Harleys were up significantly.
Zeitz said he’ll present a strategic plan for the next five
years by year end.—Bill Alpert
94
Number of new planes delivered
by Boeing and Airbus in the
second quarter, down from 317
in 2019.
55.8 M
Total of smartphones shipped
by Huawei in the second
quarter, beating Samsung
for No. 1 in the world.
85.7%
Rise in June of motor-vehicle
and parts orders.
$40 B
Peterson Institute estimate of
Chinese imports of U.S. goods
under the trade deal, 47% of the
prorated year-to-date baseline.
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THE NUMBERS
HE SAID
“The path
forward for the
economy is
extraordinarily
uncertain, and will
depend in large
part on keeping the
virusincheck.”
Federal Reserve Chairman Jerome Powell
Mitch McConnell said that he thought a
bill could get to the House in “two or
three weeks.” The president called the
GOP proposal “semi-irrelevant.”
De-Escalation in Portland
Clashes with federal agents in Portland
continued. After talk of sending more
agents, the administration agreed to with-
draw from downtown Portland. The
White House then said it was sending
agents to Cleveland, Milwaukee, and De-
troit. Attorney General William Barr de-
fended federal actions against protesters
in contentious congressional testimony.
Annals of Deal-Making