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    Big Tech went from growth stocks to Wall Street's Treasury bond substitute during the coronavirus

    FAANG stocks displayed at the Nasdaq.
    Adam Jeffery | CNBC

    Investors and traders have historically turned to less-risky assets such as U.S. Treasurys to weather market volatility and uncertainty. During the coronavirus pandemic, however, they have turned to unlikely place: tech and software stocks.
    Shares of Apple, Netflix, Microsoft, and Amazon are all trading at, or near record highs. All four of these stocks are up at least 29% for 2020 and have contributed to the Nasdaq Composite’s massive outperformance over the S&P 500 this year. The Nasdaq has surged 17% this year while the S&P 500 remains down over 2% in that time period. 

    Wall Street flocked into these names because they believe their business models can not only weather this downturn, but thrive in it. This has led major tech and software stocks to seemingly behave like a safe haven Treasury bond, a dynamic that was apparent throughout this week.
    “Clearly, the Covid cases going up around the country has gotten people into those software and internet plays,” said Christian Fromhertz, CEO of Tribeca Trade Group. “These stocks are clearly the haves and it will stay that way until something changes.”

    The U.S. reported record numbers this week in daily coronavirus increases. On Thursday, more than 63,000 new coronavirus cases were confirmed in the U.S., according to Johns Hopkins University. The country’s seven-day average of cases also jumped to more than 53,000 this week.
    At the state level, Florida’s coronavirus-related hospitalizations hit an all-time high. Nevada rolled back a reopening plan for bars in the state. 

    This grim data put stocks that would benefit from the economy reopening under pressure this week. American Airlines fell more than 8% week to date and United slid nearly 10%. Gap shares dropped more than 3% in that time period. 
    Big Tech — once considered one of the riskiest groups in the stock market — shined this week. Microsoft climbed about 3% in that time period while Netflix and Amazon popped more than 10% to record levels. Apple also hit an all-time high, jumping about 5% for the week. 
    These stocks rose alongside the U.S. 10-year Treasury note. The 10-year yield started the week trading around 0.7%, but later fell to trade around 0.6% (yields move inversely to prices).
    Investors argue that what makes these companies so attractive during this pandemic is their steady cash flows and recurring revenues at a time when clarity around the corporate earnings landscape is minimal. 

    “What these companies have going for them is that whole idea of a strong balance sheet and recurring revenue,” said Rebecca Felton, senior portfolio manager at Riverfront. “Recurring revenues, in this type of environment where cyclicals might fade out a bit, is really important.”
    “It feels right to stick with quality and growth that you think you can count on,” Felton said.
    Microsoft, Netflix and Amazon all have subscription-based services driving recurring revenue on a monthly or annual basis. 

    When the Fed forces interest rates to zero, they’re gonna push investors on the risk curve to get income and growth … If I’m going to be forced into equities, which is what the Fed’s clearly doing, I’m going to own the equities that I feel the best about and large-cap tech has become a safe-haven play.

    David Spika
    president of GuideStone Capital Management

    Last quarter, Microsoft’s Office 365 users grew to more than 39 million from 37.2 million in the previous three-month period. Amazon, meanwhile, has more than 150 million paying Prime users. There are more than 180 million paying Netflix subscribers around the world. 
    Something else making some of these stocks attractive are high dividend yields relative to U.S. Treasurys. 
    According to FactSet, Apple and Microsoft currently yield 0.86% per share and 0.96%, respectively. The 10-year Treasury note, meanwhile, has a yield of around 0.6%.
    To be sure, stocks are inherently riskier assets than Treasurys as they don’t have the backing of the U.S. government. Treasurys also give investors a consistent interest payment until they reach maturity, whereas stock dividends are subject to cuts or suspensions at any moment. 
    Tech stocks also face mounting regulation risk, which could put them under pressure. Chamath Palihapitiya, founder and CEO of investment firm Social Capital, thinks this — along with the possibility of higher taxes and new product experiences — make for a bearish case in Facebook and Google-parent Alphabet. 
    “Big Tech’s long term success is no longer about better products,” Palihapitiya said in a Friday tweet. “They are incumbents and their success is now a multi-variate/multi-dimensional problem of competition, anti-trust, tax and regulatory multiplied by EVERY city, state, country and jurisdiction in which the operate.”
    Still, David Spika, president of GuideStone Capital Management, thinks using Big Tech as a safe-haven is prudent given how easy U.S. monetary policy is right now.
    The Federal Reserve slashed rates to zero in March as part of an effort to support the economy during the pandemic. The U.S. central bank has also embarked on unprecedented monetary stimulus programs, including buying corporate debt.
    “When the Fed forces interest rates to zero, they’re gonna push investors on the risk curve to get income and growth,” said Spika. “If I’m going to be forced into equities, which is what the Fed’s clearly doing, I’m going to own the equities that I feel the best about and large-cap tech has become a safe-haven play.” 
    Time will tell how long this will last and when Big Tech equities return to acting like stocks with individual risks.
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    American Airlines tells Boeing: No financing, no 737 Max deliveries

    A file photo of American Airlines Boeing 737 Max planes.
    Patrick T. Fallon | Bloomberg | Getty Images

    American Airlines executives have told Boeing they will not take delivery of 17 737 Max airplanes unless the carrier can secure financing to pay for the aircraft, people familiar with the discussions told CNBC.
    The 17 Max planes are already built, but will not be delivered until the Federal Aviation Administration recertifies the aircraft and removes a grounding order, which is expected to happen later this summer or by early fall.

    When the FAA grounded the Max in March 2019, it meant Boeing was not allowed to deliver the 17 Max planes it had built for American. During the 15 months since the grounding, the financing for some of the 737 Max planes expired, leaving them unfunded.
    The situation means Boeing Capital, which is Boeing’s financing division, will have to find a way to arrange financing for those planes. This could involve Boeing Capital buying the planes and leasing them to American.
    Another possible scenario could involve third-party aircraft leasing companies financing the planes in question.
    While Boeing will not comment specifically on its discussions with American, or on any other order, the company told CNBC: “Our focus continues to be on working with global regulators on the rigorous process they have put in place to safely return the 737 MAX to commercial service. We are not going to comment on discussions with our customers. It is an unprecedented time for our industry as operators confront a steep drop in traffic. We continue to work closely with our customers to support their operations, while balancing supply and demand with the realities of the market.”
    American has already taken delivery of 24 Max planes, and has another 76 ordered with Boeing. The Wall Street Journal previously reported American executives have threatened to cancel some of its Max orders.

    Those familiar with the talks told CNBC that the possible cancellation of deliveries only involves the 17 Max planes scheduled to be turned over to American this year. Orders for its remaining 59 Max planes have not changed and the airline has no plans to cancel them.
    Earlier this summer, as American was burning through more than $50 million a day, CFO Derek Kerr said his airline would not take delivery of new airplanes unless the aircraft were financed with terms similar to those the airline enjoyed before the Covid-19 pandemic.
    The 737 Max, Boeing’s bestseller, has been grounded worldwide in the wake of two crashes that killed 346 people. Boeing has since made changes to a flight-control system in an effort to get the aircraft recertified and flying again.
    — CNBC’s Meghan Reeder contributed to this article. More

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    Stocks making the biggest moves midday: Gilead, Wells Fargo, Carnival & more

    A customer leaves an ATM at a Wells Fargo branch in Denver.
    Rick Wilking | Reuters

    Check out the companies making headlines in midday trading: 
    Gilead Sciences — Gilead gained 2.1% after saying its coronavirus treatment candidate drug, remdesivir, was associated with an improvement in clinical recovery and a 62% reduction in the risk of mortality compared with standard of care in a trial.

    Carnival Corp. — Shares of the cruise line operator jumped 8.2% after the company said it is seeing strong demand for trips in 2021. Carnival also said it can break even on cash flow with capacity running between 30% and 50%.
    United, American Airlines — Shares of major U.S. airline companies rallied in unison after positive news about a coronavirus treatment raised hopes for a smooth economic reopening. American Airlines and Delta Air Lines rose 4.6% and 4.0%, respectively, while United Airlines jumped 5.5%.
    Redfin — The real-estate company dropped 8.2% in midday trading after RBC Capital Markets downgraded the stock to sector perform from outperform. The brokerage cited an overly aggressive valuation in downgrading the stock after the stock soared 400% from its mid-March low. “Valuation has crept up to an extent we see the risk-reward reasonably balanced, given larger macro uncertainties,” RBC said.
    Wells Fargo — Shares of Wells Fargo climbed more than 3% after Wall Street analysts grew bullish on the bank. Evercore ISI added the bank to its tactical outperform list and said it sees upside with the dividend cut “behind” the company. Meanwhile, Baird upgraded Wells Fargo to outperform from neutral, saying investor sentiment is too negative.
    Foot Locker — Foot Locker’s stock rallied 4.2% in midday trading after an analyst at Susquehanna upgraded the equity to positive from neutral. The brokerage said it’s grown more bullish on the stock as younger customers head “to Foot Locker Inc.’s store banners and websites to spend the newfound money in their pockets to a greater degree.”

    Beyond Meat — Shares of the alternative meat company dropped 4.3% after Citi initiated the stock with a sell rating. The bank said in a note that competition in the space is getting tougher and that Beyond Meat faces headwinds in the food-service space. Citi gave the stock a price target that was more than 12% below where shares closed on Thursday.
    — With reporting from CNBC’s Yun Li, Jesse Pound and Fred Imbert. More

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    Wearing masks is now the most important thing for the economy, Fed's Kaplan says

    Gerard Miller | CNBC

    Amid historically aggressive policy moves from the U.S. central bank and Congress, Dallas Federal Reserve President Robert Kaplan said the most important thing for the economy now is wearing protective face coverings.
    Masks in public, Kaplan said, are key to stopping the coronavirus spread, which is increasing in record numbers and threatening to roll back the progress made since the U.S. went into lockdown in mid-March.

    “The main message I’d have today about the economy from here and how to grow it probably has to do with managing this virus,” he told Fox Business in an interview Friday morning. “While monetary and fiscal policy are very important, they’re not as important right now as us doing a good job flattening the curve on this virus. If we do that, we’ll grow faster.”
    The Fed has instituted programs that could provide $2.3 trillion in liquidity and lending while taking its key interest rate down to near zero. At the same time, Congress has provided more than $2 trillion in rescue funds and is debating adding more.

    Still, Kaplan said, “The primary economic policy from here is broad mask-wearing and good education of the health-care protocols.”
    “If we all wore a mask, it would substantially mute the transmission of this disease and we would grow faster,” he added. “We would have a lower unemployment rate … and we would be less likely to slow more of our reopenings.”
    The U.S. recorded nearly 58,836 new Covid-19 cases Thursday, a 1.9% increase from the day before, according to the COVID Tracking Project. Hospitalizations rose 2.1% and deaths increased 0.7% to 125,590.
    Stay-at-home measures implemented to contain the virus may have caused second-quarter GDP to contract by as much as 35%, Kaplan said. He expects growth to pick up in the second half but still sees a full-year decline of 4.5% to 5%, with that rate to be influenced by how the virus spreads. More

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    Yes, you can restart unemployment benefits if you're laid off again

    Demonstrators gather in front of the Texas State Capital during a protest in Austin, Texas, on Tuesday, June 30, 2020.
    Sergio Flores/Bloomberg via Getty Images

    More states may take similar steps as outbreaks expand, mostly across the American South and West. The United States reported a daily record of 63,247 new cases of Covid-19 on Thursday, according to data compiled by Johns Hopkins University. 
    Some businesses that took Paycheck Protection Program loans may have already or may soon spend down those funds. That money has helped prop up payrolls for tens of millions of workers. 
    But there’s good news for people who lose their jobs again: They can likely resume their unemployment benefits, essentially picking up where they left off.

    However, as is usually the case with unemployment benefits, the rules can be confusing.  
    “Everything about unemployment insurance is too complicated,” said Michele Evermore, a senior policy analyst at the National Employment Law Project.
    For one, states set different rules for their unemployment systems. But here’s what Americans across the country can generally expect.

    How much will I get?

    Applying for unemployment benefits starts a “benefit year” for that individual. A benefit year is the 52-week period following the date you first filed a claim.
    Someone who filed for unemployment in March 2020 would have a benefit year that lasts until March 2021, for example.
    Jobless workers can collect benefits over that period, even through multiple waves of unemployment.
    More from Invest in You:How to borrow money if you are out of optionsYour income took a hit. Now what?Money moves that will help you thrive in a recession
    However, states put limits on the benefits people can receive — in weekly amounts and total duration — over that yearlong time frame. Those limits often mean someone won’t be eligible to collect benefits for the whole year.
    Americans can think of unemployment benefits like a bank account, said Chris O’Leary, a senior economist at the W.E. Upjohn Institute for Employment Research.
    Let’s say someone gets about $380 a week — the average — in state unemployment benefits. The state, like most others, pays benefits for up to 26 weeks (6½ months).
    This person would have a “bank account” of $9,880.

    Now let’s say this person was receiving $380 a week over the 13-week period since mid-March, when layoffs began en masse. They got their old job back and stopped collecting unemployment. After some time, they are furloughed again.
    Half their bank account would be left. In other words, they’d be able to resume their old benefit level — $380 a week — for 13 more weeks.
    Some states allow people to collect benefits for longer than the maximum duration (i.e., 26 weeks) if they’re drawing down a smaller chunk of their “bank account” each week, O’Leary said.
    This can occur through work-sharing programs, for example, which pay prorated unemployment benefits to part-time workers. Let’s say the same person’s hours were cut in half. They could theoretically get 50% of their benefit (i.e. $190 a week) for double the time (52 weeks). 

    However, not all states operate their programs this way, O’Leary said.
    (One important note: The CARES Act, a federal coronavirus relief law enacted in March, supplements state benefits with an extra $600 a week. These payments, which are funded by the federal government and last through July 31, don’t increase the size of one’s unemployment “bank account.”)

    A year of unemployment benefits

    The CARES Act and other rules mean people can get benefits over a much longer period of time than is typically the case. 
    The law funds an additional 13 weeks of benefits for unemployment recipients. This extension, called Pandemic Emergency Unemployment Compensation, expires at the end of 2020.
    States also have rules, which predate the CARES Act, that offer “extended benefits” during periods of high unemployment in their state.  
    Most states have triggered these additional benefits, typically around 13 extra weeks, Evermore said. Some states like Florida and North Carolina pay fewer (around six weeks) and others pay up to 20 weeks.
    Unlike the 13 extra weeks offered through the CARES Act, which are unavailable past year-end, the extra weeks offered via “extended benefits” can bleed into next year if a person remains unemployed.
    So, our theoretical unemployed worker could access $380 a week for a whole year. (This factors in a typical 26-week state benefit duration, a 13-week CARES Act extension and an additional 13-week period offered via state enhanced benefits).
    This amount would be available over several periods of unemployment during that time period.
    The person would also get $600 a week through July 31 in federal supplement payments.
    Workers generally don’t have to reapply when transitioning into new periods of duration, though some states may vary in their processes, Evermore said. 

    The CARES Act offered some groups, like self-employed and gig workers, a total 39 weeks of unemployment benefits, via the Pandemic Unemployment Assistance program. It expires at the end of the year.
    These workers are typically ineligible for traditional state benefits.

    What happens when the ‘benefit year’ ends?

    High levels of joblessness could persist into next year.
    That could prove problematic for workers who’ve exhausted or nearly depleted their benefits, Evermore said. 
    While a person can reapply for unemployment after the end of their current “benefit year” — in March 2021, let’s say — their aid may be much less than it had been previously. They may also be deemed ineligible for any benefits.
    States typically use a person’s earnings over the prior four quarters to determine the amount of their weekly unemployment pay. But a long spell of joblessness would likely mean workers don’t have enough wages over that period to qualify for benefits. If they qualify, it may be for a lower amount.
    Congress passed a law during the Great Recession that prevented this dip in benefits from occurring, Evermore said. Lawmakers may do so during this recession, she said.  
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    Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns. More

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    Stocks making the biggest moves premarket: United Airlines, Amazon, Nvidia, Wells Fargo & more

    Traders work on the floor of the New York Stock Exchange shortly before the closing bell as the market takes a significant dip in New York, February 25, 2020.
    Lucas Jackson | Reuters

    Check out the companies making headlines before the bell Friday:
    United Airlines (UAL) — The airline reached a deal with a pilot union representing about 13,000 pilots regarding early retirements and voluntary furloughs as the industry faces massive headwinds from the coronavirus pandemic.  United shares traded more than 2% lower in the premarket.

    Foot Locker (FL) — An analyst at Susquehanna upgraded Foot Locker to positive from neutral and hiked his price target on the stock to $34 per share from $25 per share. The new price target implies an upside of 21.5% over the next 12 months. The upgrade reflects young customers “heading to Foot Locker Inc.’s store banners and websites to spend the newfound money in their pockets to a greater degree than what was reflected in our prior estimates,” the analyst said.
    Redfin (RDFN) — RBC Capital Markets downgraded Redfin to sector perform from outperform, citing a high valuation after the stock skyrocketed 400% from its mid-March low. “Valuation has crept up to an extent we see the risk-reward reasonably balanced, given larger macro uncertainties,” RBC said.
    Wells Fargo (WFC) — The banking giant was upgraded to outperform from hold by an analyst at Baird, who said the stock’s decline this year is an opportunity “to add bank exposure.” The analyst also said Wells Fargo has a “highly attractive” valuation when looking at a number of metrics.
    Beyond Meat (BYND) — Citigroup initiated Beyond Meat with a sell rating and a price target of $123 per share, which implies a downside of 12% from Thursday’s close of $141.22 per share. Citi expects the meatless meat maker to face long-term pressure as competition in the space grows as well as near-term struggles “as a result of its exposure to the foodservice segment.” Shares of Beyond Meat dropped 2.6%.
    BioNTech  (BNTX) — BioNTech’s U.S.-listed shares rose 2% in the premarket after CEO Dr. Ugur Sahin told The Wall Street Journal its coronavirus vaccine candidate could be ready for approval by December.

    Nvidia (NVDA) — An analyst at Rosenblatt Securities hiked his price target on the chipmaker to $500 per share from $400, implying an upside of 18.9% from Thursday’s close. The analyst said a “secular shift” into data-processing units and the company’s “entrance into new markets” will drive revenue growth for Nvidia in the years ahead.
    Amazon (AMZN) — Citigroup raised its price target on Amazon to a Street high of $3,550 per share from $2,700. The new price target implies an upside of more than 11% from Thursday’s close of $3,182.63. The analyst said Amazon’s share price will keep rising as the e-commerce market continues to grow. More

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    Tencent in exclusive talks to buy Hong Kong gaming firm Leyou

    A pedestrian walks past Tencent Holdings’s headquarters in Shenzhen, China.
    Qilai Shen | Bloomberg | Getty Images

    Chinese tech giant Tencent is in exclusive talks to acquire Leyou Technologies, the Hong Kong-listed games developer announced on Friday.
    Leyou has a number of subsidiaries which make video games. It is most well-known for “Warframe,” a title created by subsidiary Digital Extremes.

    It has also announced plans to bring out a game based around “The Lord of the Rings” franchise and is co-developing the upcoming title with Amazon’s gaming division.
    Leyou and its controlling shareholder, Charles Yuk, have entered into an exclusivity agreement with Tencent Mobility Limited, a Tencent subsidiary, Leyou said. Tencent Mobility is looking to buy Leyou and take it private.
    Piers Harding-Rolls, head of games research at Ampere Analysis, noted that Leyou began life as a food processing company before pivoting to games and buying up developers like Digital Extremes and Splash Damage.

    “My view is that it is looking for a buyer because its main service game Warframe suffered in 2019 due to a slow update cycle and new competition,” he told CNBC by email Friday. “Although it has a growth strategy for the title, it will need investment in development to drive engagement.”
    The exclusivity agreement means that Leyou and Yuk won’t be able to negotiate with another potential buyer in the next three months while the Tencent talks are ongoing. Leyou said the negotiations were still in progress and that there was no certainty the talks would lead to a binding deal.

    The firm had earlier halted trading in its shares pending an incoming takeover announcement.

    Aggressive expansion strategy

    In the past few years, Tencent has bolstered its gaming portfolio via investments in other firms. For example, it acquired most of Finnish mobile game maker Supercell in 2016 and took a stake in “Fortnite” creator Epic Games in 2012.
    An acquisition of Leyou would help Tencent further expand the number of games under its huge umbrella as it faces increasing competition from Chinese rival NetEase.
    NetEase, which is listed in the U.S., carried out a secondary listing in Hong Kong, last month, raising 21.09 billion Hong Kong dollars ($2.7 billion). That money will be put toward international expansion which means NetEase and Tencent will go head-to-head in the global games market.
    The news comes after a Bloomberg report last week said that Sony was considering a bid for Leyou. The Japanese gaming giant recently announced a $250 million investment in Epic Games.
    Sony has been aggressive in bolstering its access to key intellectual property ahead of the launch of its flagship PlayStation 5 console slated to be released later this year. Last month, the firm unveiled the design of its next-generation device and a line-up of well-known games that will be released. More

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    Coronavirus fears are pushing investors back into stay-at-home trades

    Investors are bailing on a popular trade due to the coronavirus surge.
    Allianz Global Investors’ Mona Mahajan finds a rush of money is flowing back into stay-at-home plays.

    “The cyclical story is on hold for now,” the firm’s U.S. investment strategist told CNBC’s “Trading Nation” on Thursday. “The trade is moving out of that reopening, cyclical trade which was more about sectors like airlines [and] hotels.”
    Mahajan attributes the shift to investor fear and uncertainty regarding the country’s ability to contain the virus.
    Despite the setback, Mahajan is optimistic.
    “It’s not dead forever,” she added. “There are a few things that could reignite it.”
    She lists a vaccine that becomes widely available, evidence virus cases have peaked and a resolution to the November presidential election.

    “Historically when elections are done, presidential elections in particular, markets tend to breathe a sigh of relief regardless of which party wins because that uncertainty is behind us,” noted Mahajan.
    According to her base case, stocks should grind higher in the year’s second half.  But due to seasonal pattern, virus and elections risks, she predicts it’ll be a volatile environment for stocks over the next few months.
    “That time period in September and October has not been great for markets,” said Mahajan. “This year, it happens to coincide with one: school reopenings and potentially, what we’re hearing, of another flare-up in virus cases.”
    To cope with uncertainty, Mahajan favors a barbell approach to investing and looking to China and Europe — two regions that are reporting progress against new virus outbreaks. 
    “There’s room to be a little bit more diversified,” said Mahajan, who views market downturns as a buying opportunity.
    On Thursday, the tech-heavy Nasdaq closed at a new all-time high. However, the S&P 500 and Dow closed lower.
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