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London (CNN Business)More than 75 days into its stay-at-home order, New York City — the largest and densest city in the world’s largest economy — begins to reopen on Monday. Investors and epidemiologists are watching closely.
What’s happening: New York City is entering “phase one” of its reopening plan, allowing nonessential workers in construction and manufacturing to go back to work and retail stores to set up curbside or in-store pickups. Citigroup called it a “milestone for the center of the US epidemic” in a note to clients.Investors have been betting that the city can manage the process without a new spike in infections. The S&P 500 is now at its highest level since late February, with riskier assets back in favor.
This has been driven by further declines in Covid-19 cases, increased mobility across states, reopenings and a much better than expected US jobs report for May, Evercore ISI strategist Dennis DeBusschere said in a research note Monday. Many businesses remain shuttered, however. Hair salons and offices will stay closed until the next reopening phase. Indoor seating at bars and restaurants is still off limits.Read MoreGetting Wall Street up and running in person again is still a ways off, too.The New York Stock Exchange has reopened its trading floor to a subset of brokers, who are required to wear protective masks and practice social distancing. But financial institutions are still mostly remote.The Manhattan offices of JPMorgan Chase, for example, remain closed to the vast majority of employees. Some traders have been relocated to alternate sites in Brooklyn and New Jersey.Huge nationwide protests sparked by the death of George Floyd could also complicate companies’ attempts to return to their physical offices. Cboe Global Markets has postponed the reopening of its Chicago trading floor, which had been set for Monday, in light of closures across the city and “limited access” to the area surrounding the building.Watch this space: Investors have put their faith in the reopening process, but economists are still on edge.Nearly 90% of respondents to the latest survey conducted by the National Association for Business Economics said a second wave of infections could imperil a rebound and become the biggest danger to America’s economy this year, my CNN Business colleague Anneken Tappe reports. And 80% of survey participants were pessimistic about the US economic outlook.
AstraZeneca and Gilead spark merger chatter
AstraZeneca (AZN) has approached rival drugmaker Gilead (GILD) about a potential merger, according to a Bloomberg report. Neither company responded to requests for comment on Monday, but if the transaction were to take place, it would unite two of the leading players in the fight against coronavirus in the biggest health care deal on record.
AstraZeneca and Gilead reportedly talked about coronavirus mega mergerAstraZeneca has secured production capacity to make 2 billion doses of a potential vaccine, while the experimental Gilead drug remdesivir has been approved by the US government to treat hospitalized patients with severe Covid-19.Shares in AstraZeneca dropped by more than 2% in London after Bloomberg reported the UK-based company made a preliminary approach last month to US firm Gilead, my CNN Business colleague Charles Riley reports. The two companies have a combined market value of nearly $140 billion.Bloomberg cautioned that AstraZeneca did not specify any financial terms for a deal. Its report also said that Gilead discussed the idea with advisers, but the companies were not in formal discussions.The strategy: UBS analysts said that AstraZeneca could see Gilead’s cash as a way to fund its dividend. A merger would also unite the two companies in the fight against coronavirus.Investor insight: Both companies have performed well over the past year. Shares in AstraZeneca have increased by roughly a third since June 2019, while Gilead’s stock has risen by more than 15% over the same time period. Shares in Gilead were up more than 3% in premarket trading on Monday.Uncertainty caused by the coronavirus pandemic has dampened enthusiasm for mega-mergers. But some analysts see a case for increased dealmaking in the months ahead as central banks keep financing costs low.
Deciphering a funky US jobs report
The surprisingly solid US jobs report for May released Friday sent stocks soaring as economists scrambled to determine whether America’s economy was recovering faster than expected.But a misclassification error is sparking debate over how to interpret the data, muddling the picture for investors.The latest: For the third month in a row, the Bureau of Labor Statistics’ data collectors misclassified some workers as “employed not at work,” when they should have been classified as “unemployed on temporary layoff.” Barring that issue, the unemployment rate could have been as high as 16.1% in May, not including seasonal adjustments. The official unemployment rate came in at 13.3%.Seth Harris, who served as acting Labor Secretary under President Barack Obama, told CNN’s Fredricka Whitfield over the weekend that he didn’t think it was attempt to “trying to cook the books or make President Trump look good.””They’re career professionals. They take their craft very seriously,” he said. “They’re trying to do the best they possibly can in a very complicated situation.”Ed Yardeni, president of Yardeni Research, told clients that despite the misclassification error, the jobs report suggests the economy’s comeback is on solid footing. The key question moving forward is whether workers that have been kept on payrolls thanks to government stimulus programs like the Paycheck Protection Program still have jobs to come back to when the stimulus runs out.”The bottom line is that the household survey data has a misclassification error. The payroll data may also be distorted,” he said in a note Monday. “But both will be fine if those who are counted as employed because they are still getting a paycheck (thanks to PPP) … get to go back to their jobs.”
Up next
European Central Bank President Christine Lagarde speaks to members of the European Parliament at 9:45 a.m. ET.Coming tomorrow: AMC Entertainment (AMC), Chewy (CHWY) and GameStop (GME) report results as earnings season nears an end.
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