Caterpillar’s stock swings lower as downbeat dealer inventory outlook, retail sales data follow earnings beat

Shares of Caterpillar Inc. fell on Friday, reversing early gains, following the construction and mining equipment maker’s post-earnings conference call with analysts, in which the company provided a downbeat outlook with regard to dealer inventories.

Caterpillar gave investors an early reason to cheer, with the 6:00 a.m. Eastern release of its second-quarter results. The stock surged as much as 6.0% in the premarket after the results, in which profit and revenue fell from a year ago as the COVID-19 pandemic weighed, but beat Wall Street expectations.

The company had also said in the release that dealers reduced machine and engine inventories by about $1.4 billion during the quarter, compared with an increase of $500 million in the same period last year.

Then just as the stock

was near its premarket highs, Caterpillar released its rolling 3-month retail sales statistics, and the early gains started to evaporate.

Worldwide retail sales, as reported in constant dollars on unit sales by dealers, fell 23% from a year ago for the rolling three-month period ending June, after falling 23% in May and shedding 22% in April. North America sales were down 40% in June after dropping 36% in May and declining 27% in April. In resource industries, retail sales fell 21% in June after dropping 21% in May, with North America down 46% in June after falling 39% in May.

That comes despite Caterpillar saying it saw activity in resource industries start to improve in May and June.

Then the stock turned decidedly lower after Caterpillar got into its post-earnings conference call with analysts, which started at 8:30 a.m.

FactSet, MarketWatch

The stock slumped 2.8% to close Friday at $132.88, and has lost 5.4% since it closed at a 5-month high of $140.53 on Wednesday. Year to date, it has declined 10.0%, while the SPDR Industrial Select Sector exchange-traded fund

has slid 12.0% and the Dow Jones Industrial Average

has declined 7.4%.

During the analyst call, Chief Executive James Umpleby noted that the change in dealers’ inventories from a year ago drove nearly half of the sales decline for the quarter.

“The decrease in dealer inventories in this past quarter was greater than we expected,” Umpleby said, according to a FactSet transcript of the call. “We now anticipate that our dealers will reduce their inventories by more than $2 billion by year end.”

That outlook is actually more like a $2.2 billion reduction. Chief Financial Officer Andrew Bonfield said inventories were reduced by $1.2 billion for the first half of the year. For the second half of the year, he said that based on the latest read of end-user demand, he expects dealers will further reduce inventories by another $1 billion.

During that first-quarter post-earnings conference call on April 28, Bonfield said he expected year-end dealer inventory reductions to be at the “higher end” of the previously provided guidance range of $1.1 billon to $1.5 billion. He said he would give an update on the 2021 outlook in January. Read more about first-quarter earnings.

And regarding the outlook for retail sales, Umpleby said he expects a third-quarter decline of around 20%, which is consistent with the decline in the second quarter.

Overall, the company said in the earnings release that it wasn’t providing a financial outlook for 2020 at this time, given the continued uncertainties regarding the COVID-19 pandemic’s effect on the global economy. Read MarketWatch’s latest Coronavirus update.

“We will adjust production as conditions warrant and are prepared to respond quickly to any positive or negative changes in customer demand,” Umpleby stated.

And on the analysts call, Bonfield said succinctly: “In 2021, we expect to produce to demand.”

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This sector could have a half million job openings and opportunities for older workers

Although the coronavirus continues to rattle global markets and industries, some analysts expect to see greater demand for advanced manufacturing talent in the U.S. as the pandemic diminishes. That could create opportunities for older men and women, including white-collar professionals struggling to find jobs.

Before COVID-19, there were 500,000 manufacturing jobs open in the U.S., according to the National Association of Manufacturers (NAM). “We’re going to have a need very quickly to ramp up on hiring in those facilities that may have been shut down during the crisis or that need to expand operations,” said NAM president and CEO Jay Timmons in a recent press conference.

“The fact that one can get a certificate in about nine months and totally re-career into a nearly guaranteed job is an incredible opportunity for an older worker.”

— Nora Duncan, Connecticut state director of AARP

As manufacturers frantically try to keep up again with demand for essentials and lifesaving PPE (Personal Protective Equipment) for health care workers as cases rise across the country, their innovation and high-tech problem-solving could help dispel misconceptions that all manufacturing jobs are dirty and physically demanding, said Sara Tracey, project manager of workforce services for the Ohio Manufacturers’ Association in Akron, Ohio.

Manufacturing jobs and what they pay

Entry-level manufacturing jobs in industries such as aerospace, technology and defense include CNC operators, set-up technicians and programmers, as well as inspectors, higher-end assembly technicians and quality assurance.

The pay typically ranges between $35,000 and $65,000, including overtime and benefits, said Richard DuPont, director of community and campus relations for the Advanced Manufacturing Technology Center at Housatonic Community College in Bridgeport, Conn. More experienced professionals can earn upward of $95,000.

80% of older Americans can’t afford to retire – COVID-19 isn’t helping

In Ohio, manufacturers have been training and moving some workers into higher positions so the companies can hire and train new candidates for vacated ones, Tracey noted. Resources such as the Making Ohio website let people explore careers in manufacturing, including robotics, automation and 3-D printing.

Industrial maintenance is an important career pathway these days, as well, Tracey said. This sector is expecting more retirements in the near future, which will create jobs from “traditional machine mechanics to troubleshooting state-of-the-art electronic or robotic processes,” Tracey noted.

Also see: Cannabis, whiskey, and mobile bike repair: These entrepreneurs are thriving in the pandemic

Connecticut, among other states, now offers training programs with community colleges, state manufacturers and other organizations.

From banking to precision tools

This kind of training helped Allison Clemens-Roberts, who is over 50, find work after losing her clerical job in the pensions department of a Connecticut bank in 2017. A severance package gave her time to look for work, but she couldn’t find even temporary employment. She blames age discrimination by white-collar employers.

“There’s no way to hide how old you are. They can ask when you graduated from school,” Clemens-Roberts said.

But while she was out of work, Clemens-Roberts received a postcard from AARP offering a 25% tuition scholarship on advanced manufacturing programs at Goodwin University, a career-focused school in East Hartford, Conn.

She wasn’t interested until her husband Frank saw a TV commercial touting the benefits of Goodwin’s manufacturing and other programs.

“He said, ‘Why don’t you think about changing careers?’” Clemens-Roberts recalled.

So, with several months left on her severance, she enrolled in a full-time, six-month CNC (Computer Numerical Control) Machining, Metrology and Manufacturing Technology certification program. It would prepare her for a job working with automated machine tools which requires mathematical skills, attention to detail and critical thinking.

SectorWatch: 80% of older Americans can’t afford to retire – COVID-19 isn’t helping

Scholarships cut Clemens-Roberts’ tuition bill from $7,000 to $3,200. After a two-month paid internship at TOMZ, a manufacturer of precision components for major medical devices in Berlin, Conn., she was hired in April 2019. Six months later, TOMZ reimbursed Clemens-Roberts $1,500 for her education tab.

Clemens-Roberts said her family is now in a better financial position than when she was working in a bank, living paycheck-to-paycheck. Considered an essential worker, she has kept her full-time job through the pandemic, except for three days in March.

“I never thought I would go to college and participate in a graduation — in cap and gown,” Clemens-Roberts said. “That was a big surprise. And [actor] Danny Glover was the speaker. A bucket-list experience.”

There’s “obviously age discrimination, among other things, at play” for job seekers over 50, said Nora Duncan, Connecticut state director of AARP. “The fact that one can get a certificate in about nine months and totally re-career into a nearly guaranteed job is an incredible opportunity for an older worker.”

While AARP helped Clemens-Roberts pay for the tuition initially, the internship helped her get hired as a machine operator.

Older and younger manufacturing workers helping each other

The search for skilled manufacturing labor across the country is creating opportunities for workers of all ages, said DuPont. And older and younger generations working together are assisting each other.

The older students help younger classmates with life skills, while younger students can help with technology,” said DuPont. “Together, they make excellent teams.”

Don’t miss: How will the robots see you through the pandemic?

Just ask Fernando Vega, 62, who is now a quality inspector at Forrest Machine, in Berlin, Conn. It makes precision-machined parts and other components for the aerospace and commercial industries. In the 1990s, he was a quality inspector before recessions and outsourcing forced him to consider other careers.

He tried working for a nonprofit and though Vega found the work rewarding, it wasn’t financially sustainable.

So, Vega went back to school in spring 2018 to study advanced manufacturing at Goodwin.

“I was in a class of 18, and at first everyone kept to themselves. But when it came time to read blueprints, there was some panic and I said, ‘Don’t panic, I’ll show you.’ The [younger] students helped me with trigonometry, and then we started to work together.”

Vega has worked at his manufacturing job throughout the pandemic. At one point, he was putting in 50 hours a week, but that was reduced to 40 hours plus overtime.

Vega recalled promising his mother that he would go to college. “But that was a long time ago,” he said. His mother never got to see him graduate but Vega feels he’s fulfilled his promise — not only to her, but also to himself. “I love my job,” he said.

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White House officials suggest breaking new coronavirus relief package into smaller pieces

White House officials on Sunday again suggested the best way to proceed with coronavirus relief is to split the Democratic $3.4 billion plan into pieces and pass some measures quickly while debate lingers on other items.

In an interview on ABC News’ “This Week,” White House Chief of Staff Mark Meadows said he thought Congress should pass unemployment insurance, aid to schools and liability protection for businesses.

“Perhaps we can put that forward, get that passed and we can negotiate on the rest of the bill,” he said.

Last week, Speaker of the House Nancy Pelosi repeatedly rejected doing the legislation in piecemeal fashion.

And interviewed on Sunday on CBS’ “Face the Nation,” Pelosi showed no sign of changing her mind.

One major priority for Democrats missing from Meadow’s package is more money for state and local governments.

“We have been ready for two months and ten days” to negotiate, Pelosi said, referring to when the Democrat plan passed the House.

With neither side showing signs of budging, it looks like the stimulus talks may drag on.

Republicans might be counting on pressure for lawmakers to act from the looming expiration of $600 weekly payment of enhanced federal unemployment benefits. These benefits, received by more than 20 million Americans, expire fully on July 31. No matter what Congress does, there is already likely to be a gap in those federal benefits given the delay in extending them.

But Pelosi could be counting on voters blaming Trump for any delay. She gave the president a new nickname, “Mr. Makes Matters Worse.”

Economists are worried the economy is losing steam in July after rebounding from the short but deep contraction in the second quarter.

They see more government aid to unemployed as essential to keep the economy from sliding into a double-dip recession

As it is, new layoffs continue to be announced daily, with billionaire Ray Dalio’s hedge-fund Bridgewater the latest to report job cuts late last week.

In an interview on Fox News Sunday, Treasury Secretary Steven Mnuchin confirmed the GOP package would reduce the blanket $600 weekly unemployment payment. Instead, the bonus would be tailored to workers’ income so they get about 70% of their take-home pay.

“We want to have something which is capable of about 70% wage replacement, which I think is a very fair level,” Mnuchin said.

Meadows and Mnuchin were on Capitol Hill on Saturday and will return Sunday to put the finishing touches on a Republican package to be unveiled on Monday.

Mnuchin said the GOP measure would cost $1 trillion.

“We can move very quickly with the Democrats on these issues. We’ve moved quickly before and I see no reason why we can’t move quickly again. And if there are issues that take longer, we’ll deal with those as well,” he added.

In a separate interview, White House economic adviser Larry Kudlow confirmed in an interview on CNN’s “State of the Union” that the GOP plan would include new $1,200 stimulus checks for Americans and would extend a federal moratorium on evictions.

Kudlow scoffed at suggestions the economy was weakening.

“The economy is improving by leaps and bounds,” Kudlow said.

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In apparent U-turn, Trump tweets photo of himself wearing a face mask: ‘Many people say that it is Patriotic to wear a face mask’

President Trump’s resolve may be cracking — at least when it comes to face masks.

On Monday, however, Trump tweeted

a photo of himself wearing a mask with a presidential seal, adding, “Many people say that it is Patriotic to wear a face mask when you can’t socially distance.” CNN

reported that the president’s falling poll numbers likely played a role in this decision to wear a mask, and hold a daily 5 p.m. update on the coronavirus pandemic.

On April 3, the Trump administration and the Centers for Disease Control and Prevention reversed their policies on face mask, and said all Americans should wear cloth face coverings and not — as it previously said — just medical workers. President Trump cited “recent studies” of asymptomatic transmission for the U-turn, while the CDC cited “new evidence.”

Unlike New York Mayor Bill DeBlasio‘s mandate to wear masks in stores, however, the federal government’s recommendations are voluntary. What’s more, Trump signaled his resistance to wearing a mask. “I don’t think I’m going to be doing it,” he said at the time, adding, “Wearing a face mask as I greet presidents, prime ministers, dictators, kings, queens — I just don’t see it.”

During an interview on Fox News on Sunday, journalist Chris Wallace asked Trump if he would introduce a federal mandate to wear face masks in public places where social distancing is not possible. Trump replied, “No, I want people to have a certain freedom,” he said, adding, “I don’t agree with the statement that if everyone wears a mask everything disappears.”

Asked if he takes responsibility for not having a federal policy on coronavirus during the interview, Trump replied, “Look, I take responsibility always for everything because it’s ultimately my job too. I have to get everybody in line. Some governors have done well, some governors have done poorly. We have more testing by fair than any country in the world.”

As of Monday, COVID-19 had infected 14.6 million people globally. It had killed over 609,198 people worldwide, according to Johns Hopkins University’s Center for Systems Science and Engineering. New York, the epicenter of the virus in the U.S., has still had the most deaths of any state (32,506), followed by New Jersey (15,715) and Massachusetts (8,433).

CityWatch:CDC confirms that coronavirus already spreading in New York City when European travel ban went into effect in March

On Feb 29, Surgeon General tweets his opposition to the public wearing masks. “Seriously people: STOP BUYING MASKS!” he tweeted. “They are NOT effective in preventing general public from catching #coronavirus, but if health-care providers can’t get them to care for sick patients, it puts them and our communities at risk!” He changed his mind on April 4.

The public was, understandably, confused. N95 masks appear to be effective for health-care workers. This study says N95 medical-grade masks do help filter viruses that are larger than 0.1 micrometers (One micrometer, um, is one millionth of a meter.) The coronavirus is 0.125 um. They have “efficacy at filtering smaller particles and are designed to fit tightly to the face,” it said.

The markets appear torn between optimism on vaccine research and the economic impact of new surges, particularly California, Arizona, Florida and Texas. The Dow Jones Industrial Index

closed higher Monday, as investors looked toward the prospect of further fiscal stimulus. The S&P 500

and Nasdaq Composite

also ended higher.

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The perils of waiting 10 days or more to get a coronavirus test result: ‘It’s only marginally better than not doing the testing’

When people first started showing signs of coronavirus in the U.S. in March they were told they needed special permission to get tested. 

If they didn’t fit into the high-priority bucket — which included health-care workers, people who were hospitalized, and people who recently traveled to China or came in contact with someone who did, they were often told to quarantine at home for 14 days. 

At that time, there was an extremely limited supply of testing kits, which backfired by helping accelerate the spread of coronavirus across the country because so many cases went undiagnosed, said Ashish Jha, the director of the Harvard Global Health Institute.

Since then, “testing capacity has clearly gotten better. At that time it was completely awful and now it’s inadequate,” Jha said.

So far, the U.S. has performed more than 45 million tests total, averaging approximately 700,000 a day “and that’s continuing to go up week to week,” Admiral Brett Giroir, a member of the White House coronavirus task force, who oversees testing, told reporters on Thursday.

Turnaround times for commercial test results “continues to be an issue,” Giroir, the assistant secretary for health at the U.S. Department of Health and Human Services, said. 

Wait times of more than ten days have become the norm for many Americans. There are, however, stories of people who have had to wait 26 days to get their results

“Once you get the lag of seven to ten days, it’s only marginally better than not doing the testing,” Jha said. 

Approximately half of the tests being performed daily are conducted by commercial labs such as Quest Diagnostics and LabCorp, Giroir said. The rest are done “at point of care, which is a 15-minute turnaround, or in local hospitals, which is generally within 24 hours.”

“Only one state has an average turnaround time of greater than five days. Five states are between four and five days. 26 states are still three days or less, and the rest are between three and four days.” Turnaround times of 10 to 12 days represent outliers, he added. Still, CityMD Urgent Care locations in New York, for example, says patients must wait seven days minimum for their test result.

‘Once you get the lag of seven to ten days, it’s only marginally better than not doing the testing’

— Ashish Jha, the director of the Harvard Global Health Institute

To reduce some state turnaround times, Giroir said he wants to transition to “care testing.” He also advocated for “pooling five samples into one.” 

Doing so, health experts say, would help labs churn through negative test results. The downside is that it prompts an additional round of testing if coronavirus is detected in the pooled sample. 

“It can decrease the turnaround time tremendously,” he said. However, Giroir said “the science is still being validated [and] the regulatory is still being authorized.”

The state of commercial testing in the U.S.

Quest Diagnostics Inc.
one of the largest labs in the U.S. performing coronavirus tests, said that the average turnaround time for non-priority patients is “seven or more days” and “slightly more than one day” for priority patients.

“We will not be in a position to reduce our turnaround times as long as cases of COVID-19 continue to increase dramatically across much of the United States.’

— Quest Diagnostics Inc

That’s after the company doubled its testing capacity compared to eight weeks ago, Quest said in a statement made on Monday. Testing capacity currently hovers at 125,000 tests a day, but by the end of the month, Quest said it expects to have the capacity to perform 150,000 tests a day.

“We will not be in a position to reduce our turnaround times as long as cases of COVID-19 continue to increase dramatically across much of the United States,” the company said. “This is not just a Quest issue. The surge in COVID-19 cases affects the laboratory industry as a whole.”


experience is nearly identical to that of Quest.

Both companies say that recent demand for testing in light of the country’s record daily cases that continue to climb cannot be met under their existing constraints. 

LabCorp said it has performed 7 million total tests since its test became available in March. Now it has been “able to process approximately 140,000 tests per day with plans to increase that to 150,000 tests per day this month,” a LabCorp spokesman said in a statement to MarketWatch.

Until recently, LabCorp said it’s been able to deliver test results back to patients on average between 1 to 2 days. “But with significant increases in testing demand and constraints in the availability of supplies and equipment, the average time to deliver results may now be 4 to 6 days,” he added.

“For hospitalized patients, the average time for results is faster,” LabCorp said.

But beyond the increased demand for testing, Jha pointed out that the long turnaround times cannot simply be pinned to one factor and can vary significantly at labs across the country.

For some, it boils down to not having enough reagents or swabs to perform the tests. For others, there could be a shortage of trained personnel to perform the tests that’s causing the delays. 

But it was “completely predictable,” he said. “The system was not designed to do this level of testing.”

“We designed a horse and buggy to race in the Indy 500 and we’re having a hard time keeping up,” Jha told MarketWatch, and it’s “making it so much harder to control the disease.”

Not all labs across the country are being properly utilized 

There’s a lot of capacity to do tests that’s sitting on the sidelines,” Jha said. There are many labs in the U.S. that have the ability to do coronavirus testing, but aren’t “because they’re using the machines for something else.”

“They don’t know that, if they stop doing the other stuff, if they’ll be able to get paid to switch to coronavirus testing,” he added.

Companies with the technology would still have to repurpose their machines for coronavirus testing, Jha said. “They couldn’t possibly justify spending tens of millions of dollars if they don’t know that this is going to be financially viable.” 

‘There’s a lot of capacity to do tests that’s sitting on the sidelines’

— Ashish Jha, director of the Harvard Global Health Institute

Giroir said that the price point the federal government pays to labs and suppliers of inputs for tests “is very fair and highly incentivizes people to do these tests.”

To ease their financial concerns, Jha recommended that the federal government pay them a portion of their fees upfront.  He has spoken directly to some of those labs that are already in a financial limbo due to a decline in testing volumes because non-emergency health visits have fallen.

There are only a couple of companies that make the reagents to perform the tests

The Centers for Disease Control and Prevention has not publicly disclosed how many companies commercially manufacture reagents, but Jha believes there’s only a handful of companies doing so.

In March, President Trump invoked the Defense Production Act calling upon traditional car manufacturers like General Electric

and Ford

to make ventilators. In April, he called upon 3M

to manufacture more N95 masks

Jha said that could have been prevented if Trump invoked that same act to mandate “companies that don’t make the reagents for these tests to start making the reagents.”

“Those companies are working full time, but they can’t ramp up production any more than what they’ve done,” he said.

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