The Dow Jones Industrial Average (DJINDICES:^DJI) staged a comeback, albeit a volatile one, on Friday. The Dow was up 2.8% at 1:25 p.m. EDT, regaining a portion of its near-10% loss on Thursday. News surrounding the coronavirus pandemic hasn't gotten any better, and the situation will almost certainly get worse from here.
Shares of Disney (NYSE:DIS) gained ground on Friday despite the company's decision to close its U.S. parks and delay film releases. Microsoft (NASDAQ:MSFT) was also up, even as the Department of Defense looks to review its award of the JEDI cloud computing contract.
Disney closes parks, delays films
As COVID-19 spreads in the United States, states, school districts, and companies have begun to take painful but necessary steps to keep the outbreak in check. Some states have banned large gatherings, many universities and public school systems have either closed for a few weeks or switched to online-only, some companies have begun encouraging employees to work from home, and major tourist attractions are being shuttered.
Disney announced late Thursday that it was temporarily closing Walt Disney World in Florida and Disneyland Park in California. The company is also suspending all new departures for the Disney Cruise Line. Previously, the company had closed some of its resorts abroad.
Disney has also pulled Mulan, The New Mutants, and Antlers off its film schedule. While movie theater chains in the U.S. have not yet announced any closings, temporary closings look likely as film releases are pushed back.
In the short term, these developments will hurt Disney financially. Disney's parks, experiences, and products segment produced $26.2 billion of revenue in fiscal 2019, accounting for 38% of the company's total. The studio entertainment segment, responsible for $11.1 billion of revenue last year, will also take a hit.
All of the measures being taken across the U.S. will help reduce the chances that hospitals are overwhelmed. But even under the best-case scenario, Disney's parks are likely to be closed for a while. And it's unclear what demand for cruises will look like after the outbreak has run its course.
Disney stock was up 7% in the afternoon as the stock market staged a recovery. Shares are still down nearly 33% over the past month.
Microsoft may have to share JEDI contract
Tech giant Microsoft, the No. 2 provider of cloud infrastructure services, scored a coup last year when the U.S. Department of Defense awarded the company the coveted JEDI cloud contract, which is worth as much as $10 billion over 10 years. Microsoft's victory over market leader Amazon Web Services was unexpected.
Amazon wasn't happy with its loss and filed a legal challenge. Amazon alleges that the process was tainted by interference by President Donald Trump. That challenge appears to be making progress: On Thursday, the DoD asked a federal court to give it 120 days to reconsider some aspects of its decision. A Pentagon spokesperson maintained that the process was fair and unbiased, despite the review.
This development could lead to the DoD ultimately splitting the contract between Amazon and Microsoft. Wedbush analyst Daniel Ives sees that as a likely scenario, given the strategic importance of the JEDI contract.
Microsoft stock was up 4.6% Friday afternoon, while Amazon stock gained 3%. Both are still down more than 20% over the past month.