Month: April 2020

The Nasdaq increased 0.48 percent on Monday after Amazon (AMZN) said it will hire 75,000 new workers. Both Amazon and its main competitor Wal-Mart (WMT) are near all-time highs. Netflix (NFLX) and other companies expected to benefit from quarantine also saw shares surge on Monday. Netflix hit a new 52-week high.

Technology was the best performing sector on Monday. SPDR Technology (XLK) increased 0.29 percent.

An OPEC deal to cut oil production didn’t stem the selling in energy markets. West Texas Intermediate crude slipped more than 1 percent on the day. SPDR Energy (XLE) declined 0.32 percent.

March retail sales will be released on Wednesday. Analysts project a 7.1 percent decline and a 4.9 percent decline, ex-autos. Economists forecast March industrial production to have slid 4.0 percent.

The U.S. Dollar Index weakened slightly on Monday, falling 0.15 percent. iShares MSCI Emerging Markets (EEM) gained 0.14 percent, while iShares MSCI EAFE (EFA) fell 0.95 percent.

Earnings reports will dominate headlines this week. We anticipate most companies won’t offer forward looking guidance. The analyst consensus calls for a 10.0 percent decline in first quarter S&P 500 earnings from year-ago levels. Given the high amount of uncertainty created by the coronavirus, results could deviate significantly.

There will be a high degree of variability in company performance. Some firms have benefited from the pandemic, while others have suffered.

Two large banks will announce earnings on Tuesday. JPMorgan (JPM) and Wells Fargo (WFC) will both provide reports. Additionally, United Continental (UAL), Johnson & Johnson (JNJ), Fastenal (FAST), JB Hunt (JBHT), Infosys (INFY), PacWest Bancorp (PACW) and First Republic Bank (FRC) will deliver results.

Wednesday brings Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS), PNC Financial Services (PNC), Charles Schwab (SCHW), U.S. Bancorp (USB), UnitedHealth Group (UNH), Progressive (PGR), Las Vegas Sands (LVS), ASML Holding (ASML) and Bed, Bath & Beyond (BBBY).

On Thursday, we’ll hear from Delta Air Lines (DAL), Abbot Labs (ABT), Intuitive Surgical (ISRG), Honeywell (HON), Taiwan Semiconductor (TSM), Blackstone Group (BX), Bank of New York Mellon (BK), KeyCorp (KEY) and Rite Aid (RAD).

Oil services giant Schlumberger (SLB), Kansas City Southern (KSU), Regions Financial (RF), State Street (STT), Citizens Financial Group (CFG) and IMAX Corp (IMAX) will report on Friday.

Equities staged a broad rally this week. The Dow Jones Industrial Average climbed 12.63 percent for the week, the S&P 500 Index 12.07 percent and the Nasdaq 10.58 percent. The major indexes have retraced 50 percent of their losses between February 19 and the low on March 23.

SPDR Materials (XLB) advanced 20.58 percent as beaten down commodity producers rallied along with the broader market. SPDR Financial (XLF) popped 19.05 percent on the week, with substantial gains coming on Thursday after the Federal Reserve announced it would purchase junk bonds and high-yield ETFs. SPDR Utilities (XLU) climbed 17.46 percent and SPDR Consumer Discretionary (XLY) 13.45 percent.

The Federal Reserve announced a $2.3 trillion lending program for households, governments and high-yield debt. The Fed will buy bonds directly from states if the bonds are for short-term financing of operations, though the bonds cannot have maturity beyond 2 years. As for junk bonds, the Fed will buy “fallen angel” bonds that were investment grade as of March 22 but were later downgraded. Lending to main street will come via increased purchases of small business loans.

iShares iBoxx High Yield Corporate Bond (HYG) rose 6.55 percent on Friday and 11.93 percent for the week. Invesco Senior Loan (BKLN) advanced 8.65 percent and iShares iBoxx Investment Grade Corporate Bond (LQD) 8.64 percent.

Sentiment indexes showed the effect of the coronavirus this week. The National Federation of Independent Business small-business confidence index slipped to 96.4 in March. The University of Michigan’s consumer sentiment index was 71. Producer prices fell 0.2 percent in March, less than the predicted 0.3 percent decline. Consumer prices increased 0.2 percent, much higher than the consensus estimate of a 0.4 percent decrease.

Even though the Fed announced another major bailout, the U.S. dollar saw a mild impact. The U.S. Dollar Index fell only 0.8 percent for the week. The U.S. indexes dramatically outperformed their foreign counterparts. iShares MSCI EAFE (EFA) rose 6.66 percent for the week and iShares MSCI Emerging Markets (EEM) 4.67 percent.

Crude oil ended down more than 15 percent after OPEC infighting intensified.  Russia and Saudi Arabia agreed to cut 5 million barrels, while the rest of OPEC agreed to cut another 5 million. Additionally, OPEC called on the U.S. and Canada to cut another 5 million barrels when the G20 meets on Friday.

Earnings season will heat up over the coming weeks. Starbucks (SBUX) came out with guidance this week, indicating it expects earnings between $0.28 and $0.32 per share, down from $0.60 in 2019. It will report earnings on April 28. Still shares of Starbucks rallied 3.23 percent on the news.