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End of Day Briefing - Friday April 24, 2020

Stocks end negative week on positive note

Dow +260.01 at 23775.27, Nasdaq +139.77 at 8634.53, S&P +38.94 at 2836.74

[BRIEFING.COM] The S&P 500 increased 1.4% on Friday, wrapping up a negative week on a positive note amid a resurgence in buyers during the afternoon. The Dow Jones Industrial Average rose 1.1%, the Nasdaq Composite rose 1.7%, and the Russell 2000 rose 1.6%.

Investors started the day parsing a mixed batch of earnings reports, including those from a trio of Dow components. Price action was muted from an index level, though, as the market appeared disinterested, even as oil prices ($17.03, +0.23, +1.4%) continued to rebound and the $484 billion coronavirus relief bill was signed by President Trump.

Stocks then started to gain traction in afternoon trade, presumably pulling in reluctant investors, who were fearful of missing out on additional gains given the market's recent resiliency despite the negative economic environment. From a sector level, the gains were broad, with all 11 S&P 500 sectors closing in positive territory.

The information technology sector (+2.1%) led the advance, followed by the materials sector (+1.6%). The energy sector (+0.2%) underperformed today.

As hinted earlier, Dow components Intel ($INTC 59.26, +0.22, +0.4%), Verizon ($VZ 57.93, +0.34, +0.6%), and American Express ($AXP 83.17, +0.71, +0.9%) reported mixed earnings results, but shares were able to close higher despite early losses.

Facebook ($FB 190.07, +4.94, +2.7%) was a notable standout after the company announced the launch of Messenger Rooms, a competing service to Zoom Video ($ZM 158.80, -10.29, -6.1%).

In other corporate news, Boeing ($BA 128.98, -8.76, -6.4%) will reportedly cut its 787 Dreamliner production in half and announce job cuts as a result. Alphabet ($GOOG 1279.31, +3.00, +0.2%) will reportedly cut its marketing budgets by as much as half in the second half of the year. AT&T ($T 29.71, +0.21, +0.7%) CEO Randall Stephenson will retire on July 1.

U.S. Treasuries ended the session with modest gains, pushing yields slightly lower. The 2-yr yield and 10-yr yield both declined two basis points each to 0.20% and 0.60%, respectively. The U.S. Dollar Index declined 0.2% to 100.24. On a related note, the Fed will reduce its Treasury purchases to $10 billion/day next week from $15 billion/day this week.

Reviewing Friday's economic data:

  • Durable goods orders declined 14.4% m/m in March ( consensus -10.0%). Excluding transportation, durable goods orders declined 0.2% ( consensus -4.0%).
    • The key takeaway from the report is that business spending was up slightly in March, yet that condition isn't expected to persist into April when COVID-19 shutdown measures hit in full force and corporate capex cut announcements accelerated.
  • The final reading for the University of Michigan Index of Consumer Sentiment for March was revised up to 71.8 ( consensus 66.5) from the preliminary reading of 71.0. The final reading for March was 89.1.
    • The key takeaway from the report is that the downturn in the Expectations Index has not been as severe as the downturn in the Current Economic Conditions Index, which suggests consumers are clearly concerned about the outlook but still clinging to some rebound hope with anticipated reopenings of state economies.

Investors will not receive any notable economic data on Monday.

  • Nasdaq Composite -3.8% YTD
  • S&P 500 -12.2% YTD
  • Dow Jones Industrial Average -16.7% YTD
  • Russell 2000 -26.1% YTD

Market Snapshot

SP 5002836.74+38.94(1.39%)
10-yr Note +2/320.588
NYSEAdv 1799 Dec 1085 Vol 1.1 bln
NasdaqAdv 2102 Dec 1112 Vol 3.6 bln

Industry Watch

Strong: Information Technology, Materials, Consumer Discretionary
Weak: Energy, Real Estate, Utilities

Moving the Market

-- S&P 500 closes near session highs, still ends week lower

-- Relative strength in information technology sector despite underwhelming guidance from Intel (INTC)

-- Oil prices extend rebound, $484 billion coronavirus relief bill signed by President Trump

ECONOMIC EVENTS: In U.S. data, advance durable goods plummeted 14.4% in March, the largest decline since August 2014. The University of Michigan consumer sentiment reading was edged up to 71.8 in the final April print from a 71.0 preliminary reading. However, this still represents a 17.3 point dive from March's 89.1 reading.

Meanwhile, the latest data from the Johns Hopkins Whiting School of Engineering shows there are now 2.74M confirmed cases of COVID-19 worldwide. In New York, Governor Andrew Cuomo reported 422 virus deaths yesterday versus 438 deaths the day before. Cuomo noted in his daily briefing that what he is watching now is "how fast is the decline" in COVID-19 deaths.

TOP NEWS: Shares of Intel ($INTC) finished fractionally higher after the company's first quarter report. The chipmaking giant handily beat Q1 estimates on a surge in data center and notebook demand due to COVID-led work from home impacts, but a stronger sales outlook for Q2 was offset by a lower than expected gross margin target, a number of Wall Street analysts have noted.

American Express ($AXP) reported mixed first quarter results, with better than expected adjusted earnings and lower than expected revenue. AmEx CEO Stephen Squeri explained that the first two months of 2020 "continued the strong momentum we have delivered over the past two years," but said the deterioration in the economy due to COVID-19 impacts that began in the first quarter and accelerated in April "has dramatically impacted" the company's volumes.

Verizon ($VZ) also reported mixed first quarter results, with better than expected adjusted earnings and lower than expected revenue. Verizon withdrew its financial guidance related to revenue and said it sees FY20 adjusted EPS to be down 2% to up 2%.

Meanwhile, AT&T ($T) announced some changes at the top of its leadership team. Randall Stephenson will retire as CEO, but will serve as Executive Chairman of the board of directors until January 2021, as COO John Stankey takes over as CEO, effective July 1. Following the announcement, President Trump tweeted that it was "great news" that Stephenson, who "presides over 'Fake News CNN'" is "leaving, or was forced out."

Zoom Video ($ZM) shares fell over 6% after Facebook ($FB) announced new video-calling features including Messenger Rooms, which allows users to host video calls of up to 50 people for free. Messenger Rooms' 50-person limit will not be immediately available, however. Facebook users will see a smaller limit at launch, but it will soon ramp up to 50 people, a spokesman for the company told CNBC. By comparison, Zoom Video allows up to 100 people to video chat for free for up to 40 minutes.

Additionally, Hormel Foods ($HRL) shares were 1.2% lower after its Jennie-O business announced precautionary facilities closures at its Willmar Avenue and Benson Avenue facilities in Minnesota in response to COVID-19 concerns. Smithfield Foods later said that it will proactively suspend operations at its Monmouth, IL facility beginning next week and until further notice after a small portion of its 1,700 employees tested positive for COVID-19. Both stories come after Tyson Fresh Meats ($TSN) announced yesterday that it will temporarily halt production at its Pasco, Washington, beef facility while team members undergo testing.

MAJOR MOVERS: Among the noteworthy gainers was Mesoblast ($MESO), which skyrocketed 139.5% higher after its remestemcel-L improved survival to 83% in a trial of twelve ventilator-dependent COVID-19 patients. Also higher were WWE ($WWE) and Freeport-McMoRan ($FCX), which gained a respective 14.6% and 8.5% after reporting quarterly results.

Among the notable losers was Hertz ($HTZ), which declined 6.1% after Reuters reported that the company is working with debt restructuring advisers. Also lower were Limelight Networks ($LLNW) and Moelis & Co. ($MC), which fell 5% and 8.7%, respectively, after reporting quarterly results.

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Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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