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End of Day Briefing - Thursday April 16, 2020

Large-cap indices close higher despite more bad data

Dow +33.33 at 23537.68, Nasdaq +139.19 at 8532.37, S&P +16.19 at 2799.55

[BRIEFING.COM] The stock market closed mixed on Thursday, as investors responded to another round of weak economic data by continuing to buy shares of technology companies while avoiding distressed sectors like financials and energy. The Nasdaq Composite rose 1.7%, while the S&P 500 (+0.6%) and Dow Jones Industrial Average (+0.1%) posted smaller gains. The Russell 2000 declined 0.5%.

Briefly, weekly jobless claims totaled 5.245 million ( consensus 5.000 million), down 1.37 million from the prior week. Housing starts for March declined 22.3% m/m while building permits fell 6.8% m/m. The Philadelphia Fed Index for April plunged 43.9 points to -56.6 ( consensus -25.0) for its lowest reading since July 1980.

The data was ugly like yesterday's, but unlike yesterday the stock market was more accepting of the data amid a tapering shock value. Regarding the economic outlook, investors were reminded today that the road ahead may not be as smooth as had hoped after New York extended its economic restrictions until May 15. The White House is expected to release a "flexible" guideline today for states to consider.

This viewpoint didn't dampen risk sentiment, but instead led investors into stocks that have outperformed this year: large-cap technology names like Amazon ($AMZN 2408.19, +100.51, +4.4%), Microsoft ($MSFT 177.04, +5.16, +3.0%), and many of the semiconductor stocks. The latter drew support from encouraging quarterly results and guidance from Taiwan Semi ($TSM 52.40, +2.74, +5.5%).

These gains contributed the outperformance of the S&P 500 consumer discretionary (+1.9%) and information technology (+1.2%) sectors. The health care sector (+2.2%), though, advanced the most after Abbott Labs ($ABT 96.00, +5.06, +5.6%) was the latest health care company to beat earnings estimates.

Interestingly, declining issues outpaced advancing issues in both the Nasdaq and NYSE despite the positive indication in the major indices. Laggards were found in areas that have underperformed this year, specifically the energy (-4.0%), financials (-1.7%), and industrials (-0.8%) sectors.

The industrials space was pressured by Boeing ($BA 134.24, -11.74, -8.0%) and airline stocks after United Airlines ($UAL 28.21, -3.65, -11.5%) provided shareholders a discouraging update. The company said it expects travel demand to remain suppressed for the remainder of 2020 and likely into next year, augmenting worries about a prolonged economic recovery.

U.S. Treasuries continued to show relative strength, pushing yields lower across the curve. The 2-yr yield declined one basis point to 0.19%, and the 10-yr yield declined three basis points to 0.61%. The U.S. Dollar Index increased 0.6% to 100.06. WTI crude declined 0.3% to $19.89/BBL.

Reviewing Thursday's economic data:

  • Initial claims for the week ending April 11 were "only" 5.245 million ( consensus 5.000 million), down 1.37 million from the prior week. Continuing claims for the week ending April 4, meanwhile, were 11.976 million, up 4.53 million from the prior week.
    • The key takeaway from the report is that the labor market is wrecked right now; and gainful employment with gainful income, which is missing for so many, is what is needed to drive an economy that relies heavily on consumer spending.
  • Housing starts declined 22.3% m/m in March to a seasonally adjusted annual rate of 1.216 million ( consensus 1.300 million). Building permits were down 6.8% m/m to a seasonally adjusted annual rate of 1.353 million ( consensus 1.297 million).
    • Building permits were better than expected because of increases for multi-unit dwellings, yet the key takeaway for this leading indicator is that permits for single-unit housing were down between 6.4% and 20.2% across all regions.
  • The Philadelphia Fed Index for April plunged to -56.6 (lowest since July 1980) from -12.7 in March.

Looking ahead, investors will receive the Conference Board's Leading Economic Index for March on Friday.

  • Nasdaq Composite -4.9% YTD
  • S&P 500 -13.4% YTD
  • Dow Jones Industrial Average -17.5% YTD
  • Russell 2000 -29.4% YTD

Market Snapshot

SP 5002799.55+16.19(0.58%)
10-yr Note +3/320.610
NYSEAdv 1084 Dec 1803 Vol 1.1 bln
NasdaqAdv 1438 Dec 1791 Vol 3.9 bln

Industry Watch

Strong: Consumer Discretionary, Information Technology, Health Care
Weak: Energy, Financials, Industrials

Moving the Market

-- Nasdaq outperforms amid strength in technology stocks; S&P 500, Dow inch higher

-- Jobless claims total 5.245 million ( consensus 5.0 million); Housing starts for March declined 22.3% m/m while building permits fell 6.8% m/m.

-- Continued weakness in financial and energy sectors

-- Declining issues outpace advancing issues in Nasdaq and NYSE

ECONOMIC EVENTS: Initial jobless claims fell 1.37M to 5.25M in the week ended April 11. In the last four weeks, 22 million Americans have filed for aid after having lost their jobs. Jay Bryson, the Acting Chief Economist at Wells Fargo, said the data suggests the U3 unemployment rate in April, which will be released on May 8, should exceed 15%.

In other U.S. data, housing starts plummeted 22.3% to a 1.22M rate in March. The Philly Fed manufacturing index crashed 43.9 points to -56.6 in April.

In White House news, President Donald Trump said via Twitter that he will unveil guidelines for "opening up America" in a press conference tonight at 6:00 pm ET. In addition, the Washington Post reported that federal stimulus payments from the U.S. government have been held up for millions of Americans, or the wrong amount has been deposited in their bank accounts.

In New York, which has become the "epicenter" of the outbreak in the U.S., Governor Andrew Cuomo extended his stay-and-home and non-essential business closure orders in coordination with other states until May 15.

Elsewhere in the U.S., the governors of Michigan, Ohio, Wisconsin, Minnesota, Illinois, Indiana, and Kentucky announced that they will work in "close coordination" to reopen the economy in the Midwest region.

TOP NEWS: Shares of Abbott ($ABT) rose 5.6% after the company reported better than expected sales and earnings in the first quarter, noting that worldwide Medical Devices sales increased 1.4% on a reported basis, and increased 2.9% on an organic basis, in the quarter. Due to uncertainties regarding the duration and impact of the coronavirus pandemic, Abbott is suspending its previously announced annual guidance, as nearly every other company has recently done.

Shares of Morgan Stanley ($MS) were fractionally lower after the firm's mixed report of better than expected revenue and lower than expected earnings in the first quarter. Morgan Stanley said it observed the impact of the pandemic on each of its businesses towards the end of the first quarter, pointing to "the decline of asset prices, reduction in interest rates, widening of credit spreads, lending and counterparty credit deterioration, market volatility and reduced investment banking activity" as having the most immediate negative impacts on quarterly performance.

Verizon ($VZ) announced that it has entered into a definitive agreement to acquire BlueJeans Network, an enterprise-grade video conferencing and event platform that competes with Zoom Video ($ZM) and others.

Meanwhile, shares of Nvidia ($NVDA) rose almost 5% after the company announced approval from all necessary authorities to proceed with its planned acquisition of Mellanox ($MLNX), as announced in March 2019.

Additionally, the Wall Street Journal reported that Amazon ($AMZN) is retooling its website to sell fewer items as it struggles to meet a surge in order volumes and contend with worker absences during the COVID-19 pandemic.

MAJOR MOVERS: Among the noteworthy gainers was Arcus Biosciences ($RCUS), which jumped over 90% after Bloomberg reported that Gilead ($GILD) is considering acquiring a stake in the cancer therapeutics company. Gilead shares were 2.6% higher after the news. Also higher was Extended Stay America ($STAY), which gained 8.1% after Starwood Capital reported an 8.53% stake in the company. In addition, Nokia ($NOK) shares rose 7.1% after TMT Finance said, according to Bloomberg, that the company hired Citi to fend off a hostile takeover.

Among the notable losers was Rite Aid ($RAD), which fell 21.2% after reporting quarterly results. Also lower were shares of United Airlines ($UAL), which slid 11.5% after CEO Oscar Munoz said while the airline has not yet finalized changes to its schedule for July and August, United expects demand to "remain suppressed for the remainder of 2020 and likely into next year."

Source: (

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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