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End of Day Briefing - Tuesday April 28, 2020

Large-cap indices lose reopening momentum

Dow -32.23 at 24101.55, Nasdaq -122.43 at 8607.74, S&P -15.09 at 2863.39

[BRIEFING.COM] The S&P 500 declined 0.5% on Tuesday in a mixed session. Large-cap technology and health care stocks lagged, while reopening enthusiasm continued to flow into the small-cap Russell 2000 (+1.3%) and S&P MidCap 400 (+1.0%). The Dow Jones Industrial Average shed 0.1%, while the Nasdaq Composite fell 1.4%.

The day started with broad gains that lifted the S&P 500 as much as 1.5% shortly after the open, as part of the reopening momentum from Monday. That broad momentum quickly dissipated, presumably due to valuation concerns, but lingered in areas of the market that had underperformed when the shutdown angst was rampant.

Some of those included the small-cap and mid-cap stocks, as previously noted, but also the cyclical S&P 500 energy (+2.2%), materials (+2.0%), industrials (+1.8%), and financials (+0.9%) sectors.

Conversely, the large-cap stocks that were deemed as relatively safe, and thus outperformed over the past few months, lost some of their appeal today and heavily dragged on the broader market. Those were found in the health care (-2.1%), communication services (-1.9%), and information technology (-1.4%) sectors.

The health care space also had some negative catalysts despite the reported progress on the coronavirus front. For instance, Johnson & Johnson ($JNJ 151.39, -2.90, -1.9%) was downgraded to Neutral from Buy at UBS, while Pfizer ($PFE 37.91, -0.42, -1.1%) and Merck ($MRK 81.18, -2.80, -3.3%) declined after reporting earnings.

In other earnings news, shares of Caterpillar ($CAT 115.46, +0.26, +0.2%), 3M ($MMM 157.61, +3.96, +2.6%), and PepsiCo ($PEP 136.32, +1.4%) finished higher, even after the companies withdrew full-year guidance, while shares of UPS ($UPS 96.43, -6.12, -6.0%) faltered after the company missed profit estimates.

U.S. Treasuries reclaimed most of yesterday's losses, driving yields lower across the curve. The 2-yr yield declined three basis points to 0.20%, and the 10-yr yield declined five basis points to 0.61%. The U.S. Dollar Index declined 0.2% to 99.88. WTI crude declined 4.6%, or $0.60, to $12.37/BBL, although it was down as much as 22% at one point during the session.

Reviewing Tuesday's economic data:

  • The Conference Board's Consumer Confidence Index for April plunged to 86.9 ( consensus 86.5) from a downwardly revised 118.8 (from 120.0) for March. The April reading is the lowest since June 2014.
    • The key takeaway from the report is that consumers, while thinking positively about things reopening again, are still less optimistic about their financial prospects, which could be a headwind for spending activity during the recovery phase.
  • The advance goods trade deficit totaled $64.2 bln in March after a $59.9 bln deficit in February. Advance retail inventories declined 1.3% in March after decreasing 0.3% in February. Advance wholesale inventories decreased 1.0% in March after decreasing 0.7% in February.
  • The S&P Case-Shiller Home Price Index for February increased 3.5% ( consensus 3.7%).

Looking ahead, investors will receive the advance estimate for Q1 GDP, Pending Home Sales for March, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Nasdaq Composite -4.1% YTD
  • S&P 500 -11.4% YTD
  • Dow Jones Industrial Average -15.6% YTD
  • Russell 2000 -22.0% YTD

Market Snapshot

SP 5002863.39-15.09(-0.52%)
10-yr Note +27/320.616
NYSEAdv 2080 Dec 816 Vol 1.0 bln
NasdaqAdv 1878 Dec 1343 Vol 3.6 bln

Industry Watch

Strong: Energy, Financials, Industrials, Materials
Weak: Health Care, Information Technology, Communication Services

Moving the Market

-- Large-cap indices lose reopening momentum

-- Relative weakness in technology and health care companies

-- Small-caps, mid-caps, and most cyclical sectors outperform amid lingering reopening enthusiasm

ECONOMIC EVENTS: In U.S. data, the advance goods trade deficit unexpectedly widened to $64.2B in March as goods exports dropped 6.7% to $127.6B and imports declined 2.4% to $191.9B. An index of consumer confidence tanked another 31.9 points to 86.9 in April following March's 13.8 point plunge. The Richmond Fed manufacturing index dropped 55 points to -53 in April after the surprise 4 point increase to 2 in March.

TOP NEWS: Boeing ($BA) shares are up 1% at time of writing despite Andy Pasztor and Andrew Tangel of The Wall Street Journal's report that the company faces criminal and civil scrutiny into years of quality-control lapses on its 737 MAX assembly line.

Also helping prop up the Dow following its earnings report was 3M ($MMM), which was 2% higher after it reported better than expected results for the first quarter. The company, which withdrew its fiscal 2020 guidance, said that the financial impact of the COVID-19 pandemic is "varying" across its business, adding that 3M is suspending share repurchases.

Caterpillar ($CAT) was in focus after it reported quarterly results, noting that retail machine sales fell 17% on a three month rolling basis for March. The company added that about 75% of its primary production facilities are continuing to operate and that it is "well positioned" to navigate the COVID-19 pandemic.

UPS ($UPS) shares are down nearly 5% after the shipper reported lower than expected Q1 earnings, withdrew guidance for fiscal 2020, and suspended share buybacks for the remainder of the year. Of note, the company said on its quarterly call that its liquidity is good and that it does not expect any impact from COVID-19 on its dividend.

In other earnings news, Merck ($MRK) shares slid 3.5% after the company reported upbeat Q1 results but lowered its fiscal 2020 earnings guidance. Merck noted that, to-date, COVID-19 has not had any material impact on production. Meanwhile, Pfizer ($PFE) reported better than expected Q1 results and reaffirmed its guidance for FY20, saying it has seen no "significant disruption" to its supply chain to date.

Additionally, shares of PepsiCo ($PEP) were 1% higher after the snack and beverage giant reported better than expected Q1 results and said that its previous fiscal 2020 guidance is "no longer applicable." Of note, PepsiCo added that it closed its acquisition of Rockstar Energy Beverages. Shares of Monster Beverage ($MNST) slipped fractionally after that news and Pepsi's announcement of an exclusive alliance for PepsiCo to distribute the portfolio of Bang Energy beverages in the United States.

MAJOR MOVERS: Among the noteworthy gainers was Syndax ($SNDX), which rose 55% after it reported initial clinical data for SNDX-5613. Also higher were F5 Networks ($FFIV) and Cognex ($CGNX), which gained a respective 9% and 10% after reporting quarterly results.

Among the notable losers was Blueprint Medicines ($BPMC), which slid 18% after reporting that the Phase 3 VOYAGER clinical trial of avapritinib versus regorafenib in patients with locally advanced unresectable or metastatic gastrointestinal stromal tumor, or GIST, did not meet the primary endpoint of an improvement in progression-free survival, or PFS. Also lower were Harmonic ($HLIT) and K12 ($LRN), which fell 15% and 12%, respectively, after reporting quarterly results.

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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