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End of Day Briefing - Monday April 20, 2020

Stocks close lower, as oil contract turns negative

Dow -592.05 at 23650.44, Nasdaq -89.41 at 8560.74, S&P -51.40 at 2823.16

[BRIEFING.COM] The S&P 500 declined 1.8% on Monday, although that was relatively modest given the implosion in the oil market where the expiring May contract for WTI crude closed negative for the first time ever. The Dow Jones Industrial Average declined 2.4%, the Nasdaq Composite declined 1.0%, and the Russell 2000 declined 1.3%.

Specifically, WTI crude futures for May delivery collapsed 306%, or $55.83, to -$37.63/BBL ahead of tomorrow's expiration, as no one presumably wanted to take physical delivery given the well-documented storage constraints and lack of demand. The negative price also indicated that producers are paying someone to take their oil.

The historic, and mind-boggling, occurrence appeared to spoil an intraday rebound in stocks, which started to accelerate losses heading into the futures settlement time at 2:30 p.m. ET. Around that same time, it was also reported that a vote to replenish the small business loan program was delayed in the Senate due to ongoing negotiations.

All 11 S&P 500 sectors closed in negative territory, near session lows, with the energy (-3.2%), real estate (-3.7%), and utilities (-3.9%) sectors leading the retreat. The health care (-0.8%) and communication services (-0.9%) sectors declined less than 1%.

It should be noted, though, that the WTI futures curve did show escalating prices amid expectations that prices should rebound with production cuts and hopefully increased demand. For instance, the June WTI crude futures contract settled at $20.30/BBL, although that was still an 18.9% decline.

Back to stocks, Walt Disney ($DIS 102.26, -4.37, -4.1%) and Boeing ($BA 143.61, -10.39, -6.8%) underperformed the broader market following a pair of analyst downgrades and negative-sounding reports. Disney is reportedly suspending pay for 100,000 employees, while a GE leasing subsidiary canceled 69 orders of Boeing's 737 MAX.

U.S. Treasuries finished mixed with longer-dated maturities continuing to show relative strength. The 2-yr yield increased one basis point to 0.21%, while the 10-yr yield declined three basis points to 0.63%. The U.S. Dollar Index increased 0.2% to 99.98.

Investors did not receive any economic data on Monday. Looking ahead, investors will receive Existing Home Sales for March on Tuesday.

  • Nasdaq Composite -4.6% YTD
  • S&P 500 -12.6% YTD
  • Dow Jones Industrial Average -17.1% YTD
  • Russell 2000 -27.3% YTD

Market Snapshot

Dow23650.44-592.05(-2.44%)
Nasdaq8560.74-89.41(-1.03%)
SP 5002823.16-51.40(-1.79%)
10-yr Note +2/320.628
NYSEAdv 675 Dec 2242 Vol 1.1 bln
NasdaqAdv 1252 Dec 2004 Vol 3.7 bln


Industry Watch

Strong: Health Care, Communication Services
Weak: Energy, Real Estate, Utilities


Moving the Market

-- Stocks close lower as oil contract turns negative

-- WTI crude contract for May collapses to -$37.63/BBL; prices show rebound in later contracts

-- Vote on small business funding delayed in Senate


ECONOMIC EVENTS: In U.S. data, the Chicago Fed's national activity index cratered 4.25 points to -4.19 in March after a surprise 0.33 point jump in February. The latest reading is the lowest print since the record -4.70 from January 2009.

Meanwhile, the latest data from the Johns Hopkins Whiting School of Engineering shows there are now 2.45M confirmed cases of COVID-19 and 168,500 deaths due to the disease. In New York, which is seen as the epicenter of the viral outbreak in the U.S., Governor Andrew Cuomo reported 478 deaths versus 507 deaths the day before, adding that the numbers indicate that "we're seeing a descent."

TOP NEWS: Shares of oil linked equities were dropping after WTI oil prices plunged in historic fashion, with the price of a barrel of WTI for May delivery closing in negative territory for the first time. At the close, Exxon Mobil ($XOM) was down 4.7%, Chevron ($CVX) was fractionally lower, Hess ($HES) fell 3.8%, and Occidental Petroleum ($OXY) was down 7.6%.

In earnings news, DuPont ($DD) shares rose 3.5% after it provided an update on its response to the COVID-19 pandemic, guiding for better than expected Q1 results but withdrawing fiscal 2020 guidance. The company added that, due to uncertainties related to the pandemic, it has delayed capital investments and entered into a $1B revolving credit facility.

In other COVID-19 news, Gilead Sciences ($GILD) was in focus after Wells Fargo analyst Jim Birchenough and BMO Capital analyst Matthew Luchini each downgraded the stock to Nuetral-equivalent ratings. While Birchenough remains optimistic regarding prospects for remdesivir to reduce the COVID-19 burden, he is less certain of its commercial value given the likelihood for initial distribution at cost or below. Voicing a similar opinion, Luchini added he no longer sees a favorable risk/reward in shares "given continued uncertainty around the remdesivir commercial opportunity."

Meanwhile, Reuters reported that Amazon ($AMZN) has started using thermal cameras as its warehouses to accelerate fever screening for employees who may have contracted the novel coronavirus.

Additionally, shares of United Airlines ($UAL) slid 4.4% after the company reported lower-than-expected preliminary revenue for the first quarter and said it expects to cut 90% of its capacity for May adding that it sees recording a $2.1B pre-tax loss amid the COVID-19 pandemic. The company also noted that it expects to receive roughly $5B from the U.S. government through the Payroll Support Program, and that it can burrow up to roughly $4.5B from the U.S. Treasury.

MAJOR MOVERS: Among the noteworthy gainers was Exelixis ($EXEL), which jumped 21.3% after it and Bristol Myers Squibb ($BMY) announced that CheckMate -9ER, a pivotal Phase 3 trial evaluating Opdivo in combination with CABOMETYX compared to sunitinib in previously untreated advanced or metastatic renal cell carcinoma, met its primary endpoint of progression-free survival at final analysis, as well as the secondary endpoints of overall survival at a pre-specified interim analysis, and objective response rate. Shares of Bristol-Myers rose 1.8% after the news. Also higher was FLIR Systems ($FLIR), which gained following the Reuters report on Amazon using thermal cameras at its warehouses. William Blair analyst Louie DiPalma said that even if Amazon is using a thermal camera vendor other than FLIR for some warehouses, he expects the company to benefit from what may become "a major trend."

Among the notable losers was Meredith ($MDP), which slid 7.6% after it paused its dividend, withdrew its fiscal 2020 guidance, and implemented salary reductions in response to COVID-19. Also lower was Disney ($DIS), which fell 4.2% after both UBS and Credit Suisse downgraded the stock to Neutral-equivalent ratings. UBS analyst John Hodulik believes Disney Parks' profitability "will be impaired for a longer period of time" given the lingering effects of the COVID-19 outbreak, while Credit Suisse analyst Douglas Mitchelson sees Parks downside outweighing streaming upside.


Source: (Briefing.com)(theFly.com)

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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