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End of Day Briefing - Thursday April 30, 2020

Stocks close lower, trim April gains

Dow -288.14 at 24345.72, Nasdaq -25.16 at 8889.56, S&P -27.08 at 2912.43

[BRIEFING.COM] The S&P 500 declined 0.9% on Thursday to end a strong April with some light profit-taking activity. Mega-cap technology stocks outperformed and limited the Nasdaq Composite's decline to 0.3%, while the Dow Jones Industrial Average declined 1.2% and the Russell 2000 declined 3.7%.

Economic data continued to reveal the damage caused by the coronavirus, specifically a 7.5% plunge in personal spending for March ( consensus -3.6%) and 3.839 million initial jobless claims ( consensus 3.050 million) filed for the week ending April 25. The positive spin regarding the jobs data was that it marked a 603,000 decline from the prior week.

The market remained unperturbed by the data, having rallied remarkably in the face of bad data since March 23, but it appeared due for some sort of breather. The market traded lower all day, but it did close off session lows.

The S&P 500 materials (-3.0%) and financials (-2.7%) sectors lagged, while the consumer discretionary (+0.4%) and communication services (+0.02%) sectors eked out small gains.

Notably, mega-cap technology stocks remained in favor, with Amazon ($AMZN 2474.00, +101.29, +4.3%) and Apple ($AAPL 293.95, +6.22, +2.2%) rallying in front of their earnings reports after the close. Facebook ($FB 204.35, +10.16, +5.2%) and Microsoft ($MSFT 179.13, +1.70, +1.0%) also finished higher following their earnings.

Conversely, Tesla ($TSLA 781.88, -18.63, -2.3%), McDonald's ($MCD 187.56, -0.26, -0.1%), Comcast ($CMCSA 37.63, -1.37, -3.5%), Twitter ($TWTR 28.68, -2.41, -7.8%), and Dow, Inc ($DOW 36.69, -0.78, -2.1%) were among the many companies that ended the session lower after reporting earnings results.

Separately, central banks remained committed to supporting the financial system. The Fed expanded the scope and eligibility for its Main Street Lending Program, and the ECB said it will conduct net asset purchases under its EUR750 billion pandemic emergency purchase program through at least the end of the year.

U.S. Treasuries ended the session near their flat lines. The 2-yr yield and the 10-yr yield declined one basis point each to 0.18% and 0.62%, respectively. The U.S. Dollar Index declined 0.6% to 99.01. WTI crude rose another 22.8%, or $3.45, to $18.58/BBL.

Reviewing Thursday's economic data:

  • Initial jobless claims decreased by 603,000 to 3.839 million ( consensus 3.050 million) for the week ending April 25. Continuing jobless claims totaled 17.992 million for the week ending April 18, which is the highest number ever for that series.
    • Notwithstanding the deceleration in initial claims from the prior week, the key takeaway from the report is that it reflects a brutal employment situation, evidenced by a six-week total for initial claims that exceeds 30 million.
  • Personal income declined 2.0% m/m in March ( consensus -1.5%) while personal spending plunged 7.5% ( consensus -3.6%). The PCE Price Index dropped 0.3% and the core PCE Price Index, which excludes food and energy, declined 0.1%.
    • The key takeaway from the report is that it is a precursor to what will be much worse data for April, which will drive a much worse decline in GDP than the 4.8% annualized decline registered in the first quarter.
  • The Q1 Employment Cost Index increased 0.8% ( consensus 0.6%), seasonally adjusted, for the three-month period ending in March 2020 after increasing 0.7% for the three-month period ending December 2019. Wages and salaries, which account for about 70% of compensation costs, rose 0.9%, while benefit costs, which make up the remainder of compensation costs, increased 0.4%.
    • The key takeaway from the report is that the reported increase in employment costs matched peak rates from 2017 and 2018. The 12-month percent change in wages and salaries of private industry workers (+3.3%) exceeded its prior peak from 2019.
  • The Chicago PMI for April declined to 35.4 ( consensus 39.2) from 47.8 in March.

Looking ahead, investors will receive the ISM Manufacturing Index for April, Construction Spending for March, and auto and truck sales for April on Friday.

  • Nasdaq Composite -0.9% YTD
  • S&P 500 -9.9% YTD
  • Dow Jones Industrial Average -14.7% YTD
  • Russell 2000 -21.5% YTD

Market Snapshot

SP 5002912.43-27.08(-0.92%)
10-yr Note -1/320.637
NYSEAdv 807 Dec 2066 Vol 1.5 bln
NasdaqAdv 905 Dec 2355 Vol 4.3 bln

Industry Watch

Strong: Consumer Discretionary, Communication Services
Weak: Materials, Financials, Energy

Moving the Market

-- Stock market closes lower, trims April advance

-- Nasdaq outperforms amid continued strength in mega-cap technology stocks

-- Initial jobless claims decreased by 603,000 to 3.839 million ( consensus 3.050 million); March personal spending drops 7.5% ( consensus -3.6%)

ECONOMIC EVENTS: In U.S. data, initial jobless claims fell 603,000 to 3.84M in the week ended April 25. The Chicago manufacturing PMI for April tumbled another 12.4 points to 35.4.

In central bank news, the Federal Reserve Board announced it is expanding the scope and eligibility for the Main Street Lending Program. Meanwhile, the ECB kept the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged, but announced other forms of aid. The Governing Council decided to reduce the interest rate on the targeted longer-term refinancing operations during the period from June 2020 to June 2021 to 50 basis points below the average interest rate on the Eurosystem’s main refinancing operations prevailing over the same period. Additionally, a new series of non-targeted pandemic emergency longer-term refinancing operations, or "PELTROs," will be conducted to support liquidity conditions in the euro area financial system.

In COVID-19 news, New York Governor Andrew Cuomo reported 306 virus deaths in the state yesterday versus 330 the day before. Meanwhile, Bloomberg reported that U.K. Prime Minister Boris Johnson said that Britain has passed the peak of the COVID-19 pandemic, adding that he plans to provide details next week on how businesses can reopen to revive the nation's economy.

TOP NEWS: Shares of Facebook (FB) gained 5.4% as a number of Wall Street analysts described the company's first quarter report as significantly better than anticipated. Facebook reported a significant slowdown in advertiser demand in the last three weeks of Q1, but the initial weakness exhibited in late March seems to have stabilized a bit as advertising revenue is trending flat year-over-year to start Q2.

Shares of Microsoft ($MSFT) were fractionally higher after the tech giant similarly reported better than expected results. Of note, Microsoft said COVID-19 had "minimal net impact" on total company revenue in the third quarter of fiscal year 2020, with CEO Satya Nadella adding that we have seen "two years' worth of digital transformation in two months" due to the pandemic.

Credit Suisse analyst Dan Levy was among those on Wall Street who raised the firm's price target on Tesla ($TSLA) following the company's "gross margin fueled beat" in Q1. In addition to "providing us with an interesting call," Elon Musk expressed confidence in 40% compound annual growth over the next 5-10 years and said capacity expansion plans are intact, leaving the central long-term narrative intact, Levy said. His reference to the "interesting call" is most likely an allusion to the fact that the car maker's CEO used a curse word when ranting about his frustration regarding ongoing shelter-in-place and non-essential business orders.

Twitter ($TWTR) shares initially jumped in pre-market trading after the company's adjusted earnings, revenue and monetizable daily active user growth beat forecasts. In its shareholder letter, Twitter said the quarter was "best seen as two distinct periods." January through early March "largely performed as expected, with strength in the US and some COVID-19 related weakness in Asia," said Twitter, adding that "from March 11 until March 31, our total advertising revenue declined approximately 27% year over year." At the close, Twitter shares had fallen 7.7%.

Shares of McDonald's ($MCD) were fractionally lower after the restaurant giant reported that its global comparable sales declined 3.4% in the first quarter.

In non-earnings news, Zoom Video ($ZM) shares fell 7.7% after The Verge's Tom Warren pointed out that the company has admitted that "it doesn't have 300 million daily active users." The company has removed and now corrected claims made in a prior blog post, stating now that there are "300 million daily Zoom meeting participants," according to Warren.

Meanwhile, shares of J.C. Penney ($JCP) were 1.2% lower after Bloomberg reported that the company and the lender it is asking to finance a potential bankruptcy are struggling to find enough company assets to back the added debt.

Additionally, Loral Space & Communications ($LORL) shares surged 24.8% after the company declared a $5.50 per share special dividend and said it is in "advanced talks" about a combination transaction with Telesat.

MAJOR MOVERS: Among the noteworthy gainers was Energy Transfer ($ET), which rose 3.2% after Blackstone (BX) reported a 6.9% passive stake in the company. Also higher were Kraton ($KRA) and Matador ($MTDR), which gained a respective 17.5% and 5.2% after reporting quarterly results.

Among the notable losers was Royal Dutch Shell ($RDS.A), which slid 12.8% after the company reported lower than expected quarterly earnings and slashed its dividend for the first time since World War II. Also lower after reporting quarterly results were Goodyear Tire ($GT), and Comcast ($CMCSA), which fell 11% and 3.5%, respectively.

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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