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End of Day Brief - Tuesday May 4 - Stocks lower as big tech declined

Dow34133.03+19.80(0.06%)
Nasdaq13633.54-261.61(-1.88%)
SP 5004164.66-28.00(-0.67%)
10-yr Note +1/321.592
NYSEAdv 1402 Dec 1837 Vol 951.9 mln
NasdaqAdv 1186 Dec 2207 Vol 5.8 bln


Industry Watch

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


Moving the Market

-- Mega-cap/growth/technology stocks closed sharply lower

-- Rotation into cyclical stocks, which helped lift the Dow

-- Treasury Secretary Yellen said interest rates may need to rise to prevent the economy from overheating


Averages broadly lower as tech stocks slump

The major averages were mostly weaker, led lower by the Nasdaq as the laggard with tech stocks continuing their recent weakness. Pfizer and CVS each reported solid profit growth, aided by their roles in the nation's COVID-19 vaccination efforts.

ECONOMIC EVENTS: In the U.S., the trade deficit widened almost exactly as expected to a new all-time high of $74.4B from a prior record-high of $70.5B in February. The factory report for March slightly undershot estimates with a 1.1% headline orders gain and a 1.7% ex-transportation increase.

TOP NEWS: Pfizer (PFE) shares were fractionally higher after the pharmaceutical giant reported better than expected first quarter adjusted earnings and revenue and raised its guidance for fiscal 2021. The results came after the New York Times reported last evening that the FDA is slated to approve use of Pfizer's COVID-19 vaccine, which is co-developed with BioNTech (BNTX), in adolescents aged 12 to 15 by early next week.

Shares of CVS Health (CVS) rose 4.4% after the company reported upbeat quarterly results, with same-store sales for the quarter rising 0.4% year-over-year. The company also raised its fiscal 2021 adjusted earnings view.

Under Armour Class A (UAA) shares fell 1.2% even after the apparel company reported better than expected Q1 results and raised its earnings and revenue guidance for fiscal 2021.

In non-earnings news, Bill.com (BILL) shares close 4.9% lower after Forbes reported that the company is in talks to acquire expense reporting startup Divvy.

Meanwhile, Ford (F) shares were 1.9% lower despite the car maker reporting that April U.S. car sales rose 64.8% year-over-year to 197,813 vehicles. The company noted that retail sales for the month not only increased from last year, but also exceeded April 2019's sales by 24%.

Additionally, Gap (GPS) shares were fractionally lower after the company entered into an agreement to sell Intermix, an omni-channel fashion boutique for customers seeking a highly curated shopping experience, to private equity firm Altamont Capital Partners.

MAJOR MOVERS: Among the noteworthy gainers was Camping World (CWH), which gained 10% after reporting quarterly results. Shares of Domtar (UFS) advanced 19.2% after the company acknowledged that its management has been in discussions with Canada's Paper Excellence about a possible business combination or acquisition.

Among the notable losers was ChemoCentryx (CCXI), which declined 45.4% after the FDA posted the briefing documents for the May 6 Arthritis Advisory Committee Meeting, which included discussing “uncertainties” with the company's Avacopan study. Also lower was SmileDirectClub (SDC), which fell 19% after revealing the company experienced a system outage caused by a cybersecurity incident which has caused delays and disruptions to parts of the business.


Reviewing Tuesday's economic data:

  • The U.S. trade deficit widened to $74.4 billion in March (Briefing.com consensus -$74.7 billion) from an upwardly revised $70.5 billion (from -$71.1 billion) in February, with exports increasing by $12.4 billion to $200.0 billion and imports increasing by $16.4 billion to $274.5 billion.
    • The key takeaway from the report is that both exports and imports increased sharply, which is a telltale sign of increased demand. Importantly, it was exports and imports of both industrial supplies and materials and consumer goods that paced the pickup in trade activity, speaking to the uptick in demand seen for businesses and consumers alike.
  • Factory orders for manufactured goods increased 1.1% m/m in March (Briefing.com consensus 0.7%) after decreasing an upwardly revised 0.5% (from -0.7%) in February. Shipments of manufactured goods were up 2.1% after declining 1.9% in February.
    • The key takeaway from the report is that it suggests the recovery blip in February was largely a function of extreme winter weather and some natural slowing after a long streak of gains in factory orders. The report also demonstrates that demand for manufactured goods was quick to rebound.

Looking ahead, investors will receive the ISM Non-Manufacturing Index for April, the ADP Employment Change report for April, the final IHS Markit Services PMI for April, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Russell 2000 +13.8% YTD
  • Dow Jones Industrial Average +11.5% YTD
  • S&P 500 +10.9% YTD
  • Nasdaq Composite +5.8% YTD

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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