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End of Day Briefing - Wednesday April 22, 2020

Stocks recoup some weekly losses in broad-based advance

Dow +456.94 at 23475.82, Nasdaq +232.15 at 8495.39, S&P +62.75 at 2799.31

[BRIEFING.COM] The S&P 500 advanced 2.3% on Wednesday, recouping some of its weekly decline, as sentiment benefited from a reprieve in the oil futures market and more stimulus action. The Nasdaq Composite outperformed with a 2.8% gain, followed by the Dow Jones Industrial Average (+2.0%) and Russell 2000 (+1.3%).

Specifically, WTI crude futures gained 19.3%, or $2.23, to $13.80/BBL after a two-day collapse, and the Senate passed a $484 billion stimulus bill targeted for small businesses, hospitals, and COVID-19 testing. What's interesting, though, is that stocks were already indicated for a higher start as oil futures initially traded lower, and the market barely reacted to the initial news of a stimulus agreement yesterday.

To be fair, the reprieve in oil prices might have warranted follow-through buying after the open, and the stimulus bill is now one step closer to providing much-needed relief. A general observation that the S&P 500 declined 4.8% over the past two days, thus presenting a suitable entry point for some investors, likely contributed to the gains, too.

The advance was steady and broad-based, with all 11 S&P 500 sectors closing in positive territory. The information technology sector (+3.9%) leaped ahead amid strength in the semiconductor stocks, which rallied around a positive earnings report from Texas Instruments ($TXN 111.98, +5.14, +4.8%). The consumer staples sector (+1.1%) underperformed.

Facebook ($FB 182.28, +11.48, +6.7%) and Alphabet ($GOOG 1263.21, +46.87, +3.9%) also did some heavy lifting, partially due to the overwhelmingly positive response to Snap's ($SNAP 16.95, +4.51, +36.3%) revenue results.

Chipotle Mexican Grill ($CMG 882.26, +95.57, +12.2%) was another earnings standout, while shares of Netflix ($NFLX 421.42, -12.41, -2.9%) and AT&T ($T 29.47, -0.40, -1.3%) declined following their results.

U.S. Treasuries finished on a lower note with longer-dated maturities backtracking from their recent advance. The 2-yr yield increased one basis point to 0.21%, and the 10-yr yield increased five basis points to 0.62%. The U.S. Dollar Index increased 0.1% to 100.40.

Reviewing Wednesday's economic data:

  • The FHFA Housing Price Index for April rose 0.7% after increasing an upwardly revised 0.5% in March (from +0.3%).
  • The weekly MBA Mortgage Applications Index declined 0.3% following a 7.3% increase in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report and the New Home Sales report for March on Thursday.

  • Nasdaq Composite -5.3% YTD
  • S&P 500 -13.4% YTD
  • Dow Jones Industrial Average -17.7% YTD
  • Russell 2000 -28.0% YTD

Market Snapshot

SP 5002799.31+62.75(2.29%)
10-yr Note -4/320.614
NYSEAdv 2051 Dec 854 Vol 1.0 bln
NasdaqAdv 2163 Dec 1060 Vol 3.0 bln

Industry Watch

Strong: Information Technology, Energy
Weak: Consumer Staples, Financials

Moving the Market

-- Stocks recoup some weekly losses in broad-based advance

-- WTI crude spikes 19% to $13.80/BBL

-- Senate passes $484 billion stimulus bill for small businesses, hospitals, and COVID-19 testing

ECONOMIC EVENTS: In U.S. data, the FHFA house price index increased 0.7% to 287.0 in February.

Meanwhile, the latest data from the Johns Hopkins Whiting School of Engineering shows there are now about 2.6M confirmed cases of COVID-19 and 179,778 deaths due to the disease.

TOP NEWS: Shares of Netflix ($NFLX) are slipping 3% following last night's quarter report. While the streaming company reported a big jump in subscribers amid the COVID-19 pandemic, Netflix also said that given the uncertainty on home confinement timing, predicting future subscriber growth was "mostly guesswork." Both Raymond James and Stifel analysts downgraded the stock after the announcement, with the latter saying that he feels now is "as good as it gets" for Netflix. Meanwhile, Wells Fargo analyst Steven Cahall upgraded the stock to Equal Weight, arguing that "as long as hand sanitizer is sold out," Netflix should outperform.

Shares of Snap ($SNAP) are up 29% near midday following its Q1 results, which included in-line losses, above consensus revenue, and better than expected user engagement. Oppenheimer analyst Jason Helfstein upgraded Snap to Outperform from Perform with an $18 price target, telling investors in a post-earnings research note that the company is "executing on all metrics." Pre-COVID-19 revenue growth of 58% year-over-year in January and February suggests the company has overcome its monetization issues, Helfstein added.

Meanwhile, AT&T ($T) shares are down 1% after the wireless services and media giant reported worse than expected revenue for the first quarter and withdrew its financial guidance. Randall Stephenson, AT&T Chairman and CEO, attributed a 5 cents per share impact on its first quarter earnings from the COVID pandemic, stating that "without it, the quarter was about what we expected - strong wireless numbers that covered the HBO Max investment, and produced stable EBITDA and EBITDA margins." The company's "core businesses are solid and continue to generate good free cash flow - even in today's environment," added Stephenson.

Shares of L Brands ($LB) have fallen sharply 21% after Bloomberg reported that Sycamore Partners is seeking to terminate its agreement with the company regarding the Victoria's Secret brand. Following the report, L Brands confirmed that Sycamore Partners delivered a notice on April 22, "purporting to terminate" the transaction agreement relating to the sale of a 55% interest in Victoria's Secret Lingerie, Victoria's Secret Beauty and PINK. L Brands said it believes that Sycamore's purported termination of the agreement is invalid and that the company "will vigorously defend the lawsuit and pursue all legal remedies to enforce its contractual rights" while continuing its work towards closing the transactions contemplated by the pact with the private equity firm.

Additionally, Delta Air Lines ($DAL) is down about 3% after reporting revenue that was worse than expected in the first quarter but losses that were not as steep as analysts' average forecast. "With the significant impact of COVID-19 on Delta's revenue, we were burning $100 million per day at the end of March. Through our decisive actions, we expect that cash burn to moderate to approximately $50 million per day by the end of the June quarter," said CFO Paul Jacobson.

MAJOR MOVERS: Among the noteworthy gainers was Expedia ($EXPE), which rose 10% after The Wall Street Journal reported that the company was in talks to sell a stake in itself to private equity firms Silver Lake and Apollo ($APO). Also higher were Healthcare Services ($HCSG), Manhattan Associates ($MANH), and Chipotle ($CMG), which gained a respective 19%, 13%, and 13% after reporting quarterly results.

Among the notable losers was United Airlines ($UAL), which has declined 7% after filing to sell 39.25M shares of common stock. Also lower were Biogen ($BIIB) and Interactive Brokers ($IBKR), which fell 10% and 8%, 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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