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End of Day Briefing - Thursday April 23, 2020

Stock market gives up gains after negative remdesivir report

Dow +39.44 at 23515.26, Nasdaq -0.63 at 8494.76, S&P -1.51 at 2797.80

[BRIEFING.COM] The S&P 500 advanced as much as 1.6% on Thursday after the number of weekly initial claims declined to about 4.4 million, but stocks gave up gains following a negative report regarding a potential COVID-19 treatment. The benchmark index finished just below its flat line with a 0.1% decline.

The Dow Jones Industrial Average (+0.2%) and Nasdaq Composite (unch) also closed little changed, while the Russell 2000 (+1.0%) outperformed.

The Financial Times reported that Gilead's ($GILD 77.78, -3.53, -4.3%) remdesivir drug flopped in its first randomized clinical trial in China, according to draft documents published accidentally by the World Health Organization (WHO). The news unnerved the market, and wiped out gains, as Stat News reported last Friday that the drug showed promising signs in one Chicago trial.

Gilead defended the results, saying WHO had an inappropriate characterization of the study and the data still suggested the drug had a "potential benefit," according to Stat News. Shares of Gilead still declined, and the broader market struggled the rest of the session, as the report reminded investors of the medical breakthroughs still needed to restore consumer confidence.

The S&P 500 sectors finished mixed with six closing higher and five closing lower. The energy sector (+3.0%) outperformed amid a 21.7% spike in WTI crude futures ($16.80/BBL, +3.00), which are now up 45% since Tuesday's settlement price. The utilities (-1.8%), real estate (-1.2%), and consumer staples (-1.0%) sectors underperformed.

As for the unemployment data, initial claims for the week ending April 18 decreased by 810,000 to 4.427 million (Briefing.com consensus 4.0 million), which helped the market's thinking that the worst of the labor market data might be in the past.

The latter can be rationalized by states getting ready to reopen their economies, but it likely won't be as swift as the market's month-long rally. Illinois, for instance, extended its stay-at-home order through the end of May.

Separately, Union Pacific ($UNP 152.29, +5.19, +3.5%), Eli Lilly ($LLY 159.93, +3.22, +2.1%), and CSX ($CSX 64.47, +0.58, +1.0%) stood out with positive earnings results and/or guidance.

U.S. Treasuries traded near their flat lines during the session. The 2-yr yield increased one basis point to 0.22%, while the 10-yr yield declined one basis point to 0.61%. The U.S. Dollar Index increased 0.1% to 100.50.

Reviewing Thursday's economic data:

  • Initial claims for the week ending April 18 decreased by 810,000 to 4.427 million (Briefing.com consensus 4.0 million). Continuing claims for the week ending April 11 increased by 4,064,000 to 15.976 million (a record high).
    • The key takeaway from this report, which covers the period in which the survey for the April Employment Situation Report was conducted, is that it presents some hope that the peak of the layoffs following the COVID-19 shutdowns has passed. Nonetheless, it is also a reminder of how bad things are on the labor front.
  • New home sales decreased 15.4% m/m in March to a seasonally adjusted annual rate of 627,000 units (Briefing.com consensus 655,000) from a downwardly revised 741,000 (from 765,000) in February. On a yr/yr basis, new home sales, which are counted when a contract is signed, were down 9.5%.
    • The key takeaway from the report is that it isn't as bad as feared, although COVID-19 shutdown issues didn't ramp up until the latter half of the month, which is harbinger presumably of decidedly weaker activity in April.

Looking ahead, investors will receive Durable Goods Orders for March and the revised University of Michigan Index of Consumer Sentiment for April on Friday.

  • Nasdaq Composite -5.3% YTD
  • S&P 500 -13.4% YTD
  • Dow Jones Industrial Average -17.6% YTD
  • Russell 2000 -27.2% YTD

Market Snapshot

Dow23515.26+39.44(0.17%)
Nasdaq8494.76-0.63(-0.01%)
SP 5002797.80-1.51(-0.05%)
10-yr Note +2/320.602
NYSEAdv 1757 Dec 1104 Vol 1.1 bln
NasdaqAdv 1931 Dec 1256 Vol 3.7 bln


Industry Watch

Strong: Energy, Industrials
Weak: Consumer Staples, Real Estate


Moving the Market

-- Stocks pare gains on disappointing Remdesivir update

-- Weekly initial claims decreased by 810,000 to 4.427 million (Briefing.com consensus 4.0 million).

-- WTI crude futures spike 25% to $17/BBL


ECONOMIC EVENTS: In U.S. data, initial jobless claims dropped to 4.43M in the week ended April 18. Markit's manufacturing index dropped 11.6 points to 36.9 in the preliminary print for April. New home sales plummeted 15.4% in March to a 627,000 unit pace.

TOP NEWS: Shares of Eli Lilly ($LLY) are 3.5% higher near noon after the drugmaker posted better than expected earnings and revenue in the first quarter. Of note, Lilly said its sales were boosted by approximately $250M of additional revenue "due to increased customer buying patterns and patient prescription trends due to the COVID-19 pandemic."

Meanwhile, Target ($TGT) shares have slid 1.5% after the company reported that total company comparable sales have grown more than 7% quarter-to-date, reflecting a slight decline in stores and more than 100% growth in digital channels. Target also warned on "a number of factors" that will reduce its first quarter profitability, including investments in pay and benefits, a shift in category mix towards lower-margin categories, a shift towards digital fulfillment, and inventory write-downs in Apparel & Accessories.

Las Vegas Sands ($LVS) shares are up 11% after its "not as bad as feared" first quarter report and management commentary that pent up demand in both Macau and Singapore should allow operations to bounce back relatively quickly once forced closures and travel restrictions are lifted.

Bloomberg reports that Apple ($AAPL) is seeking to begin selling Mac computers with its own main processors by next year. According to people familiar with the matter, Apple is preparing to release at least one Mac with its own chip next year, but may seek to transition more of its Mac lineup away from current supplier Intel ($INTC). After the report, Raymond James analyst Chris Caso said that for Intel, this news is "a potential black eye, but that's no longer a particular surprise."

MAJOR MOVERS: Among the noteworthy gainers was Immunomedics ($IMMU), which surged 24% after announcing yesterday afternoon that the FDA has approved Trodelvy for the treatment of adult patients with metastatic triple-negative breast cancer who have received at least two prior therapies for metastatic disease. Also higher were Sleep Number ($SNBR) and Blackstone ($BX), which gained a respective 32% and 7% after reporting quarterly results.

Among the notable losers were Netgear ($NTGR) and Crocs ($CROX), which fell 17% and 13%, respectively.


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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