foxex: About Face

Read in Browser

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Wednesday's Headlines

1. US markets rally through the day

2. Oil prices spike ahead of OPEC+ meeting tomorrow

3. CEO confidence is waning

4. Individual investors are less fearful

Markets Closed

Dow
23,433.57
+779.71 (+3.44%)

S&P
2,749.98
+90.57 (+3.41%)

Nasdaq
8,090.90
+203.64 (+2.58%)

VIX
43.35
−3.35 (-7.17%)

Bitcoin
$7,31665
+$142.20 (+1.98%)

US 10-Yr Yield
0.764
+0.028 (+3.80%)

photo: Leif Skoogfors/Getty Images

Markets Today

U.S. markets rallied throughout the day, closing near session highs. In a sharp about-face from yesterday's performance, today's rally included all sectors of the S&P 500. Oil prices spiked in the last hour of trading to close nearly 11% higher as OPEC+ is scheduled to meet tomorrow to potentially agree on a daily production cut of as much as 15 million barrels. The spike in crude prices drove beaten-down oil stocks higher with it. Airline stocks rallied as well on hopes that there may be an increase in travel to some countries in the coming weeks.

The Federal Reserve released the minutes from its emergency meeting back in March, and it was pretty clear how serious the FOMC was taking the global pandemic when it cut rates to zero and offered hundreds of billion in quantitative easing measures. Here's a snippet:

"Participants noted that risk-management considerations pointed toward a forceful monetary policy response...in light of the 'sharply increased downside risks to the economic outlook.'"

When the Fed Governors start using words like "forceful" and "downside risk" in their meetings, you know they are serious.

It's down to a two man race for the White House this November, as Vermont Senator Bernie Sanders suspended his campaign.

It was a busy day... let's get to it.

Headlines:

Vermont Senator Bernie Sanders suspended his campaign for president today, effectively ending his presidential run, and setting up former Vice President Joe Biden to face President Donald Trump in November. Sanders also said he would remain on ballots and continue to collect delegates so that he could push the Democrats closer to his vision for America.
Eurozone finance ministers failed to agree on a coronavirus stimulus plan after a 16-hour marathon teleconference. Negotiations stalled over whether the loans should have any conditions and if they should be paid off jointly by all members, which the Netherlands opposes.
Starbucks (SBUX) became the latest company to withdraw its financial outlook for the year. The company announced that it expects fiscal second-quarter adjusted earnings of 32 cents per share, and said that U.S. same-store sales fell 3% during the quarter. In the quarter up to March 11, U.S. same-store sales grew 8%.
McDonald's (MCD) said global same-store sales fell 22% in March as the coronavirus pandemic led the fast-food chain to close its dining rooms. In the two months ended Feb. 29th, McDonald's U.S. same-store sales grew by 8.1%. But thanks to domestic same-store sales plummeting 13% in March, the company expects first-quarter same-store sales growth of 0.1% in the U.S.
Mortgage applications fell 17.9% last week compared with the previous week, according to the Mortgage Bankers Assoc. Applications to refinance a home loan fell 19% from the previous week but were 144% higher than the same period last year. Applications to purchase a home continued their sharp decline, falling another 12% for the week and 33% from 2019.
Gig workers at Shipt, a grocery delivery company owned by Target, organized a walkout today. The workers are striking until they receive hazard pay of $5 per order, more than 14 days sick pay for those who contract COVID-19, adequate PPE, and changes to the pay structure and tipping policy.
Tesla is halting production at its U.S. factories until May 4, according to TechCrunch. Starting April 13th, the electric car maker is also cutting salaries between 10–30% depending on rank and furloughing employees who cannot work from home and do not occupy critical positions.
Levi Strauss beat earnings and revenue expectations for Q1 2020 and withdrew its annual guidance due to COVID-19. CEO Chip Bergh noted the company has made it through two world wars, the Great Depression, earthquakes, fires, and the 1918 Flu Pandemic in the press release.
Amazon is suspending its third-party delivery service that competed with FedEx and UPS, according to a Wall Street Journal report. The company reportedly needs to focus all its staff on delivering Amazon orders since it has seen a surge in demand.
Rice futures are at a six-year high and up 38% in a year as the commodity faces higher transport costs due to travel restrictions throughout Asia and increased demand from stay-at-home consumers who are cooking more than usual. Chart below.

chart courtesy TradingView

chart courtesy The Business Roundtable

CEO Confidence is Waning

Top executives' outlook for the economy and their businesses has been weakening since the first quarter of 2018. The trade wars with China were top of mind last year despite record highs in the financial markets and low unemployment. Then the coronavirus pandemic began taking shape in late February, and their confidence plunged to levels not seen since the 2008–09 financial crisis, according to The Business Roundtable's CEO Economic Outlook survey.

That lack of optimism is translating into some interesting expectations for the rest of 2020 in terms of sales growth, capital spending, and hiring.

The good news:

62% of those surveyed expect their sales to grow in the next six months.
80% expect their capital spending to grow or remain flat over the next six months.

The not-so-good news:

60% expect to have the same or fewer employees six months from now
This survey concluded in mid-March, before 10 million people filed for unemployment in the U.S.
Corporate earnings season starts in earnest next week, and we'll get a better sense of what is on the minds of CEOs then.

chart courtesy BespokeInvestments

Individual Investors Are Getting Braver

While still plenty scared, individual investors are starting to shake the fear and look for opportunities to invest. The AAII's latest survey of individual investors shows that nearly half of them are bearish, and more than a third are bullish. After peaking a couple of weeks ago, the percentage of bearish investors is decreasing while those who are bullish are increasing.

This matches the data we are seeing from online brokers like Fidelity and E*TRADE, as well our survey of our readers. Both show that their retail customers are mostly buying stocks and ETFs, and they are looking for opportunities to buy beaten down blue chips as well as some riskier companies.

If you juxtapose the way CEOs feel with the way that individual investors feel, you see a fundamental disconnect in the perception of the future and how markets may react. CEOs are facing uncharted waters and see how hard it will be to get the economy and their businesses running again. Investors see a steep sell-off in the stock market but remember what happened after the last recession and bear market. They don't want to miss what could be a generational investing opportunity.

More News:

Macy's Stores Are Empty as the Stock Tries to Rebound

3 Charts That Suggest Trend Traders Will Be Buying Global Technology Stocks

Bank of America Earnings: What to Look For

SPONSORED BY FIDELITY INVESTMENTS
How do taxes fit into your overall investment strategy?
Our advisors can provide you with personalized, tax-efficient strategies.
LEARN MORE >

(chart courtesy YCHARTS)

PVH's stock price rose by almost 18% after the clothing company announced several financial policy changes, such as a temporary suspension of cash compensation for board members, in order to strengthen its financial position." This sentence seems long, maybe change to "PVH's stock price rose by almost 18% after the clothing company announced several financial policy changes. These changes include a temporary suspension of cash compensation for board members in order to strengthen its financial position.

Shares of Boeing are down by nearly 5% today. In addition to the coronavirus' impact on the airline industry, the airplane manufacturer is also in the process of creating an update for its 737 MAX's flight control computer to address two software issue. That makes a total of four technical flaws discovered on this model in less than four months.

Word of the Day

Reversal

A reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside. Following an uptrend, a reversal would be to the downside. Following a downtrend, a reversal would be to the upside. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart. Certain indicators, such a moving average or trendlines, may help in isolating trends as well as spotting reversals.

image courtesy: loc.gov

Today in History

April 8th, 1935:

The U.S. Congress enacts legislation creating the Works Progress Administration, later known as the Works Project Administration, or WPA, which ends up employing more than 8 million people during the Great Depression.

http://memory.loc.gov/ammem/today/apr08.html