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The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Monday's Headlines

1. US markets rally into the close

2. WTI oil futures fall 25%

3. The market has bad breadth

4. We are getting antsy

Markets Closed

Dow
24,133.78
+358.61 (+1.51%)

S&P
2,878.48
+41.74 (+1.47%)

Nasdaq
8,730.16
+95.64 (+1.11%)

VIX
33.29
−2.64 (-7.35%)

Bitcoin
$7,745.25
+$42.59 (+0.55%)

US 10-Yr Yield
0.656
+0.06 (+10.07%)

image: Michal Bednarek/Getty

Markets Today

U.S. markets ripped to recent highs today as the DJIA is on a four-day winning streak and up above 24,000 again for the first time since March 11th. The S&P 500 is having its best month since 1991, and all sectors of the index closed higher today in a broad-based rally. We haven't had a lot of those lately, as the market has either been boosted by big-cap tech stocks or dragged lower by energy and airlines.

Oil prices continue to fall with June contracts for WTI falling another 25% today. Concerns about oversupply and a slow return to robust demand will keep putting pressure on oil prices until an economic recovery gathers steam. At this point, all global economies are in the early stages of coming back to life, but the restart will be gradual. That will be frustrating for those who have lost their livelihoods over the past month. Expect more stimulus plans and monetary policy moves by global governments and central banks in the coming weeks.

That is, if we don't get wiped out by 1998 OR2, a mile-wide asteroid that will pass by the Earth on Wednesday. It will actually pass 3.9 million miles away, so we might get lucky, but these days, anything can happen.

image courtesy sciencealert.com

Headlines:

A vaccine to halt the coronavirus pandemic could be available as early as this year for vulnerable groups, such as healthcare workers, according to the Coalition for Epidemic Preparedness Innovations, which is funding nine different coronavirus vaccine projects.
Apple is delaying the production ramp-up of its new flagship phones by a month and slashing the number of handsets that it plans to make in the second half of this year by 20%, according to The Wall Street Journal. The tech giant will release four new models, some with 5G connectivity, later this year.
General Motors is suspending its dividend and share repurchases. The automaker is trying to preserve cash while auto sales are plunging. The company last suspended its dividend in July 2008, as it hurdled towards bankruptcy and an eventual federal bailout. It resumed paying a dividend in the first quarter of 2014, a little more than three years after its post-bankruptcy initial public offering.
U.S. Treasury Secretary Steven Mnuchin believes the economy will "really bounce back" in the summer after reopening begins in May and June. "As businesses begin to open, you're going to see demand side of the economy rebound," he said during an interview on Fox News Sunday.
Boeing has terminated its $4.2 billion joint venture deal with Embraer. The Brazilian jet maker did not satisfy the necessary conditions, according to Boeing. Embraer has rejected this as "false claims" and vowed to pursue all remedies for the damages incurred.
Adidas said Q1 sales dropped 19% to 4.75 billion euros and operating profit decreased 93% to 65 million euros in the first quarter. The sportswear company predicts sales will fall 40% in the second quarter and is not able to provide an outlook for the full year 2020. Over 70% of its stores worldwide are currently closed.
"The food supply chain is breaking," according to Tyson Foods, America's largest meat supplier. The company, which produces about 20% of the beef, pork, and chicken in the U.S., issued the warning on Sunday in full-page ads published in The New York Times, The Washington Post, and Arkansas Democrat-Gazette.
The Bank of Japan has ramped up buying of commercial paper and corporate bonds and has lifted the cap on its government bond buying. "It's a monetary policy step based on yield curve control," said BOJ Governor Haruhiko Kuroda. The central bank also predicted a 3% to 5% contraction of the economy in the current fiscal year, which ends in March.
Deutsche Bank says first quarter profit before tax is expected to be 206 million euros and net income is expected to be 66 million euros. Both are above market expectations. Provisions for credit losses are expected to be 0.5 billion euros. The bank will announce full results on Wednesday.
Disney is releasing the latest Star Wars film on its Disney+ streaming service two months sooner than expected—the latest sign that the coronavirus is accelerating the shift toward home viewing. The Rise of Skywalker will be available for streaming on May 4th, the company said Monday, less than five months after it opened in theaters.

image courtesy Disney

chart courtesy Goldman Sachs

Bad Breadth

Microsoft, Apple, Amazon, Facebook, and Google combined are now 25% of the market value of the S&P 500 and bigger than 350 companies within it. They all report quarterly results this week, and as they go, so goes the stock market.

This concentration is also exaggerating the narrow breadth in the market. While the index has climbed 20% from its lows last Month, only a small percentage of stocks have carried the performance. As Goldman Sachs, Chief Strategist David Kostin put it in a note to clients, "The S&P 500 trades just 17% below its all-time high amid the largest economic shock in nearly a century. Below the surface of the market, however, the median S&P 500 constituent trades 28% below its record high."

The fear is, that these few companies that are concentrated in the tech sector and have been less impacted than consumer discretionary, travel, or energy sectors, will fail to generate enough fundamental earnings strength to justify elevated valuations.

We are ordering as much from Amazon as we can. Apple says sales will fall hard in 2020. Facebook and Google are facing advertising revenue risk, and Microsoft generates a healthy chunk of its revenue from enterprise sales. Companies plan to spend less money on technology this year, not more.

chart courtesy ArborDataScience

We Are Getting Antsy

As states slowly start to open up and the weather gets nicer, we are having a hard time staying at home. It has undoubtedly worked to slow the curve of new cases, but Americans are moving again. According to Arbor Data Science, the week of April 7–12th may have marked the bottom in terms of our daily movements using transportation such as a car, train, plane, or bus. Our activity picked up in the past week, especially in some cities.

We Are Getting Anxious

With over 26 million Americans filing for first-time unemployment claims in the past five weeks, you can understand why anxiety is high.

According to Gallup, 10% of Americans report they have been temporarily laid off from work as a result of the coronavirus, and an additional 2% say that the situation has caused them to permanently lose their job. More common than loss of employment are reductions in hours (15%) and loss of income (26%). Not surprisingly, minority and poorer communities are the hardest hit.

Sadly, many more Americans expect to lose their job in the next 12 months. 25%, according to Gallup's latest poll, the highest reading for that question in Gallup's history.

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(chart courtesy YCHARTS)

Shares of retail-chain stores, such as Kohls (18%) and Gap (13%), are up today on news that online sales are helping several retailers weather the ongoing pandemic and resultant store closures. F5 Network's stock price rose by almost 11% after the web applications company posted Q2 results showing an increase in revenue and EPS.

Shares of Coty are down by over 12.5% following the beauty company receiving a downgrade from "Buy" to "Neutral" from DA Davidson. Regeneron's stock price fell by 3.5% once it was determined that the biotech company's Kevzara drug was only successful in treating the sickest coronavirus patients.

Word of the Day

Market Breadth

Market breadth indicators analyze the number of stocks advancing relative to those that are declining in a given index or on a stock exchange (such as the New York Stock Exchange or NASDAQ). Positive market breadth occurs when more stocks are advancing than are declining. This suggests that the bulls are in control of the market's momentum and helps confirm a price rise in the index. Conversely, a disproportional number of declining securities is used to confirm bearish momentum and a downside move in the stock index.

image: Thoughtco.com

Today in History

April 27th, 1791:

Samuel Finley Breese Morse is born in Charlestown, Mass., to the Rev. Jedidiah Morse and Elizabeth Breese Morse. After working as a successful portrait painter, Morse demonstrates the world's first working telegraph in 1844.