Sticking With The Plan

U.S. markets shoot higher as tech stocks lead gains despite somber economic news.

Read in Browser   The Market Sum | Insight after the bell By Caleb Silver, Editor in Chief Tuesday's Headlines 1. US markets power higher on tech gains 2. JPMorgan posts 69% drop in profits as it prepares for loan defaults 3. The IMF says global growth will plunge 3% in 2020 4. CFOs weigh timing and spending cuts as crisis persists 5. It's Amazon's world Markets Closed Dow 23,949.76 +558.99 (+2.39%) S&P 2,846.06 +84.43 (+3.06%) Nasdaq 8,515.74 +323.32 (+3.95%) VIX 37.76 −3.41 (-8.28%) Bitcoin $6,890.22 −$38.67 (-0.56%) US 10-Yr Yield 0.752 +0.003 (+0.40%)     image: Stone/Getty Images   Markets Today U.S. markets erased Monday's losses, racking up strong gains as investors stuck with the plan of buying big tech stocks into market rallies. They also picked up healthcare stocks and even battered cruise companies. It's an odd grouping, but this is an odd time. When markets have these sharp rallies, individual stocks get taken for wild rides.   There is improving news on the health front as the number of deaths seems to be leveling in New York City. The enormity of the pandemic, however, is still staggering. Data from Johns Hopkins University shows there are more than 1.9 million COVID-19 cases around the world, with over 598,000 in the U.S.    The economic news was sour. We knew it would, and will continue to be, for awhile. The IMF lowered its global growth forecast to a steep loss, and Goldman Sachs says U.S. economic activity will plunge 35% from last quarter, on an annualized basis. JPMorgan reported a deep drop in profits as the bank held back more capital for loan losses that it knows are coming soon. All the big banks are preparing for massive defaults.   But tech investors weren't hearing any of that today as they bid up shares of Apple, Amazon, and Microsoft. The Nasdaq Composite is actually up 6.7% in the past year. Go figure.   chart courtesy YCharts     **Survey alert: We are running another survey of our U.S. newsletter readers to learn more about your views on these volatile markets and moves you may or may not be making in your portfolios. We do this because we think you are fascinating and wildly intelligent, and we like to put our finger on the pulse of individual investors like you to understand sentiment. We don't do anything creepy or untoward with the information you provide... I promise. If you would, please take this brief survey, and we'll let you know what we learn. Thanks!**   Headlines: Boeing posted 150 cancellations of its beleaguered 737 Max jets in March. Brazilian airline, Gol, canceled 34 of the narrow-body planes and leasing firm Avolon scrapped orders for 75 of them, a move it announced earlier this month. That brought net orders Boeing removed from its order list in first three months of the year to 307 planes. JPMorgan Chase reported a first quarter 2020 profit of $2.87 billion, or $0.78 a share, missing analysts' estimates of $1.87 per share. Revenue fell 3% year over year to $29.07 billion. The extreme decline in profits came as JPMorgan added $6.8 billion to loan loss provisions to bolster the bank against pending defaults, according to its earnings release. As CEO Jamie Dimon put it, "... Given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter." Johnson and Johnson reported earnings of $2.30 per share for the first three months of 2020 and sales of $20.7 billion. Both were better than analysts' forecasts. While the company lowered its forecasts for 2020 earnings, it did increase its dividend from 95 cents a share to $1.01, or a 6.3% increase. That's pretty rare these days. Wells Fargo reported earnings of $0.01 and revenue of $17.7 billion for Q1 2020. Both were below analysts' expectations. Net income was $653 million. "Our results were impacted by a $3.1 billion reserve build, which reflected the expected impact these unprecedented times could have on our customers," said Chief Financial Officer John Shrewsberry. Shares in Roku (ROKU) jumped 9.8% after the company said Q1 revenue will be slightly higher than stated in its prior outlook. Active accounts have increased nearly 3 million since Dec. 2019 to reach 39.8 million and Q1 streaming hours are expected to be worth 13.2 billion, a 49% YOY increase. China's exports fell 6.6% and imports fell 0.9% year-over-year in March as the economic recovery continued. This was much better than analysts were expecting. The country's trade surplus was $19.9 billion for the month. Britain's GDP could fall 35% in the second quarter if lockdown measures last for three months and are followed by three months of partial restrictions, according to the Treasury's official forecaster, the Office for Budget Responsibility. The scenario also shows unemployment rising by more than 2 million to 10%. Apple iPhone sales in China rebounded 416% in March from February to 2.5 million units, according to the country's Ministry of Industry and Information Technology. Total handset sales were 21.8 million, up 241% from February but still 23% lower from the same period a year ago. SoftBank will see its first operating loss in 15 years for the year ended March. This is primarily because the Vision Fund will record a $16.73 billion loss for fiscal 2019 "due to the deteriorating market environment," the company said in a statement. OnePlus, the Chinese premium phone maker competing with Apple in markets like India, is introducing its new 8 Series today. OnePlus is owned by BBK Electronics, the same company behind brands like Vivo, Oppo, and Realme. U.S. airlines and the Treasury Department have reached an agreement in principle on billions in government aid aimed at softening the blow from the coronavirus, according to CNBC.     image courtesy Schwab Research   IMF Forecasts 3% Plunge in Global Growth In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated on Tuesday that global gross domestic product will shrink 3% this year. That compares to a January projection of a 3.3% expansion and would likely mark the deepest dive since the Great Depression. The IMF says growth in 2021 can rebound to 5.8% if and only if the coronavirus is contained in the second half of 2020.   That's a big "if," and the IMF says there are many uncertainties in the way:   "The economic fallout depends on factors that interact in ways that are hard to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, the extent of supply disruptions, the repercussions of the dramatic tightening in global financial market conditions, shifts in spending patterns, behavioral changes (such as people avoiding shopping malls and public transportation), confidence effects, and volatile commodity prices."   Basically, everything.   As you can see from the chart above, economic growth in the first quarter was mostly limited in China and Italy. The second quarter will be mostly orange, except for China and some parts of Europe, and we'll see for certain whether the IMF is being overly optimistic in its projections.     chart courtesy PWC Pulse Survey   CFO Say It Will Take Some Time Chief financial officers think it may take a few months to get back to business once the pandemic is over and industries return to work. In PWC's recent Pulse Survey of CFOs, only one in five respondents believes they'll be back to business as usual within a month once the outbreak ends. In contrast, during the week of March 9th, as "shelter-in-place" orders started taking hold in the U.S., 66% of U.S. and Mexico respondents estimated that their companies could recover within a month.   Right now, they are in cost-cutting mode. Two-thirds of those surveyed said they are considering deferring or canceling planned investments. The areas where they plan to cut the most are in capex and their workforces. Cuts to those areas don't bode well for a V-shaped recovery.   chart courtesy PWC Pulse Survey     It's Amazon's World Perhaps no other company was situated better for this economic shutdown than Amazon.com. It mastered one-day delivery last year, it has more than 100 million Prime members who are relying on it for just about everything right now, Prime Video is helping us binge-watch our way through these shelter-at-home days and nights, and Amazon Web Services is storing about one-third of all Internet data in its cloud warehouses.   Read more: How Amazon Makes Money   We shouldn't be surprised to see the stock hitting an all-time high today.   chart courtesy YCharts     More News: Roku Stock Breaks Out After Preliminary Q1 Numbers Amazon Stock Hits All-Time High JPMorgan Stock in Rally Mode Despite Weak Quarter 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)     Shares of Netflix hit an all-time high today after climbing 7% on the session. It joins Amazon as one of very stocks hitting all-time highs. Word of the Day Loan Loss Provision A loan loss provision is an expense set aside as an allowance for uncollected loans and loan payments. This provision is used to cover a number of factors associated with potential loan losses, including bad loans, customer defaults, and renegotiated terms of a loan that incur lower than previously estimated payments. Loan loss provisions are an adjustment to loan loss reserves and are also known as valuation allowances.     image: Chris Hondros/Getty Images   Today in History April 14th, 2000: The Nasdaq has one of its worst days ever, plunging 355.49 points, or 9.67%, to finish at 3,321.29, down 25.3% for the week. While many strategists predict an impending rebound, it turns out there are no points on the upside and more than 2,000 on the downside as the Nasdaq ends the year at 2,470.52, on the way to its trough of 1,114.11 in Oct. 2002. How can we improve the Market Sum? Tell us at marketsum@investopedia.com Enjoy the Market Sum? Share it with a friend.   Click to Share   Or share the link below to invite friends to sign up. https://link.investopedia.com/join/53o/00-fwd-marketsum CONNECT WITH INVESTOPEDIA Email sent to:  mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.   114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC. All Rights Reserved | Privacy Policy