The Market Sum | Insight after the bell Friday's Headlines 1. US markets rally behind tech sector 2. White House lays out return to work path 3. Market leadership is concentrated like never before 4. Who the stimulus checks help the most 5. What to expect next week Dow
24,242.49
+704.81
(+2.99%) | | S&P
2,874.56
+75.01
(+2.68%) | | Nasdaq
8,650.14
+117.78
(+1.38%) | | | | | | Bitcoin
$7,110.34
+$10.07
(+0.14%) | | US 10-Yr Yield
0.654
+0.045
(+7.39%) | | | | | | Russell 2000
1,229.10
(-26.33%) | | Crude Oil
$18.34
(-66.85%) | | US 10-Yr Yield
0.654
(-65.92%) | | | | image: Koichi Kamoshida/Getty Markets Today U.S. markets rallied hard and into the close to cap the second straight week of gains. Five out the past seven trading days have ended in the green as the sentiment has shifted and investors pile back into big technology stocks. Markets were buoyed following a report that Gilead Sciences' remdesivir drug was proving effective in treating the virus. Shares of Gilead (GILD) climbed 9.73% on the day. Investors may have been optimistic about the White House's plans to reopen the U.S. economy in stages beginning May 1st. The guidelines around the "Opening Up America Again" plan put the onus on individual states to reopen their economies, but lay out a phased approach for broader testing, treatment, and social distancing mandates for public places. The drumbeat to "end the lockdown" is growing stronger in several U.S. states, many of which have already started getting back to work. This is happening as layoffs mount, the Small Business Administration runs out of PPP funding, and the outcry for more stimulus measures gets louder by the day. It's been an interesting week. Have a great weekend.  **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 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: - Shares of Boeing (BA) jumped 14% after the company said it will resume all commercial airplanes production in a phased approach at its Seattle-area factory next week. It's putting in place various safety measures, like staggered shift start times, face coverings, physical distancing, and wellness checks.
- Procter & Gamble reported a 10% surge in sales in its fiscal third quarter as consumers stocked up on staples like toilet paper and other home essentials ahead of the coronavirus outbreak. Revenue topped $17.2 billion and the company earned $1.17 earnings per share.
- General Electric and Ford Motors have signed a $336 million contract to produce 50,000 ventilators by July 13th. This is under the Defense Production Act (DPA). The Department of Health and Human Services says it has contracts to produce over 187,000 ventilators by the end of the year. General Motors is making 30,000 ventilators for $489.4 million by the end of Aug. 2020.
- Moderna has received $483 million from the Biomedical Advanced Research and Development Authority (BARDA), a U.S. government agency, to accelerate the development of its COVID-19 vaccine. A Phase 1 study of the candidate is being conducted by the National Institutes of Health (NIH).
- Goldman Sachs cut Apple's stock rating to "sell" on Friday and cut its price target to $233 from $250, as it reduced its earnings estimates for a third time since Feb. 17th. Analysts led by Rod Hall said they are modeling a far deeper reduction in unit demand through mid-2020, followed by a shallower recovery heading into 2021.
- Uber says its financial assistance program for drivers and delivery people will reduce GAAP Revenue by an estimated $17 to $22 million in Q1 and an estimated $60 to $80 million in Q2. The company also withdrew its 2020 guidance and said the coronavirus lockdowns have forced it to write-down its investments in the range of $1.9 billion to $2.2 billion during Q1.
- Stripe has raised $600 million in new funding at a valuation of $36 billion in an extension of its Series G round. The investors include Andreessen Horowitz, General Catalyst, GV, and Sequoia. This is the largest round to date for a U.S.-based online payments startup, according to PitchBook. Ecommerce has received a significant boost during the health crisis, and Stripe called itself a "critical infrastructure provider" in the press release.
- Facebook says the vast majority of its employees will work from home through at least the end of May. In a post on the website about reopening, CEO Mark Zuckerberg said this is "in order to create a safer environment both for our employees doing critical jobs who must be in the office and for everyone else in our local communities."
 Where Is the Market Leadership? Technology has been leading the market gains since the lows in mid-March and for the past year. The leadership is concentrated in just a few of the top stocks, including Facebook, Apple, Amazon (all-time highs), Alphabet, and Microsoft (more below). Zoom in to the chart above and you'll see that tech stocks as seen through the SPDR Tech sector ETF have returned 14.5% over the past year. It doesn't feel that way given the viciousness of the recent sell-off, but it's there. Healthcare has also delivered strong returns, and our reliance on the sector has never been greater. Consumer staples have been core to surviving the last six weeks at home, and retailers like Walmart and Dollar General are hitting all-time highs. Financials and the industrial sectors have been hit hard by low interest rates for banks, a global economic shutdown, and last year's trade war. But energy has been destroyed, down more than 50% in the past year. Typically, financial stocks need to start leading for a broader market rally, but these are not typical times.  chart courtesy BofA Concentration The stocks that led markets to record highs are roughly the same ones that have led the recovery from last month's bear market lows. Facebook, Alphabet, Amazon, Apple, and Microsoft have been powering the market higher. They are also among the most widely held stocks in index funds, tech ETFs, and most U.S. equity mutual funds. As they go, so goes the market, for better or worse. According to Bank of America, they now account for the highest concentration of five stocks in the S&P 500 in its history.  Who the Stimulus Checks Help the Most The CARES Act will provide much-needed economic assistance to tens of millions of Americans who may lose their jobs, their sources of income, or be in some way impacted by the economic recession brought on by the 2020 pandemic.
While everyone's economic needs are different, we wanted to take a look at how much the stimulus actually covers the average American's expenses. While there is no 'Average American,' the Department of Labor collects data on American "consumer units," which allows us to view average yearly expenditures for singles, couples, and families. We can also see the average breakdown of a consumer's monthly spend across categories. As you can see from the chart above, bigger households get a bigger benefit, but there are a lot of interesting facts in the data worth exploring. Check out the full story here: How Far Do The Stimulus Checks Really Go?  Here's a list of economic events for the week ahead:
Sunday, April 19th:
- Japanese Trade Balance (March)
- Peoples Bank of China Loan Prime Rate
Monday, April 20th:
- German Producer Price Index (PPI) (March)
- Eurozone Trade Balance (February)
- Russian Gross Domestic Product (GDP) (March)
- Royal Bank of Australia Meeting Minutes
Tuesday, April 21st:
- Market Holiday in Brazil for Tiradentes Day
- U.K. Unemployment Rate (February)
- U.K. Average Earnings Index (February)
- German ZEW Economic Sentiment Index (April)
- Eurozone ZEW Economic Sentiment Index (April)
- Canadian Retail Sales (February)
- U.S. Existing Home Sales (March)
Wednesday, April 22:
- U.K. Consumer Price Index (CPI) (March)
- U.K. PPI (March)
- Canadian CPI (March)
- Japanese Preliminary Purchasing Managers' Index (PMI) (April)
Thursday, April 23:
- U.K. Retail Sales (March)
- German GfK Consumer Climate (May)
- Eurozone Preliminary Manufacturing and Services PMI (April)
- French Preliminary Manufacturing and Services PMI (April)
- German Preliminary Manufacturing and Services PMI (April)
- U.K. Preliminary Manufacturing and Services PMI (April)
- U.S. Preliminary Manufacturing and Services PMI (April)
- Japanese CPI (March)
- U.S. New Home Sales (March)
Friday, April 24:
- U.K. Retail Sales (March)
- German Business Expectations (April)
- German Ifo Business Climate Index (April)
- U.S. Durable Goods Orders (March)
- U.S. Michigan Consumer Sentiment Index (April)
It's the Best of Earnings and the Worst of Earnings
Companies reporting earnings this week are split sharply between those hammered by the current pandemic, major airlines, and those that potentially stand to benefit, Netflix (NFLX) and Snap (SNAP). Delta Air Lines (DAL), Southwest Airlines (LUV), and American Airlines Group (AAL) are all expected to report earnings next week, though AAL hasn't officially announced a date yet. As the COVID-19 pandemic halts travel all over the world, the airlines' load factor, basically the percentage of seats filled, is likely to fall, but the amount of the fall should give us an idea of how severe the damage will be.
On the other side of things, with people stuck indoors and live sporting events cancelled, Netflix's comparative advantage versus movie theaters and cable has never been higher. However, it has more competition than ever as well, with streaming services proliferating fast. Keep an eye on Netflix's subscriber count when it announces earnings on Wednesday to see which of those factors dominates. Snap is another company likely to benefit from social distancing, as conventional avenues for socializing are cut off due to the pandemic. Keep an eye on Snap's daily active users when it reports earnings on Tuesday to see if it's able to use this opportunity to grow.
Unemployment Claims, No Bottom in Sight
With another 5 million Americans applying for unemployment insurance last week, the U.S. job market has erased nearly all of its gains since the Great Recession. While the exact unemployment figure for April is still unclear, it is almost certainly going to break the post-WWII record of 10.8% set in the early 1980's. While claims are down from the 6 million the previous week, it is unclear how much they will continue to drop. We've said it before, but it bears repeating, keep an eye on weekly unemployment to see if this is a decline or just a plateau.
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LEARN MORE > Word of the Day Trend Trading Trend trading is a trading style that attempts to capture gains through the analysis of an asset's momentum in a particular direction. When the price is moving in one overall direction, such as up or down, that is called a trend. Trend traders enter into a long position when a security is trending upward. An uptrend is characterized by higher swing lows and higher swing highs. Trend traders may opt to enter a short position when an asset is trending lower. A downtrend is characterized by lower swing lows and lower swing highs. image: History.com Today in History April 17th, 1930: The stock market hits its post-Crash high, as the Dow Jones Industrial Average closes at 294.07, up an astonishing 48% in the five months since the Crash bottomed on Nov. 13th, 1929. Over the coming two years, however, the Dow will lose another 85.99% of its value, scraping rock-bottom at 41.22 on July 8th, 1932. Enjoy the Market Sum? Share it with a friend. CONNECT WITH INVESTOPEDIA |
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