The Market Sum | Insight after the bell Friday's Headlines 1. US markets tumble into May as optimism fades 2. Oil profits fall, bleach profits rise 3. Investors put it in neutral after April gains 4. Retirement accounts took a big hit 5. What to expect next week Dow
23,723.69
−622.03
(-2.55%) | | S&P
2,830.71
−81.72
(-2.81%) | | Nasdaq
8,604.95
−284.60
(-3.20%) | | | | | | Bitcoin
$8,781.44
+$107.39
(+1.24%) | | US 10-Yr Yield
0.642
+0.02
(+3.22%) | | | | | | Russell 2000
1,260.48
(-24.45%) | | Crude Oil
$19.72
(-69.26%) | | US 10-Yr Yield
0.642
(-66.55%) | | | | Image Credit: bestdesigns/Getty Markets Today U.S. markets opened low and stayed low today to open the month as tech stocks weighed down the major averages. All sectors closed sharply lower as investor sentiment has turned over the past two days. There are also growing concerns that the U.S. will begin retaliatory measures against China, which it blames for obfuscating details about the coronavirus when it first emerged in Wuhan this past winter. One market that is red hot right now is the corporate debt market. Since the World Health Organization declared the coronavirus a pandemic on March 11th, corporations had issued $265 billion in debt through April 27th, according to Intelligize. That's more than double the volume of $108 billion for the same period in 2019. With the Fed promising to back the corporate bond market and cheap rates ripe for refinancing, companies are borrowing like it's their job. Hopefully that helps them save more jobs, but that's typically not what companies do when they raise debt. They need to repair their balance sheets and brace for bumpy roads ahead. And, after the market's historic April, there may be a growing sense that stocks have run pretty far given global economic realities. Bear down.  Chart courtesy FT.com Headlines: - Today is International Workers' Day and stock markets across the world are closed. The holiday holds particular significance this year as the coronavirus forces workers to ask for better protection and wages. Essential workers and employees of online retailers staged walkouts throughout the country today.
- The FDA granted emergency approval for Gilead Sciences' remdesivir to treat the coronavirus, President Trump announced today. Gilead plans to spend $1 billion this year on remdesivir, the antiviral drug the world has pinned its hopes on. More than 140,000 treatment courses will be manufactured by the end of May and one million will be manufactured by December. It beat earnings and revenue expectations for first quarter.
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The House Judiciary Committee demanded that Amazon CEO Jeff Bezos testify after Democratic leaders said they suspected the company of lying to Congress about its use of third-party seller data. This comes after a WSJ story investigation that found Amazon employees used non-aggregated or easily identifiable data from third-party sellers to figure out which products to make on its own. -
Exxon swung to a $610 million loss in the quarter as it took a "market-related" $2.9 billion charge. It reported $2.4 billion in profits during the same period last year. The bulk of the impairment was related to its downstream business, which refines oil into gasoline and other products. The largest U.S. oil company has cut $10 billion from its planned capital expenditures in 2020, a 30% budget cut. - Clorox reported a 15% rise in first quarter sales as consumers stocked up on cleaning supplies. The company reported fiscal third-quarter net income of $241 million, or $1.89 per share, up from $187 million, or $1.44 per share, a year earlier. Both were higher than expected.
- Global smartphone shipments suffered the biggest year-over-year decline ever in Q1 due to the coronavirus supply and demand problems, says IDC. Samsung and Huawei suffered the biggest drops in volume at 19% and 17%. Apple fared much better with shipments down only 0.4%. Its market share climbed to 13.3% from 11.8% the same time last year.
- The U.K. is past the peak of the coronavirus outbreak, according to Prime Minister Boris Johnson. He will lay out a "comprehensive plan" next week for restarting the economy and warned that a second spike must not be risked.
- Tesla CEO Elon Musk single-handedly knocked billions of dollars off of his company's market cap today with the tweet below. Shares of TSLA are up 71% so far this year. While Musk had been relatively quiet, he has been on a bit of a tweet rage of late, blasting politicians for not opening the economy and disputing the severity of the virus outbreak in California. He also tweeted today that he is getting rid of all his possessions. TSLA shares fell 10% on the day.
 Inside Investor Sentiment The market's dramatic rise from its March lows has messed with investors' heads a bit over the past six weeks. Bank of America's Sell-Side Indicator, which measures bullishness among institutional investors, is back in "neutral" territory after the S&P 500's best month since 1987. The Indicator is what we call a "contrarian indicator," in that markets usually start to rise when investors are at their most bearish, and vice-versa. Money has definitely come back to stocks and equity ETFs in the past month, but the enthusiasm may be waning as the realities of the recession reveal themselves daily.  chart courtesy BofA Individual Sentiment Is Improving Individual investors are still hungry, apparently. While we know that many self-directed individual investors have been actively buying stocks and ETFs through the downturn, they may feel that there is even more upside. The AAII Survey of Individual Investors showed a 5.7% increase in the bullish sentiment in the past week. We are still bearish, to be sure, but those with money to invest are still willing to put it to work.  401(k)s Are Feeling It That risk appetite may be fueled, in part, by the hit we took to our retirement accounts in the first quarter. According to Fidelity Investments: - The average 401(k) balance was $91,400, down 19% from the record high of $112,300 in Q4 2019 but still higher than Q1 2010 balance of $71,500.
- The average IRA balance was $98,900, a 14% decrease from last quarter but higher than the Q1 2010 balance of $66,200.
- The average 403(b)/tax exempt account balance was $75,700, down 19% from last quarter but still above the average balance of $50,000 in Q1 2010.
Two things: It's good to see that balances are higher than they were a decade ago, but these balances are way too low, and they've just taken a big hit. April likely helped boost them a bit, but it's going to be a long, slow road back up.
Pack your patience. chart courtesy Fidelity What to Expect Next Week Here's a look at how different asset classes have been performing:  Here's a list of economic events for the week ahead:
Sunday, May 3rd:
- Chinese Caixin Manufacturing Purchasing Managers Index (PMI) (April)
Monday, May 4th:
- Market Holiday in Japan for Greenery Day
- Spanish Manufacturing PMI (April)
- Italian Manufacturing PMI (April)
- French Manufacturing PMI (April)
- German Manufacturing PMI (April)
- Eurozone Manufacturing PMI (April)
- U.S. Factory orders (March)
- Russian Gross Domestic Product (GDP) (March)
Tuesday, May 5th:
- Market Holiday in Japan and South Korean for Children's Day
- U.K. Composite, Construction, and Services PMIs (April)
- Brazilian Industrial Production (March)
- U.S. Trade Balance (March)
- Canadian Trade Balance (march)
- U.S. Markit Composite PMI (Apri)
- U.S. ISM Non-Manufacturing PMI (April)
- Chinese Caixin Services PMI (April)
Wednesday, May 6th: - Market Holiday in Japan for Constitution Day
- German Factory Orders (March)
- Spanish Services PMI (April)
- Italian Services PMI (April)
- French Services PMI (April)
- German Services PMI (April)
- Eurozone Services PMI (April)
- ADP Nonfarm Employment Change (April)
Thursday, May 7th: - Bank of England Interest Rate and QE Decisions
- German Industrial Production (March)
- U.K. Halifax House Price Index (April)
- Bank of England Inflation Report and Monetary Policy Meeting Minutes
- U.S. Weekly Initial Unemployment Claims
- U.S. Preliminary Nonfarm Productivity (Q1)
- Chinese Trade Balance (April)
- Japanese Services PMI (April)
- Japanese Household Spending (March)
Friday, May 8th:
- U.K. Market Holiday for Bank Holiday
- Brazillian CPI (April)
- Canadian Housing Starts (April)
- U.S. Nonfarm Payrolls (April)
- U.S. Unemployment Rate (April)
- Canadian Employment Change (April)
Earnings Ahead
As we move to the tail end of earnings season, we have a few more big names to go. Disney reports earnings on May 5th, and the COVID-19 pandemic is likely to have hurt it badly, as its very profitable theme parks have had to close. Less predictable is what may happen to its media networks revenue. On one hand, ESPN, one of its biggest media properties, has no live sports to broadcast, but on the other hand, people are staying home to stream content, so its Disney+ streaming service may benefit. Also reporting on May 5th is Activision Blizzard. The video game firm has struggled for a few years now, but with everyone indoors due to the pandemic, we may see an uptick in its userbase. Finally, Berkshire Hathaway reports earnings this weekend while hosting its annual meeting. Investors will want to be on the lookout for what guidance or advice the oracle of Omaha has for them.
U.S. Unemployment
U.S. unemployment figures are released for April on Friday, May 8th. While we've covered the astronomically high weekly unemployment claims over the past several weeks, we'll finally get some idea of what the unemployment situation is. All reports indicate that unemployment will reach levels not previously seen since The Great Depression. U.S. and China Trade Balance The trade balance data for the U.S. and China are released on Tuesday and Thursday, respectively. The U.S. is releasing March data, while China is releasing April data. While this means it is not an apple-to-apples comparison, both are important to pay attention to. With factory closures and lockdowns disrupting supply chains around the world, it will be important to see how total trade numbers have been affected, as they can be a useful indicator for the overall economic health of the economy. SPONSORED BY INVESCO
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LEARN MORE > Shares of Fortune Brands Home & Security are up by nearly 7% after the home fixtures and hardware manufacturer's Q1 adjusted earnings managed to beat estimates. Clorox's stock price rose by over 3% today. The cleaning products manufacturer reported that organic sales volumes jumped 18% in the fiscal third quarter, which is right around the time when consumer efforts to combat the coronavirus began. Shares of Weyerhaeuser are down by nearly 18% after the timberland company announced a suspension of its dividend, in addition to a prediction that its second-quarter results will be much lower than those of Q1. Norwegian Cruise Line fell by 14% as the deadline approaches for a class action lawsuit against the company. The lawsuit concerns whether or not the cruise line violated federal securities laws by providing consumers with false information about the coronavirus. Word of the Day Contrarian Contrarian investing is an investment style in which investors purposefully go against prevailing market trends by selling when others are buying and buying when most investors are selling.
Contrarian investors believe that people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak. So, when people predict a downturn, they have already sold out, and the market can only go up at this point.  photo courtesy NYULocal.org Today in History May 1, 1884: In the late nineteenth century, the working class was in a constant struggle to gain the eight-hour work day. Working conditions were severe and it was quite common to work 10 to 16 hour days in unsafe conditions. Death and injury were commonplace at many workplaces and inspired such books as Upton Sinclair's The Jungle and Jack London's The Iron Heel. As early as the 1860's, working people agitated to shorten the workday without a cut in pay, but it wasn't until the late 1880's that organized labor was able to garner enough strength to declare the eight-hour workday. This proclamation was without consent of employers, yet it was demanded by many of the working class. Source: https://archive.iww.org/history/library/misc/origins_of_mayday/ Enjoy the Market Sum? Share it with a friend. CONNECT WITH INVESTOPEDIA |
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