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The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Thursday's Headlines

1. US markets erase losses, steam to big gains

2. Another 2.9 million Americans join unemployment ranks

3. Healthcare benefits are at risk

4. The results of our reader survey

Markets Closed

Dow
23,625.34
+377.37 (+1.62%)

S&P
2,852.50
+32.50 (+1.15%)

Nasdaq
8,943.72
+80.56 (+0.91%)

VIX
32.61
−2.67 (-7.57%)

Bitcoin
$9,661.79
+$376.70 (+4.06%)

US 10-Yr Yield
0.619
−0.03 (-4.62%)

Image credit: 101cats/Getty

Markets Today

U.S. markets staged a sharp turnaround today, reversing steep losses and powering higher to close at session highs. All sectors of the S&P 500 rallied, and while tech stocks resumed their leadership, industrial and financial stocks rallied. That hasn't happened in awhile.

The sudden reversal in sentiment may be temporary, but it did happen in the face of more dire economic news on the labor front. Another 2.9 million Americans filed for first-time unemployment claims last week, bringing the two month total to more than 36 million people. The weekly numbers have been trending lower, but they are still sky high.

The economic news is going to get worse, but then it's going to get better, probably after tomorrow (see chart below). That's clearly what some investors are starting to bet on, but for many, the time gap between here and there might be too much.

chart courtesy Bespoke Investments

Headlines:

The New York Stock Exchange will reopen its trading floor to some brokers on May 26th, following two months of closure, according to an op-ed in The Wall Street Journal from NYSE President Stacey Cunningham.
The International Energy Agency has raised its forecast for global oil demand in the second quarter of 2020 and the full year. It now expects a decline of 8.6 mb/d instead of 9.3 mb/d. In its Oil Market Report for May, the organization cited better-than-expected mobility in OECD countries and the gradual easing of lockdown measures for its upwards adjustments. "We see early signs of a gradual rebalancing of oil markets. It is still gradual and it is still fragile," said Fatih Birol, the IEA's executive director.
Starbucks sent a letter to landlords demanding a break on rent for the next year as the coronavirus pandemic hammers U.S. sales. The coffee chains told landlords that starting June 1st, for at least the next 12 months, it will need changes to lease terms and base rent, according to The Seattle Times.
McDonald's is asking restaurant owners in the U.S. to make dozens of changes to ease coronavirus concerns before reopening their franchises, according to The Wall Street Journal. Those changes include commitments to clean bathrooms every half-hour and digital kiosks after each order. It is also asking its franchises to enforce social distancing in its restaurants and either close their public soda fountains or deploy a staff member to monitor them.
The International Olympic Committee expects to bear costs of up to $800 million for its part in the organization of the postponed Tokyo 2020 Olympics, now due to be staged next year, IOC President Thomas Bach said on Thursday.
Over 300 businesses, including Microsoft, Nike, Visa, and Salesforce, are lobbying Congress to build back a more resilient, sustainable economy from COVID-19. With a campaign called LEAD on Climate 2020, they are calling for a net-zero emissions economy by 2050 or sooner and more investment in resilient infrastructure among other things.
Amazon has launched three new affordable Fire tablets, including one built specifically with kids in mind, as people spend more time at home. The starting price is $90, and Amazon bundles free content subscriptions like Kindle Unlimited and Amazon FreeTime Unlimited with higher versions. Amazon shipped 3.3 million units and had a 7.6% market share among tablet makers in Q4 2019.
Lloyd's of London, the world's largest insurance exchange, estimates the industry will suffer around $203 billion in losses from the coronavirus pandemic this year. The projected losses include about $107 billion from underwriting claims, with the rest from insurers' investment portfolios. The claims costs are on a par with some of the most catastrophic hurricanes of recent years and could rise further if the virus isn't contained, Lloyd's said.
Facebook is building a massive underwater cable around Africa, in an effort to bring more of the continent's 1.3 billion people online. It has partnered with companies including China Mobile, South Africa's MTN, France's Orange, and Britain's Vodafone as well as local network operators on the project, dubbed 2Africa. At 37,000km long, 2Africa will be one of the world's largest subsea cable projects and will interconnect Europe (eastward via Egypt), the Middle East (via Saudi Arabia), and 21 landings in 16 countries in Africa. The system is expected to go live sometime in 2023–24. Here's a rendering:

map courtesy 2Africa

Another Week of New Jobless Claims

2.9 million Americans filed for first-time unemployment claims last week, bringing the eight-week total to around 36.5 million. The only silver lining is that unemployment filings have declined since an initial surge in layoffs drove claims up to a weekly peak of nearly 7 million at the end March. In all but seven states, unemployment applications fell last week.

The highest insured unemployment rates in the week ending April 25th were in the following states:

California (27.7)
Michigan (23.1)
Nevada (22.0)
Pennsylvania (21.2)
Rhode Island (20.6)
Georgia (20.2)
Vermont (20.0)
New York (18.6)
Connecticut (18.0)
Washington (18.0)

The impact to the lowest earning part of the population has been the most severe, both here in the U.S. and around the world. According to the Federal Reserve, 40% of people who were working in February and were members of households making less than $40,000 a year had lost their jobs in March.

Beyond that economic hardship is the fact that many of those impacted could lose their healthcare benefits, according to a recent study from The Kaiser Family Foundation. According to the survey, as of May 2nd, 2020, nearly 27 million people could potentially lose employee-sponsored insurance and become uninsured following job loss. That's why several economists are worried that this economic crisis could easily tip into another health crisis if it goes on too long.

Your Investor Sentiment

We've published the results of our reader survey we did with you and readers of our morning newsletter, The Express, and here are some of the highlights of what we learned:

First, you are a very smart bunch, and we really appreciate you taking the time to fill out the survey. Thank you.

Most of you have become more cautious over the last month as the stock market has rallied off of its March lows. Older readers with more to invest have become particularly cautious and have moved money out of equities and equity mutual funds and into money markets, bonds, and high-yield savings accounts.

Our younger readers with less to invest have remained aggressive. You've been buying beaten-down blue chips and some very risky stocks in the airline sector. Those prices are tempting.

What Have You Been Buying?

The split in investor sentiment across generational lines makes sense. It's pretty consistent across what we are seeing in the industry. Those of you that are actively managing your investments, and buying and selling securities, though, are doing it aggressively.

In our roundup of online broker activity, platforms like Fidelity, E*TRADE, Robinhood, and Schwab have reported record activity in existing and new accounts.

In terms of what you have been buying, here's a breakdown of the most actively purchased stocks by both bearish and bullish investors who took our survey.

More News:

Are Stocks Too Hot for a Pandemic?

WWE Network Puts a Chokehold on Account Sharing

Online Brokers See Record Activity Through Volatility

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(chart courtesy YCHARTS)

Shares of Cintas rose by over 14.5% following the business services provider's earnings call with investors and analysts, many of whom raised their price targets. Credit card stocks, including Capital One Financial (over 9%) and Discover Financial Services (8.5%), are up today after Mastercard reported consumer spending could be significantly improving.

Shares of Coty are down 7% as investors continue to react to the beauty company's difficult week. This included a dismal Q3 earnings report, the sale of a 60% stake in its professional beauty and hair care business, and a downgrade from a market analyst. Kroger's stock price fell nearly 4% following the grocery store chain's decision to end its $2 an hour "hero bonus" and coronavirus-related emergency sick leave policy. Following this announcement, three Kroger employees in a Cincinnati location tested positive for COVID-19.

Word of the Day

Initial Claims

Initial Claims are an employment report that measures the number of new jobless claims filed by individuals seeking to receive unemployment benefits. The report, published since 1967, also shows how many unemployed individuals qualify for and are receiving benefits under unemployment insurance. The initial claims number is watched closely by financial analysts because it provides insight into the health of the economy. Policy makers use the initial claims figure in conjunction with other employment data to determine the strength of the labor market.

Initial claims may be contrasted with continuing claims, which measures ongoing unemployment.

photo courtesy Bloomberg/Getty

Today in History

May 15th, 1997:

Amazon.com Inc. goes public on the NASDAQ, offering 3 million shares at an initial price of $18 per share. $10,000 invested that day would be worth $12 million today. Who's laughing now?