May 4, 2020

The Week on Wall Street

Stock prices ended the week slightly lower, despite news of positive results from a test trial of a COVID-19 drug treatment and several states easing their economic lockdowns. 

 

The Dow Jones Industrial Average slipped 0.22%, while the Standard & Poor’s 500 lost 0.21%. The Nasdaq Composite Index dropped 0.34%. The MSCI EAFE Index, which tracks developed stock markets overseas, rose 4.34%.

 

Light at the End of the Tunnel?

Investors were emboldened last week by two significant developments: a quickening in the pace of state re-openings and positive results from a clinical trial of pandemic treatment. These developments turned investor focus toward economic normalization and away from the economic destruction that has occurred.

 

Market optimism was also supported by earnings reports early in the week, which showed that some companies were navigating reasonably well through the crisis. But stocks retreated on Friday as traders reacted to mixed earnings from two tech titans. The two firms offered a reminder that even the strongest companies have not escaped the economic impact of the pandemic.

 

Worries over possible new China trade tariffs also weighed on stocks as the trading week came to a close.

 

Corporate Earnings

It was a busy week for corporate earnings reports. So far, the earnings season has been mixed; it has provided some clarity, though, about the impact of COVID-19 on businesses. 

 

With 193 of S&P 500 companies reporting, 65% have checked in with results ahead of consensus Wall Street estimates. Among the better-performing sectors to date were Technology and Consumer Staples. Financials were among the laggards.

 

Final Thought

Despite the continued shutdown of businesses nationwide, stocks staged a powerful rebound in April, leading some to wonder if Wall Street is disconnected from Main Street. But market watchers are quick to point out that Main Street may not be as disconnected as it appears. April’s rally was led by a group of very large companies, with over 75% of stocks in the S&P 500 trading below their 200-day moving average.

 

THIS WEEK: KEY ECONOMIC DATA

Monday: Factory Orders.

Wednesday: Automatic Data Processing (ADP) Employment Report. 

Thursday: Jobless Claims. 

Friday: Employment Situation Report. 

 

 

THIS WEEK: COMPANIES REPORTING EARNINGS

Monday: Skyworks Solutions (SWKS), Tyson Foods (TSN)

Tuesday: Walt Disney (DIS), Electronic Arts (EA), Prudential Financial (PRU), Illinois Tool Works (ITW), Sysco (SYY)

Wednesday: Square (SQ), CVS Health (CVS), General Motors (GM), Shopify (SHOP), T-Mobile (TMUS) 

Thursday:  Bristol-Myers (BMY), Anheuser-Busch (BUD), Becton Dickinson (BDX), Danaher Corp. (DHR)


S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896. The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia. The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

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Sources:
1 The Wall Street Journal, April 24, 2020
2 The Wall Street Journal, April 24, 2020
3 The Wall Street Journal, April 24, 2020
4 US News & World Report, April 21, 2020
5 US News & World Report, April 22, 2020
6 Econoday, April 24, 2020
7 Zacks.com, April 24, 2020