Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for April 24, 2020.
Major indices in the US were flat yesterday, closing up just a few points. They are being called to open slightly off this morning, between 0.5 and 1%, as another 4.4 million people in the US filed for unemployment benefits and news of a failed drugs test emerged.
US unemployment continues to climb, some 26 million people have now claimed benefits in the past five weeks. The surge in unemployment has been largely ignored by investors, but this week the market bounceback has stalled, with the S&P 500 flat over five days. Many investors are now in wait and see mode as they look for clarity on timelines for major economies reopening.
A cure for coronavirus is what is ultimately needed, but one potential treatment being trialed by pharmaceutical firm Gilead Sciences has failed its first clinical trial. The story, reported by the Financial Times, cited documents that had been published accidentally by the World Health Organization. Nasdaq-listed Gilead sank around 8% from its daily high after the news was reported.
Oil prices enjoyed another positive day, with June 2020 WTI crude and Brent crude contracts up trading at $17.80 and $22.50 a barrel yesterday evening, but have come off slightly this morning. Yesterday, the US Congress also passed a $484bn pandemic relief package, which provides more funding for small businesses, hospitals and Covid-19 testing.
Cryptoassets continue to rally, with bullish investors taking Bitcoin and its smaller peers up more than 50% from lows.
JCPenney in advanced bankruptcy talks
Bankruptcies are looming in the US, with JCPenney reportedly in advanced talks to file for bankruptcy. A loan package is being agreed with major US lenders to fund the firm’s operations while a court supervised bankruptcy occurs, The Wall Street Journal reported. JCPenney stock closed 10% higher after the news was announced. The firm has been in decline for years, losing more than 90% of its value even before the pandemic hit. Its market cap stands at just $88m, despite still operating more than 800 stores.
In the S&P 500, energy names including Devon Energy and Halliburton led the way, along with travel names, while investment firm Invesco brought up the back of the pack. Invesco tumbled 21.1% after missing its Q1 earnings expectations and slashing its dividend in half. The day ended on a bizarre note, after President Trump gave a briefing in which he suggested injecting coronavirus patients with disinfectant and treating them with ultraviolet light — both ideas were quickly denounced by the medical community.
S&P 500: -0.1% Thursday, -13.4% YTD
Dow Jones Industrial Average: +0.2% Thursday, -17.6% YTD
Nasdaq Composite: 0% Thursday, -5.3% YTD
Homebuilders lead FTSE higher despite disastrous economic data
While a round of economic data in the UK released on Thursday came in well below expectations, both the FTSE 100 and FTSE 250 managed to post a positive day.
The Markit/CIPs purchasing manager index flash results for the manufacturing and services sectors came in at 32.9 and 12.3, down from 47.8 and 24.5 last month. Expectations were for figures of 42 and 29, with the results painting a far more dire picture of the state of the UK economy than had been anticipated. The surveys ask business decision makers to share their views on business conditions, with any reading below 50 indicating a contraction. Senior ING economist Bert Colijn noted that the figures shouldn’t be a surprise given many companies have zero output at present.
Investors also shrugged them off, with the FTSE 100 led higher by homebuilders. Taylor Wimpey, Barratt Developments and Persimmon were the top three performers in the index, all with daily gains of more than 8%. The surge was prompted by Taylor Wimpey announcing that its order book has grown, with recent cancellations accounting for less than one percent of its order book. It also plans to return to construction on May 4.
Verizon: Telecoms giant Verizon has held up better than the broad US market in 2020 and is only down 6.2% year-to-date. The firm is the largest mobile carrier based on subscriber numbers and, according to Zacks Equity Research, benefits from the fact that consumers will look to cut back on other spending before considering reducing their spend on their phone or internet connection. When the firm reports its Q1 2020 earnings today, investors will be watching closely for details of Verizon’s continued investment in 5G, and how that rollout might be hampered by the current economic lockdown. Wall Street analysts’ expectations for the firm’s Q1 earnings per share figure are pretty much unchanged over the past few months and stand at $1.22.
Sanofi: French pharmaceutical giant Sanofi reports its latest set of quarterly earnings on Friday morning New York time. Like many companies in the industry, the firm is involved in both testing solutions for Covid-19 and helping to develop a vaccine — it has partnered with GlaxoSmithKline to speed up the development of the latter. Sanofi is combining its vaccine technology with a GSK additive that increases the potency of vaccines. Those efforts are likely to be front and center of the firm’s earnings call.
American Express: Credit card and financial services behemoth American Express also reports Q1 2020 earnings on Friday. It should provide a useful window into consumer behaviour given the firm’s direct view of how they are choosing to spend — or not spend — their money, and the credit decisions they are making. Its involvement in issuing credit cards in partnership with airlines, and consumers reining in big ticket spending in the face of economic and labour market uncertainty, may have hurt the company’s revenue and profits. Amex stock is down 33.8% year-to-date, well below the performance of the broader market. Analysts expectations for the firm’s Q1 have fallen from an earnings per share figure of $2.18 three months ago, to $1.46 now.
Having bottomed at $4,884 just over a month ago, Bitcoin’s roller-coaster recovery continues, and is now up more than 50% in a month. Overnight it hit a peak of $7,596 before settling marginally lower this morning. It seems as though there is an increasing link between poor economic data from the US and a reaction in the price in bitcoin, this could also be attributed to growing interest as the halving continues to draw closer. From a technical point of view, the narrowing consolidation seems to have broken out to the upside, with the price hurdling a significant resistance milestone above $7,330.
Peers have also rallied sharply. Ethereum is up from $108 in mid-March to $186 this morning, having gone as high as $190 in the last 24 hours, while XRP is at $0.191 today, more than 40% up from its low of $0.136.
All data, figures & charts are valid as of 24/04/2020. All trading carries risk. Only risk capital you can afford to lose.
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