Before The Bell
The month of April will be coming to an end today, and for all of the economy's struggles and the worrisome path being taken by the deadly coronavirus, the stock market is enjoying a nice recovery, following a dreadful March. And yesterday's early action only strengthened the argument that the worst may be over the for equity market. In large part, it continues to be optimism about a selective and partial reopening of the economy. But there are other forces at work.
On point, drug maker Gilead (GILD) saw its shares soar yesterday after the release of positive data in the form of a potential coronavirus treatment. Specifically, a study of its remdesvir drug was conducted by the National Institute of Allergy and Infectious Diseases met its key end point. That lifted both the stock and expectations for a potential treatment. The stock market, which had closed slightly lower on Tuesday, ran with this good news, with the Dow Jones Industrial Average jumping by more than 550 points as we hit the early afternoon.
Meanwhile, in news that was less than compelling, the U.S. Government reported that the nation's gross domestic product had contracted by 4.8% in the opening quarter, a somewhat larger setback than had been forecast. Importantly, that decline was the steepest since 2008 and it ended the longest expansion in the nation's history. Of course, that showing, weak as it was, is just the tip of the iceberg, with some estimates holding that second-quarter GDP could plunge by upwards of 30%.
In other news, and on the bright side, shares of Alphabet (GOOG), the parent of Google jumped strongly as its quarterly earnings were not as bad as forecast. Also gaining was American Express (AXP), as the stock rose after the company topped earnings estimates. Shares of Boeing (BA) also surged on decent cash flow news. Finally, there is the Fed, which concluded its two-day FOMC meeting. After that gathering, in which it kept interest rates, already at historic lows, unchanged, the bank indicated that it would keep rates where they are until full employment and a higher rate of inflation had been reached. That might be many months--if not longer.
The market would then retain strong gains into the close, with just a whiff of profit taking during the final minutes of the session. All told, the Dow would add 532 points; the S&P 500 would climb 76 points; and the NASDAQ would surge more than 300 points. Importantly, the technology group, which had led the NASDAQ down the losing path on Tuesday, was out front on the upside yesterday, with some high-profile tech names, including the semiconductors leading the way.
Now, a new day begins, and after the futures markets moved higher last night, the current trend this morning suggest that the stock market will open matters on a mixed note, with gains in the NASDAQ being offset by losses in the Dow. Finally not all the earnings news was constructive yesterday, as coffee retailer Starbucks (SBUX) posted disappointing results and the stock pulled back in dealings during the latest session. Today, meantime, will see the flood of quarterly earnings continue. Also, weekly jobless claims just came out at 3.84 million. That was above expectations of 3.5 million.
— Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
