Stocks rose Tuesday as investors considered signs that states were beginning to plan for reopening parts of the economy, and braced for a choppy earnings season, as the coronavirus pandemic swept the country at the end of the first quarter.
The Nasdaq ended higher by nearly 4%, as Amazon (AMZN) shares jumped to a record high.
Federal and state officials have shifted their rhetoric around the coronavirus from solely discussing containment and distancing efforts to beginning to think about reopening portions of the country.
During a press conference Monday, Andrew Cuomo, governor of the hardest-hit state of New York, said he believed “the worst is over” so long as New Yorkers remain prudent about abiding by social distancing measures. In a subsequent conference Tuesday, Cuomo announced that the states’ net change in hospitalizations turned negative for the first time since the crisis began. However, the death toll for Monday was 778, or above the 671 reported for the prior day and bringing the total death toll for the state to 10,834.
With at least early signs of a stabilization in cases and death toll, Cuomo on Monday delivered a joint conference with the governors of New Jersey, Connecticut, Pennsylvania, Delaware and Rhode Island to announce that they had formed a working group to devise a reopening plan for the Northeast.
In a similar move on the other side of the country, California Governor Gavin Newsom said he was working with Washington state and Oregon to come up with a blueprint to reopen schools and businesses, as new cases of the coronavirus in the regions also began showing signs of leveling off.
The announcements of these multi-state coalitions came shortly after President Donald Trump said on Twitter that the decision to reopen the government would be determined by the White House, creating a potential sticking point in deciding the ultimate path to easing weeks-long social distancing measures across the nation.
A first batch of corporate earnings results Tuesday provided investors with the first data on how the coronavirus pandemic has impacted big banks and health-care institutions. JPMorgan Chase (JPM) and Wells Fargo (WFC) were some of the biggest names to report first-quarter results, with each taking massive charges to build credit reserves for anticipated loan losses. Health-care giant Johnson & Johnson (JNJ) also reported results Tuesday morning, raising its dividend and beating first-quarter expectations as consumers flocked to the company’s over-the-counter medicines like Tylenol.
With the pandemic leading to unprecedented social distancing and lockdown measures globally – along with equally unprecedented fiscal and monetary policy responses – analysts have had little to grasp onto to estimate how companies fared in the early stages of the outbreak.
“Concerned investors have focused on the fact that the 1Q earnings season will inevitably lead to a wave of downward revisions to analyst estimates, meaning the implied equity risk premium will fall — and the consensus P/E [price-to-earnings] multiple will rise — even with no change in the S&P 500 price,” Goldman Sachs analyst David Kostin wrote in a note Monday. His firm forecasts a drop in S&P 500 earnings per share of 15% for the quarter over last year.
“While many analysts were hamstrung by uncertainty and the lack of management guidance for much of the last several weeks, revisions have been accelerating ahead of earnings reports,” he added. Nonetheless, we believe they remain too high.”
4:02 p.m. ET: Stocks close higher, with Dow up 559 points, as reopening of economy in sight
Here’s where the major indices had settled as of 4:02 p.m. ET:
S&P 500 (^GSPC): +84.43 (+3.06%) to 2,846.06
Dow (^DJI): +558.99 (+2.39%) to 23,949.76
Nasdaq (^IXIC): +323.32 (+3.95%) to 8,515.74
Crude (CL=F): -$1.74 (-7.76%) to $20.67 a barrel
Gold (GC=F): -$5.60 (-0.32%) to $1,755.80 per ounce
10-year Treasury (^TNX): +0.3 bps to yield 0.7520%
2:56 p.m. ET: Crude oil settles sharply lower even after OPEC production cut
Domestic crude oil futures settled lower by 10.3% to $20.11 on Tuesday, just after OPEC and its allies over the weekend announced production cuts taking out about one-tenth of worldwide production to help ease a global supply glut.
Market participants have maintained concerns that the cuts, which begin May 1 at 9.7 million barrels per day, will be insufficient to stem demand destruction due to the coronavirus pandemic.
The Energy sector underperformed in the S&P 500, rising just 0.06% intraday Tuesday amid a 3% gain in the broader market.
12:15 p.m. ET: Invesco: How tech, pharma can pull US out of crisis mode
Tim Horsburgh, strategist at Invesco Investment doesn’t think JPMorgan and Wells Fargo’s earnings are a huge shock. He told Yahoo Finance that a weak quarter was baked in given the coronavirus, but earnings guidance and loss provisions were far more interesting to investors. He also thinks that technology and pharmaceutical companies will be linchpins to extricating the economy from the pandemic’s worst effects.
11:23 a.m. ET: Boeing customers cancel 150 orders for 737 Max aircraft in March
Boeing (BA) lost 150 orders for its 737 Max aircraft last month as carriers hit by a slump in travel demand cut back on new purchases.
Half of the cancellations stemmed from Avolon Holdings, a Dublin, Ireland-based airline leasing company. Brazil’s Gol airline cut 34 orders, and Smartwings Slovakia cut five. Additional unnamed customers cut the balance of the 150 total orders scrapped for the jet in March.
Boeing netted 119 cancelations in March as 31 orders for other passenger planes and defense aircraft blunted dropped orders for Max planes. For the full first quarter, Boeing gained 49 new orders and 196 cancellations. Its order backlog fell to 5,049, down from 5,351 previously.
Shares of Boeing fell 2.2% to $144.07 each as of 11:23 a.m. ET.
10:12 a.m. ET: Tesla on track for seventh straight session of gains, Credit Suisse upgrades stock
Tesla (TSLA) shares rose more than 12% intraday Tuesday, pointing toward a seventh straight session of gains, as analysts struck a more bullish tone around the stock. Tesla shares are up 38% for the month to date.
Credit Suisse upgraded Tesla shares to Neutral from Underperform, noting the company “competitively has more edge in the transition to EV [electric vehicles] as coronavirus disruption will make it more difficult for legacy automakers to balance the long-term shift to EV in the face of near-term cycle disruption,” analyst Dan Levy said in a note.
In the near-term, Tesla could face some headwinds, including softening consumer demand due to the coronavirus pandemic, and supply challenges and cash burn after temporarily shutting down its Fremont, California factory, Levy acknowledged. However, he ultimately sees the company bouncing back strongly from these monetary set-backs, and sees volume growth to 1.2 million units by 2025. Tesla delivered about 367,500 in 2019.
9:30 a.m. ET: Stocks open higher as earnings season kicks off
Here were the main moves in markets, as of 9:30 a.m. ET:
S&P 500 (^GSPC): +47.71 points (+1.73%) to 2,809.34
Dow (^DJI): +416.91 points (+1.78%) to 23,807.68
Nasdaq (^IXIC): +153.69 points (+1.87%) to 8,345.09
Crude (CL=F): -$0.95 (-4.24%) to $21.46 a barrel
Gold (GC=F): +$10.20 (+0.58%) to $1,771.60 per ounce
10-year Treasury (^TNX): -0.8 bps to yield 0.741%
8:31 a.m. ET: Import prices drop the most in five years in March as fuel prices slide
U.S. import prices were down 2.3% month on month in March in the largest decline since early 2015, driven by a drop in fuel costs, the Department of Labor said in its monthly report Tuesday. The March drop extended a decline from February, when import prices fell 0.7%.
Import prices for fuel slumped 26.8% in March for the largest drop since November 2008, after a 9.0% decline in February. Excluding fuel, import prices were unchanged in March after a 0.3% increase in the measure the prior month.
U.S. export prices fell 1.6% in March, also representing the largest decline since January 2015.
8:30 a.m. ET: IMF downgrades global outlook, sees global economic activity contracting 3% in 2020 due to coronavirus
The International Monetary Fund said Tuesday it expects the global economy will contract by 2% in 2020, or by a margin “much worse than during the 2008–09 financial crisis,” due to the COVID-19 pandemic, it said in a statement. Previously in January, the IMF saw growth of 3.3% for the year in 2020.
“In a baseline scenario — which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound — the global economy is projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support,” the IMF said.
“The risks for even more severe outcomes, however, are substantial,” it added. “Effective policies are essential to forestall the possibility of worse outcomes, and the necessary measures to reduce contagion and protect lives are an important investment in long-term human and economic health.”
7:40 a.m. ET: Fastenal shares rise as strong safety equipment sales outweigh weak March results
Shares of Fastenal (FAST), a wholesale distributor of industrial and construction supplies, rose 4.5% in premarket trading after the company reported a 31% boost in its personal protective equipment sales on a daily basis in March amid the coronavirus pandemic.
Prior to March, when social distancing measures took effect across much of the US, Fastenal’s business activity in January and February had “remained sluggish, as it had been through much of the latter half of 2019,” the company said.
“The second half of March saw activity levels weaken significantly in response to societal actions meant to address the coronavirus pandemic,” it added.
However, the company saw bright spots in results related to producing equipment related to slowing the spread of the coronavirus outbreak.
“March sales of our fastener products declined 10.1% on a daily basis as industrial activity slowed, while our safety business grew 31.0% on a daily basis as we were able to source and deliver critical personal protective equipment ('PPE') supplies to the marketplace,” Fastenal said. “In addition, while our manufacturing and non-residential construction end markets were down 1.1% and 7.8% on a daily basis, respectively, our government business was up 31.1% on a daily basis with sales to healthcare organizations more than doubling.”
7:33 a.m. ET: Stock futures rise amid first handful of earnings results
Here were the main moves in markets, as of 7:34 a.m. ET:
S&P 500 futures (ES=F): up 26.5 points, or 0.96% to 2,785.75
Dow futures (YM=F): up 263 points, or 1.13% to 23,572.00
Nasdaq futures (NQ=F): up 106.5 points, or 1.28% to 8,433.75
Crude (CL=F): -$0.48 (-2.14%) to $21.93 a barrel
Gold (GC=F): -$2.50 (-0.14%) to $1,758.90 per ounce
10-year Treasury (^TNX): -0.2 bps to yield 0.747%
7:17 a.m. ET: JPMorgan Chase boosts credit reserves, cuts full-year net interest income forecast as Dimon warns of ‘fairly severe recession’
JPMorgan Chase, the largest U.S. bank by assets, took a significant charge in the first quarter to build up its credit reserves in anticipation of a downturn, which dented the company’s reported earnings per share for the first quarter.
“In the first quarter, the underlying results of the company were extremely good, however given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter,” CEO Jamie Dimon said a statement.
For the first quarter, JPMorgan Chase reported adjusted earnings per share of 78 cents on adjusted revenue of $29.07 billion. Both fell below expectations for adjusted earnings of $2.13 per share on adjusted revenue of $29.52 billion, according to Bloomberg-compiled data. Results relative to earnings expectations, however, have largely taken a back seat due to a lack of visibility heading into results over how the coronavirus pandemic would impact companies.
JPMorgan now sees closely watched net interest income totaling $55.5 billion for the full year, or below the $57 billion the company previously forecasted.
6:50 a.m. ET Tuesday: Johnson & Johnson cuts 2020 guidance due to coronavirus but boosts dividend
Johnson & Johnson on Tuesday reduced its outlook for 2020 full-year results due to impacts from the coronavirus, it said in its quarterly earnings report Tuesday.
Operational sales are expected to decline by as much as 3.5% over last year, according to the updated guidance, or come in between a band of $79.2 billion to $82.2 billion. In January, J&J previously saw operational sales growing between 4.5% and 5.5% for the year, to as much as $86.6 billion.
J&J also announced Tuesday it was boosting its quarterly dividend to $1.01 per share from 95 cents per share.
For the reported first quarter, J&J posted adjusted earnings of $2.30 per share on sales of $20.69 billion, topping expectations for $2 per share on revenue of $19.48 billion.
6:00 p.m. ET Monday: Stock futures open roughly flat
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:00 p.m. ET Monday:
S&P 500 futures (ES=F): up 2.25 points, or 0.08% to 2,761.5
Dow futures (YM=F): up 21 points, or 0.09% to 23,330
Nasdaq futures (NQ=F): up 11.25 points, or 0.14% to 8,338.5