Uncertainty Rules

By Nicholas Jasinski |  Thursday, April 16

Wavering. Traders may be excused for feeling a bit of whiplash after today. U.S. stock indexes spent the day drifting higher and lower, dipping back and forth between positive and negative territory. Incoming economic data, coronavirus figures, and corporate earnings reports kept stocks jumpy and without a prevailing direction.

And after the closing bell, an initial report  by the medical news site Stat suggested very positive early results from a Chicago hospital testing Gilead Sciences’ antiviral treatment remdesivir on Covid-19 patients. The study included just 125 of the thousands of patients participating in clinical trials of the medicine, and Gilead said it was waiting for more results before making any conclusions. Traders weren't as patient: The biotech company's shares soared 15% in after-hours trading, and S&P 500 futures pointed to an almost 2% gain at tomorrow's open. Needless to say, a successful Covid-19 treatment would be a game-changer on all fronts.

The Dow Jones Industrial Average ended today's regular session up 33 points, or 0.1%. The S&P 500 rose 0.6%, and the Nasdaq Composite gained 1.7%. Sector performance was mixed, with health care and technology shares leading, while energy and financials stocks fell the most. Just under half of the S&P 500’s components rose.

The day began with a pair of dreary economic indicators. In the week ended April 11, 5.3 million additional Americans filed for unemployment insurance, versus the 5.5 million economists had expected, and the record of 6.6 million set in the prior week. It brings the number of people newly unemployed over the past month to more than 22 million, according to the Labor Department. Lisa Beilfuss has more on the sorry state of the U.S. job market here.

In a separate release, the Census Bureau showed a major housing slowdown in all regions of the U.S. Across the country, builders began construction on 22% fewer homes in March than in February. Shaina Mishkin covered the figures here.

Both figures point to the depths of the economic downturn currently unfolding across the U.S. But investors have long ago turned their focus to the eventual recovery, and what the process of gradually reopening the economy will look like.

As with the onset of the coronavirus earlier this year, Europe is a few weeks ahead of the U.S. on that front. Nonessential workers are returning to their stores and workplaces in certain areas of Spain and Italy, while Germany plans to begin lifting physical-distancing restrictions next week.

In the U.S., President Donald Trump announced the federal government’s recommendations for reopening the economy at his daily news conference this evening. The White House is essentially leaving the exact timing up to state governors. New York Gov. Andrew Cuomo also said today that current guidelines will remain in place at least through May 15.

The overall picture remains one of high uncertainty, with things certainly looking up from a month ago, but with the economic and public-health outlook still far from rosy. That left investors to continue piling into relative winners in the current environment—think Netflix, Amazon.com, and health-care names—while selling the most coronavirus-sensitive stocks. Oil companies, airlines, and cruise operators all saw their shares drop today.

Investors’ other focus was on the handful of companies reporting quarterly earnings today. Morgan Stanley largely echoed its big-bank peers’ tone from recent days. CEO James Gorman—who recently recovered from Covid-19 himself—told analysts and investors that he expects the virus to “adversely affect” Morgan Stanley, but emphasized that the bank was strong enough to weather the storm. Nonetheless, the bank's earnings fell sharply from a year ago, weighed down by funds set aside to cover expected loan losses. The stock rebounded from a greater loss to close down just 0.1%.

Abbott Laboratories stock jumped to a record high, up 5.7%, after beating Wall Street estimates for its first-quarter earnings and sales. Investors didn’t seem to mind that it suspended its financial forecasts for the rest of the year. Abbott stock is up over 11% this year, helped by Trump frequently heralding its on-site coronavirus diagnostic kit, which can produce a result in less than 15 minutes.

Finally, BlackRock also beat earnings estimates, and shares rose 3.5% today. The more surprising news was that the investing giant took in $35 billion in new money last quarter despite the turmoil in markets.

Next up on the earnings calendar are Kansas City Southern, Schlumberger, and State Street tomorrow, followed by 68 S&P 500 components next week.