Dow, S&P 500 end last session in April lower, but notch best monthly gains since 1987

Dow, S&P 500 end last session in April lower, but notch best monthly gains since 1987

Big tech stocks Apple, Facebook and Amazon book sharp gains

U.S. stocks ended lower Thursday but off their worst levels of the session as investors weighed mixed corporate earnings and a report that the federal government was considering retaliating against China for its handling of the coronavirus.

How are benchmarks faring?

The Dow Jones Industrial Average US:DJIA finished 288.14 points, or 1.2%, lower at 24,345.72, while the S&P 500 index US:SPX lost 27.08 points, or 0.9%, to close at 2,912.43. The Nasdaq Composite US:COMP shed 25.16 points, off 0.3%, to end at 8,889.55.

The small-capitalization Russell 2000 index US:RUT finished down 3.7% at 1,310.66.

For the month, the Dow gained 11.1%, while the S&P 500 ended April up 12.7%, representing their best monthly gains since 1987 and their best April performances since 1938, according to Dow Jones Market Data.

The Nasdaq booked a monthly return of 15.5%, its best such advance since 2000 and the best April for the technology-laden index on record, while the Russell 2000 rose 14% for its best month since 2011 and its best April since 2009.

What’s driving the market?

The pain facing many Americans was on stark display Thursday morning. Nearly 3.8 million people filed for unemployment benefits for the first time in the most recent week, the Labor Department said. That topped the consensus forecast among economists surveyed by MarketWatch, even as last week’s report was raised. The new tally shows that over 30 million Americans have lost their job since the start of the coronavirus pandemic.

Personal income also fell sharply in March as workers received less compensation, the government said Thursday. Incomes dropped 2% in March, while disposable income also fell 2%. Consumer spending slumped 7.5% last month as households stayed at home. Meanwhile, a measure of business conditions in the Chicago area fell sharply in April to its lowest level since 2009.

Eurozone first-quarter GDP fell 3.8% compared with the fourth quarter. European data is reported on a quarter-on-quarter basis, so on an annualized basis, the economy fell 14.4%, worse than the U.S. annualized decline of 4.8%.

Stocks took a leg lower late morning after the Washington Post reported that the Trump administration was considering retaliatory actions against the Chinese government for its lack of transparency about the seriousness of the outbreak.

Earlier in the session, the European Central Bank provided a monetary-policy update, leaving interest rates unchanged, as expected, while further easing conditions for its existing targeted long-term refinancing operations, or TLTROs, and introducing a new program of non-targeted pandemic emergency longer-term refinancing operations, or PELTROs. In a press conference after the ECB’s decision, the central bank’s chief said economic growth in the Eurozone could slump much harder.

On Wednesday, Fed Chairman Jerome Powell emphasized the limits of central banks to tackle the pandemic and pointed to lawmakers to do more to control infections and provide sufficient funding to restart the economy.

But central-bank interventions are providing a support for stocks, even if market outperformance feels disconnected from real economic fundamentals.

“Markets are looking through this horrendous air pocket of economic fundamentals and leaning on the Fed,” said Chris Dillon, capital markets investment specialist for T. Rowe Price. “We’re all MMTers now,” he added, referring to Modern Monetary Theory, the idea that government budget deficits don’t matter.

And investors have taken heart from strong corporate reports from Facebook, Microsoft and Tesla late Wednesday, perhaps reflecting more optimism about the ability of technology stocks to be “on the right side of COVID-19,” Dillon said.

The concentration of stock-market gains among tech heavyweights has been somewhat concerning, Dillon said. “Narrow market leadership can only carry you so far.” But signs of life among small-cap stocks was heartening, he said. Small-cap stock performance is often seen as a measure of investor confidence in the economy.

Which stocks are in focus?

  • McDonald’s US:MCD missed on profit but beat revenue estimates for the first quarter, even after many of its restaurants were forced to close during the coronavirus pandemic. Shares slipped nearly 0.1%.
  • Twitter Inc. US:TWTR topped expectations with its first-quarter results, but shares fell sharply Thursday morning as the social-media company reported a net loss of $8 million, or 1 cent a share, versus net income of $191 million, or 25 cents a share, in the year-earlier period. Shares fell 7.8%,
  • Shares of Altria Group US:MO fell 3% after as the cigarette maker beat profit and revenue expectations, as COVID-19-related pantry-loading helped boost shipment volumes.
  • Shares of Coach parent Tapestry Inc. US:TPR lost 12.7% after it reported that it had swung to a wider-than-expected loss, as 90% of the company’s stores were closed or operating on shortened hours as a result of the COVID-19 pandemic.
  • Shares of Chesapeake Energy Corp. US:CHK  tumbled 35% Thursday, after Reuters reported late Wednesday that the oil and gas production company was preparing for a potential bankruptcy.
  • Molson Coors Beverage Co. US:TAP stock slumped 11.2% after the beer brewer said coronavirus-related closures will hurt fiscal-year results.
  • US:AMZN was expected to report earnings of $6.35 per share at the end of 2019, based on average analysts’ estimate. For the full year, analysts expect earnings of $28.15 a share. Shares were higher in early action. Shares closed up 4.3%.
  • Apple Inc. US:AAPL shares rose 2.1% as it gets set to report earnings after the close on Thursday.
  • Inc. US:CRM late Wednesday announced it will cancel its Dreamforce conference, as well as its other major in-person events through the end of the year due to the coronavirus pandemic. Shares gained 1%.
  • Qualcomm Inc. US:QCOM topped Wall Street estimates after the closing bell Wednesday, and forecast a COVID-19-impaired outlook still was in the ballpark of analysts’ consensus, and said it still expects 5G chip sales to fall within its projections. Its stock slipped 0.4%.
  • EBay Inc. shares (TICKER:EBAY) rose 2.1% after the online retailer beat Wall Street earnings expectations.
  • Facebook US:FB missed earnings and user growth estimates, reporting first-quarter earnings of $4.9 billion, or $1.71 a share, compared with $2.43 billion, or 85 cents a share, in the year-ago period. Revenue grew 17% to $17.74 billion from $15.08 billion in the year-ago period. Shares gained 5.4%.
  • Tesla Inc. US:TSLA late Wednesday surprised Wall Street by posting a first-quarter profit amid the broad economic destruction wrought by the coronavirus pandemic.Shares fell 2.3%.
  • Microsoft Corp. US:MSFT outperformed the financial expectations that it faced even before the coronavirus pandemic. Shares rose 1%.
  • Gilead Sciences Inc. US:GILD reported better-than-expected earnings for the first quarter of the year Thursday, and detailed more of its work on remdesivir, an antiviral drug candidate aimed at helping COVID-19 patients.

How did other markets trade?

West Texas Intermediate crude for June delivery US:CL rose $3.78, or 25.1%, to settle at $18.84 a barrel on the New York Mercantile Exchange, to cut its monthly drop to a loss of 8%.

Gold for June delivery US:GCM20 lost $19.20, or 1.1%, to settle at $1,694.20 an ounce.

European stocks closed sharply lower, with the Stoxx Europe 600 XX:SXXP down 2%, and the FTSE 100 UK:UKX retreating 3.5%.

The U.S. dollar US:DXY slumped 0.6% against a basket of currency trading partners, as measured by the U.S. Dollar Index.

Overnight in Asia, Japan’s Nikkei JP:NIK rose 2.1%, China’s Shanghai Composite Index CN:SHCOMP rose 1.3 %, while the CSI 300 Index XX:000300 gained 1.2%.

How is MarketWatch’s oil-currency index performing?

The MarketWatch Petrocurrency Index XX:MWPC jumped 0.9% to 234.82.

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