Market Rally – Monday Morning Market Memo – April 20, 2020

Market Rally – Monday Morning Market Memo – April 20, 2020

Good morning,

Stocks rallied last Friday, with the Dow Jones Industrial Average gaining over 700 points, a 3% jump. As you can imagine, the gain was not the result of good economic numbers – with data on employment, retail sales, and manufacturing all looking abysmal, as the impact and ramifications of the coronavirus continue to weigh on the economy. Rather, the rally was spurred by reports a treatment for the virus is showing some effectiveness, along with plans for reopening the economy.

STAT news reported patients with severe symptoms being treated with Gilead’s drug remdesivir at a Chicago hospital were recovering rapidly (Gilead awaits more data). The other major catalyst pushing the stock market higher last week was the governments outline of a three-phase process to reopen the U.S. economy, which would be coordinated with governors. Along with life in general, financial markets are centered around the pandemic right now, and the above news items provided some welcome hope and optimism.

For the week, the Dow gained 2.2%, the NASDAQ Composite surged 6.1%, and the benchmark Standard & Poor’s 500 Index rose 3%. Looking to the week ahead, along with tracking the pandemic, the market will have a large batch of earnings reports to digest. Companies scheduled to report this week include International Business Machines, Chipotle Mexican Grill, Netflix, Procter & Gamble, AT&T, Intel, Hershey, Verizon Communications, and American Express.

For the first quarter of this year, earnings for the Standard & Poor’s 500 are expected to decline 14.5%, which would mark the largest year-over-year decline since the third quarter of 2009, according to data from FactSet. More than earnings however, which the market knows are going to be down significantly – investors will rightly be focused on the trend of coronavirus cases along with the speed, consistency and strength of the reopening – which will be primary factors in determining future earnings.

All the best – Southport Station Financial Management, LLC