The Week on Wall Street
Stock prices ended the week slightly lower, despite news of positive results from a test trial of a COVID-19 drug treatment and several states easing their economic lockdowns. The Dow Jones Industrial Average slipped 0.22%, while the Standard & Poor’s 500 lost 0.21%. The Nasdaq Composite Index dropped 0.34%. The MSCI EAFE Index, which tracks developed stock markets overseas, rose 4.34%.
Light at the End of the Tunnel?
Investors were emboldened last week by two significant developments: a quickening in the pace of state re-openings and positive results from a clinical trial of pandemic treatment. These developments turned investor focus toward economic normalization and away from the economic destruction that has occurred.
Market optimism was also supported by earnings reports early in the week, which showed that some companies were navigating reasonably well through the crisis. But stocks retreated on Friday as traders reacted to mixed earnings from two tech titans. The two firms offered a reminder that even the strongest companies have not escaped the economic impact of the pandemic.
Worries over possible new China trade tariffs also weighed on stocks as the trading week came to a close.
Corporate Earnings
It was a busy week for corporate earnings reports. So far, the earnings season has been mixed; it has provided some clarity, though, about the impact of COVID-19 on businesses. With 193 of S&P 500 companies reporting, 65% have checked in with results ahead of consensus Wall Street estimates. Among the better-performing sectors to date were Technology and Consumer Staples. Financials were among the laggards.
THIS WEEK: KEY ECONOMIC DATA
Monday: Factory Orders.
Wednesday: Automatic Data Processing (ADP) Employment Report.
Thursday: Jobless Claims.
Friday: Employment Situation Report.
THIS WEEK: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Skyworks Solutions (SWKS), Tyson Foods (TSN)
Tuesday: Walt Disney (DIS), Electronic Arts (EA), Prudential Financial (PRU), Illinois Tool Works (ITW), Sysco (SYY)
Wednesday: Square (SQ), CVS Health (CVS), General Motors (GM), Shopify (SHOP), T-Mobile (TMUS)
Thursday: Bristol-Myers (BMY), Anheuser-Busch (BUD), Becton Dickinson (BDX), Danaher Corp. (DHR)
Final Thoughts
Despite the continued shutdown of businesses nationwide, stocks staged a powerful rebound in April, leading some to wonder if Wall Street is disconnected from Main Street.
Over the weekend, Berkshire Hathaway held their annual meeting. This is normally like Woodstock for the investing world. This year there was no hoopla as the meeting was held virtually. Warren Buffet, known as the Oracle of Omaha for his investing prowess, talked into a camera and answered questions that were emailed in for almost 5 hours straight without a break. Pretty good stamina for an 89-year-old.
Warren Buffet is well known for swooping in during the 2008 financial crisis and investing in and lending money to big investment banks which led to massive profits down the as time has gone on. Buffet is credited for the saying “When others are nervous, be greedy and when others are greedy, be nervous.
The investing world was dying to know if Buffet and his partner, 96-year-old Charlie Munger, acted as a white knight to any companies during the most recent malaise. Buffet outlined and maintained his very long-term bullishness on the prospects for America. However, he indicated the main action they took during the downturn were to dump all of the airline holdings as they feel, through no fault of the airlines, the businesses face tremendous headwinds ahead. He indicated they added to their massive cash position of over $137 billion. He said Berkshire would love to do a big deal of some sort, but there was nothing attractively priced at the moment. Reading between the lines of Buffet’s over 5-hour Q&A session one would be left with America is the best place to be and be invested in over the longer term, while the near term is a little more uncertain. He was asked about all of the money printing the Federal Reserve is doing. “We’re doing things that we really don’t know the ultimate outcome to,” the 89-year-old investing legend said at the virtual meeting. “I think in general they’re the right thing, but I don’t think they’re without consequences, and I think they could be of extreme consequences if pushed far enough. But there would be kind of extreme consequences if we didn’t do it as well.”
In our most recent quarterly newsletter, we echoed what Warren Buffet has said so many times, that betting against America has never been a very good strategy. However, in the near term we must recognize we won’t just wake up to 2019 again as America attempts to restart its economic engines this week. It would be wonderful to flip a switch and have life go back to normal. However, there are likely to be triumphs and disappointments along the way.
We will continue to actively monitor the situation and will do our very best to keep you informed. As always, we welcome the opportunity to talk with you and are honored to serve you. Finally, for those of you who may be STAR WARS nerds like me, today is STAR WARS day. May the 4th be with you.
Warm regards,
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May 04, 2020
