5/4/20 Market Notes
The month of May is off to a tough start for investors, as major indexes sold off sharply this past Friday and premarket equity futures are pointing to a lower open early this morning. Nonetheless, there are several positive developments that could prove to be positive catalysts for stocks. Around the world, many governments, including our own, are contemplating further stimulus via infrastructure bills. In addition to being needed, this would likely be a tremendous positive force in stabilizing and raising oil prices, something our own production and refining businesses welcome very much. Moreover, it would likely generate millions of jobs, directly and indirectly, as there would be a great need for transportation equipment, mechanical engineers, iron workers, etc.. One indicator to keep an eye on is copper, which is off more than 20% since it’s January highs, but has showing signs of stabilization in the past week.
Ahead of tomorrow’s April Markit Services PMI and ISM non-manufacturing index release, market participants will get the March Factory Orders report later this morning. Also, according to the research firm Zacks, over 1,400 companies will be reporting first quarter earnings this week, making it the busiest week of the season yet. According to Factset, just over half of the constituents of the S&P 500 have reported earnings so far. Of these, 63% have reported positive earnings surprises, which is tough to fathom, given that on a blended basis earnings are down more than 14% year-over-year.
The week ahead is likely to be volatile, but there is reason for optimism as Gilead Sciences has shipped out its latest drug, remdesivir, and that pharma giant Roche is experiencing positive results in early trials. Positive developments for treatments of Covid-19 or better yet a vaccine, would surely be welcomed by all and could turn the tide in the favor of investors.
Disclosures: This market commentary is written by the 1879 Advisors® and represents the views of 1879 Advisors®. This commentary is not investment advice and should not be used as a basis to make investment decisions. Please consult with your registered investment advisor before making any investment decisions.