Market Overview

Disney Leading $DJI After Announcing Big Surge in Streaming Subscribers

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Disney Leading $DJI After Announcing Big Surge in Streaming Subscribers

Another week, another terrible jobless claims number.

The market was expecting another huge wave of jobs losses to be reflected in this morning’s report on initial claims for unemployment benefits. But it still turned out worse than expected. The government said 6.6 million people filed new unemployment claims during the week ended April 4. A Briefing.com consensus estimate was expecting 5 million new claims.

In the past, the weekly figures often got a yawn among traders and investors. But they have become highly watched indicators of the coronavirus’ toll on the economy, giving market participants a more up-to-date picture of the employment situation in the country than the government’s monthly jobs report. 

Last week’s initial claims—for the week ended March 28—came in at an astonishing upwardly revised 6.867 million, handily topping the prior week’s 3.341 million. The atrocious claims number is another reminder of the pain many people are suffering as this crisis goes on and on.

Powell in Spotlight as Fed Lends a Hand

At the same time that the claims numbers are horrendous, the Federal Reserve has said it would provide $2.3 trillion in economic support, expanding its operations to reach small and midsize businesses and U.S. cities and states. This could provide bulls some muscle in the tug of war between a dire outlook and a less-bad outlook.

The amount of Fed help for the economy is arguably a plus for long-term thinkers who want to be optimistic, even though in the short term things look pretty bad in terms of the unemployment situation. 

Fed Chairman Jerome Powell is scheduled to speak later this morning. It could be interesting to get a sense of whether he thinks more needs to be done to address the crisis. Consider also listening for anything Powell says Congress might need to do on the fiscal side of the equation. 

His comments come on the heels of yesterday’s release of the minutes of the Fed’s March 15 meeting when it cut rates by 0.75 percentage points to help the economy deal with the coronavirus fallout. The minutes showed that central bankers “judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to 0.25% until policymakers were confident that the economy had weathered recent events and was on track to achieve the committee’s maximum employment and price stability goals.”

Looking for the Tide To Turn

That nod to rates being at or near zero until the economy gets back on its feet seems to have helped encourage investors yesterday, as they also cheered some good news on the coronavirus front and some lessened uncertainty surrounding the U.S. presidential race. 

Investors sent the S&P 500 Index (SPX) and the Dow Jones Industrial Average ($DJI) more than 3.4% higher while the Nasdaq Composite(COMP) gained more than 2.5%.

In welcome news for both the stock market and global health in general, data from Johns Hopkins University showed a slowdown in the rate of new coronavirus cases in the United States and globally. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told Fox News that new cases could be nearing their peak.

Declines in the number of newly infected seem to have investors seeing a potential light at the end of the tunnel in terms of parts of the economy being able to reopen. 

Investors also cheered news on the political front. Sen. Bernie Sanders dropped out of the presidential race, apparently lowering some uncertainty on Wall Street about his plans for healthcare and taxes. The news made Vice President Joe Biden, who tends to be seen as more market-friendly than Sanders, the presumptive Democratic presidential nominee.

Still, there remains plenty of uncertainty in the market because of the coronavirus. So it would seem wise for investors to not get complacent. 

At Home Watching Disney

In corporate news, The Walt Disney Company (NYSE: DIS) shares were up more than 5% this morning on word that its streaming service now has more than 50 million subscribers. In addition to the introduction of the service in India, subscribers have been piling into the Disney+ service as the coronavirus has kept many people home. 

It’s another example of how companies involved in entertainment streaming or video games, or even the data centers that help make internet-based entertainment possible, are bright spots amid so much stock market gloom elsewhere.

As a reminder, tomorrow is a market holiday, so investors could be more in a selling mood than a buying mood. As the day progresses, they may want to take some risk off the table ahead of a long weekend and uncertainty about what the headlines will bring. Weekly options, which typically expire on Fridays, roll off today instead.

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CHART OF THE DAY: 10-Year Treasury Bounces: In another sign that investors’ nerves may be calming a bit, the yield on the 10-year Treasury has been climbing. It rose again on Wednesday as investors didn’t feel as much of a need for government debt as the stock market rose. Chart source: Cboe Global Markets. The thinkorswim® platform from TD AmeritradeFor illustrative purposes only. Past performance does not guarantee future results. 

Stocks Aren’t the Economy: Even if a recovery in gross domestic product happened fairly quickly, a recovery in corporate earnings might take longer, according to investment research firm CFRA. The group said GDP forecasts are anticipating a V-shaped trajectory, with a first-half decline including GDP falling 15% in the second quarter and then a second-half bounce back. But earnings per share among S&P 500 companies will likely take longer to recover, with S&P Capital IQ consensus estimates pointing to four quarters of year-over-year declines, including a 20% dip in the second quarter, CFRA said. 

Caution Still Warranted: That sobering outlook can serve as another reminder that just because stocks are well off their recent lows doesn’t automatically mean that the worst is over. While it’s encouraging to see signs that the virus’ trajectory may be peaking, that’s also far from certain. And the market is arguably just one or two dire headlines away from retesting those lows. “Now that China is getting back to work, combined with an apparent cresting of NY COVID-19 caseloads and congressional conversations over additional stimulus packages, investors appear willing to reembrace equities,” CFRA said. “Yet history reminds us that a retest is still possible.”

Technically Speaking: In addition to being in the green, another encouraging aspect of S&P 500’s close at 2749.98 on Wednesday was that it was above Tuesday’s open. On Tuesday, the broad index didn’t make it much higher than its open of 2738.65 before pulling back and closing near its lows. So Tuesday’s opening might have been considered resistance, and was nice to see the index close above that. Still, while the SPX’s Wednesday intraday high was above Tuesday’s peak, the index’s close was below Tuesday’s high, indicating potential struggle around that area. And with volatility remaining elevated, the SPX would need to see a more decisive move above Tuesday’s open to cement the next leg up of this bounce, if there is to be one. 

 

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