Indexes End Week Higher As White House Rolls Out State-By-State Coronavirus Strategy, Investors Digest First Round Of Earnings Reports

It was a choppy week of trading as investors digested the first wave of abysmal first-quarter earnings reports, followed by a positive turn Friday in the wake of the White House’s rollout of a phased plan for states to reopen their economies and a report on positive results from Gilead’s potential coronavirus therapy remdesivir. 

Banks Ramp Up Reserves

Big U.S. banks, including JPMorgan Chase & Co. JPM, Bank of America Corp BAC, Citigroup Inc C and Goldman Sachs Group Inc GS, reported mixed first-quarter earnings. While first-quarter revenue numbers were generally solid, earnings fell well short of expectations as banks ramped up their loan loss provisions ahead of an expected spike in delinquencies.

However, stocks rallied on Friday on a report that Gilead Sciences, Inc. GILD is seeing positive clinical results from its antiviral drug remdesivir in treating COVID-19. In Phase III clinical trials of patients diagnosed with COVID-19, patients are reportedly showing “rapid recoveries in fever and respiratory symptoms” in most of the patients treated with remdesivir, according to the biotech publication STAT.

“The light at the end of the tunnel is getting closer, and I think that’s why markets are starting to price in the recovery,” said Shawn Cruz, manager of trader strategy at TD Ameritrade. 

Investors also got some good news last week that stay-at-home measures seem to be slowing the spread of COVID-19 in New York and other hard-hit areas. On Thursday, President Donald Trump unveiled new federal guidelines outlining conditions under which certain states and areas of the country can start to relax social distancing measures and allow businesses to begin bringing back workers.

The Labor Department reported another 5.245 million U.S. jobless claims for the week ending April 10, bringing the running four-week total to 22 million. The U.S. economy is now just 3 million job losses away from giving up all the jobs created from 2010-2020.

Earnings Season Kicks Off

UnitedHealth Group Inc UNH stock was a big winner in the opening week of the first-quarter earnings season, while Wells Fargo & Co WFC shares tumbled roughly 20% after the company reported earnings per share of just 1 cent. 

This week, investors will be watching for reports from Coca-Cola Co KO on Tuesday, AT&T Inc. T on Wednesday, Intel Corporation INTC on Thursday and Verizon Communications Inc. VZ on Friday.

If first-quarter earnings are in-line with the 10% drop analysts expect, it will be the largest earnings contraction since the 15.7% drop in the third quarter of 2009, according to FactSet.

Economic Numbers

This week, key economic updates include an interest rate decision from the People’s Bank of China on Monday and another weekly U.S. initial jobless claims report from the Labor Department on Thursday.

Cruz said he will be paying especially close attention to the continuing claims number in the weekly Initial Jobless claims report, as that could act as more of a leading economic indicator. 

“What I would look at that will give you a signal that we are on the other side is continuing claims in the weekly jobless claims. That will taper off when all the people who have been laid off and furloughed start getting back to work and stop receiving unemployment,” he said. 

“But as long as the numbers go up and continuing claims continue to climb, you sort of expect that we’re still on the bad side of the economic impact.”