Market Brief: May 1, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Friday, May 1, 2020
Down Week. U.S. stocks started the first trading day in May on a downbeat note after notching the best April for the benchmarks in years. The day’s losses wiped out weekly gains and were mostly reflective of the magnitude of the surge in the prior month and concerns about the earnings prospects for dominant technology-related firms that have been at the vanguard of a recovery for the market from a coronavirus-induced selloff that hit a low in late March. On Friday, the Dow Jones Industrial Average closed down more than 622 points, or 2.6%, at about 23,724, marking its worst day since April 21, while the S&P 500 index ended down 2.8% at around 2831 and the Nasdaq Composite Index closed down 3.2% at about 8605. For the week, the Dow declined 0.2%, the S&P 500 lost 0.2%, and the Nasdaq fell 0.3%. Shares of Amazon ended Friday’s session down by more than 7% after the
company said that it would use its profits to spend on protecting its workers during the Covid-19 pandemic, raising the question about costs for companies during the public health crisis. Separately, shares of electric-vehicle maker Tesla finished the session off by more than 10% after CEO Elon Musk tweeted that the share price of the company had gotten too high.
DJIA 23,723.69 -622.03
S&P 500 2,830.71 -81.72
NASDAQ 8,604.95 -284.60
US 10-Year Note 0.62 -0.02
Dollar Index 99.07 0.06
Crude Oil 19.73 0.89
Gold 1,708.30 14.10
Global Dow 2,604.17 -59.26
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Exxon Mobil Reports $610 Million First-Quarter Loss Amid Low Oil Prices
Exxon Mobil on Friday announced billions in write-downs of its assets because of low prices. The announcement came as the oil giant reported first-quarter results.

Under standard accounting, Exxon lost $610 million, or 14 cents per share in the first quarter. But excluding one-time items, the company posted earnings per share of 53 cents, ahead of Wall Street expectations for 4 cents. Revenue of $56.2 billion was a decline from last year’s $63.3 billion, but ahead of analysts’ expectations for $53.5 billion.

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Chevron Announces New Production Cuts
As it reported quarterly results Friday, energy giant Chevron announced new production cuts to handle extremely low oil prices. The company’s production actually rose on a year-over-year basis in the first quarter but is now expected to start sliding.

Chevron said it will spend $14 billion on capital expenditures this year, down from the $16 billion it said it would spend in March, and the company’s initial expectations of $20 billion. Chevron also plans to reduce its operating expenses by another $1 billion.

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Gilead Stock Has Soared. Wall Street Thinks It’s Gone Far Enough.
Wall Street has changed its tune on biotech Gilead Sciences. Three separate analysts issued downgrades of the highflying stock on Thursday night and Friday morning after the company reported earnings for the first quarter that surpassed estimates.

Shares of Gilead are up 29.3% so far this year as the S&P 500 has dropped 9.9%. The stock soared on excitement over the company’s antiviral remdesivir, which a government-run study found shortened the recovery time for Covid-19 patients, according to an announcement this week. All three of the analysts praised Gilead for its work on remdesivir. But they say the antiviral won’t lead to profits for Gilead, and that the run-up of the stock on remdesivir news has boosted the valuation too far, or at least far enough.

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AbbVie Beats Earnings Estimates as Allergan Acquisition Nears
The drug company AbbVie reported earnings for the first quarter on Friday morning that beat Wall Street estimates.

AbbVie reported adjusted diluted earnings per share of $2.42 for the quarter, beating the S&P Capital IQ Consensus estimate of $2.25. The company reported net revenue of $8.6 billion, up 10.1% from the same quarter last year. AbbVie said in its news release that it expects its acquisition of Botox maker Allergan to close this month.

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Elon Musk Said Tesla’s Stock Price Is ‘Too High.’ Investors Dumped the Stock.
Many Wall Street analysts believe in Tesla’s products but say the stock price is too high. It turns out that Tesla CEO Elon Musk agrees with them. The enigmatic chief tweeted out at 11 a.m. Eastern time Friday: “Tesla stock price is too high IMO.”

Tesla shares, already trading lower Friday morning, slumped following the tweet. Regardless of how investors feel about the stock, Musk has a point. And shares could have further to fall.

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Apple Posts Better-Than-Expected Results for the March Quarter
Apple late Thursday reported better-than-expected results for its fiscal second quarter ended March 31, but the stock traded lower on Friday.

For the quarter, Apple reported revenue of $58.3 billion, up 1% from a year ago, with profits of $2.55 a share, up 4%. The Wall Street forecast had called for revenue of $54.5 billion and profits of $2.26 a share. In February, Apple withdrew its original guidance for the March quarter, which had called for revenue of $63 billion to $67 billion.

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Clorox Is Rallying After Earnings Because Cleaning Products Are Popular in a Pandemic
Clorox stock has rallied more than 2% in premarket trading after the cleaning- and consumer-products company reported a blowout quarter.

The company reported that its quarterly sales increased by 15% from last year, above the 10% increase analysts had forecast. Its diluted quarterly earnings per share jumped 31% from last year, well above estimates for a 16% increase. Earnings per share came in at $1.89 a share on sales of $1.783 billion, beating forecasts for $1.67 a share and $1.707 billion.

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Apollo Global Management Swings to a Loss
Apollo Global Management swung to a loss in the first quarter as the coronavirus pandemic roiled markets.

Net losses for the asset management firm totaled $2.3 billion in the first quarter, with $1 billion—or $4.47 a share—of those losses attributable to Apollo’s class A shareholders. By comparison, in the first quarter of 2019, Apollo reported profits of $315.5 million, with $139.9 million—or 67 cents a share—attributable to its class A shareholders. Still, despite the significant first-quarter drop, Apollo is declaring a cash dividend of 42 cents a share.

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Honeywell Spells Out Just How Bad the Second Quarter Will Be
Honeywell on Friday said it earned $2.21 a share from $8.5 billion in sales in the first quarter. Earnings per share were significantly ahead of analysts’ estimates for $1.97, although sales missed the $8.6 billion consensus.

But looking at the current quarter, Honeywell expects sales to slide. It says sales linked to the aerospace industry, which has been hard hit by the coronavirus crisis, likely will decline 25% year over year. Energy-linked sales will be down 15%. Even building-technology sales will fall 10%.

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Boeing Is Saying No to Government Money. Here’s What It Is Doing Instead.
Commercial aerospace giant Boeing announced a huge $25 billion bond offering. It will use the liquidity to help itself and its suppliers through the Covid-19-induced aerospace crisis. Just as important, with the cash, expected to arrive in early May, Boeing says it won’t need a government bailout.

“As a result of the [bond offering] response, and pending the closure of this transaction …we do not plan to seek additional funding through the capital markets or the U.S. government options at this time,” reads the company’s news release.

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