Morning Minutes 4/28/2020

Morning Minutes

Stocks Keep Climbing with Earnings and Reopenings In Focus

April 28, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

US index futures are pointing toward a second straight positive open this week rising 1.0%-1.5%. European markets are also up strong led by Milan gaining 2.8%, while Frankfurt, London and Paris are all up about 1.7%. Dow Futures are currently up about 365 points building on yesterday’s 358-point, 1.5% gain. Fear indicators continue to fade with the VIX Volatility Index, the US Dollar and Gold all in retreat again today. Crude oil is mixed with WTI down 10.8% to trade near $11.40/bbl while Brent Crude is up 0.9% and holding just above $20.00/bbl.

With limited economic news, focus remains on efforts to reopen economies, particularly Italy and some states in the US. Earnings season picks up again today with a number of results from large cap companies. Highlights include:

Canadian National Railway announced that between the rail blockades and COVID-19 disruptions to the economy, its Q1 net income was down 22% from a year ago, although earnings per share weren’t as bad as investors feared, coming in at $1.22, which was better than the $1.09 street estimate. Citing reduced overseas trade and auto production, plus ongoing economic uncertainty, management pulled its guidance for this year.

In the US, 3M, producer of the N95 respirator mask, beat the street on sales ($8.08B vs street $7.91B) and earnings per share ($2.16 vs street $2.03) on increased sales of personal products. Pepsico announced a 7.7% increase in sales and earnings above expectations ($1.07 vs street $1.03). Big Pharma companies Merck ($1.50 vs street $1.34) and Pfizer ($0.80 vs street $0.73) both beat the street on earnings. Caterpillar announced a 22% decline in sales and a 50% decline in adjusted EPS from a year ago. Southwest Airlines announced that it expects sales in May to be down 95% from a year ago amid travel restrictions. Homebuilder DR Horton exceeded expectations on earnings ($1.30 vs street $1.12) but indicates sales have been slowing and cancellations have been increasing. Several companies either cut or completely withdrew their guidance for this year.

Later today, results are due from Alphabet (parent of Google), UPS, and Starbucks, with Boeing and General Electric reporting in the morning. Economic news resumes tomorrow with US Q1 GDP and results of the latest Fed meeting.

 

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