Morning Minutes 5/6/2020

Morning Minutes

Mixed Markets Digest Earnings and Payrolls

May 6, 2020

At SIA Wealth Management everything we do is based on Relative Strength Analysis. We evaluate the Relative Strength between asset classes giving us insight into money flows on a large scale, and from this select top ranked investments.

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

World markets have been mixed overnight and into this morning with the Dax falling 0.3%, the Nikkei falling 2.8%, the Hang Seng rising 1.1% and the FTSE climbing 0.5%. US index futures are up about 0.5% this morning with Dow futures up 115 points.

Markets appear to be caught between anticipation of reopening economies and negative news driven by the current pandemic-impacted economic situation. This morning, ADP reported a 20.23 million plunge in US private sector payrolls, slightly more than the 20.05 million drop the street had expected. Markets took this news in stride, however and appear to be more focused on weekly jobless claims reports, such as the one due tomorrow morning, than the lagging monthly employment reports at the moment. Trade numbers for China are due tonight which could also influence sentiment tomorrow.

Crude oil contracts are up slightly this morning as they start to consolidate recent gains. WTI is trading up 0.4% near $24.50/bbl, while Brent crude is up 0.7% trading near $31.20. While investors continue to anticipate an improvement in demand as economies reopen, how quickly demand may get back to where it was before March remains an open question. US inventory growth appears to be slowing as API reported a weekly increase in US oil inventories of 8.4 mbbls for last week, down from 9.9 mmbbls the week before. DOE weekly inventories are out at 10:30 am EDT this morning with the street expecting a 7.7 mmbbl increase for last week down from the previous week’s 8.9 mmbbl increase.

It’s another big day for earnings on both sides of the border. Highlights from results announced overnight and this morning include:

In Canada, Shopify* announced Q1 sales of $470M, up 47% over year and above the $433M street estimate. Suncor Energy reported a $3.5B loss for Q1 down from a $1.4B profit a year ago, slashed its dividend by 55%, suspended its share buyback program and cut its capital budget by $400M. Crescent Point Energy reported a $2.3B Q1 loss and confirmed the previously announced 35% cut to its capital budget and production cuts.

In the US, General Motors reported a 46% decline in adjusted earnings as sales fell by 6.2% in the March quarter as it prepares to restart most of its auto production on May 18th.  Walt Disney’s earnings fell well short of expectations ($0.60 vs street $0.89) and suspended its dividend for the first half of this year after its parks and cruise lines division was hit particularly hard by the COVID-19 pandemic. Beyond Meat beat the street on Q1 revenues ($97.1M vs street $88.3M) but noted that sales started to drop off at the end of March as restaurants were shuttered and pulled its guidance. Video game producers Electronic Arts and Activision Blizzard also beat investor expectations on earnings.

Later today, results are due from Manulife Financial, Metlife, Nutrien, Barrick Gold*, Lyft*, Paypal* and Square.

*Shares of Shopify, Barrick Gold, Paypal and Lyft are held in some portfolios managed by SIA Wealth Management

SIA Wealth In The Media

Chief Market Strategist Colin Cieszynski appeared recently on BNN Bloomberg, where he discussed the importance of tactical, relative strength-based investing in current markets.

Stock and sector picking for a demarcated economy: SIA Wealth

 

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