Hi Everyone,
The stock market finished lower amid the collapse in the price of oil, as countries across the globe started to reopen their economies, and the pandemic-curve continued to flatten. The Dow was down 592 or 2.4%, to 23,650, the Nasdaq lost 89, or 1.0%, to 8,561, while the S&P 500 fell by 51, or 1.8%, to 2,823. Decliners outnumbered advancing issues decliners by a 3-to-1 ratio on the NYSE, where volume was lighter than it has been of late.
Traders said that although today’s chaos in the crude oil market spooked investors, it has not changed the long-term outlook for the sector and the broader market. As one trader explained, “The price for May delivery hit an incredible -$40 per barrel today, but the energy sector remained relatively stable despite the extreme market conditions, as the COVID-19 situation continues to slowly improve globally.”
Safe-haven assets, such as Treasuries and gold ticked higher today, but there was no sign of panic outside of energy markets, and the major indices continue to hold on to most of their post-crash gains. The tech sector’s relative strength is especially encouraging from a long-term perspective, and today, small-caps also performed well thanks to the likely agreement on the expansion of the small business loan program. The Dow was hit the hardest among the large-cap benchmarks, with Boeing (BA, -6.8%) and mega-cap banks JP Morgan (JPM, -3.7%) and Bank of America (BAC,-3.4%) weighing heavily on the industrial average besides oil giants Chevron (CVX, -4.1%) and Exxon (XOM, -4.75).
IBM (IBM, +0.6%) reported after the bell today, and the company’s profit beat the consensus estimate even though its revenue slightly missed expectations. The tech giant has been struggling to gain market share in the all-important cloud segment due to the fierce competition from Amazon (AMZN, +0.8%) and Microsoft (MSFT, -1.9%). That said, the IBM was finally posting promising numbers before the pandemic, and since cloud-related issues might be among the winners in the coming months, it could continue its comeback with new CEO Arvind Krishna, who took over the company’s management this month.
Even if today’s crude oil collapse was mostly technical in nature, reflecting the extreme short-term drop in demand, the fact that the May WTI contract closed a whopping 280% lower is still something for the history books. The June WTI contract remains above $20 per barrel, suggesting quick normalization in the market of the crucial commodity. Looking further ahead in the futures curve, it reveals that energy traders expect the price of oil to climb above $35 per barrel as soon as early 2021 as the global economy recovers.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
Joseph Esposito
President
The Pinnacle Financial Group
T: 516.763.9700
F: 516.763.9706
Joseph.Esposito@lpl.com
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