Stocks fell at the starting bell, then trimmed losses Friday as investors grappled with a record-setting dive in April retail sales and a new round of U.S.-China trade friction. Chip stocks took the most direct early hits. On the Dow Jones today, the trade news also sent Apple and Intel sharply lower. Earnings reports fueled healthy premarket gains for China’s JD.com and marijuana stock Aurora Cannabis.
The Nasdaq had pared its early 1.3% tumble to less than 0.3% on the stock market today. The S&P 500 and Dow Jones Industrial Average halved their early losses, trading down less than 0.2%. All three indexes remained on track for their largest weekly losses since late March.
Drug distributor McKesson (MCK) topped the S&P 500, up more than 3% after an upgrade to buy from UBS. Test maker Hologic (HOLX) gained 1.2% after FDA granted emergency approval of the company’s Covid-19 molecular test.
Chips came under harsh early pressure, after the U.S. announced a fresh round of U.S.-China trade restrictions aimed at the chip supply chain. Qualcomm (QCOM), KLA (KLAC) and Lam Research (LRCX) led the losses among Nasdaq 100 and S&P 500 stocks, down almost 5%. Teradyne (TER) sloughed off 5.5%, leading the downside of the Philadelphia Semiconductor Index and the Nasdaq 100. The VanEck Vectors Semiconductor ETF (SMH) dropped 2.7% in early trade.
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Among IBD 50 stocks, Covid-19 test-maker Quidel (QDEL) sailed almost 6% higher after the Food And Drug Administration warned on Thursday that rapid test kits made by competitor Abbott Laboratories (ABT) were showing frequently false negative results. Abbott shares dropped 1.4%.
Zoom Video Communications (ZM) jumped 3.2% after Citi initiated coverage with a neutral rating and a price target at 186. IBD 50 ore miners Franco-Nevada (FNV) and Kirkland Lake Gold (KL) each moved up close to 2% as silver prices soared more than 4% in early futures trading.
Also on the IBD 50 list, Bristol-Myers Squibb (BMY) popped 1.8%, after the FDA broadens its approval for the company’s drug Pomalyst to certain AIDS-related treatments.
Blue chips divided shortly after the open on the Dow Jones today. Walgreens Boots AllianceWBA paced the early downside, falling more than 3% following the retail sales data. UnitedHealth Group (UNH) popped 3% higher, after announcing a collaboration with Microsoft (MSFT) aimed at providing workplace Covid-19 screening to workplaces.
Apple and Intel also slumped low on the list, as trade war rhetoric once again rose to move global markets. A new technology export restriction announced by the Trump administration on Friday aimed to cut U.S. chip supplies to China-based telecom giant Huawei.
Apple (AAPL) backed off more than 2%. Intel (INTC) dropped 1.8% after the editor of China’s state-based Global Times tweeted in response to the new restrictions that China would activate its own “unreliable entity list” if the U.S. pressed forward with initiatives that would affect microchip shipments to Huawei.
The editor, Hu Xijin, according to news reports, tweeted “Based on what I know, if the U.S. further blocks key technology supply to Huawei, China will activate the ‘unreliable entity list’, restrict or investigate U.S. companies such as Qualcomm, Cisco Systems and Apple, and suspend the purchase of Boeing airplanes.”
In addition, Taiwan Semiconductor (TSM) on Friday announced plans to build a $12 billion chip factory in Arizona, a move in line with recent White House efforts to bring more chip production back to the U.S. Part of the motive behind the effort was more control over U.S. chip supply chain due to security issues. The White House had reportedly directly discussed the effort with Taiwan Semi and Intel.
Taiwan Semi stock dropped 2.5% in early trade.
Coffee shop chain Denny’s (DENN) served up a 10% jump after its late-Thursday report. Data analysis software brand New Relic (NEWR) rallied 13% on earnings.
Marijuana stock Aurora Cannabis (ACB) spiked 43% as analysts weighed in following the company’s fiscal third-quarter report late Thursday. Cantor Fitzgerald reiterated its overweight rating with a price target at 16, which was 140% above Thursday’s closing price. Piper Sandler upgraded the stock to neutral from underweight, and trimmed its price target to 10, from 12.
China-based JD.com (JD) rolled up an early 2% gain, after reporting its first-quarter earnings fell less than expected as revenue topped analyst targets. JD.com shares ended Thursday up 13.6% so far in May, and are up 39% year-to-date as they work on their eighth-straight monthly advance.
April retail sales careened 16.4% lower, the Commerce Department reported, nearly double March’s 8.4% tumble and far beyond economist expectations for an 11.2% dive. Sales minus autos and gasoline were projected to fall 8.6%. The actual number came in at 17.2% — indicating fuel and auto sales were actually better than expected, but other retail sales were worse. Clothing and accessories were off more than 89%.
On Tuesday, Adobe’s Digital Economy Index reported that online sales soared 49% in April. Sales of electronics surged 58%, while online grocery sales scored a 110% increase.
The New York Federal Reserve’s Empire State Manufacturing Survey came in at minus 48.5 for May, up from a negative 78.2 in April. The number beat the minus 65 forecast from economists and, under any other circumstances, the 30-point increase would be record-setting. But the coronavirus pandemic has left the index far below the zero level that divides contraction from expansion.
Worldwide, more than 66,000 new cases of coronavirus infections were confirmed in the 24 hours to Friday morning. That lifted the cumulative total for cases above 4.5 million, according to Worldometer data, and put the growth rate at less than 1.5%, well below recent levels. Deaths rose by 1.2%, with more than 3,700 additional deaths raising the cumulative total above 300,000.
The share of the total number of cumulative cases from EEA countries dropped to 28.7%. The region still accounted for more than 51% of the total deaths worldwide from the virus, according to the latest data from the European Center for Disease Prevention and Control.
In the U.S., 21,508 new confirmed cases put the cumulative count at just below 1.5 million — more than 32% of the total number of infections worldwide. Another 1,464 persons died from Covid-19, putting the death toll up 1.7% to nearly 87,000. That holds the U.S. portion of total deaths worldwide at less than 29%.
New tests continued to roll out at an increasing rate. The COVID Tracking Project reported 366,944 new tests were conducted on Thursday. That lifted the 10-day average for tests to more than 304,000, up from 249,000 at the start of the month.
At least 32 states have started to relax stay-at-home rules and business lockdowns. Stay-at-home orders expired Thursday in Arizona, Maryland and Louisiana. Massachusetts’ stay-at-home advisory elapses on Monday. Similar orders expire on May 22 in North Carolina, May 29 in Ohio and May 31 in Maine, Hawaii and New Hampshire.
The reopenings allow a larger number of residents out for a broader number of activities, but businesses will reopen only gradually and nearly always with restrictions. Most states are opening on a county-by-county basis, with local decision makers deciding when and to what degree they will ease rules. In Maryland, which still has one of the highest rates of new infections in the U.S., the two most highly-populated counties, Montgomery and Prince Georges, remain under lockdown rules.
Big caps headed a bullish turnaround on Thursday, leaving the Dow Jones today down 2.9% for the week. The Dow has slipped in two of the past three weeks, but has continued to holding support at its 50-day moving average. Thursday’s session offered another confirmation, just touching the 50-day level at its low before rebounding.
The test on Friday will be whether the Dow can haul itself back above its 21-day moving average, which it undercut on Wednesday and which has supported the Dow’s advance since early April.
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Cisco Systems’ (CSCO) earnings-fueled 4.5% jump on Thursday was a positive for the index. UnitedHealth Group (UNH) also leapt 4.5%, climbing to within 5% of a 304.10 buy point in a three-month cup-with-handle base. Friday’s early gain put UnitedHealth less than 2% from the entry.
Drugmaker Pfizer (PFE) bounced off its 200-day line, jumping to less than 4% from a 39.32 handle buy point. Pfizer, partnered with Germany-based BioNTech (BNTX), has fast-tracked human trials in the U.S. for multiple Covid-19 vaccine candidates.
Home Depot (HD) remains in a buy range above a 224.32 buy point with earnings due on Tuesday. Walmart (WMT) is also expected to report on Tuesday, wrapping up the Dow’s March-quarter reporting roster.
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Crude higher in European trading amid stronger demand outlook
Crude oil futures contracts were trading above their levels from Thursday on Friday morning in Europe, with bulls in the market taking heart from the latest forecasting from the International Energy Agency, which essentially calls for a less severe coronavirus demand disruption.
According to its latest report issued Thursday, the IEA forecasts 2020 demand to fall 8.6 million b/d on average compared with 2019, a better scenario than an average decline of 9.3 million b/d from the agency’s prediction one month earlier.
At 0851 GMT Friday, ICE July Brent crude futures was trading at $31.91/b, with NYMEX June WTI crude futures trading at $28.18/b, up 2.5% and 2.2% from the previous day’s settle, respectively.
The IEA report also highlighted that the global oversupply in crude is starting to feel some pressure from production cuts, both from the OPEC+ countries and other producers. “We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected,” said the IEA. The IEA reported that the US and Canadian oil outputs have fallen by 3 million b/d in April compared with the start of the year, and could go lower to 4 million b/d in June.
Following this report, on Friday, the CEO of Abu Dhabi National Oil Co, UAE’s biggest oil producer, said he sees signs that the oil market has tightened as cuts from OPEC+ and producers outside the coalition help rebalance the market. “When it comes to oil, there are signs that the market has tightened in recent weeks,” said Sultan al-Jaber on a webcast, according to an ADNOC statement on Friday. “The OPEC-plus agreement, voluntary cuts outside OPEC-plus plus, and production shut-ins are working together to start to rebalance the market,” he said.
Analysts, for their part, seemed to have a more cautious attitude in terms of the supply cut’s ability to rebalance the market.
Police bust illegal waste oil trading suspects
Thirty-five suspects have been caught for alleged illegal trading of waste oil from car dealers and service shops, Shanghai police said on Friday.
Police said they found clues during recent investigations of some local car dealers and service stations, and soon identified suspicious shops and suspects.
The suspects allegedly collected waste oil from vehicles in these shops, processed it and sold it illegally without permits to trade waste oil.
The suspects were caught in Shanghai and neighboring Jiangsu Province on April 27, with about 60 tons of waste oil seized from them, police said.
Author: Chen Huizhi
Dow falls 100 points in volatile trading as Wall Street wraps up worst week since late March
Stocks fell in volatile trading Friday as Wall Street wrapped up its worst weekly performance since late March. Investors grappled with a slew of economic reports as well as increasing tensions between China and the U.S.
The Dow Jones Industrial Average traded 100 points lower, or 0.4%. Earlier in the day, the 30-stock average dropped more than 260 points. It also momentarily broke above the flatline around 10:20 a.m. The S&P 500 dipped 0.3% while the Nasdaq Composite slid 0.5%.
The major averages clawed back most of their losses as retail stocks turned around. The SPDR S&P Retail ETF (XRT) traded 1.1% higher after sliding more than 1.4% earlier in the session. Office Depot shares rallied more than 15% to lead the ETF higher. Best Buy, Kohl’s and Nordstrom also rose. Walmart traded 0.7% higher while Home Depot advanced 1.1%.
Friday’s turnaround also followed better-than-expected data on U.S. consumer sentiment. The University of Michigan’s consumer sentiment index unexpectedly rose in early May as U.S. fiscal stimulus measures “improved consumers’ finances and widespread price discounting boosted their buying attitudes.”
For the week, however, the Dow and S&P 500 were both down at least 3% while the Nasdaq fell 2.5%. Those would be the biggest weekly losses for the major indexes since the week of March 20, when they dropped more than 12%.
“Given the amount of uncertainty about this crisis that still looms, we should not be surprised by the setbacks we’ve seen in markets this week,” said Scott Knapp, chief market strategist at CUNA Mutual Group.
U.S. monthly retail sales fell by 16.4% in April, a record. Economists polled by Dow Jones expected a decline of 12.3%. So-called core retail sales —which exclude auto, gas, food and building materials sales — dropped 15.3%.
“I guess you could say we knew it was weak,” said John Briggs, head of strategy at NatWest Markets. “The problem is you can’t dismiss all this bad news for April. If you have a deeper hole, you’re starting point is lower.”
Stocks initially tumbled on the data. Market sentiment also took a hit amid rising trade tensions between China and the U.S.
The Trump administration has moved to block semiconductor shipments to Chinese company Huawei. The Commerce Department said it would “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
Meanwhile, Hu Xijin, editor-in-chief of Chinese state-run publication Global Times, tweeted on Friday that China would “restrict or investigate” U.S. companies including Qualcomm, Cisco Systems and Apple if the U.S. takes further action to block Huawei’s supply chain. Hu’s Twitter account was closely followed last year by traders looking for insight on the U.S.-China trade war.
Shares of semiconductor makers AMD, Nvidia and Skyworks Solutions all fell more than 0.8%. Apple shares slid 2.1% while Cisco and Qualcomm fell 0.8% and 5%, respectively.
—CNBC’s Patti Domm contributed to this report.
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Author: Fred Imbert