Company / Analytics

Analytics, 20 April 2020

Week 16 in Brief

Health professionals are making progress in finding a cure for Coronavirus disease. An antiviral drug remdesivir, developed by Gilead Sciences’ appeared to be working in a small COVID-19 trial at the University of Chicago. Over 2.3 million cases of Coronavirus have been diagnosed globally, of which 161,324 patients have died.

In the United States which has over 735,000 confirmed cases and over 39,000 deaths, citizens in some states demonstrated, calling on their state government to ease measures and allow them to go back to work, allegedly on incitements by President Trump.

On the financial markets

US stocks rallied the week, with major indices finishing higher on optimism that authorities are gaining control over the coronavirus which appears to have reached its plateau in some States, such as New York where the number of COVID-19 deaths appeared to be declining for the first time.

The Dow Jones Industrial Average gained 704.81, or 2.99%, to close the week at 24,242.49, and is now more than 30% above its low hit on March 23, its best two weeks since the summer of 1938. The S&P 500 was up 5.01, or 2.68%, to end at 2874.56, while the Nasdaq Composite was up by 117.78, or 1.38%, to close at 8650.14.

But while the gains of large-cap companies on the Dow are reassuring despite the economic impacts of COVID-19, small-cap company index the Russell 2000 which dropped by 1.4% to 1229.1 on Friday implies not everything is okay. The gap between the indexes has increased for the third time since March 13, according to Barons, retail sales have plummeted while industrial production has suffered its biggest decline since 1946.

Bond yields were slightly higher while gold edged lower, which indicates that investors appear to be betting on good times ahead than buying to protect against disaster. The bond market has been riding on the Feds decision to buy junk bonds. But analysts have warned that this will not be enough to stop a wave of imminent corporate defaults which could reach more than 20%. U.S. junk-bond defaults have already climbed to 4.9$, a 10-year high, according to JPMorgan data.

European markets ended the week sharply higher on Friday with shares in France leading the region. The CAC 40 is up 3.42% while Germany’s DAX is up 3.15% and London’s FTSE 100 is up 2.82%, even as Europe-wide Coronavirus death toll crossed 100,000.

Asian markets finished higher on Friday with shares in Japan leading the region. The Nikkei 225 is up 3.15% while Hong Kong’s Hang Seng is up 1.56% and China’s Shanghai Composite is up 0.66%, according to CNN Business.

China released its trade data for March which indicates it performed better than expected. China’s GDP was 9.8% lower in the first 3 months of 2020 than it was at the end of 2019, which is equivalent to a 34% drop at an annual rate. However, China’s exports in March fell by 6.6% from the same period a year earlier, a smaller drop than the 14% plunge analysts had predicted. China has eased many of the restrictions put in place to control the spread of the coronavirus, and the IMF predicts that together with India, it will have positive growth.

The stock of the week

The single stock that made the most move was Tesla. Tesla rose for 10 consecutive days, closing at almost $754 a share. Shares closed more than 30% higher for the week and are up more than 40% for the month, as well as 80% for the year, better than the market. The last time Tesla was on the red was April 2. The electric car maker is now the second most valuable company in the world, just behind Toyota. Toyota has a market value of about $200 billion while Tesla has a market capitalization of about $140 billion, greater than the other 23 stocks in the Russell 3000 Auto & Auto Parts Index combined, according to Barons.

Commodities

On the commodities markets, oil had the biggest moves (downward). The price of West Texas Intermediate crude oil dropped 8% to $18.27—its lowest level since Jan. 18, 2002. WTI is down 70% year to date due to demand collapse and overproduction. Gasoline prices in some US states - Wisconsin, Kentucky, Michigan, Oklahoma, Minnesota, and Illinois – dropped to more than 10-year lows this week, due to low demands for fuel caused by travel restrictions.

This week?

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