Despite mixed news yesterday, the stock market continued its stunning rally. This happened as good news in the battle against the coronavirus seems to outweigh bad news for corporate earnings.
New York, the hardest-hit state in the country, is seeing a slowdown in the number of new cases. Because of this, Governor Andrew Cuomo believes that “the worst is over … if we continue to be smart going forward.”
Cuomo added that governors from Connecticut, New Jersey, Pennsylvania, Delaware and Rhode Island have already started discussions about reopening the economy in those states.
It echoes comments by California Governor Gavin Newsom. Newsom previously announced that his state is working with Oregon and Washington to work on a plan to collaboratively lift the stay at home orders for those three states.
It may still take weeks before any state lifts orders. However, the market continues to look for any indication that the worst is behind us in the battle against the pandemic. It’s also looking for any sign indicating that the economy will be open for business again.
The optimism around the slowing of new cases moved the markets higher, with the Dow Jones Industrial Average gaining 2.4%. The S&P 500 jumped 3.05%, pushing its overall gain to 27.5% since the low on March 23. The Nasdaq officially exited bear market territory as it gained 3.95%. This puts together its first four-day winning streak since early February.
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How the Market Reacts
The market shrugged off plenty of bad news yesterday. This includes what is considered a bad start to earnings season yesterday.
JPMorgan Chase (NYSE: JPM) reported that profits plunged 69% compared to a year ago. They also said that they have set aside $6.8 billion to cover loan losses brought on by the economic shutdown. The company reported earnings and revenues that were below expectations.
Similarly, Wells Fargo (NYSE: WFC) is setting aside $3.1 billion to cover loan losses. They reported a quarterly profit of just $0.01 per share on revenues of $17.7 billion. Both numbers were below analyst estimates.
While not earnings-related, Anheuser-Busch InBev (NYSE: BUD) has proposed cutting its dividend by 50%. He suggested doing so in order to save the company $1.1 billion and ease its debt burden.
Boeing (NYSE: BA) announced it lost 150 orders for the 737 Max last month as airlines cut back amidst the travel slowdown and lingering concerns over the inability to get the plane certified for flight. The company has already announced a negative 144 orders for the first quarter as cancellations far exceed any new orders.
Oil plunged 10.3% lower yesterday, with WTI crude closing at $20.11 per barrel. This occurred despite the historic production cuts of 9.7 million barrels per day agreed on over the weekend by OPEC and other oil-producing nations.
Will This Be Enough?
Many analysts still believe that the production cuts simply aren’t enough. After all, they need to overcome the massive demand collapse due to the pandemic.
Even President Trump weighed in, implying the production cut is only half of what might be needed.
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The President tweeted, “Having been involved in the negotiations, to put it mildly, the number that OPEC+ is looking to cut is 20 Million Barrels a day, not the 10 Million that is generally being reported.”
As we mentioned on Monday, we wouldn’t be surprised if they scrape the current agreement for a larger production cut before the ink even dries.