Stocks retreated Tuesday, but the losses, by the standards of what was a wild first quarter, were tolerable. With the first quarter of 2020 now in the books, it’s clear that this was the worst quarterly performance for the S&P 500 since the global financial crisis. That despite a 17% rally by the benchmark equity gauge over the prior seven days.
- The S&P 500 lost 1.60%
- The Dow Jones Industrial Average fell 1.84%
- The Nasdaq Composite dropped 0.95%
- American Express (NYSE:AXP) capped a tumultuous quarter, falling 4.94% today, after the company said Monday it won’t be laying off workers this year, but it’s implementing a hiring freeze.
One point of emphasis for investors on Tuesday was Congressional plans for a fourth round of coronavirus-related stimulus and what form that could take. These talks come as Americans wait on their $1,200 checks from Uncle Sam.
Perhaps the next round of stimulus will include the infrastructure sector, for which President Trump is pushing $2 trillion in spending. That’s double his $1 trillion pledge on the 2016 campaign trail and reports of the new pitch out Tuesday could explain why Caterpillar (NYSE:CAT) was the Dow’s best-performing name today.
Speaking of Dow winners, those were in short supply Tuesday as just seven of the 30 members of the index were higher in late trading.
Maybe The Worst Is Over
Dow Chemical (NYSE:DOW) is one of the smallest stocks in the index of the same name. It has been one of the worst offenders in the first quarter, but the chemical maker delivered one of the better showings in the blue-chip benchmark on Tuesday, gaining 2.72%.
Chemical stocks are highly cyclical and, as such, can be pretty good recession indicators. The stocks, including Dow, are pricing in that scenario, prompting some analysts to say enough is enough as there is value in the group.
Broadly speaking, the technology sector was less bad than the broader market in the first quarter, but the group wasn’t perfect and there are muddle expectations for how the S&P 500’s largest sector weight will perform over the next two quarters.
Speaking of expectations, Intel (NASDAQ:INTC) traded lower today after Northland Securities analyst Gus Richard cut his price target on the semiconductor giant to $60 from $70, noting he’s not enthusiastic about chip makers in the second half of 2020.
“We also expect that declining PC unit volume will create excess capacity at Intel pressuring margins,” said the analyst.
Oil put the finishing touches on its second-worst quarterly performance ever and for those that are following the energy sector, you know that there are plenty of concerns about Exxon Mobil (NYSE:XOM) and its dividend.
Morgan Stanley energy analyst Devin McDermott said today that XOM will pay its 2020 dividend with cash from operations. That’s the good news. The bad news is that the company will fund its exploration and production budget with debt.
Earlier this month Exxon said it was going to spend $33 billion on exploration and production this year, but McDermott said that number is likely to decline to $25 billion given low oil prices.
Bottom Line on the Dow Jones Today
The calendar changes to April tomorrow and whether or not that brings better things for equities remains to be seen, but the fourth month of the year is historically kind to stocks.
However, the other issue is the start of first-quarter earnings and just how bad 2020 forecasts can get. In fact, John Butters of FactSet notes it’s all but assured the S&P 500 will post a year-over-year earnings contraction in 2020.
“During the past week, the aggregate earnings growth rate for CY 2020 changed from slight year-over-year earnings growth on March 24 (+0.6%) to a slight year-over-year earnings decline on March 25 (less than -0.1%),” he said.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.