Stocks rallied Monday with significant contributions from the healthcare sector — the S&P 500’s second-largest sector weight — and with some help from a JPMorgan report noting that the worst of the bear market may be behind us.
- The S&P 500 jumped 3.35%
- The Dow Jones Industrial Average tacked on 3.19%
- The Nasdaq Composite advanced 3.62%
- Microsoft (NASDAQ:MSFT) was the Dow’s leader today, gaining 6.79%, on reports some of the company’s services are gaining momentum as more American workers being forced to work from home due to the coronavirus.
Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK) weren’t far off the pace set by Microsoft on positive reports regarding progress on COVID-19 testing and vaccines by big pharmaceuticals companies. For its part, JNJ said it could have a coronavirus vaccine ready by early 2021. Human trials for that treatment could commence as soon as September.
Merck’s move was accrued on the back of a report out Saturday that a treatment the company is working on for worsening chronic heart failure hit a primary endpoint in a crucial Phase 3 clinical trial.
The contributions from the healthcare sector were meaningful as 28 of 30 Dow stocks were higher in late trading.
One of the more interesting Dow scenarios today was that Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) were among the index’s winners even as oil prices continued to plunge. West Texas Intermediate futures fell below $20 per barrel, at one point testing 18-year lows.
Bank of America said global crude demand will drop 12% this year, calling the outlook “ugly” while noting “there is no way to sugarcoat it.”
There are reports that in some shale locations, producers are selling barrels of crude for pennies on the dollar and there are even reports that in some instances, producers are paying buyers to take oil off their hands. Indeed, investors would be right to question today’s price action in CVX and XOM.
Gordon Haskett analyst John Inch, a name investors may be familiar with due to his coverage of General Electric (NYSE:GE), lowered his rating on 3M to the equivalent of a “sell” while trimming his price target on the name. He also noted that if the economy undergoes a prolonged recession, the MMM dividend could be at risk.
“If the recession were to worsen, this could place 3M’s dividend at risk,” said the analyst in a note to clients.
Even with that MMM commentary, Boeing (NYSE:BA) was the only industrial stock in the Dow to trade lower today.
A Good Idea
With investors favoring quality stocks with strong balance sheets, it’s not surprising that Apple (NASDAQ:AAPL) is getting some love from analysts. BofA Global Research analyst Wamsi Mohan put the iPad maker on the research firm’s best ideas list today while noting effects of the coronavirus on the company will be temporary.
“Apple continues to enjoy competitive advantage with its ecosystem, App Store, large/captive installed base and brand value,” said the analyst.
Bottom Line on the Dow Jones Today
Friday was a down day, but four of the past five have been up days for the Dow and it’s worth pointing out that after one of the most rapid corrections/bear markets on record, plenty of bad news is already being consumed, but plenty of uncertainty lingers, too.
“Credible estimates suggest a 10 to 20% contraction in second quarter GDP. What is less clear is the outlook for the second half of the year,” said BlackRock. “That will be determined by three factors: the path of the virus, duration and severity of the lock-down and efficacy of the stimulus.”
The takeaway is obvious: the sooner the coronavirus curve flattens and America can reopen for business, the better.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold any of the aforementioned securities.