Saddled by another round of bleak economic data delivered on a Thursday and tepid earnings reports, stocks faltered in the final trading day of April, though the major equity benchmarks posted strong monthly performances.
- The S&P 500 declined 0.92%.
- The Dow Jones Industrial Average slid 1.17%
- The Nasdaq Composite retreated 0.28%
- After being one of the Dow’s best performers yesterday, American Express (NYSE:AXP) succumbed to profit-taking today, sliding 4.55% to rank as the worst offender in the blue-chip index.
Thursday is the day initial jobless claims benefits data are reported and last week’s number was worse than expected, bringing the five-week tally to 30 million. Unsurprisingly, surging unemployment has decimated consumer spending, which accounts for two-thirds of the U.S. GDP. That metric plunged 7.5% in March, according to a report released by the Commerce Department today.
As a result, all of the Dow’s consumer discretionary names closed lower today, as well as all but one of its consumer staples components — Procter and Gamble (NYSE:PG).
The effects of the dismal data were again palpable, as 25 of 30 Dow members were lower in late trading, one of the worst ratios seen in weeks.
Microsoft Earnings Impress
Microsoft (NASDAQ:MSFT) was in the thinly populated Dow winners club today after the company reported fiscal third-quarter results after the close Wednesday that beat Wall Street estimates. The tech giant earned $1.40 a share on sales of $35.02 billion. Analysts were expecting earnings per share (EPS) of $1.26 on revenue of $33.66 billion.
Through its Azure business, Microsoft is the second-largest player in the cloud computing arena, and the company said its commercial cloud revenue surged a jaw-dropping 39% on a year-over-year basis. Office revenue jumped 25% and Microsoft’s overall turnover increased 15%, which is no small feat for a company in the 13-digit market capitalization club.
McDonald’s Earnings Do Less
McDonald’s (NYSE:MCD) doesn’t qualify as “fine dining,” but it is sensitive to consumer spending trends, which as noted above, are deteriorating.
Wall Street expected earnings of $1.57 a share on revenue of $4.65 billion. Predictably, with many of its restaurants relegated to only take-out/drive-thru and delivery service in the wake of the novel coronavirus, earnings are lower on a year-over-year basis. The Illinois-based company notched first-quarter EPS of $1.47 on better-than-expected sales of $4.71 billion.
The story with McDonald’s becomes just how bad its second-quarter results will be. Predictions are increasing that the current quarter will be the worst for the U.S. economy, but how much of that theory is baked into McDonald’s stock is up for debate this point.
Further weighing on the fast food giant is the slow slog of the U.S. economic reopening. Some states are inching their way there. Others, including California, are offering up little or no visibility on when businesses dependent on foot traffic will be open again.
Boeing (NYSE:BA) was actually a Dow leader today after the downtrodden aerospace firm saw strong demand for its corporate debt across several maturities. The company was looking to raise $20 billion, but strong demand across maturities ranging from five years to 40 years could see Boeing upsize the offerings.
Bottom Line on the Dow Jones Today
This will be Amazon’s first report for a time frame including the Covid-19 pandemic, which is likely to result in a blowout quarter. As for Apple, the numbers are likely to be subdued due to coronavirus supply chain disruptions, but that’s accounted for in the stock price.
What would be helpful is if one or both of these companies can put together a positive outlook, something that’s becoming a rarity in the current environment.
“There have been 90 negative pre-announcements in the first quarter, compared with 40 positive, and analysts see aggregate S&P earnings dropping by a year-on-year rate of 14.4% in the first three months of 2020,” according to Reuters.
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.