Stocks soared Monday on signs that the coronavirus could be easing in some of most affected areas, namely Italy and New York. In New York, the state hit hardest by COVID-19, case numbers are flat for the past two days, potentially bringing much needed relief.
- The S&P 500 gained 7.03%
- The Dow Jones Industrial Average jumped 7.73%
- The Nasdaq Composite advanced 7.33%
- In another rapid reversal, something this stock is making a habit of, Boeing (NYSE:BA) was the best-performing name in the Dow today, surging 18.31%.
The Dow notched its biggest advance in more than a week Monday, but investors should be wary of getting carried away over just one day of gains. Yes, these gains are important, but remember that President Trump and his COVID-19 team noted over the weekend that this week and perhaps the following one could be the worst in terms of COVID-19 fatalities.
Another reason to remain prudent in the near-term: JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon said in his annual letter to shareholders that the world could encounter a level of financial stress due to the COVID-19 pandemic similar to the global financial crisis and that the “bank cannot be immune to the effects of this kind of stress.”
Dimon added that if the U.S. unemployment rate surges to 14%, JPM’s dividend, likely the safest in the industry, could be pared or suspended.
Still, JPM shares jumped more than 5% on a day in which all 30 Dow stocks were higher in late trading.
Intel Getting Interesting
Semiconductor stocks are highly sensitive to the whims of the broader economy and that much was on display as Intel (NASDAQ:INTC) and friends slumped through much of March. However, some analysts are now defending Intel, one of the higher quality large-cap technology names on the market.
Raymond James chip analyst Chris Caso boosted his rating on Intel to “market perform” from “underperform” today:
“Our upgrade is primarily based on our view that the company is exposed to the right end markets for this pandemic—namely, notebooks and data center. While we expect the current surge in notebook sales to be relatively short-lived and roll off in the back-half of the year, cloud and service provider data center spending is expected to remain strong through 2020.”
McDonald’s (NYSE:MCD) was a top-tier Dow performer today and even though the domestic restaurant industry is revolving solely around deliveries and takeout these days, there may be some good reasons to consider this beleaguered group.
Specifically for McDonald’s there are a couple of points to ponder. First, its franchisees are in fact eligible for stimulus loans from the Small Business Administration (SBA).
Second, for all the talk about dividend cuts this year, and that talk is real, there isn’t much chatter about MCD going down that road. The company scrapped buybacks, but appears committed to defending its dividend.
It’s easy to gloss over because stocks are still well off the February highs, but insider buying at an array of companies is perking as executives and directors look to defend sagging share prices. Nike (NYSE:NKE) is part of that trend and recently released data on that front could be one of the explanations for the roughly 6% jump by that name today.
Remember this: insiders only buy a stock for one reason: because they think it’s going up.
Apple Estimates Declining
Kudos to Apple (NASDAQ:AAPL) for announcing that the company will produce 1 million face shields per week to help workers on the front lines of the coronavirus fight. And props to the stock for gaining about 6% Monday despite some challenging news.
Or perhaps this is a case of investors knowing what was coming. Either way, analysts are reducing earnings and revenue estimates on the iPhone maker due to the coronavirus outbreak.
Following supply chain issues in China, temporary closures of retail stores and now shutterings in the U.S., reduced expectations for Apple’s top and bottom lines were only natural.
Bottom Line on the Dow Jones Today
I’ll break the near-term outlook down like this: we know that bank earnings are likely to be dismal and that jobs and other economic data will be the same. However, this week’s equity action could follow through on today’s catalyst, that being the New York coronavirus plateau. If that holds and we start seeing flattening, or fewer cases in other affected areas, particularly those near large cities, there could be fuel for a short-term rally in riskier assets.
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.