One of the big themes emerging due to the novel coronavirus outbreak is the effect of the virus on economic data and how equity markets are reacting to that news. As Wednesday’s market action suggests, poor economic data is likely to be met with ugly stock market response.
- The S&P 500 dipped 2.20%
- The Dow Jones Industrial Average fell 1.86%
- The Nasdaq Composite declined 1.44%
- With economic data taking center stage, it wasn’t surprising that cyclical names endured harsh punishment today as Dow Chemical (NYSE:DOW) was the blue-chip index’s biggest loser, sliding 8.92%.
It’s no mystery as to why Home Depot (NYSE:HD) and Nike (NYSE:NKE) were among the worst Dow offenders today. Earlier Wednesday, the Commerce Department said March retail sales fell 8.7%, the worst decline since 1992. Even Walmart (NYSE:WMT) wasn’t spared by the retail carnage, posting a modest loss. The report deals an unsurprising but still severe blow to the thesis that consumer demand could prop up the U.S. economy.
Further pressuring Home Depot was an early look at April homebuilder sentiment, which looks extremely dour. The National Association of Home Builders/Wells Fargo Housing Market Index resides at its lowest levels in eight years.
The New York Fed’s general business conditions index plunged a staggering 56.7 points to a negative (yes negative) reading of -78.2. As a result, each one of the Dow’s industrial components with the exception of Boeing (NYSE:BA) traded lower today.
In late trading, 25 of 30 Dow stocks were in the red.
Healthy Earnings
UnitedHealth (NYSE:UNH) was one of the Dow’s lone bright spots today, trading higher after the managed care provider reported first-quarter earnings of $3.72, topping the consensus estimate of $3.65 a share. The company confirmed 2020 earnings per share (EPS) guidance of $16.25 and $16.55.
Looks Like Good News Is Coming
Procter and Gamble (NYSE:PG) was another Dow winner a day after the company said it’s boosting its quarterly dividend by 6%. The company has one of the longest payout increase streaks in the U.S., but this increase was bigger than expected. Additionally, P&G said it will report earnings this Friday, moving its release date up from April 21.
It’s just speculation, but it wouldn’t be surprising if this report is good and/or contains positive guidance. After all, if bad news was coming, P&G probably wouldn’t be in a hurry to reveal it.
Giddy for Goldman
Goldman Sachs (NYSE:GS) was another Dow winner today despite reporting a 46% drop in first-quarter earnings. Goldman said it earned $3.11 a share, well below the $3.35 per share analysts expected. Revenue checked in at $8.74 billion, topping the $7.92 billion estimate.
Investors appeared to look over the glum broad results, opting to focus on robust bond trading revenue. The bank said it allocated $937 million for sour loans in the January through March period.
Cheaper Isn’t Always Better
It can be argued that with many things, cheaper probably isn’t ever better and that may explain the market’s lack of enthusiasm today for Apple (NASDAQ:AAPL). The company said today it’s rolling out a new iPhone SE that costs just $399, its cheapest model launch in two years.
The new SE launch has some pros and cons. The primary drawback is that it won’t feature 5G capabilities at a time when the world is transitioning to that wireless system. Conversely, some buyers like smaller phones, of which the SE is one, and it could serve as a springboard to entice users to eventually purchase pricier Apple products.
Bottom Line on the Dow Jones Today
If today’s economic data wasn’t bad enough, there’s a strong chance it will get worse tomorrow with another look at weekly jobless claims. The consensus estimate for initial jobless claims last week is 5.46 million.
If that number is accurate or is exceeded, that means when combined with the previous three weeks of unemployment claims, all of the jobs gained in the U.S. since the end of the 2008 global financial crisis will be wiped out.
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.
