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Stock Market Today: Airline Headaches; Facebook’s Big Investment

After a tough couple of sessions for the bulls, we got a nice rally in the stock market today. The S&P 500 rose over 2.25% as investors got back to bidding up stocks despite the continued volatility in the oil market.

What’s one way to get oil prices to rise? Potential geopolitical conflict is one method. Before the market opened, President Donald Trump tweeted, “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”

That sent crude prices higher by more than 25% at one point, although the market will need more than that to save it. There’s still the issue of lower demand.

With concerns of where to store oil, roughly three dozen oil tankers are gathering around California. They’re carrying approximately 20% of the world’s daily use and have nowhere to put it. As everyone struggles on where to store oil, several big refineries are being forced to halt production and curtail crude processing.

Specifically, Marathon Petroleum (NYSE:MPC) and Chevron (NYSE:CVX) have been idling certain refineries in the state due to stay-at-home orders and lower gasoline demand. That’s not helping the situation.

Earnings Roundup

Delta Air Lines (NYSE:DAL) shares slipped lower on Wednesday after a concerning earnings report. The company reported a non-GAAP loss per share of 51 cents per share, 31 cents ahead of estimates. Revenue of $8.6 billion tumbled 18% year-over-year and missed estimates by almost $750 million.

However, the big issue is cash burn. At the end of the quarter, the company was burning $100 million a day. Management hopes to get that figure down to “just” $50 million a day, but there’s good reason why investors are still concerned. Continued uncertainty about the global environment doesn’t help.

While United Airlines (NASDAQ:UAL) didn’t report earnings, it priced a $1 billion secondary offering to help with its cash burn. Shares slipped about 7% in the stock market today. Between United and Delta’s news, American Airlines (NASDAQ:AAL) fell on the day too, down 6.3%.

Both UAL and AAL were on our Top Stock Trades list from Wednesday.

AT&T (NYSE:T) shares started off higher on the day, but ultimately fell about 1%. That’s as the company reported earnings of 84 cents per share on revenue of $42.8 billion. The results missed expectations by a penny and $1.4 billion, respectively, as sales declined 4.6% year-over-year.

AT&T pulled its full-year guidance, said the novel coronavirus impacted results by roughly $600 million and reassured investors about its dividend thanks to strong cash flow. That dividend yield is up to 7% now, by the way.

Movers in the Stock Market Today

According to a lawsuit filed Wednesday, Sycamore Partners is attempting to get out of a deal made back in February to take a majority stake in Victoria’s Secret from L Brands (NYSE:LB). When L Brands decided to close its stores and skip rent payments in April due to the pandemic, the equity firm said the retailer violated the transaction. L Brands plans to fight the lawsuit, arguing that Sycamore Partners’ reason for termination is invalid.

Facebook (NASDAQ:FB) became the biggest minority holder in Reliance Jio after making its largest-ever investment. The company invested $5.7 billion for a 9.99% stake in Reliance Jio, an Indian telecom company, which also owns a suite of other services such as smartphones, music streaming, broadband, on-demand live television and payments.

Macy’s (NYSE:M) has had a rough year, with shares down about 70% in 2020 — and the ongoing coronavirus outbreak isn’t helping matters. The company is hoping to avoid bankruptcy by considering a $5 billion debt raise. Macy’s is looking to use $3 billion of its inventory as collateral and another $2 billion in its real estate.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long T. 

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