From an equities perspective, it wasn’t an abnormal session in the stock market today. However, Monday’s action created a sight to behold in the energy markets.
The drama has not finished playing out in the oil market just yet. The novel coronavirus has created a significant drop in demand, as economies around the world grind to a halt. Adding misery to the situation, OPEC+ got into a temporary pricing war, driving up crude oil supplies while demand sank.
Despite the group agreeing to a production cut earlier this month to stabilize the price of oil, it’s not helping much. The May crude oil contract plunged into negative territory, falling to negative $40 per barrel at one point.
What does that even mean? Essentially, there wasn’t a buyer for every seller. With storage running full and nowhere to put the stuff, many of those who are long May crude oil contracts can’t take delivery. If you can’t take delivery, you have to sell your contracts, but with no buyer in sight, prices turned negative.
Some argued that it was algorithmically driven. Others have said it was technical factors driving the move — not a liquidation event — while others have said it was due to an oil ETF. In any case, investors will enjoy seeing some normalcy this week as we shift our focus to the June contract, and it’s a phenomenon we will not likely see again.
To some surprise, the Energy Select Sector SPDR ETF (NYSEARCA:XLE) only fell 3.2% on the day, while the VanEck Vectors Oil Services ETF (NYSEARCA:OIH) dipped 1.9%. A number of energy stocks, as well as the XLE, were included in today’s Top Stock Trades list.
Movers in the Stock Market Today
The General Services Administration just awarded the $810 million transportation services deal to Uber (NYSE:UBER). The news helped bid shares higher, as the stock looks to add to its rebound from the March lows. The stock is up almost 100% from that point, as investors continue to bet on the long-term opportunity in ride-hailing. Still, shares are down 32% over the past year.
Cheesecake Factory (NASDAQ:CAKE) is up 1.1% on news that Roark Capital invested $200 million through a convertible preferred investment. Cheesecake Factory’s CEO David Overton states that the investment will “enhance our liquidity position to navigate the near-term COVID-19 landscape and get our affected staff members back to work as soon as practicable.”
Disney (NYSE:DIS) is furloughing more than 100,000 employees this week — nearly half its employees. The company is feeling the pain from nearly every angle, with its parks, cable and studio revenue all under pressure. The furlough will save Disney roughly $500 million a month as it looks to preserve capital.
Heard on the Street
However, Disney still has its detractors as well. Credit Suisse downgraded the company’s rating from “outperform” to “neutral” and cut its price target from $140 to $116. UBS analysts also downgraded Disney from “buy” to “neutral.”
UBS didn’t stop there though, cutting its price target on ViacomCBS (NASDAQ:VIAC) to $16 from $31. However, the analysts kept a “neutral” rating on the company.
In other analyst news, Wells Fargo downgraded Gilead Sciences (NASDAQ:GILD) to “equal weight” with a price target of $87, while BMO also downgraded GILD to market perform with a $79 price target. Neither expect much upside from current levels, with shares closing at $81.26, down about 3.3% on the day.
Finally, Morgan Stanley removes Amazon (NASDAQ:AMZN) from its Fresh Money list after shares hit analyst Brian Nowak’s $2,400 price target. He “remains positive on the stock and the long-term thesis,” but argues that it’s now time to lock in some profits.