With oil trading higher for a fifth consecutive day and more states embracing the idea of at least partially reopening their economies, the major equity averages traded higher Tuesday, building on the late Monday rally.
- The S&P 500 climbed 0.90%.
- The Dow Jones Industrial Average jumped 0.56%
- The Nasdaq Composite rallied by 1.13%
- On a day when oil is was in style, Chevron (NYSE:CVX) was the best-performing name in the Dow, gaining 1.60%.
Among the states inching toward reopening in the wake of the novel coronavirus is California. That’s important not just because the Golden State is the largest state by population with the biggest economy, but because it was also the first to implement a Covid-19 shutdown. On Monday, Gov. Gavin Newsom said some non-essential businesses, such as apparel retailers, book stores and florists, can resume limited service — such as curbside pick up, perhaps as soon as later this week.
Getting the economy back up to speed is important for multiple reasons, not least among them rising household debt. Earlier today, the New York Federal Reserve reported U.S. household debt now stands at a staggering record $14.3 trillion.
Even with looming challenges of more earnings reports and unemployment data later this week, 25 of 30 Dow names were higher in late trading.
Pfizer Shows Coronavirus Credibility
Blue-chip pharmaceuticals name Pfizer (NYSE:PFE) was in the upper tier of Dow winners today after the company and partner BioNTech (NASDAQ:BNTX) said they’ve commenced trials on an experimental coronavirus vaccine. If those trials pan out, the vaccine could be available later this year, said Pfizer CEO Albert Bourla in a news release:
“With our unique and robust clinical study program underway, starting in Europe and now the U.S., we look forward to advancing quickly and collaboratively with our partners at BioNTech and regulatory authorities to bring a safe and efficacious vaccine to the patients who need it most.”
Someone Said Something Nice About Boeing
The following may serve as a reminder of just weak a place Boeing (NYSE:BA) stock is in these days. Even with the benefit of some bullish analyst chatter, the stock was still the worst-performing name in the Dow today.
Earlier Tuesday, Benchmark analyst Josh Sullivan raised his rating on Boeing to a “buy” with a $180 price target, saying the controversial 737 Max jet could become a cash flow generator for the company.
“Further, the [roughly] 450 grounded 737 MAX’s are a source of cash and provide liquid finished inventory which can efficiently fill the ambiguous fits [and] starts of an airline recovery,” said the analyst.
Walt Disney (NYSE:DIS) reports earnings after the close today and as I’ve noted several times in recent weeks, with its theme parks closed, its cruises not sailing and no sports available for ESPN to broadcast (does Korean baseball count?), this is likely going to be a rough report for Disney.
LightShed Partners analyst Richard Greenfield is warning investors on the name ahead of today’s earnings update, cutting both his 2020 and 2021 earnings per share (EPS) estimates to $2.03 and $1.26, respectively, from $2.10 and $2.22.
“If our estimates are even close to realistic, we cannot see Disney’s stock price holding in at current levels,” said the analyst, who rates Disney “sell.”
The Dow’s financial services names trader higher today, but credit writedowns are a potential problem for the group. Recall that increasing household debt. In a note out today, S&P Global Ratings shifted its outlook on large U.S. lenders to negative from stable, saying that consumer lending is under pressure due to Covid-19 economic shocks.
“The COVID-19 pandemic and the associated sharp contraction in the U.S. economy have abruptly ended a long period of good fortune for U.S. banks and created their greatest challenge since the 2008-2009 financial crisis,” said the ratings agency.
Bottom Line on the Dow Jones Today
By no means is the coronavirus coast clear, but with gradual reopenings taking place and the notion that the second quarter will be dreadful for the economy a known quantity at this point, some asset managers are advising investors to at least bring equity exposure back up to standard allocations.
“We prefer re-balancing equity exposure back up to target, though the ongoing policy response has helped equities stage a sizable rebound,” said BlackRock. “Equities remain a key source of return in strategic portfolios even when considering changing fundamentals, in our view.”
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.