After some discouraging comments from Warren Buffett over the weekend and U.S.-China trade concerns, equities opened lower in the stock market today. Of course, it didn’t help that a number of global equities were under pressure ahead of the open.
However, U.S. stocks battled higher, setting the low in the first 15 minutes of trading. After mostly sideways action, the S&P 500 resolved higher. The index finished higher by 0.42% on Monday, as bulls get set for another busy week of earnings.
Buy Energy Stocks?
Goldman Sachs analysts are cycling through some energy names. They upgraded ConocoPhillips (NYSE:COP) from a “buy” rating to “conviction buy.” The analysts are looking for shares to hit $51, up from $38, and comes as they drop Chevron (NYSE:CVX) from the conviction buy list.
Chevron has solid cash flow, good leverage in the industry and a solid balance sheet. But the risk-reward balance with ConocoPhillips is apparently better. Note that Goldman is maintaining CVX as a “buy.”
The fundamentals are bottoming for the energy sector, the analysts argue. When oil prices eventually rebound, ConocoPhillips will be in a solid position to benefit from the coming upcycle.
Don’t Forget the Fed
As for the Federal Reserve, the liquidity drums bangs on. Although the plan was previously announced, many investors have likely forgot about the Federal Reserve’s intention to provide liquidity to credit markets via exchange-traded funds.
It will begin its purchases this month, initially allocating $50 billion to its Primary Market Corporate Credit Facility and $25 billion to its Secondary Market Corporate Credit Facility. The purchases will begin as soon as these facilities are operational.
The Fed plans to allocate up to $750 billion.
Movers in the Stock Market Today
Ford’s (NYSE:F) COO James Farley upped his stake in the company by 30%. He bought roughly 195,000 shares at $5.13 a share on April 30, bringing his total stake up to 828,000. Although Ford still fell 1.1% on the day, perhaps the insider purchase will give bulls some confidence.
By June 4, Uber’s (NYSE:UBER) UberEats will cease operations in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine and Uruguay. Remember, Uber wants to be dominant in the markets that it operates in. That means in the first or second position in terms of market share. The exit of its Eats business will not affect its Rides operation in those regions, while it’s meant to curb expenses.
Today J. Crew became the first major retailer to unravel during the pandemic and file for Chapter 11 bankruptcy protection. The company agreed to convert $1.65 billion of its debt into equity. After talks of taking its Madewell brand public, J. Crew plans keep its hands on it for now.
As many businesses continue to struggle with this pandemic, Gold’s Gym also joined the bankruptcy club. Who’s next?
Apple (NASDAQ:AAPL) is taking advantage of lower interest rates. With its powerful balance sheet and robust cash flow, the company took to raising several billion dollars in low-interest debt. That’s as the 10-year Treasury yield sits just a few basis points over 0.60%. So far, the market has seen more than $800 billion of investment-grade debt raised this year, making it the fastest start to the year for this much debt.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL.