Stocks chased global markets lower Monday, as investors reacted to a historical sell-off in U.S. oil prices. Increases in reported coronavirus cases slowed Monday, as testing declines continued in the U.S. Deaths from the virus also slowed, following a sharp spike on Friday. A hanful of coronavirus stocks advanced, as oil-related issues weighed heavily on early trade. Exxon Mobil (XOM) and Chevron (CVX) ground out big early declines on the Dow Jones today, as oil prices collapsed to a 21-year low.
XThe Dow Jones industrials dragged 1.8% lower at the starting bell. S&P 500 futures dropped 1.2%. The Nasdaq, which feels smuch less oil-industry impact, shed 0.8% on the stock market today. Early premarket action had been positive, on news of progress toward a second round of federal support for small busines and hospitals grappling with the impact of the coronavirus pandemic.
Last week's bullish advance showed the market's confirmed uptrend gaining strength. But investors should be aware of the five factors likely to determine the market's course for May
Oil stocks held eight of the S&P 500's 10 worst declines at Monday's open. United Airlines Holdings (UAL) was also among the early casualties, down 6.5%, after warning of a wider-than-expected loss, and plans to request $4.5 billion under the Coronavirus Air, Relief and Economic Security Act.
Netflix (NFLX) vaulted to top the S&P 500 and the Nasdaq 100, up 3.8% ahead of its first-quarter report, due on Tuesday. The IBD Leaderboard stock is extended after an April 13 breakout. IBD Long-Term Leader stock Alibaba Group Holdings (BABA) added 0.4%, rising within a short-term buy zone on IBD's Swingtrader stock tracker.
Amazon.com (AMZN) rattled off an early 1.7% advance. Amazon stock, also an IBD LEaderboard name, is extended after a breakout from a cup base last week.
Also on the S&P 500, Flir Systems (FLIR) jumped 2.5% in early trade. Chemicals maker DuPont (DD) added 0.8% as JPMorgan upgraded the stock after the company updated its first-quarter guidance.
United and American Airlines (AAL) traded near the bottom of the Nasdaq 100. Western Digital (WDC) and Tesla (TSLA) each gave up 4%.
Oilfield services heavyweight Halliburton (HAL) picked a bad day to report earnings, diving nearly 7% despite a better-than-expected first-quarter report. HVAC leader Lennox (LII) tumbled 5.6% after a big earnings miss. Auto loan specialist Ally Financial (ALLY) shed 6.5% as investors dug into its Q1 results.
Gear up for a critical week's market action by reading IBD's Investing Action Plan.
Dow Jones Today: Exxon, Chevron Slide; IBM Reports
Exxon and Chevron dived more than 4% apiece, to the bottom of the Dow Jones today, as energy sector names came under a clear threat from faltering oil demand. Exxon had recovered 43%, Chevron 71%, since mid-March. But both stocks remained deep in 11-month corrections.
IBM slipped 0.9%, ahead of its first-quarter results due out after today's close. Intel (INTC) announces after Thursday's market close. American Express (AXP) announces Friday morning.
Coronavirus Stocks: Co-Diagnostics, Alexion, Vertex Rise
Some coronavirus-related stocks rose against the undertow. Test kit maker Co-Diagnostics (CODX) spiked more than 10% after its chief executive reported increasing test kit sales to more than a dozen states. Testing is increasingly becoming a critical factor for the revival of U.S. economic activity. Co-Diagnostics is climbing the right side of a seven-week cup base.
Germany-based biotech BioNTech (BNTX) clibmed 2%. The volatile October IPO broke explosively out of a 10-week cup base on March 16. Shares spiked 115% in the week following the breakout, then retraced to end Friday 17% below the 48.95 entry. BioNTech is partners with Pfizer (PFE) in the development of multiple coronavirus vaccine candidates.
Alexion Pharmaceuticals (ALXN) powered up 1.8% after the open. The company announced plans to launch phase 3 clinical trials of its Ultomiris as a potential treatment for Covid-19 patients. Alexion stock is attempting to scale up from the bottom of a year-long consolidation, and has gained 46% since mid-March.
Vertex Pharmaceuticals (VRTX), which is extended after a breakout last week from a cup base, tacked on 1.4% in premarket trade.
Oil Prices Unravel To 21-Year Low
The overhanging question for Monday will be the impact of falling U.S. oil prices. The U.S. benchmark West Texas Intermediate crude is in the midst of its fourth-straight monthly decline, down 10.8% so far in April to trade 72% below a January high. WTI oil prices collapsed an additional 38% early Monday, moving to near $11 a barrel — and to their lowest level since February 1999. Europe's Brent crude backed off 6% to $26.36.
U.S. drilling rig activity had already declined 35% over the past month as U.S. and international lockdowns carged deeply into fuel demand. Heavily-leveraged U.S. oil producers are poised at the edge of a bankruptcy rush — following a record number of bankruptcies recorded in the sector in 2019. A rising wave of bankruptcies, in turn, threatens to spin out to the financial sector and into the banks and funds holding that debt.
Storage is creeping toward the upped end of capacity at key oil transport hubs, most notably Cushing, OK. Reuters reported Saturday that oil producers and traders had parked a record 160 million barrels offshore in tankers, double the level from two weeks earlier.
The apparent trigger for Monday's deep declines was data out of Japan showing a 12% drop in March exports — just the latest metric of the demand destruction underway in relation to the coronavirus pandemic. Tokyo's Nikkei 225 skidded 1.2% lower Monday, while markets in China ended briskly mixed.
Europe followed Japan's lead, with the CAC-40 in Paris and Frankfurt's DAX each down more than 1% in afternoon trade. London's FTSE 100 was down 0.7%.
Dow Jones Today: A 10% Month For the Dow
Thirteen trading days into the month, and April is on track for the Dow and S&P 500's first monthly advance in 2020. The Dow ended last week with a 10.6% gain so far for the month. The S&P 500 was ahead 11.2%. The Nasdaq (which had posted a 2% gain in January) had a 12.3% April gain.
The Dow does not toss out a month of more-than 10% gains for light and transient reasons. Its performance for April, through Friday, is the largest monthly advance since October 2002. That was the month in which the market marked the bottom to the 22-month market collapse that began in January 2000, and which included the impact of the terrorist attacks of Sept. 11, 2001.
The Dow posted a 10.6% rebound in October 2002, followed by a 5.9% gain in November. That rally faltered, falling back for three months, but holding above the Dow's Oct. 10, 2002 low. Stocks then launched into a five-month rally in March 2003, initiating a 43-month uptrend that boosted the Dow until financial markets began to unravel in October 2007.
No two market recoveries behave alike. But keeping an eye on history can provide useful perspective as the stock market stages such history-making recoveries. For the latest on how stock market action informs the current confirmed uptrend, be sure to read the Big Picture, and follow IBD Live.
Coronavirus Update: Growth Rates
The cumulative number of confirmed cases of coronavirus was rapidly approaching the 2.5 million mark, up 69,123 in the 24 hours to Monday morning to 2.419 million cases now recorded worldwide. That was an increase of 2.9%, vs. the 4.9% rise marked on Friday morning. Another 4,505 persons died, lifting the total to 165,775 – slowing the increase in deaths to a 2.8% rise, compared to a 9% surge on Friday.
In the U.S., 25,342 reported new cases were confirmed, down sharply from Friday's rise of more than 33,000. Reported new cases result only from the number of tests conducted, and are a poor gauge of the actual spread of the virus, which remains largely unknown. Monday's newly reported cases brought the current cumulative total to 764,265 – up 3.4% over the past 24 hours, lifting the U.S. share of the global total number of coronavirus cases to nearly 32%.
The number of deaths rose by 1,550, bringing the rate of increase back below 4%, following a 21% surge on Friday. That puts the number of U.S. deaths from the virus at 40,565. The bulk of those deaths occurred in New York state, which has so far reported 18,298 deaths – 45% of the U.S. total.
The growth in the number of active cases held steady through Sunday at around 3.4%. That raised the number of infected persons currently being treated or quarantined to 652,874 on Sunday – more than three times what it was at the end of March. The growth rate of those active cases slowed from around 14% at the start of the month.
Dow Jones Today: IBM Earnings, Intel Base
Dow Jones stocks are off to a mixed start to the first-quarter reporting season after Goldman Sachs (GS), JPMorgan (JPM), UnitedHealth Group (UNH) and Johnson & Johnson (JNJ) reported last week.
Johnson & Johnson clocked a strong week, its fourth straight weekly advance, after reporting a solid earnings beat on Tuesday. Shares soared 7.6% for the week, ending less than 2% below a 151.60 buy point in a 10-week cup base.
UnitedHealth logged an even stronger week, rallying 9.9% after topping analysts' first-quarter targets. Shares ended a shade less than 6% below a 306.81 buy point in an eight-week cup base. Aggressive investors might also consider a buy point at 295.94.
IBM (IBM) reports after today's closing bell. Intel (INTC) announces after Thursday's market close. American Express (AXP) announces Friday morning.
American Express and IBM are still fairly beaten down. Intel has tracked the generally chip sector upswing, fueled largely by the rally among data-center chipmakers. Intel has climbed 38% since March 16, moving up the right side of a cup-with-handle base pattern and retaking support at its 10-week line last week.
Intel stock briefly topped the base's 61.59 buy point Friday, then pulled back to end just below that entry.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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