Stocks Tumble as Earnings, Data Sap Recent Optimism…..

The U.S. equity markets finished with solid losses, dousing early notion of stocks finishing with weekly gains, as a slew of earnings and economic data continued to illustrate the dramatic disruption of the COVID-19 pandemic, and after President Trump threatened to slap new tariffs on China over its role in the coronavirus pandemic. The negative sentiment overshadowed recent optimism of the slow reopening of the U.S. economy and recent signs of progress on the virus treatment front out of the biotech sector. On the earnings front, Dow member Apple posted stronger-than-expected Q2 results but held off on providing Q3 guidance, while Amazon reported mixed results. Dow components Exxon Mobil and Chevron posted earnings north of the Street’s estimates but reduced their 2020 capital and operating expenditures, and Clorox rallied on its results and guidance. More disappointing economic news hit the tape, as April manufacturing reports from ISM and Markit both showed the contraction in the sector intensified. Treasury yields and the U.S. dollar were little changed, while gold and crude oil prices finished higher. Overseas, most markets were closed for holidays, but those that were open for business posted losses.

The Dow Jones Industrial Average fell 622 points (2.6%) to 23,724, the S&P 500 Index decreased 82 points (2.8%) to 2,831 and the Nasdaq Composite declined 285 points (3.2%) to 8,605. In moderately heavy volume, 923 million shares were traded on the NYSE and 3.7 billion shares changed hands on the NASDAQ. WTI crude oil gained $0.94 to $19.78 per barrel and wholesale gasoline lost $0.01 to $0.77 per gallon. Elsewhere, the Bloomberg gold spot price was $12.81 higher at $1,699.31 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 99.04. Markets were lower for the week, as the DJIA and the S&P 500 fell 0.2%, while the Nasdaq Composite shed 0.3%.

Dow member Apple Inc. (AAPL $289) reported fiscal Q2 earnings-per-share (EPS) of $2.55, up 4.0% year-over-year (y/y) and above the $2.24 FactSet estimate, with revenues ticking 0.5% higher y/y to $58.3 billion, north of the Street’s $54.8 billion estimate. The company’s iPhone, iPad and Mac revenues all topped forecasts, while its wearables, home and accessories sales were a bit shy of expectations. AAPL’s services revenues came in north of expectations. The company declined to give guidance for Q3 but announced that it has authorized an increase of $50.0 billion to its existing share repurchase program and an increase of 6.0% to its quarterly dividend to $0.80 per share.

AAPL said, “Despite COVID-19’s unprecedented global impact, we’re proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables.” The company added that in this difficult environment, its users are depending on its products in renewed ways to stay connected, informed, creative, and productive. Shares finished lower. Inc. (AMZN $2,286) posted Q1 EPS of $5.01, down from $7.09 a year ago, and compared to the forecasted $6.22, as revenues grew 26.4% y/y to $75.5 billion, north of the projected $73.7 billion. AMZN issued Q2 revenue guidance with a midpoint that was above estimates but its operating income outlook came in well below expectations, assuming approximately $4.0 billion of costs related to COVID-19, aimed at getting products to customers and keeping its employees safe. AMZN said, “From online shopping to AWS to Prime Video and Fire TV, the current crisis is demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced.” Shares fell.

Clorox Company (CLX $193) reported a fiscal Q3 profit of $1.89 per share, compared to the $1.44 a year ago, above the Street’s forecast of $1.67 per share, on a 15% increase in sales to $1.78 billion, also topping expectations of $1.71 billion. The consumer product maker said it saw a 32% jump in revenue from its cleaning segment, citing increased consumer demand for its disinfectant wipes, bleach and Pine-Sol items amid the coronavirus pandemic. As a result CLX said it sees growth in organic sales for the year—excluding acquisitions, divestitures and foreign exchange—in a range of 6% to 8% and full-year EPS of $6.70 to $6.90, well above earlier guidance provided in February of sales growth of 2% and EPS of $6.25. Shares of CLX rallied.

The April Institute for Supply Management (ISM) Manufacturing Index fell to 41.5 from March’s unrevised 49.1 level, but above the Bloomberg forecast of a drop to 36.0. The index fell further into contraction territory (a reading below 50) and hit the lowest level since April 2009 as new orders tumbled to 27.1 from 42.2, production fell to 27.5 from 47.7, and employment dropped to 27.5 from 43.8. The ISM said comments from the survey were “strongly negative” regarding the near-term outlook, with sentiment clearly impacted by the coronavirus pandemic and continuing energy market recession.

The final Markit U.S. Manufacturing PMI Index was revised lower to 36.1 for April, versus expectations to be adjusted to 36.7 from the preliminary estimate of 36.9, and below March’s 48.5 level. A reading below 50 denotes contraction. The release is independent and differs from ISM’s report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.

Construction spending unexpectedly rose, gaining 0.9% month-over-month (m/m) in March, versus projections of a 3.5% drop, and following February’s downwardly-revised 2.5% decrease. Residential spending rose 2.3% m/m more than offsetting a 0.1% dip for non-residential spending.

Treasuries were little changed, with the yields on the 2-year and 10-year notes were flat at 0.19% and 0.64%, respectively, while the yield on the 30-year bond ticked 1 basis point (bp) lower to 1.27%.

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