Thursday Morning Reads

Thursday Morning Reads



Open Interest Changes:




Wednesday's advance put the S&P 500 up more than 13% for April, the index's biggest monthly increase since 1974, while futures extended the gains ahead of today's session. Optimism was driven by positive results from Gilead's (NASDAQ:GILD) remdesivir trial, which could help speed recovery from COVID-19, as well as strong earnings from Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB) that put the Nasdaq Composite on track to erase losses for the year. The Fed further pledged to use "its full range of tools to support the U.S. economy in this challenging time" and the news was enough to override data showing the U.S. economy (-4.8% GDP) had logged its worst quarterly performance since 2009.

Workforce statistics

Jobless claims data is set to grow in the millions this morning, with a consensus forecast of 3.5M filings last week to take the total figure over the past six-week period to at least 30M. At face value, the numbers imply a jump in the unemployment rate to above 15% for April, though it's unlikely that figure will be reported in the non-farm payrolls report next week. The government has allowed people temporarily unemployed for reasons related to COVID-19 to file for jobless benefits, even those quarantined with the expectation of returning to work and those leaving employment due to risk of exposure.

Earnings roundup

Seeing "signs of stability" after an initial steep decrease in March advertising revenue, Facebook (FB) shares soared 10% AH on Wednesday, while Microsoft (MSFTclimbed 2% as remote work boosted Teams and cloud services. Tesla (NASDAQ:TSLA) also rose 8% on a surprise Q1 profit and numbers that excited investors. Keep an eye out today for earnings from Apple (NASDAQ:AAPL), which has warned of a shortfall in March quarter sales, and Amazon (NASDAQ:AMZN), which has seen a massive surge in demand for online orders (don't forget AWS).

ECB eyed with eurozone economy in tailspin

Today's ECB meeting will be closely watched after the French (-5.8% GDP) and Spanish (-5.2% GDP) economies posted their sharpest contractions on record. The central bank has already launched a €750B Pandemic Emergency Purchase Program to weather the COVID-19 pandemic, putting it on track to buy a total of €1.1T in net assets this year. Besides a possible expansion to the program, the ECB is likely to focus on bubbling tensions across the bloc's financial system, and rein in yield spread expansions between core and so-called peripheral countries.
Go deeper: The eurozone economy contracted by 3.8% in Q1.

New age for Big Oil

"Given the continued deterioration in the macroeconomic outlook and significant mid- and long-term uncertainty," Royal Dutch Shell (RDS.ARDS.B) is slashing its quarterly dividend to $0.16, from $0.47 per share, for the first time since WWII. COVID-19 has slammed demand for oil, gas and related products, while crude recorded a historic plunge into negative territory earlier this month. Shell's adjusted current cost of supplies income, used as a proxy for net profit, slid 45% to $2.9B during the first quarter of 2020, compared with $5.3B a year earlier.
Go deeper: Exxon Mobil maintains dividend at $0.87.

Supply cuts

Western Europe's biggest oil producer, Norway, is joining international efforts to cut supply for the first time in almost two decades. "We will cut production by 250K barrels per day in June and by 134K bpd in the second half of 2020. In addition, the start-up of production of several fields will be delayed until 2021," Oil Minister Tina Bru declared. The Nordic nation's annual average crude oil production slipped to a 30-year low of 1.4M bpd in 2019, but stood at 1.75M bpd in February, up 26% from a year ago. Data from the EIA yesterday also showed U.S. crude inventory building slightly less than estimates, suggesting a pick up in fuel demand.
Go deeper: Energy demand set to fall most on record.

Clash of tech titans

As states mull whether to reopen businesses, two of Silicon Valley's most iconic billionaires clashed over lockdown measures during their post-earnings conference calls. "I worry that reopening certain places too quickly before inaction rates have been reduced to very minimal levels will almost guarantee future outbreaks and worsen longer-term health and economic outcomes," said Facebook's (FB) Mark Zuckerberg. "To say that they cannot leave their house, and they will be arrested if they do, this is fascist," Tesla's (TSLA) Elon Musk told analysts. With both companies based in the San Francisco Bay area, could it be that the opinions stem from operating in vastly different industries - online vs. manufacturing?


SoftBank (OTCPK:SFTBY) has widened its record annual loss forecast to ¥900B ($8.4B), from ¥750B ($7B), as it calculates the bottom line hit from souring investments before it releases earnings on May 18. Triggering the updated outlook are expectations of a ¥700B loss ($6.6B) on its investment in WeWork (WE) which the tech conglomerate holds outside of its $100B Vision Fund (it has poured more than $13.5B in the office-sharing firm so far). Beyond the losses, SoftBank is also being sued by WeWork for its decision to back out of a $3B tender offer that was agreed upon in October 2019.

Masks the new normal

Effective Monday, May 4, most U.S. Costco (NASDAQ:COST) locations and Costco gas stations will return to regular operating hours. Customers and employees alike will be required to wear face coverings or masks, though the rule does not apply to children under the age of 2 or to individuals who are unable to comply due to a medical condition. "The use of a face covering should not be seen as a substitute for social distancing," the company said in a statement.

What else is happening...

Chesapeake Energy (NYSE:CHKpreparing bankruptcy filing - Reuters.

Emergency loans to the U.S. oil industry? (NASDAQ:JDapplies for $3B Hong Kong secondary listing.

Crypto on a tear as Bitcoin (BTC-USD) tops $9,000.

Lyft (NASDAQ:LYFT) to slash workforce by about 17%.

Hertz (NYSE:HTZnegotiates relief or bailout as bankruptcy looms.

Wednesday's Key Earnings
Annaly Capital (NYSE:NLY+2.7% AH weathering Q1, poised for opportunities.
AstraZeneca (NYSE:AZN-0.5% despite robust results, affirming outlook.
Boeing (NYSE:BA+5.9% on steps to preserve investment grade rating.
eBay (NASDAQ:EBAY-3.2% AH on hit to classifieds business.
Facebook (FB+10.5% AH as ad sales 'stabilized.'
Enterprise Products (NYSE:EPD+9.3% cutting $1B from 2020 capex budget.
General Dynamics (NYSE:GD+0.1% missing expectations.
General Electric (NYSE:GE-3.2% as coronavirus whacked $1B from FCF.
Mastercard (NYSE:MA+7.1% beating estimates.
Microsoft (MSFT+2.2% AH seeing "minimal" COVID-19 impacts.
Northrop Grumman (NYSE:NOC-3.7% posting light guidance.
Qualcomm (NASDAQ:QCOM+2.9% AH reporting higher revenue.
Spotify (NYSE:SPOT+11.5% on soaring usage, paid subscribers.
Tesla (TSLA+8.7% AH following surprise Q1 profit.
Valero Energy (NYSE:VLO+14.5% seeing gradual gasoline demand recovery.
Yum! Brands (NYSE:YUM-0.9% on mixed results.

Today's Markets
In Asia, Japan +2.1%. Hong Kong closed. China +1.3%. India +3.1%.
In Europe, at midday, London -0.5%. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:20, Dow +0.4%. S&P +0.2%. Nasdaq +0.6%. Crude +16.1% to $17.48. Gold +0.9% to $1729. Bitcoin +18.6% to $9389.
Ten-year Treasury Yield -2 bps to 0.61%

Today's Economic Calendar
8:30 Initial Jobless Claims
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
10:30 EIA Natural Gas Inventory
3:00 Farm Prices
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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