Wall Street Week Ahead for the trading week beginning March 30th, 2020 : stocks

Wall Street Week Ahead for the trading week beginning March 30th, 2020 : stocks

Good Saturday morning to all of you here on r/stocks. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading week ahead.

Here is everything you need to know to get you ready for the trading week beginning March 30th, 2020.

What could be ‘shocker’ economic reports may test stocks in week ahead – (Source)

Everything from auto sales to manufacturing surveys and employment data in the coming week will likely paint a bleak picture of how much the first weeks of the coronavirus shutdown have already hit the economy.


Market turbulence is expected to remain high, though volatile moves in the past week were largely to the upside. The S&P 500, by Thursday, had soared 20% intraday off its Monday low, before giving up some gains Friday. For the week, the S&P 500 was up 10.3% at 2,541.


The market’s rip higher ignited a debate about whether stocks have now bottomed, and that discussion will carry on into the week ahead. Some major investors like billionaire investor Leon Cooperman and BlackRock’s Rick Rieder believe stocks may have hit their lows. Other strategists say the market needs to see a retest before a bottom can be called.


“It’s amazing to me that people are so bullish when virus cases are accelerating and economic growth is deteriorating,” said Richard Bernstein, CEO Richard Bernstein Advisors. “I could see it if cases peaked out, and the economy is troughing.”


It’s the economy

In the coming week, the big number to watch could again be Thursday’s weekly jobless claims, up a record 3.2 million for the week ended March 21, as the shutdown of stores, restaurants, and other businesses across the country resulted in immediate layoffs.


Economists expect several million more claims to be filed for the past week, and they are looking at that new claims report as potentially more important than Friday’s March employment report. The survey week for the March jobs report was ahead of some of the major shutdowns by the states most impacted by the virus. Economists expect nonfarm payrolls to drop by 56,000 in March, according to Dow Jones.


Other data could show some of the early signs of an economy brought to a standstill. There are auto sales and ISM manufacturing releases on Wednesday, both March reports. Service sector data will be released Friday.


Market focus will be more intensely focused on the economic data, shifting from the $2 trillion aid bill, signed by President Donald Trump on Friday. Economists expect the economy already may be in a slowdown and that it should trough with a double-digit decline in the nation’s gross domestic product in the second quarter.


Vehicle sales will be reported Wednesday, and sales are expected to have come to a near standstill even though shuttered dealerships continue trying to deliver autos to buyers.


For “car sales, I would think the drop would be more precipitous,” said Diane Swonk, chief economist at Grant Thornton. “They shut down in every major market. Even though they’re offering deliveries and all that stuff, it’s going to be a shocker … large double digit decline.”


Auto sales were at an annualized pace of 16.8 million in February, and some economists say the number in March could be closer to 12 million.


Congress passed a $2 trillion aid package to help put cash in the hands of workers and companies, so they can weather the effects of a shutdown.


Separately, the Fed has delivered a massive amount of monetary stimulus that has helped ease up some of the problems in illiquid credit and even the Treasury market. It has been buying Treasury and mortgage-backed securities at a record pace of $70 billion a day, and markets are focused on when the Fed will alter the size of its purchases, which are open-ended.


“This week, plus last week was more than $600 billion. It’s monumental.” said Michael Schumacher, director, rates at Wells Fargo. The Fed said it was reducing the purchases to $60 billion a day, which is the amount it had been buying in a one-month period.


Stimulus one-two punch

The double-barreled boost to markets from the Fed’s policy and the prospect of the fiscal spending package helped fire up the mid-week rally in stocks.


“Even though the market, from the intraday low on March 23 through the intraday high on March 26, soared more than 20%, which to many is the definition of a new bull market, this low must be sustained before a new bull market can be crowned,” said Sam Stovall, chief investment strategist at CFRA. “We’ve got to maintain this recent low, in my opinion, for another six months before we can call this another bull market.”


Stovall said the S&P 500 is often higher in April, though this year it may not be. The S&P is down about 14% for the month of March so far. Since World War II, April has been the second best month for the S&P, which has been up an average 1.5% and higher 71% of the time.


The big rally in stocks this week is not an unusual occurrence in a bear market, Stovall said. “There have been multiple times in history – 1973/1974, 2001/2002, and combined with 2008, 2009, that we saw 20 plus percent rallies before ultimately setting an even lower low.”


Stovall said it’s likely there will be a lower low. “The only think that causes me to say we may not retest the bottom is everybody is saying we need to retest the bottom,” he said. The S&P hit a low of 2,191 before bouncing higher.


Credit un-crunching

In addition to its Treasury and mortgage purchases, the Fed has cut rates to zero, added liquidity in the repo market and committed to creating vehicles to help corporate paper, municipal bonds and corporate debt.


“Stress levels in financial markets have receded in a meaningful way this week, thanks in no small part to the Fed’s aggressive moves. Leveraged loans rebounded somewhat in price yesterday, and the MBS market is seeing broadening improvement (though it is far from normal),” noted Stephen Stanley, chief economist at Amherst Pierpont.


Stanley said the Fed may not need to buy corporate bonds for now, based on new issuance activity in that market this week.


This past week saw the following moves in the S&P:

Major Indices for this past week:

Major Futures Markets as of Friday’s close:

Economic Calendar for the Week Ahead:

Sector Performance WTD, MTD, YTD:

Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday’s close:

S&P Sectors for the Past Week:

Major Indices Pullback/Correction Levels as of Friday’s close:

Major Indices Rally Levels as of Friday’s close:

Most Anticipated Earnings Releases for this week:

Here are the upcoming IPO’s for this week:

Friday’s Stock Analyst Upgrades & Downgrades:


Will the Fed’s Bold Moves Keep Yields from Rising?

With the major stock market indexes all entering a bear market this month, it’s no surprise that stocks have stolen most of the spotlight. However, actions taken by the Federal Reserve (Fed) to support what may be considered the safest part of the bond market, US Treasuries, may actually have more lasting implications for investors’ portfolios.

From February 19 through midday March 9, the yield on the 10-year Treasury fell an incredible 125 basis points (1.25%), briefly reaching an all-time low of just 0.31%. In fact, the 14-day relative strength index RSI on the 10-year yield, a technical measure of momentum, was more oversold than at any point since 1971. Since then yields came roaring back, trading as high as 1.27%, before fading back to near 0.8% currently.

It is logical to think that the incredibly bold moves from the Fed, including unlimited Treasuries purchases, will help keep yields down. But could yields actually rise from here after the Fed writes the bond market a blank check? History says yes, which seems counter-intuitive. For investors, it’s important to keep in mind that the combination of low starting yields and rising interest rates may lead to meager future fixed income returns.

As shown in the LPL Chart of the Day, following prior announcements of quantitative easing (Fed securities purchases), yields have actually risen. Part of that story is the market pricing in higher inflation expectations as a result of the “money printing.” Another piece is the market becoming more confident in economic recovery. “The massive injection of liquidity into the bond market by the Federal Reserve—in concert with fiscal stimulus—surely helps shore up the economy and credit marekts for an eventual recovery,” noted LPL Financial Sr. Market Strategist Ryan Detrick.

LPL Research forecasts the 10-year Treasury yield will end 2020 in the range of 1.25-1.75%. Outcomes outside of that range are certainly possible depending on how long it takes to get the pandemic under control.

If the roughly $2 trillion in fiscal stimulus is added to the Fed’s securities purchases, and additional lending capacity that the Fed’s new programs create, the economy will get a $5-6 trillion jolt in the next several months to help us get through this crisis to the other side. In a $22 trillion US economy, that is significant and far exceeds the stimulus that dug the economy out of a ditch after the 2008-2009 financial crisis. This human crisis is not over unfortunately, but the bold moves from policymakers should help lessen the blow. The size of hit became evident in Thursday’s massive spike in jobless claims. The economic data will get worse before it gets better, but visibility into the peak of this crisis is starting to come into view and markets—both stocks and bonds—may be beginning to sniff that out.


Making Sense of Skyrocketing Jobless Claims

Weekly new jobless claims were reported this morning, and to no one’s surprise they rose to levels thought unimaginable just a few weeks ago. As shown in the LPL Chart of the Day, 3.3 million people filed new claims for unemployment benefits in the week ending March 21, almost 5 times the previous high of 695,000 set in 1982.

“The personal and economic disruptions represented by the latest new claims number are staggering,” said LPL Chief Investment Officer Burt White. “This is a genuine human crisis, and a robust response from the Federal Reserve and Congress seems appropriate. Unfortunately, we do expect more numbers like this in the coming months. At the same time, markets are forward looking and will be more focused on how quickly we might be able to get to the other side.” Per LPL’s Chart of the Day:

While the number of new claims is extraordinary, it’s not entirely unexpected. The United States and countries across the globe have shut down entire segments of their economies in an effort to delay or disrupt the impact of the COVID-19 pandemic. Many of the jobs most impacted by social-distancing measures, such as cashiers, restaurant workers, and hotel staff, are in the services sector, which now makes up about 80% of the jobs in the United States.

There is no silver lining in a number like this, but there is reason for hope. The US economy was not in a recession prior to the global spread of COVID-19. Workers are not being let go because of some structural fault in the economy or a financial crisis. As a result, when the slowdown ends, we may not see the extended hiring delay that has typically followed recessions. In fact, a surge in demand may require extra hiring, although it may not take place until people are fully confident that social distancing is no longer necessary.

Markets may not be responding to the dramatic numbers seen this morning, but they have been absorbing the rapidly changing economic expectations it represents over the last few weeks. We’ll see a lot of this over the next couple of months: historic numbers with markets seemingly unmoved. But it’s not because they’re indifferent. Economic data is slow moving and backward looking, while our economic reality has been changing at an unprecedented pace. Even new unemployment claims, which are released weekly, seem somewhat stale. Markets will still be reacting to shifting expectations of the depth and duration of the slowdown, as well as the effectiveness of policies to help businesses and workers get to the other side.


Market Volatility Stresses Liquidity

The COVID-19 pandemic has caused unprecedented volatility in recent weeks that has investors and traders scrambling to assess the economic and market impact of the aggressive containment measures.

This past week the CBOE Volatility Index (VIX), which measures the implied 30-day volatility of the S&P 500 Index based on options contracts, measured its highest reading since its inception at over 82—besting the prior high set during the financial crisis in 2008-2009, shown in the chart below. That is saying something.

As market participants have sought shelter from the storm in traditional safe havens such as US Treasuries, gold, or cash, we have seen signs that liquidity has dried up. All that means is buyers have become more tentative, demanding lower prices to get trades done due to the historic volatility and heightened uncertainty. That in turn can lead to wider bid-ask spreads for market participants—both retail investors and institutions—and we sometimes see a dollar of value selling for 95 cents, if not less.

We have seen some of this in the corporate bond markets in recent days. Even short-maturity, high-quality investment grade corporate bond strategies have seen market prices disconnect with their fair value, as measured by net asset value (NAV). That metric essentially adds up the value of individual bonds in a portfolio such as an exchange-traded fund, which should in theory match the market price of the security that we all see on our screens.

“In volatile markets, quality items go on sale to clear the racks because there aren’t a lot of shoppers walking through the malls,” noted Ryan Detrick, LPL Financial Senior Market Strategist. “Improving liquidity in all markets can help restore investor confidence after being shaken the past few weeks.”

At their worst, these conditions can translate into serious dislocations, such as those experienced during the financial crisis when banks didn’t trust each other enough to make overnight loans and credit froze up. Short-term lending is a necessary lubricant for economic activity.

Investors can get hurt selling into these dislocated markets. This is where the Federal Reserve (Fed) comes in. The programs the Fed launched on Monday, March 23—including buying large amounts of corporate bonds—are aimed at restoring health to credit markets. The central bank’s aggressive bond purchases (as much as needed) should help restore orderly trading in corporate bonds and narrow spreads, a measure of risk, which have widened significantly in recent weeks. As shown in the chart below, spreads are still well short of 2008-2009 highs.

There is some other good news here. These dislocations can present opportunities for buyers to get discounts they may not otherwise see in normally functioning market environments. We aren’t suggesting running out and buying securities trading at the biggest discounts to their intrinsic value. Instead, we are highlighting that attractive opportunities are emerging in the corporate bond market, particularly in strategies focused on strong companies that may emerge on the other side of this crisis as leaders of the economic rebound.


Time In The Market Versus Timing The Market

The incredible volatility continues, with the S&P 500 Index now in one of its worst bear markets ever, along the way making the quickest move from an all-time high to down 30% at only 22 days. What is a long-term investor to do?

“Although market timing is very alluring to investors, especially after the past few weeks, the reality is timing things incorrectly can set you back significantly,” explained LPL Financial Senior Market Strategist Ryan Detrick. “In fact, if you started in 1990 and missed the best day of the year each year for the S&P 500, your annual return was nearly cut in half.”

As shown in the LPL Chart of the Day, the annualized return for the S&P 500 from 1990 to 2019 was 7.7%. Yet, if all you missed was the best day of the year, that return dropped to only 3.9%. Miss the best two days of each year, and you were up less than 1% a year. Taking it to the extreme, if you missed the best 20 days of each year, you’d be down 27% per year.

No one can consistently pick the best or worst days of the year, so this is why it can be so dangerous for investors to miss time in the market by trying to time the market. If you miss one or two big days, compounded over time, this can greatly impact your portfolio.


Boeing (BA) Sends the Dow Flying

Turnaround Tuesday has carried into hump day with the Dow up well over 5% again today as of this writing. As we mentioned in an earlier post, that means the Dow is on track for its first back-to-back up days for the first time since early February. Remarkably, even with only two consecutive up days, the index is closing in on exiting a bear market. For that to happen, the Dow would need to close above the 22,310.32 level which is 20% off of the bear market closing low (Monday’s close at 18,591.93). At today’s high, the Dow was less than 300 points or 1.32% from that level.

As for the individual stocks contributing to the rally, Boeing (BA) deserves a lot of thanks. The stock has been hit very hard during the sell-off. Whereas the stock has traded in the mid-$300 for much of the past two years and up to mid-February, as of late last week BA had fallen below $100. That massive drop in price means that day to day movements in the stock would have a lesser impact on the level of the price-weighted Dow. In spite of this, BA has contributed over 400 points to the Dow’s rally in the past two days alone! That is much more than any other stock in the index with the next biggest contributor being UnitedHealth (UNH) who’s 335.44 point contribution comes as its share price is currently around $100 more than BA. BA’s contribution is also almost 200 points more than those of McDonald’s (MCD), Visa (V), and Apple (AAPL). Of all 30 Dow stocks, there is only one that is down over the past couple of days, subtracting from the index’s rally: Walmart (WMT). Given WMT has held up fairly well recently, its performance is yet another example of investors’ focus on the more beaten down names that we have noted earlier today and in last night’s Closer.


Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-


  • $RH

  • $BB

  • $VFF

  • $CHWY

  • $KMX

  • $WBA

  • $PAYS

  • $TTNP

  • $STZ

  • $CALM

  • $GNLN

  • $CSU

  • $CAG

  • $MKC

  • $RMBL

  • $GPL

  • $HEXO

  • $PVH

  • $DARE

  • $CTEK

  • $CYD

  • $NVCN

  • $LW

  • $AYI

  • $ICLK

  • $ALPN

  • $APOG

  • $UNF

  • $EAST

  • $SMTS

  • $CSSE

  • $SCHN

  • $LNDC

  • $NG

  • $RECN

  • $EDAP

  • $APTX

  • $ASND

  • $VRNT

  • $MOTS

  • $VERO



Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:


Monday 3.30.20 Before Market Open:

Monday 3.30.20 After Market Close:


Tuesday 3.31.20 Before Market Open:

Tuesday 3.31.20 After Market Close:


Wednesday 4.1.20 Before Market Open:

Wednesday 4.1.20 After Market Close:


Thursday 4.2.20 Before Market Open:

Thursday 4.2.20 After Market Close:


Friday 4.3.20 Before Market Open:


Friday 4.3.20 After Market Close:

(CLICK HERE FOR FRIDAY’S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

NONE.


RH $110.93

RH (RH) is confirmed to report earnings at approximately 4:20 PM ET on Monday, March 30, 2020. The consensus earnings estimate is $3.59 per share on revenue of $709.42 million and the Earnings Whisper ® number is $3.74 per share. Investor sentiment going into the company’s earnings release has 81% expecting an earnings beat The company’s guidance was for earnings of $3.50 to $3.62 per share on revenue of $703.00 million to $712.00 million. Consensus estimates are for year-over-year earnings growth of 19.67% with revenue increasing by 5.74%. Short interest has decreased by 10.6% since the company’s last earnings release while the stock has drifted lower by 47.2% from its open following the earnings release to be 35.0% below its 200 day moving average of $170.64. Overall earnings estimates have been revised higher since the company’s last earnings release. On Friday, March 13, 2020 there was some notable buying of 2,037 contracts of the $125.00 call expiring on Friday, May 15, 2020. Option traders are pricing in a 27.2% move on earnings and the stock has averaged a 13.4% move in recent quarters.


BlackBerry Limited $3.81

BlackBerry Limited (BB) is confirmed to report earnings after the market closes on Tuesday, March 31, 2020. The consensus earnings estimate is $0.04 per share and the Earnings Whisper ® number is $0.05 per share. Investor sentiment going into the company’s earnings release has 77% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 76.47% with revenue increasing by 291.76%. Short interest has increased by 44.2% since the company’s last earnings release while the stock has drifted lower by 37.3% from its open following the earnings release to be 38.6% below its 200 day moving average of $6.21. Overall earnings estimates have been unchanged since the company’s last earnings release. On Friday, March 13, 2020 there was some notable buying of 13,415 contracts of the $10.00 put expiring on Friday, January 15, 2021. Option traders are pricing in a 19.0% move on earnings and the stock has averaged a 12.0% move in recent quarters.


Village Farms International $3.47

Village Farms International (VFF) is confirmed to report earnings at approximately 5:00 PM ET on Monday, March 30, 2020. The consensus earnings estimate is $0.03 per share on revenue of $41.96 million and the Earnings Whisper ® number is $0.04 per share. Investor sentiment going into the company’s earnings release has 78% expecting an earnings beat. Short interest has increased by 23.2% since the company’s last earnings release while the stock has drifted lower by 40.2% from its open following the earnings release to be 58.3% below its 200 day moving average of $8.31. Overall earnings estimates have been revised lower since the company’s last earnings release. On Wednesday, March 18, 2020 there was some notable buying of 668 contracts of the $6.00 call expiring on Friday, September 18, 2020. Option traders are pricing in a 33.9% move on earnings and the stock has averaged a 4.6% move in recent quarters.


Chewy, Inc. $36.16

Chewy, Inc. (CHWY) is confirmed to report earnings at approximately 4:15 PM ET on Thursday, April 2, 2020. The consensus estimate is for a loss of $0.17 per share on revenue of $1.35 billion and the Earnings Whisper ® number is ($0.16) per share. Investor sentiment going into the company’s earnings release has 71% expecting an earnings beat. Short interest has decreased by 13.6% since the company’s last earnings release while the stock has drifted higher by 50.7% from its open following the earnings release to be 24.5% above its 200 day moving average of $29.04. Overall earnings estimates have been revised lower since the company’s last earnings release. The stock has averaged a 6.1% move on earnings in recent quarters.


CarMax, Inc. $58.93

CarMax, Inc. (KMX) is confirmed to report earnings at approximately 6:50 AM ET on Thursday, April 2, 2020. The consensus earnings estimate is $1.12 per share on revenue of $4.65 billion and the Earnings Whisper ® number is $1.10 per share. Investor sentiment going into the company’s earnings release has 65% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 0.88% with revenue increasing by 7.67%. Short interest has decreased by 17.7% since the company’s last earnings release while the stock has drifted lower by 37.6% from its open following the earnings release to be 33.0% below its 200 day moving average of $87.96. Overall earnings estimates have been revised lower since the company’s last earnings release. On Thursday, March 19, 2020 there was some notable buying of 1,206 contracts of the $30.00 put expiring on Friday, July 17, 2020. Option traders are pricing in a 21.3% move on earnings and the stock has averaged a 4.1% move in recent quarters.


Walgreens Boots Alliance Inc $44.00

Walgreens Boots Alliance Inc (WBA) is confirmed to report earnings at approximately 7:00 AM ET on Thursday, April 2, 2020. The consensus earnings estimate is $1.44 per share on revenue of $35.30 billion and the Earnings Whisper ® number is $1.50 per share. Investor sentiment going into the company’s earnings release has 59% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 13.77% with revenue increasing by 2.24%. Short interest has decreased by 1.0% since the company’s last earnings release while the stock has drifted lower by 21.5% from its open following the earnings release to be 18.5% below its 200 day moving average of $54.00. Overall earnings estimates have been revised lower since the company’s last earnings release. On Thursday, March 19, 2020 there was some notable buying of 8,804 contracts of the $55.00 call expiring on Friday, April 17, 2020. Option traders are pricing in a 21.5% move on earnings and the stock has averaged a 5.1% move in recent quarters.


Paysign, Inc. $5.44

Paysign, Inc. (PAYS) is confirmed to report earnings at approximately 4:00 PM ET on Tuesday, March 31, 2020. Investor sentiment going into the company’s earnings release has 69% expecting an earnings beat. Short interest has increased by 10.0% since the company’s last earnings release while the stock has drifted lower by 49.5% from its open following the earnings release to be 54.6% below its 200 day moving average of $11.98. Overall earnings estimates have been revised lower since the company’s last earnings release. The stock has averaged a 11.3% move on earnings in recent quarters.


Titan Pharmaceuticals, Inc. $0.25

Titan Pharmaceuticals, Inc. (TTNP) is confirmed to report earnings at approximately 4:00 PM ET on Monday, March 30, 2020. Investor sentiment going into the company’s earnings release has 71% expecting an earnings beat. Short interest has increased by 222.9% since the company’s last earnings release while the stock has drifted higher by 49.0% from its open following the earnings release to be 58.5% below its 200 day moving average of $0.60. The stock has averaged a 15.6% move on earnings in recent quarters.


Constellation Brands, Inc. $144.88

Constellation Brands, Inc. (STZ) is confirmed to report earnings at approximately 7:30 AM ET on Friday, April 3, 2020. The consensus earnings estimate is $1.62 per share on revenue of $1.84 billion and the Earnings Whisper ® number is $1.75 per share. Investor sentiment going into the company’s earnings release has 59% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 11.96% with revenue decreasing by 6.50%. Short interest has decreased by 27.3% since the company’s last earnings release while the stock has drifted lower by 23.2% from its open following the earnings release to be 23.0% below its 200 day moving average of $188.19. Overall earnings estimates have been revised lower since the company’s last earnings release. On Friday, March 13, 2020 there was some notable buying of 1,502 contracts of the $100.00 put expiring on Friday, October 16, 2020. Option traders are pricing in a 15.0% move on earnings and the stock has averaged a 6.5% move in recent quarters.


Greenlane Holdings, Inc. $2.16

Greenlane Holdings, Inc. (GNLN) is confirmed to report earnings at approximately 7:00 AM ET on Monday, March 30, 2020. The consensus estimate is for a loss of $0.07 per share on revenue of $38.88 million and the Earnings Whisper ® number is ($0.09) per share. Investor sentiment going into the company’s earnings release has 7% expecting an earnings beat. Short interest has decreased by 13.3% since the company’s last earnings release while the stock has drifted lower by 36.8% from its open following the earnings release to be 53.7% below its 200 day moving average of $4.66. Overall earnings estimates have been revised lower since the company’s last earnings release. The stock has averaged a 2.6% move on earnings in recent quarters.


DISCUSS!

What are you all watching for in this upcoming trading week?


I hope you all have a wonderful weekend and a great trading week ahead r/stocks.

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