Dow Stays Positive After Drug Disappointment
Stocks took another rough jobs report in stride on Thursday, but a mid-day medical setback threw the market off its game and left us with flat results.
The big news of the day was a report that threw cold water on the effectiveness of Gilead’s remdesivir in the treatment of the coronavirus. The Financial Times article stated that the drug “flops in first trial”.
It was last Friday when a positive report on remdesivir helped stocks move sharply higher and complete a second straight week in the green. Apparently, the market put a lot of hope in the drug even though several companies are working on treatments and vaccines.
It should be noted that Gilead (GILD), which slipped 4.34% today, takes issue with the report, calling it premature. So, we’ll be hearing more about this in the days ahead.
The news certainly took the air out of a positive morning and led us on an erratic ride for the rest of the session that ended with a mixed result.
The Dow finished positive for the second straight session with a gain of 0.17% (or around 39 points) to 23,515.26. However, it had been up more than 400 points earlier.
The other major indices couldn’t hold onto their positive starts… though the NASDAQ almost did. It finished lower by 0.01% (or less than a point) to 8494.75. The S&P was off 0.05% to 2797.80.
The market was holding up well in the face of another high jobless claims number. Approximately 4.4 million people filed last week, bringing the 5-week total to 26.4 million.
If you’re looking for a silver lining, the number was just slightly more than expected and was down from previous weeks.
Oil has been the major story of the week, especially after the May contract dipped sharply negative on the eve of expiration on Monday. Stocks dipped by about 5% on Monday and Tuesday combined, though prices have stabilized and risen since then.
Let’s end the day on an encouraging note. Today is the one-month anniversary of the coronavirus low on March 23. Since then, stocks have recovered approximately half of what was the sharpest plunge into a bear market in history.
Meanwhile, the Fed has taken extraordinary measures to support the economy and even Congress is finally getting its act together with another relief package. Also, earnings season is turning out to be decent here in the early days, all things considered.
And the economy isn’t even open yet.
There’s still plenty of pain to come, of course, but we’re dealing with this unprecedented situation and are hopefully closer to the end than the beginning.
Today's Portfolio Highlights:
Stocks Under $10: Biotechs have been performing well for Brian in his others services, so he decided to add one over here. On Thursday, he picked up RedHill Biopharma (RDHL), which is focused on gastrointestinal diseases but one of its drugs is being looked into for non-clinical tests to treat the coronavirus. In other words, this is one of many biotechs with a different stated goal that's working on this sickness. This Zacks Rank #1 (Strong Buy) actually has a good earnings history with three beats in the past four quarters, which is rare for its industry. The editor also likes its topline growth of 17%. The full write-up has a lot more on the addition of RDHL. This portfolio also had the best performer of the day, as NCI Building Systems (CNR) jumped 12.5%.
Counterstrike: The market’s rather positive response to earnings and economic data have convinced Jeremy to push the button on a couple of long positions. On Thursday, he added a 12% allocation in Netflix (NFLX) and a 6% allocation in National Beverage Company (FIZZ). We all know what NFLX is and why it added nearly 16 million new subs in Q1. The editor likes how the stock moved forward this morning after dipping on Wednesday. As for FIZZ, the maker of LaCroix and Shasta increased sales recently and doesn’t have to worry about pesky litigation anymore. This Zacks Rank #1 (Strong Buy) reports on June 4. Read the full write-up for a lot more on today’s additions.
Technology Innovators: The portfolio added its 13th name on Thursday in its quest to get to 15 by May 1. The new buy is business analytics provider Workiva (WK). Brian sees a lot of potential in this Zacks Rank #2 (Buy) cloud-based and mobile-enabled platform provider. WK has beaten earnings for four straight quarters with an average surprise of 75%, while its earnings estimates are holding up well despite the coronavirus. The editor thinks this stock has room to run and could be a big winner for the portfolio. Read the full write-up for more.
Until Tomorrow,
Jim Giaquinto
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