Earnings: Tesla, Facebook and Microsoft sizzle
The equity markets were on a roll most part of this week. It picked up further momentum on Wednesday when Gilead Sciences reported that its antiviral drug Remdesivir showed positive results in a major clinical trial.
The main take away was that COVID-19 treatment successfully reduced the recovery time from 15 days to 11. No big deal but it does ease overcrowding of hospitals a bit and streamline allocation of valuable resources.
The S&P 500 had actually recovered 36% from its low of 23 March, probably the biggest rise in such a short time and the best monthly recovery since 1987.
All this positivity evaporated when the markets opened in NY yesterday and when the weekly filings for unemployment benefits were released. Though it has been trending downwards the 6-week number exceeds more than 30 million, probably the worst employment crisis in US history.
As expected, the major indices found strong resistances in our higher window of targeted resistance areas and made a quick reversal. The S&P 500 exceeded its 61.8% retracement of the recent move down from Feb 19 to Mar 23 at 2930 and probably had all the makings of challenging the 200-day moving at 3004.
The sharp turnaround from critical levels with strong momentum gives us more confidence that the bearish down move could be underway now. Currently, it is also below our significant level of 2855.
Once again, Gold held our critical resistance levels and has made a sharp reversal. Will provide more detailed analysis in our weekend report.
As suspected the Euro is making a recovery high. Will look for a selling opportunity.
Bonds are non-eventful at the moment, but our bias is to be short.
Tesla (TSLA) shocked the street with stunning results. This is a stock that is beyond our understanding and its volatility is something difficult to handle. The stock continues to surprise all its doubters and maybe it is in a league of its own and a long term investment.
Facebook (FB) also beat street expectations and we have been very bullish on it. Think FB is in a unique position to take advantage of the current market conditions and it is the best social media stock on the market.
Microsoft (MSFT) was the only Dow stock to gain in the first quarter. They stated, “COVID-19 had minimal net impact on the total company revenue”. If you thought “buy and hold” is dead, think of Microsoft. For decades, it has weathered many a storm. Dot-com bubbles, GFC, antitrust lawsuits – you name it.
We keenly await the results of Amazon and think it will be stellar.
Will develop on some thematic issues plus the markets over the weekend.
Stay safe and be home.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.