27 May 2020

FAANG Stocks Brush Off Covid-19 Worries

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News shaping
the markets today

     

What’s happening: Tech firms, especially the FAANG companies - Facebook, Amazon.com, Apple, Netflix, and Google, have played a key role in the new normal world created by covid-19. These stocks not only survived but some reached new highs during the pandemic.

What happened: While most industries have been impacted severely by the coronavirus lockdowns, tech companies are among the few that have witnessed a strong run.

Tech companies have emerged as the lifeline for individuals and businesses, providing connectivity and aiding people to efficiently work or learn from home, stay connected with colleagues, friends and family as well as find some sort of entertainment amid the lockdown.

Investors who had put their money behind tech companies in March, when the virus started spreading in the US, are reaping strong returns now. Last week’s trading suggested that the FAANG stocks are now racing past the coronavirus impact.

Performance of the FAANG stocks: Facebook, Amazon.com, Apple, Netflix, and Google

Facebook: The stock climbed more than 11% last week after the social media company launched its ecommerce venture, Facebook Shops. Although the Menlo Park, California-based company suffered due to a decline in advertising revenue during the pandemic, it is benefiting from higher user engagement.

Facebook’s stock closed higher by 1.5% on Friday to reach a record high of $234.91. Although the stock slipped 1.2% on Tuesday, it has gained close to 18% over the past three months.

Amazon.com: The ecommerce giant continued to operate during lockdowns across the globe, as its business became an essential service for people stranded at home. The Seattle, Washington-based company added 175,000 employees to meet the rising demand during the pandemic and is now on course to bringing back its one-day delivery for all items, including non-essential ones, with restrictions being lifted. To boost deliveries, the company is considering investing in Amazon Air, buying aircrafts at highly depressed prices due to distress sales by battered airline companies.

The stock climbed to a record high of $2,497.94 on Wednesday and gained 1.1% over the week. Although shares of Amazon slipped slightly by 0.6% on Tuesday, they have gained more than 22% during the previous three months.

Apple: The Cupertino-based company started reopening its stores in the US, with an easing of lockdown restrictions. Apple also launched an app and a website in collaboration with the government to allow users to conduct a self-screening test for the coronavirus.

Apple’s stock gained 3.6% last week, although remaining 2.5% lower than the record high of $327.20, which it recorded in February. The stock has climbed more than 8% over the past three months.

Netflix: The Los Gatos, California-based company witnessed an increase in subscriptions during coronavirus-led shutdowns globally, as the company’s streaming service emerged as one of the major sources of entertainment for millions.

Netflix’s stock lost 5.5% last week but reached an all-time high of $454.19 during the week. Although the company’s stock slipped 3.4% on Tuesday, it has gained more than 9% over the past three months.

Alphabet: Google parent Alphabet collaborated with Apple to develop a contact-tracing technology to help reduce the spreading of covid-19.

The stock climbed 2.9% last week but remained 7.3% below the all-time high of $1,524.87 achieved in February. Alphabet’s shares have gained 2.2% over the past three months.

The Markets Today

     

Investors will be keeping an eye on US markets today, after the strong rise in the previous session.

Context: US stocks ended higher on Tuesday following a three-day long weekend, as investors welcomed fresh news of a coronavirus vaccine. Markets were also optimistic about the reopening of economies.

Details: Investor sentiment was lifted by news of the gradual easing of restrictions and signs of people beginning to make travel plans. Travel and leisure stocks posted the strong gains in the US and Europe following an upturn in US air travel demand and announcements by a German airline to resume flights in July.

Investors also cheered news of a coronavirus vaccine, with Novavax announcing the start of human trials for its vaccine candidate and Merck planning to develop one.

Some positive economic data also helped refresh the market’s mood on Tuesday, with the Conference Board’s consumer confidence index climbing to 86.6 in May and new home sales rising to an annual rate of 623,000 in April.

After trading above the 25,000 mark earlier in the session on Tuesday, the Dow closed at 24,995.11, with a 2.2% rise. The S&P 500 gained 1.2% to close at 2,991.77, while the Nasdaq 100 rose 0.2% to close at 9,340.22.

AutoZone’s stock closed almost flat after the auto-parts company reported better-than-expected quarterly results. Shares of Hertz Global Holdings tumbled more than 80% after the company filed for bankruptcy.

In other news, crude oil closed higher, with WTI (West Texas Intermediate) crude for July rising 3.3% to $34.35 per barrel on Tuesday. Gold for June delivery slipped 1.7% to end the day at $1,705.60 an ounce.

What to watch: Investors await economic data from the country, including the Redbook index, Richmond Fed manufacturing index and Fed Beige Book report.

Investors will continue to keep a close eye on the coronavirus graph, with the number of cases exceeding 5,593,140 globally. The US has so far confirmed over 1,681,410 cases with around 98,920 deaths.

Other Markets: European indices were trading lower on Wednesday, with the FTSE 100, German 30 and French 40 down by 2.17%, 1.23% and 0.17%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Mexico’s unemployment rate, Canada’s value of building permits, Argentina’s balance of trade as well as the US MBA mortgage applications and API crude oil stock change.

 

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