May Day Opens on Sour Note as Markets Lose Some Steam

Wall Street opened with steep losses to kick off May trading, as companies continue to report mixed effects on earnings by Covid-19. 

A sign on the Coney Island boardwalk reminds people to keep their distance. From Cape Cod to California, people who have been cooped up through a dismal spring are worrying summer will bring just more of the same. (AP Photo/Seth Wenig, File)

MANHATTAN (CN) — Investors hoping that April’s historic rally brings more of the same in May could be disappointed.

Despite coming off one of the best months ever, the Dow Jones Industrial Average fell 380 points at the morning bell, with the Nasdaq and S&P 500 seeing decreases of about 2% each.

Any investor optimism seems pinned to major company earnings, but many on Wall Street are watching one company more closely than the rest.

Gilead, whose remdesivir drug has shown great promise as a treatment for coronavirus, posted a $267 million increase in revenue though a $424 million drop in net income from the first quarter of 2019 to the first quarter of 2020.

The company is poised to be a major player later this year, as it promised to produce 1 million rounds of remdesivir by the end of the year and “several million” rounds in 2021. A recent study showed the drug was 50% effective on the nearly 400 patients involved in a clinical trial, though further studies will need to be done before the Food and Drug Administration approves the antiviral drug for use on Covid-19.

The technology sector, in particular, has done well, and investors remain bullish on leading companies as industry leaders Amazon and Apple posted their earnings reports after markets closed on Thursday. 

Amazon posted a massive boost in net sales, with $75.5 billion during the first quarter of 2020 versus just under $60 billion in Q1 2019, a 26% increase. The company’s net income fell, however, from $3.6 billion to $2.5 billion year over year.

In a statement, CEO Jeff Bezos noted the company gained $4 billion in operating profit. “If you’re a shareholder in Amazon, you may want to take a seat, because we’re not thinking small,” Bezos told investors. “We expect to spend the entirety of that $4 billion, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe.”

In its release, Apple posted a $300 million increase in net sales but a $312 million drop in net income year over year between the first quarters of 2020 and 2019. Most of that drop was attributed to the company’s iPhone segment, while the company’s home and accessory and its services segments saw increases in sales. 

Microsoft has already reported $2 billion more in net income and $5 billion more in total revenue, increases mostly driven by the company’s Office suite of software, its LinkedIn segment and cloud services. 

Social media companies had mixed results, with Facebook showing a 17% increase in total revenue and a whopping 102% increase in net income from the first quarter of 2019. Twitter reported $808 million in revenue during Q1 2020 versus $786 million during Q1 2019, but the company posted a net loss of $8.3 million.

A more down-to-home company for most consumers, Clorox, predictably saw a massive 32% spike in demand for its cleaning products as companies aggressively sterilize surfaces and consumers try to keep their homes clean. In total the company saw a 15% increase in demand for its products from Q1 2019 to Q1 2020.

That demand translated into $232 million more in net sales and $54 million in net earnings year over year. CEO Benno Dorer noted that Clorox has been resilient during past recessions. “Our business was on track to deliver growth for the back half of the fiscal year in line with our expectations, even ahead of the pandemic,” Dorer said.

Many markets in Asia were closed Friday to celebrate the international labor movement, though those that were open did not fare well. Japan’s Nikkei dropped 2.8% and Australia’s market lost a whopping 5%. 

Most markets in Europe were closed Friday after closing out Thursday on a down note, with most countries losing about 2% and the pan-European Stoxx 600 falling 0.6%. 

About 3.2 million people worldwide have been confirmed infected by Covid-19, according to data from researchers at Johns Hopkins University, and more than 233,000 have died. In the United States, more than 1 million people have contracted the novel coronavirus and 63,000 have died.

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