Wall Street Crippled by Second-Wave Suspense

Dire coronavirus warnings from Jerome Powell and Dr. Fauci weighed on U.S. equities

Patrick Martin
May 15, 2020 at 1:33 PM
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There was optimism heading into the week as U.S. economies began to reopen, but that sentiment was not replicated on Wall Street. The Dow Jones Industrial Average (DJI), the S&P 500 Index (SPX) and the Nasdaq Composite (IXIC) are on track for ugly weekly losses, as lockdown leniency is met with panic of a second wave of coronavirus. A dire warning from Fed Chair Jerome Powell weighed on investors, as did a Congressional testimony from National Institute of Allergy and Infectious Diseases Director Dr. Anthony Fauci. Despite a Nasdaq win streak and a dramatic Thursday comeback, more ugly jobs data and bubbling U.S.-China trade tensions dampened the mood.

Rumor Mill Spinning

It was a headline-laden week for many high-profile names. Amazon.com (AMZN) is reportedly eyeing movie theater name AMC Entertainment (AMC). Downtrodden airliner United Airlines (UAL) announced a new president, while software stock Twilio (TWLO) hit a new record high after a Zocdoc deal.

Lost in the shuffle of everything going on in the world is another week of corporate reports. A disappointing sales forecast kept Toyota Motor (TM) stock in the mud. On the other end of the spectrum, software stock Datadog (DDOG) bit into new record highs after a top-line beat. And ahead of their respective earnings reports, options traders piled on blue chip Cisco Systems (CSCO) and DraftKings (DKNG).

Other Movers and Shakers

Several stocks brushed up to trendlines that are worth monitoring. Real estate investment trust (REIT) Digital Realty (DLR) has drifted lower but remains cushioned by several layers of support. Belgium-based crude name Euronav (EURN) pulled back to a long-term trendline, while fellow oil stock Occidental Petroleum (OXY) is staring up at a technical ceiling amid employee buyout buzz.

In the options pits, traders blasted streaming stock Roku (ROKU) with a distinctive call bias, as this bank exchange-traded fund (ETF) saw an intriguing number of puts traded.

And among drug stocks, Co-Diagnostics (CODX) -- known for its role in making COVID-19 test kits -- continued its torrid climb up the charts while analysts showered Allogene Therapeutics (ALLO) with bull notes after upbeat cancer drug data.

Blue-Chip Retail Earnings in Focus Next Week 

Next week the calendar is light on economic data, but keep an eye on these blue-chippers stepping into the earnings confessional. The market cap battle between Netflix and Walt Disney (DIS) is worth watching, as is this SPX level, which could determine how severe this week's broad-market slide really is is. And if you're looking for some silver linings during this doom and gloom, Fibonacci retracements and their relation to rallies offer some optimism for investors, going forward.


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