02 April 2020

This MAGA Stock Flies While Tech Giants Stumble

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What’s happening: The first quarter of 2020 has been extremely challenging for companies big and small, with major economies grappling with the coronavirus outbreak. Equity markets have suffered massive swings, and the fear-gauge CBOE Volatility Index declined as much as 23.2% in the first quarter.

What happened: While COVID-19 is seen as the main culprit, this is not the sole reasons for the crumbling markets. The US-China trade war and Brexit had already caused distress. The more recent oil price war between Saudi Arabia and Russia have added to the woes.

The Dow recorded its sharpest first-quarter decline in history, while the S&P 500 and Nasdaq 100 lost 20% and 14% in the quarter.

Amid these challenges, the four US tech giants, which were termed as “MAGA” by President Donald Trump during his election campaign, have also been under immense pressure. In fact, the MAGA stocks lost $1 trillion in market value in a single day on March 17.

Here's a look at the performance of the MAGA stocks and one tech giant that has recorded gains.

How the MAGA giants performed: The four largest US tech companies - Microsoft, Apple, Google parent Alphabet and Amazon – are now known as “MAGA”.

Microsoft: This tech giant’s stock largely resisted the slump in US markets. The company’s shares closed the first quarter mostly unchanged at $157.71. Given the global lockdown scenario, the company has seen a steep rise in demand for its cloud-based products, including Microsoft Teams, which supports people working from home.

The Redmond, Washington-based company has also announced Microsoft 365 Personal and Family and launched a new interactive Bing map that provides information related to the COVID-19 outbreak.

Apple: The iPhone maker’s stock came under pressure in the first quarter, with both manufacturing and demand being impacted by the COVID-19 outbreak. The company’s shares declined by 13.4% in the first quarter.

The company's supply chain suffered a massive disruption, with store closures in China. With China now recovering from the virus, Apple is gradually reopening its stores in the region, but has had to shut down its global stores due to the spread of the pandemic. Even amid this, Apple is planning to launch iPhone 9 on April 15.

Alphabet: The Google parent’s stock ended the quarter on a negative note, with shares down 13.24%.

With the global stay-at-home trend, Internet usage has surged. However, Google is hit by the sharp decline in advertising revenue, as most companies are either closed or facing major financial issues.

Amazon: Amazon has emerged victorious among the MAGA stocks, with its shares rising in the first quarter. The company’s stock climbed 5.5% to end the quarter at $1,949.72.

The ecommerce behemoth is witnessing solid demand for home deliveries due to the coronavirus lockdown. Amazon announced another 100,000 job openings during the quarter to help facilitate the larger number of online orders. Amazon’s cloud services business – Amazon Web Services (AWS) – has also received significant investor attention. This subsidiary is the most profitable business for Amazon and caters to a diverse set of customers, including individuals, start-ups, small businesses, governments and large corporates.

The Markets Today

     

Investors will be keeping an eye on US markets today, while waiting for various economic reports scheduled for release later in the day.

Context: US stocks opened the second quarter with a strong selloff, even after delivering the worst quarterly performance since 2008. Investor fears were fueled by President Donald Trump’s warning to brace a rough period ahead for COVID-19.

Details: US stocks declined for the third time in the past four days, following President Trump’s comments on coronavirus. While Trump prepared Americans for a tough two weeks ahead, the White House said coronavirus deaths in the country could rise to between 100,000 and 240,000.

Banking stocks were hammered on speculation of banks being forced to cut dividends, after many European banks ceased dividend payouts due to pressure for the Bank of England. Utilities and real estate stocks were the worst performing sectors, falling 6.1% on Wednesday.

The Dow shed 974 points to settle at 20,943.51 on Wednesday, while the S&P 500 slipped 4.4% to 2,470.50. The Nasdaq 100 also dropped 4.4% to close at 7,360.58.

Coronavirus cases in the US have exceeded 216,700, with over 5,100 deaths. Worldwide more than 939,400 people have been infected by the virus, resulting in around 47,200 deaths.

In other news, the yield on US 10-year Treasuries fell 5 basis points to 0.62%, while WTI crude gained 2.2% at $20.93 a barrel.

What to watch: Markets are expected to open in positive territory and the US stock futures are pointing towards a higher start this morning. Investors await a basket of economic reports from the country, including jobless claims, balance of trade, ISM New York Index and factory orders.

Initial jobless claims are projected to surge to a new record high of 3.5 million in the latest week, with some analysts projecting claims to reach a whopping 5.25 million. Initial claims reached 3.28 million in the previous week.

America is expected to report a trade deficit of $40 billion in February, versus a $45.3 billion deficit in January. US factory orders are likely to rise 0.2% in February, after a 0.5% decline in January.

Other Markets: European indices were trading higher at 9:00am GMT, with FTSE 100, German 30 and French 40 up 0.6%, 0.4% and 0.6%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
the markets today

     

What else to watch today

     

Canada’s balance of trade, Brazil’s federal tax revenues as well as the US Challenger job cuts and natural gas stocks change.

 

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