5/3/2020: Weekly Wrap-up & What to Expect

Market Movers

Last week was mixed with positive and negative drivers for the market, but it closed with a devastating statement by Warren Buffett that will likely drag down next week's markets: "The world has changed...and I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way". Here are the details:

  1. Better than expected earnings reports from tech and airline companies. This week began with strong earnings reports by Apple (AAPL), Facebook (FB), United Airlines (UAL), and others, demonstrating that analyst expectations for COVID-19's impact on the markets were overstated. Markets rallied on these strong earnings reports.

  2. Gilead (GILD) announced a successful COVID-19 treatment and is making it widely available for free. Mid-week, GILD announced a successful phase 3 trial for remdesivir for the treatment of severe COVID-19 patients. Remdesivir's ability to reduce hospital stays to <2 weeks for over 50% of patients. The drug gained FDA approval for emergency use and will be available to COVID-19 patients for free beginning next week. This event was another positive driver in the markets last week. 

  3. Amazon (AMZN) profits dip due to coronavirus response, even though revenue grew by 27% since last year, disappointing investors. AMZN share price decreased by ~8% from the beginning of the weak as it posted earnings 20% lower than analyst expectations. Bezos told investors that the increase in expenses were from spending millions on developing COVID-19 tests to test all its employees and implementing enhanced cleaning techniques to prevent COVID-19 spread.

  4. Warren Buffett sells all airline shares as he is uncertain what society will be like coming out of COVID-19. Warren Buffett announced he sold all his airline shares because he is uncertain about society after the COVID-19 crisis. Buffett stated with uncertainty, “The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way. I don’t know if Americans have now changed their habits or will change their habits because of the extended period.” This announcement may have a rippling effect on the market as many investors deem Buffett as an "oracle," able to see the future of markets.

Overall, WX Capital is optimistic about the economic recovery once stay-at-home declarations have been lifted. Protests across the country indicate unrest that is associated with lack of employment and the inability to move freely. Gilead's remdesivir brings a sense of security to economic opening as it may save many at-risk, severe patients from death. The virus is a transient event that will leave as quickly as it came.