- Dow futures movements suggest investor optimism about the new PPP cash infusion outweighs coronavirus fears.
- Leaked drug trial results from Gilead suggest there’s no quick-fix for coronavirus.
- Earnings are expected to continue to underscore the lack of visibility U.S. businesses have into their own futures.
Wall Street uncertainty kept a lid on the stock market recovery Friday morning, but Dow futures pointed to a modestly higher opening as a fresh cash infusion from the U.S. government outweighed disappointing coronavirus updates.
Investors’ muted response to mounting evidence of economic destruction can be attributed to faith that one way or another, the U.S. economy will emerge from the coronavirus crisis relatively unscathed.
Both the Dow Jones Industrial Average and the S&P 500 looked poised to start the day higher after a bumpy week driven by dismal first-quarter results and fluctuating oil prices.
PPP Cash Infusion Buoys Dow Futures
Dow futures were up around 150 points on Friday morning as investors cheered a newly approved $484 billion fund aimed at small businesses.
As of 8:31 am ET, Dow futures had climbed 152 points or 0.65% to 23,489. That implies a gain of just under 82 points at the opening bell.
S&P 500 futures and Nasdaq futures rose 0.61% and 0.4%, respectively.
The congressional stimulus fund seeks to replenish the Paycheck Protection Plan (PPP) loans that were depleted just days after being made available.
Several large companies gobbled up the funding intended for small business owners, prompting lawmakers to add new restrictions this time around.
Treasury Secretary Steven Mnuchin warned that public companies with access to funds elsewhere would be required to repay PPP loans.
But there are severe consequences for people who don’t attest properly to this certification. And again, we want to make sure this money is available to small businesses that need it, people who have invested their entire life savings.
Gilead Trials Show No Coronavirus Quick Fix
The cash infusion was a welcome distraction from bad news regarding Gilead’s (NASDAQ:GILD) coronavirus drug, remdesivir.
Dow futures struggled overnight after the World Health Organization accidentally posted disappointing results from remdesivir trials. According to the now-deleted study data, the drug could not be considered effective.
Gilead hit back at the negative reports, saying the study’s premature release led to the misunderstanding of its results. In a statement on Twitter, Gilead alleged that the results were inconclusive and that the data actually suggested remdesivir offered a potential benefit.
Around a Fifth of U.S. Workers are Now Unemployed
With hopes of a quick-fix vaccine off the table, investors were forced to confront the possibility that coronavirus could continue to weigh on the U.S. economy in the year to come.
That’s a point that U.S. businesses have driven home in their first-quarter results as management teams all admitted to having little to no visibility into the future of their operations.
Worries about the fallout from coronavirus were compounded on Thursday when another round of jobless claims confirmed that over 26 million Americans are now unemployed.
That erases a decade’s worth of employment gains and raised questions as to whether consumers will return to spending even when the lockdown measures have been lifted.
Dow Futures Shake off Bad News
More bad news is expected Friday as the University of Michigan’s consumer sentiment index for April hits the airwaves at 10:00 am ET and a handful of big-name companies release their Q1 results.
Results from Dow Jones components Verizon (NYSE:VZ) and American Express (NYSE:AXP) will be closely scrutinized on Wall Street.
Meanwhile, investors will have a close eye on oil prices as the commodity’s wild swings threaten to topple the energy industry and send even more U.S. workers to the unemployment line. While prices appear to have stabilized, Blackstone CEO Stephen Schwarzman cautioned that it would take years to iron out the severe imbalance between supply and demand.
Mnuchin says he’s working on an aid package to help the industry stay afloat, but his proposals have been flatly refused by House Democrats.
But don’t expect the bad news to derail the Dow. The Fed’s commitment to injecting unprecedented liquidity into the U.S. economy has acted as an effective backstop for the stock market so far.