Top 5 Things to Know in the Market on Friday, May 1st

By Peter Nurse  

Investing.com -- President Donald Trump has raised the spectre of another trade war with China, threatening new tariffs on Beijing citing China's role in the origin and spread of the novel coronavirus. The airline industry showed its pain over the global lockdown and earnings releases centre around the oil industry. And there's the April U.S. ISM manufacturing PMI data to study. Here's what you need to know in financial markets on Friday, 1st May.

1. Tech disappoints; Amazon (NASDAQ:AMZN) shareholders should “take a seat”

It’s not all shiny and bright in Silicon Valley, as a couple of tech giants disappointed the market after the bell on Thursday.

Amazon stock slumped almost 5% in after-hours trade after stating it would spend its entire second-quarter profit, seen at around $4 billion, on Covid-19 related expenses. 

“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” said Amazon CEO Jeff Bezos said in a statement explaining the hefty jump in expenses.

Apple (NASDAQ:AAPL) stock fell 2.6% after hours despite reporting a slight uptick in revenue for its latest quarter as its services business picked up the slack caused by the coronavirus denting iPhone sales in China. 

However, Chief Executive Officer Tim Cook pointed to an uncertain future, saying it was impossible to forecast overall results for the current quarter because of uncertainty created by the virus.

This was the first time Apple omitted an earnings forecast in more than a decade. 

Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT) had offered up stellar earnings earlier this week.

2. Manufacturers have little to smile about

The latest dismal economic number is likely to come Friday from the Institute of Supply Management, which will issue its April purchasing managers’ index at 10:00 AM ET (1400 GMT).

The ISM manufacturing PMI is expected to have dropped to 36.9 last month from 49.1 in March, according to economists’ forecasts compiled by Investing.com, rapidly approaching the record low below 30 in 1980.

Earlier, the British equivalent saw its manufacturers suffering the biggest fall in output and orders for at least three decades in April.

April's final IHS Markit/CIPS Manufacturing Purchasing Managers' Index fell to a record-low 32.6 from March's 47.8, broadly in line with the earlier flash estimate of 32.9 released on April 23.

3. Stocks set to open lower; Trump hints at another trade war

U.S. stock markets are set to open lower, coming off the best April for the Dow Jones Industrial Average and the S&P 500 in 82 years. Threatening rhetoric from President Donald Trump about another trade war with China will likely weigh on the market ahead of the release of ISM manufacturing PMI data at 10:00 AM ET. 

Late Thursday Trump made it clear that his concerns about China's role in the origin and spread of the coronavirus were taking priority for now over his efforts to build on an initial trade agreement with Beijing.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 414 points or 1.7%, while the S&P 500 Futures contract was 53 points or 1.8% lower and the Nasdaq 100 futures contract was down 207 points or 2.3%.

In Asia, with many markets closed, the benchmark Nikkei index fell 2.8%, while Australian shares fell 5%, their most in five weeks. 

In Europe, most markets are closed for a May 1 public holiday, but the FTSE 100 in London dropped over 2%.

4. Pain of airlines plain to see

Ryanair (LON:RYA)announced Friday it would ground more than 99% of its flights until July and said it had begun negotiations with Boeing (NYSE:BA) about cutting the number of aircraft deliveries over the next 24 months.

Europe's largest low-cost carrier said it would take at least two years for passenger demand to return to normal, which could result in the loss of up to 3,000 mainly pilot and cabin crew jobs.

Lufthansa (DE:LHAG) is negotiating a 10 billion euro ($10.98 billion) bailout that would result in Germany taking a 25.1% stake in the airline, according to reports Friday.

Meanwhile, the fate of Norwegian Air Shuttle (OL:NWC) was in the balance on Friday after a deadline passed overnight for bondholders to vote on a rescue package for the transatlantic budget airline.

Late Thursday, United Airlines (NASDAQ:UAL) announced a loss of $1.7 billion in the first quarter, as it attempted to manage “the most disruptive global crisis in the history of aviation.” 

5. U.S. oil giants in the spotlight

Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), the two largest U.S. oil producers, are set to report first quarter earnings Friday. 

Exxon had already been facing quizzical glances before Covid-19 hit, because of its high capital expenditure at a time when most oil companies were cutting back. It is set to report earnings of 4 cents per share, down from 55 cents per share in the year-ago period, on revenue of about $54.8 billion, and has to explain how it can successfully navigate these tricky waters while maintaining its healthy dividend.

Chevron looks to be in a stronger position. It is set to report earnings of 65 cents per share on $29.80 billion in revenue, and has already announced that it would be halting share buybacks and lowering its capital spending by 20%.

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