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Stock Market News for May 20, 2020

Zacks Equity Research

U.S. stock markets closed sharply lower on Tuesday following the news that a potential vaccine candidate for the treatment of the novel coronavirus may not be affective. Moreover, investors' remained concerns about a significant drop of the U.S. GDP in the ensuing second-quarter 2020 and a potentially protracted economic recovery. All three major stock indexes ended in the red.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) plunged 1.6% or 390.51 points to close at 24,206.86. Notably, 27 components of the 30-stock blue-chip index ended in red while three finished in the red. Meanwhile, the S&P 500 tumbled 1.1% to close at 2,922.94. The Energy Select Sector SPDR (XLE) and the Financials Select Sector SPDR (XLF) tanked 2.8% and 2.4%, respectively. Notably, all eleven sectors of the benchmark index closed in the red. Meanwhile, the tech-heavy Nasdaq Composite closed at 9,185.10, shedding 0.5% due to the weak performance of large-cap tech stocks.

The fear-gauge CBOE Volatility Index (VIX) increased 4.2% to close at 30.53. A total of 10.66 billion shares were traded on Tuesday, lower than the last 20-session average of 11.34 billion. Decliners outnumbered advancers on the NYSE by a 1.43-to-1 ratio. On Nasdaq, a 1.63-to-1 ratio favored declining issues.

Doubt On Effectiveness of a Potential COVID-19 Vaccine

On May 19, Boston Globe Media’s STAT news service reported that a potential vaccine develop by Moderna Inc. MRNA for treating COVID-19 patients, may not reach its goal. Per STAT, several vaccine experts opined that they are unable to determine how impressive — or not — the vaccine may be based on the information made available by the company.

Notably, on May 18, Moderna announced that all 45 patients that received its coronavirus vaccine candidate in a Phase 1 clinical trial developed neutralizing antibodies. The company has received the FDA's permission to conduct more in-depth phase 2 clinical trial. The company plans to begin a phase 3 clinical trial in July.

The stock price of Moderna plummeted 10.4% yesterday. Moderna has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bleak Outlook for Second-Quarter U.S. GDP

The Congressional Budget Office has projected that the U.S. GDP is likely to plunged 38% on an annualized basis in the ensuing second-quarter 2020. the Atlanta Federal Reserve has estimated the GDP to decline 42% in the second quarter. Lockdown imposed by several states to limit the coronavirus outbreak is the reason for disappointing outlook. The U.S. economy has just started reopening in a phased manner to restrict a further surge of the coronavirus.

Economic Data

The Department of Commerce reported that housing start plummeted 30.2% in April to 891,000 units,  the lowest level since early 2015. The consensus estimate was 926,000. Year over year, housing starts declined 29.7%. Meanwhile, March's data was revised upward to 1.276 million units from 1.216 million units.

Moreover, building permits tumbled 20.8% in April to 1.074 million units. However the data was better than the consensus estimate of 996,000. Meanwhile, March's data was revised upward to 1.356 million units from 1.353 million units.

Stocks That Made Headline

Lowe's Q1 Earnings Beat on Robust Actions Amid Pandemic

Lowe’s Companies Inc. LOW reported strong first-quarter fiscal 2020 results, which marked the fourth straight quarter of an earnings beat and a top-line beat after two consecutive quarters of misses. (Read More)

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