Stock market live Monday: Stocks close in the green, Buffett dumps airlines, tech gains

Stocks staged a late-day rally on Monday, erasing losses and moving higher in the final hour of trading. Investors shrugged off escalating geopolitical tensions, which had weighed on stocks earlier in the session. Airline stocks continued to move lower, however, after Warren Buffett said Berkshire Hathaway sold its entire position in American, Delta, Southwest and United.

• The Dow gained 26 points, 0.11%, breaking a 2-day losing streak.
• Dow Impact: Microsoft had the most positive impact on the Dow, adding 29 points to the index.
• The S&P 500 gained 12 points, 0.42%, breaking a 2-day losing streak.
• SPY Impact: Microsoft had the most positive impact on the SPY, adding 0.40 points to the ETF.
• The Nasdaq Composite gained 106 points, 1.23%, breaking a 2-day losing streak.
• 8 of 11 S&P Sectors were positive in Monday’s session, led by Energy, up 3.71%
• The Russell 2000 gained 0.28%, breaking a 2-day losing streak.
• DJ Transports fell 2.01%, its 3^rd negative session in a row. — Hayes

U.S. equities started the week off with modest gains, with the S&P 500 rising 0.42% on Monday. The tech-heavy Nasdaq Composite rose more than 1%. The Dow Jones Industrial Average registered a gain of 0.1% or about 26 points to end the first session of the week. — Fitzgerald

The S&P 500 was flat after briefly trading in positive territory as stocks pared losses from the morning. Major airline stocks have cut their losses roughly in half for the day, while tech stocks pulled the Nasdaq 0.66% higher. The Dow has climbed as well and is down roughly 80 points, or 0.33%. — Pound

The Federal Reserve’s program to purchase corporate bonds is ready to take effect. A facility aimed at buying debt in the secondary markets will begin operating “in early May,” according to an update the New York Fed provided Monday. That program will include the purchase of “fallen angels,” or companies that had been trading at investment grade but were downgraded after the coronavirus crisis hit. That program will purchase ETFs that track both investment-grade corporate bonds as well as high-yield, or junk, debt. The primary market facility will start “soon thereafter” and buy bonds either as the sole investor in an issuance or portions of syndicated loans or bonds when they are issued. The combined size of the two facilities will be a maximum $750 billion and will run, barring extension, until Sept. 30. Investment giant BlackRock has been contracted to manage the two operations. – Cox

The firm trimmed its price target to $125 from $130 as the company continues to deal with its theme park closures due to the coronavirus pandemic. “We lower our near-term forecast due to a more conservative outlook on initial Parks utilization and traditional TV headwinds,” analyst Benjamin Swinburne said. However, the firm also said it’s staying overweight and confident in a recovery as the company has “content strength and growing direct-to-consumer distribution.” MoffettNathanson downgraded the stock on Monday morning. —Bloom

Warren Buffett has both praise and a note of caution for the Federal Reserve’s actions during the coronavirus crisis. “I think in general they’re [doing] the right thing, but I don’t think they’re without consequences, and I think they could be of extreme consequences if pushed far enough,” the Berkshire Hathaway chief said during the firm’s investor conference Saturday. Buffett spoke of the Fed’s move to slash interest rates and its borrowing and liquidity facilities implemented over the past two months. He said companies given access to credit markets should put Fed officials “on a pedestal” and said the moves effectively took away from investing moves from Berkshire, with profited off its investments during the financial crisis. – Cox

• American Airlines, Delta Air Lines, United Airlines — Airline stocks moved lower after Warren Buffett’s Berkshire Hathaway sold its positions following the Covid-19 outbreak. United, Delta and American Airlines all fell more than 8%. For the year, they’re now down more than 60%.
• Vornado Realty Trust, Federal Realty, SL Green Realty — despite parts of the country beginning to reopen, real estate names traded lower as investors fear that foot traffic will remain depressed.
• Tesla — Morgan Stanley raised its target on the stock to $680, but reiterated its equal-weight rating. Shares traded more than 5% higher.

Read more about the biggest movers here. – Fitzgerald

Fundstrat founder Tom Lee says it appears driving is picking up and so is walking as states reopen. But Americans are still avoiding mass transit. Mobility data from Apple shows that queries for driving and walking are rising. Subway ridership, however, continues to flatline. New York’s Metropolitan Transportation Authority has said its ridership is down more than 90% while the city remains shut down. The MTA has been attempting to secure funding both from the government and market. As for drivers, government data shows they’ve also been using slightly more gasoline recently. There’s been a pickup from a low average of 5.1 million barrels a day from March 23 to April 24. That has since increased to about 5.9 million barrels a day, still 37% off its five-year average. – Domm

Source: Fundstrat, Apple

Jim Cramer said Monday that Berkshire Hathaway’s shedding of all its airline stock was a sign that there were serious issues with the economy in the short term.

“Buffett’s overview on airlines really does make me very concerned about the near term,” Cramer said on “Squawk on the Street.” Major airline stocks were down sharply in early trading after Buffett’s announcement, with United, Delta and American all down more than 10%. — Pound

• Wells Fargo initiated Qualcomm as underperform.
• MoffettNathanson downgraded Disney to neutral from buy.
• Morgan Stanley raised its price target on Tesla to $680 to $440.
• Telsey upgraded Big Lots to outperform from market perform.
• Deutsche Bank downgraded Honeywell to hold from buy.
• Bernstein downgraded Cigna to market perform from outperform.
• Goldman Sachs added ConocoPhillips to the conviction buy list.
• UBS downgraded Wells Fargo to sell from neutral.
• Barclays downgraded Delta to equal weight from overweight & American to underweight from equal weight.

CNBC PRO subscribers can read more here. – Bloom

Jim Cramer harshly criticized Tyson Foods on Monday as the food processing company has been forced to close some of its plants due to outbreaks of the coronavirus among its workforce. “I think Tyson has a lot to answer for here. This is the kind of thing that, if we had an Upton Sinclair, he might go to these places … Someone should be ashamed here, I think, and it’s not the workers,” Cramer said.

The company’s stock fell about 8% in early trading after the company reported weaker-than-expected earnings and revenue for fiscal second quarter. The company’s CEO Noel White said in a statement announcing the results that “The health and well-being of our team members remains our top priority as we fulfill our critical role feeding the world in these uncertain times. We have instituted safeguards that meet or exceed CDC and OSHA guidelines at all our facilities to protect our teams and keep our workers, families and communities safe.” — Pound

Popular technology companies Microsoft, Facebook, Amazon and Netflix all eked out gains in morning trading, capping losses in the broader market. The tech-heavy Nasdaq Composite was trading near the flat line, while the S&P 500 dropped 0.5%. Shares of Netflix and Microsoft gained more than 1%, while Amazon and Facebook traded about 0.5% higher. – Li

Barclays downgraded shares of American Airlines to underweight and shares of Delta to equal weight on Monday, saying “the future is uncertain on travel demand.”

“Objectively, airline equities face an uphill battle. Apart from not knowing when revenue will return for an industry collectively burning an estimates $20 billion of cash this quarter, sizable debt balances and yet unknown structural cost burdens loom large,” the firm’s analysts led by Brandon Oglenski wrote in a note to clients. The firm’s new target on American is $7, while Barclays’ Delta target is $26. Shares of each airline slid more than 13% on Monday following the downgrade and after Warren Buffett said Saturday that he sold his airline positions. – Stevens

Stocks opened lower on Monday as growing tensions between the U.S. and China sent jitters through the market. The Dow dropped 1%, or 240 points, while the S&P 500 fell 0.75%. The tech-heavy Nasdaq Composite shed 0.6%. The move lower extends recent declines, which have seen the major averages post two straight weeks of losses. – Stevens

The market has rallied furiously from its March low, but the comeback may have run out of steam, according to Stephen Suttmeier, Bank of America’s technical research strategist. The S&P 500’s 12.7% gain in April marked the best month since January 1987, but the equity benchmark has retreated after hitting a key resistance zone of 3,000 to 3,027. “After equities floated like a butterfly with a solid April rally, bearish weekly candles last week … have stung like a bee, increasing the risk for an interim top and corrective phase for US equities entering the seasonally weak month of May,” Suttmeier said. The S&P 500 closed at 2,830.71 on Friday. – Li

Media analyst Michael Nathanson cut his price target on Disney by $8 and downgraded the stock to neutral from buy. He said in a note that others on Wall Street are underestimating how long the economic hit to the entertainment giant will last, with theme parks in particular facing a multi-year recovery. Shares were more than 3% lower in premarket trading. –Pound

Evercore ISI portfolio strategist Dennis DeBusschere wrote Monday that geopolitical tensions between the U.S. and China are beginning to supersede Covid-19 as the market’s main source of angst. Reports that the Trump administration is moving to remove global industrial supply chains from China, and worries that their trade deal could fail, are weighing on commodity cyclicals. Deaths and new Covid-19 case growth, the strategist said, are at their lowest levels in two months across Spain, Italy and Germany, increasing optimism over economic reopening.

“Covid risk [is] being replaced by geopolitical tension,” DeBusschere, who has been tracking the incremental coronavirus developments closely for clients, wrote Monday. “Risk assets are lower on reports the Trump administration is ‘turbocharging’ an initiative to remove global industrial supply chains from China and that the trade deal is falling apart.” — Franck

Phase one of Florida’s reopening begins Monday across the state, apart from in the three hardest-hit counties: Miami-Dade, Broward and Palm Beach. Restaurants and stores can open their doors again – at reduced capacity – and voluntary surgeries can once again be scheduled. People must continue to practice social distancing, however, and bars, gyms and schools remain closed. New Hampshire, Montana, Colorado and Indiana are among the other states that will begin easing restrictions on Monday.

For a state-by-state guide to reopening plans, click here. – Stevens

“Looking at these sales can also provide insights into the mind of one of the greatest investors of all time,” wrote Bill Stone, chief investment officer at Stone Investment Partners. “Buffett was willing to take a loss when the facts changed… Second, the investing process is about probabilities and he observed that a ‘low probability risk ended up happening.’ Third, he eliminated the entire position when he became ‘uncertain about the future’ of industry profitability rather than just trimming the positions.”

Stone noted Buffett did not imply this was a market call. The investor also pointed out Buffett still has exposure to the aerospace industry through businesses Berkshire owns including Precision Castparts, FlightSafety and NetJets. – Melloy

The market is expected to be choppy as investors grapple with a slew of pandemic-related developments, according to Mark Haefele, chief investment officer at UBS Global Wealth Management.

“We expect stocks to remain volatile as markets struggle to find a balance between announcements on the lifting of lockdowns, data on potential treatments and vaccines, economic releases, news on the course of the pandemic, and changing political dynamics,” Haefele said in a note on Monday. The strategist said investors should remain positioned for upside in stocks, but also “sufficiently diversified to protect against potential negative surprises.” – Li

Secretary of State Mike Pompeo said Sunday on ABC’s “This Week” that while he does not believe the coronavirus was deliberately spread in China, the country “has a history of infecting the world, and they have a history of running substandard laboratories.”

“These are not the first times that we’ve had a world exposed to viruses as a result of failures in a Chinese lab,” Pompeo said. “And so, while the intelligence community continues to do its work, they should continue to do that, and verify so that we are certain, I can tell you that there is a significant amount of evidence that this came from that laboratory in Wuhan.” Trump had previously speculated that China may have unleashed the coronavirus due to some kind of horrible “mistake.” His intelligence agencies say they are still examining a notion put forward by the president and aides that the pandemic may have resulted from an accident at a Chinese lab.

Experts say the virus arose naturally in bats, and make it clear that they believe it wasn’t man-made. Many virologists say the chance that the outbreak was caused by a lab accident is very low, though scientists are still working to determine a point at which it may have jumped from animals to humans. – Stevens, AP

The fast-spreading coronavirus has infected more than 1.15 million Americans, more than any other country, according to Johns Hopkins University. U.S. President Donald Trump said on Sunday he was confident that a vaccine would be available by the end of 2020. More than 3.5 million people have now been infected worldwide by the coronavirus and over 247,000 people have died. Italy saw a slowdown in daily cases over the weekend. – Fitzgerald

The “Oracle of Omaha” Warren Buffett hasn’t made any big investments in several years as Berkshire Hathaway’s massive cash pile ballooned to a record $137 billion by the end of March. He said the reason is simply that he hasn’t found anything “attractive.”

“We have not done anything because we haven’t seen anything that attractive to do,” Buffett said at Berkshire’s annual meeting on Saturday. “We are not doing anything big obviously. We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion. And if we really like what we are seeing, we would do it.” The billionaire investor said previously he was ready to make an “elephant-sized acquisition.” – Li

At Berkshire Hathaway’s annual shareholder meeting on Saturday, Warren Buffett said his conglomerate has sold all of its airline holdings because of the coronavirus pandemic. The prior stake, worth north of $4 billion in December, included positions in United, American, SouthWest and Delta Airlines. The sale marks a rare move for the buy-and-hold value investor.

“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,” he said. “I don’t know if Americans have now changed their habits or will change their habits because of the extended period.”

Demand for air travel has plunged since March as the virus and precautions like shelter-in-place orders keep potential passengers at home. Airline shares were the biggest losers in the S&P 500 in premarket trading. Delta, United Airlines, American Airlines and Southwest Airlines all lost more than 9%. – Li

U.S. stock index futures pointed to losses across the board at the open, extending markets’ rocky start to May. The Dow Jones Industrial Average was set to open nearly 300 points lower for a loss of 1.2%, while the S&P 500 and Nasdaq Composite were slated to decline 1% and 0.8%, respectively. Relations between the U.S. and China worsened over the weekend after Secretary of State Mike Pompeo said there was a “significant amount of evidence” connecting the coronavirus to a lab in the Wuhan region of China. Meanwhile legendary investor Warren Buffett said Saturday at his virtual annual shareholder meeting that Berkshire Hathaway is still sitting on its massive cash hoard because the conglomerate hasn’t found a company to buy at an attractive price.

The turn lower follows Friday’s underperformance, which saw the Dow and S&P 500 drop 2.5% and 2.8%, while the Nasdaq tumbled 3.2%. But it’s been a brief respite in an otherwise strong period for stocks. April was the best month since 1987 for the Dow and the S&P, while the Nasdaq saw its best month since 2000. – Stevens

– CNBC’s John Melloy, Thomas Franck, Michael Bloom, Jesse Pound, Jeffrey Cox and Patti Domm contributed reporting.

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