The stock market bounced back a little today. The Dow is trading over 24,000 again, S&P 500 up 1.47%, NASDAQ up 1.11%, Russell 2000 up 3.96% and S&P 400 up 4.07%. Mid-cap and small cap companies outperformed Large-caps by a landslide today. States are drafting plans to reopen the economy. This market, however, is making me extremely nervous. Did I mention the backdrop of the gains today is another day of plunge in the oil market? WTI June contract has fallen to $11 per barrel as of 11:28pm. At the worst level, the future plunged over 36% today. Unlike the fiasco merely a week ago, this time, I am nervous.
Last night, a YouTube video caught my attention. A private pilot flew over the Southern California Logistics Airport in Victorville, CA. A former U.S. airbase, the airport now is dubbed as a boneyard for retired commercial airliners. Today, there’s over 400 airplanes parked permanently in this airport. The airport even shutdown one of its two runways to accommodate more grounded airplanes. Among the airlines are Southwest, Delta, FedEx, and others that I cannot quite identify from the video footage. These planes are not retired, but grounded for dramatic decline demand. For an asset that is literally on the air for the majority of the time, the parked planes are a looming signal.
Right after watching that video, I did a quick google search on other major airports and airlines’ aircrafts storage status quo. The Hartsfield-Jackson Atlanta International Airport, the world’s busiest airport and the largest hub of the largest U.S. airline, Delta, also shutdown multiple runways to park planes. Recall the earnings report from Delta last Wednesday, Delta has recorded a net loss of $534 million, grounded more than 650 of its 878 planes, reduced 85% of its capacity, and burned through $100 million a day during the final days of the first quarter. It received a government bail-out package which include stock warrants at strike price of $25 a share for total of 1% of its shares outstanding. Delta has been seen as a leader in this industry in the past couple of years and been praised for its profitability, customer loyalty, and reliability. As a medallion member, it aches my heart to see that Delta’s planes are grounded and the next quarter is still looming. Another airline is Southwest, which is releasing its Q1 result tomorrow before the opening bell. Along with Delta, these two companies are my favorite in the entire industry. I have had confidence in a speedy recovery post-corona, but I am not so sure now.
That is, the oil price plunged again. It is no secret that the world oil reserves are filling up quickly and the production cut has not been fast enough. June contract prices is below the pre-corona historical low. With the world slowly opens back up, I cannot foresee a speedy recovery in the demand for oil, which will have small impact on the oil reserve. Although the market is up today, the oil market is telling me different story in terms of the recovery that we will see. I still remain optimistic, but I worry the market is going to not take the chill pill and remain stable but to take another dive.
This week is the busiest week in this earning season. There are two particular stocks that I am keeping a close eye on: Southwest and AMD. More than 20 states are planning on reopening by the end of next week, and New York is also planning on a reopening after May 15th. We might have seen the worst point of this pandemic already. With just a few more days to go in April, it will sure be interesting to see the movement in the market. We can better plan for the future as we learn more about the states that has already partially reopened and are reopening soon in the next couple of days.
