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Stock Market Wrap-Up: AMC Hopes for a Hollywood Ending; Why Are Energy Stocks Soaring?

By Dan Caplinger – Apr 17, 2020 at 5:39PM

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The stock market finished with big gains Friday.

The stock market jumped to close the week, rising on hopes that the U.S. economy might be able to restart in the near future. Calls from the White House to urge state and local governments to ease restrictions on travel and work seemed to energize Wall Street, sending the Dow Jones Industrial Average (^DJI -1.62%) and the S&P 500 index (^GSPC -1.72%) to gains of nearly 3%. The Nasdaq Composite (^IXIC 0.00%) settled for a more modest gain, although small-cap stocks rose even more sharply.

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Data source: Yahoo! Finance.

The energy sector was the biggest winner on the day, sending the Energy Select Sector SPDR (XLE -6.90%) to gains of more than 10%. However, AMC Entertainment Holdings (AMC 1.78%) fared even better as investors celebrated its efforts to raise cash and keep itself alive for the next several months.

The show goes on at AMC

Shares of AMC Entertainment Holdings soared more than 30% Friday, closing a tumultuous week for the movie theater operator. AMC took steps to shore up its cash reserves in an effort to make sure it has enough money to function in the months to come even with many of its locations remaining closed.

Late Thursday, AMC announced plans to sell five-year notes in a private offering. The theater chain intends to raise $500 million in the offering, specifically saying that it intends to increase its liquidity. AMC said that it had about $300 million in cash available as of March 31, in large part due to its having borrowed $215 million in March to use up its existing liquidity on available letters of credit.

Hollywood sign on side of hill with radio tower nearby.

Image source: Getty Images.

AMC also offered a perspective on its prospects, saying that even excluding the $500 million, it should have enough cash to operate until it can hopefully reopen theaters at least partially beginning in July. The company is taking advantage of available assistance under the CARES Act, including getting tax refunds and deferring payroll tax obligations into 2021 and 2022.

Shareholders were pleased to see AMC raise cash without apparently diluting their stock interest, in contrast to what many other companies have done. It's still uncertain whether AMC's assumptions about reopening during the summer will pan out, but investors were optimistic about it today.

The big disconnect

Elsewhere, energy stocks were broadly higher. The boosts were unusual in how broad they were spread across the industry, with some oil and gas giants seeing similar percentage gains to much smaller companies.

The confusing part of today's gains for energy stocks was that crude oil showed no signs of recovery. West Texas intermediate dropped another 8%, losing more than $1.50 per barrel to drop below $18.50. There's so much oil supply with so little demand that storage facilities are starting to fill up, and investors are getting a big premium for being willing to hold on to physical oil just for a few months.

However, when you look further out, oil looks stronger. Crude for delivery in August is fetching almost $31.50 per barrel. That shows the anticipation of renewed energy demand after just a few months, along with the expected effects of production cuts from OPEC and Russia.

It's that long-term future that's pushing most stocks in the oil patch higher Friday. If something happens to jeopardize that narrative, however, then the hard-hit sector could find itself moving lower again.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$7.99 (1.78%) $0.14
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,590.41 (-1.62%) $-486.27
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,693.23 (-1.72%) $-64.76
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,066.81 (0.00%) $0.00
The Select Sector SPDR Trust - The Energy Select Sector SPDR Fund Stock Quote
The Select Sector SPDR Trust - The Energy Select Sector SPDR Fund
$70.48 (-6.90%) $-5.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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