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S&P 500 Up on Healthcare Stock Surge, Blackrock Earnings; Netflix Down on Earnings, Cruise Line, Airline, Oil Stocks Fall on Fears of Stalling Recovery

By Jason Hall – Jul 17, 2020 at 5:20PM

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Intuitive Surgical leads healthcare gainers lifting the market, while Netflix investors "sell the news" and travel stocks fall on a weakening jobs opening market and rising cases of COVID-19 around the world.

The S&P 500 Index (^GSPC -1.51%) closed the week up 0.37% on July 17, closing a mixed week up about 1.5%. Today's gains were driven by the healthcare sector; more than a dozen of the index's best-performers today included companies like Intuitive Surgical (ISRG -0.86%)Align Technology (ALGN -1.85%), Boston Scientific (BSX -1.55%), and Stryker Corp (SYK -1.43%), all up more than 3% to close out the week. 

Asset management giant Blackrock Inc (BLK -2.42%) stock gained 4% today following the company's earnings report, on strong growth in demand for bonds during the recession.  

Papers with unemployment benefits printed at the top.

Image source: Getty Images.

On the downside, investor worry over the tightening jobs market is taking some wind out of the sails for travel and leisure stocks, as well as oil stocks. Some of the day's biggest losers were MGM Resorts International (MGM -0.90%)American Airlines Group (AAL -1.71%), Apache Corp (APA -2.17%), and Occidental Petroleum (OXY -1.06%), all down around 4% or more. 

Today's worst-performing S&P 500 stock was Netflix Inc (NFLX -1.78%). The streaming giant reported earnings after market close yesterday, and despite adding more new subscribers than expected, investors are selling en masse, sending the stock down nearly 7% today. 

Netflix earnings: Solid quarter, but weak guidance

Investors in the streaming giant have enjoyed enormous long-term returns, as well as a big run-up on the stock recently as investors piled in during the weeks heading into earnings. In the first two weeks of July, shares surged up 24%, but the good run came to an end today as investors sold following yesterday evening's earnings results. 

Netflix reported a great second quarter, adding a Q2-record 10.1 million subscribers. Revenue increased 25%, and operating profits doubled. But management rained on the parade with guidance that didn't make investors happy. CEO Reed Hastings (now co-CEO after the promotion of Ted Sarandos to share the big chair) said that because the company "pulled forward" so many new customers in the second quarter, management now expects to add only 2.5 million new subscribers in Q3. 

Result? Investors who've done so well recently are taking their money and running today, despite the enormous financial improvements Netflix continues to deliver. 

Healthcare stocks deliver a great day

The healthcare sector delivered a great day for investors. The SPDR S&P Health Care Equipment ETF (XHE -1.04%) and SPDR S&P Health Care Services ETF (XHS -1.61%) subsector ETFs were big winners, up 2.6% and 1.2% to close out the week. 

The biggest winner in the sector was Intuitive Surgical, with shares gaining almost 8% on news that one of its biggest potential competitors, a surgical robot being jointly developed by Johnson & Johnson (JNJ -0.71%) with an Alphabet (GOOGL -1.82%) (GOOG -1.98%) subsidiary, would not begin human trials before 2022 due to more stringent regulations from the FDA for medical devices. 

While investors see Intuitive Surgical as the most obvious winner here, other device makers such as Stryker and Boston Scientific, which make a litany of surgically implanted devices, also see their near-term prospects boosted by the delay in bringing a competitive product to the market. The market rightly viewed this as having a minimal impact on the healthcare giant J&J in the interim, with its shares closing about flat for the day. 

Cruise line stocks stuck in port

The bad news continues for the cruise industry. The CDC announced an extension of the "no sail" order that has held the industry at harbor for months now to September 30. Shares of industry giants Royal Caribbean Cruises (RCL -13.15%), Carnival Corp (CCL -23.25%), and Norwegian Cruise Line Holdings Ltd (NCLH -18.04%) were down between 1.3% and 2% today. 

The news wasn't unexpected; the industry had already imposed a no-sail plan through mid-September and was unlikely to begin sailing before the end of that month before the order was put in place. The companies continue to work to implement a plan that can get their vessels back in the water profitably while also keeping customers and crew safe. In the interim, they'll remain a risky proposition, as the group burns through massive amounts of cash to keep afloat long enough to start taking on paying passengers later this year. 

Oil stocks, travel and hospitality stocks falling on ongoing coronavirus and economic worries

Some of the worst-performing S&P 500 stocks today were in various industries that will struggle to recover as long as the coronavirus pandemic continues to delay and stop travel and leisure activity. The latest COVID-19 case data is worrisome, with the U.S. and global new case counts overnight reaching record levels. More than 75,000 new cases were reported in the U.S. yesterday, and nearly 250,000 new cases were reported worldwide. The number of deaths also continues to trend higher, with more than 900 U.S. deaths reported yesterday and hospitals across the country reporting ICUs are approaching capacity. 

The U.S. has yet to implement a cohesive plan to prevent the spread of the virus, with 50 states enacting different policies, and the federal government seeming to be at odds with its own healthcare experts on the best steps to get back in front of the spreading disease. Even as this battle rages on in public view, the economic worries are intensifying. Google searches for terms including the words "file for unemployment" are still well-above typical levels, and have held steady over the past couple months.

This certainly matches the trend of high numbers of new filers for unemployment. Last week another 1.5 million people joined the newly unemployed as the initial recovery seems to be slowing to a halt. 

Carrying this over to oil stocks, the industry got more worrying news. The Russia and OPEC group of oil nations called OPEC+ is set to start opening up the taps soon. It's expected that the group will start adding about 2 million barrels per day to their production starting in August. This will not only soak up the minimal recovery in demand seen over the past couple months, but also put more pressure on U.S. producers to rein in their output and work through the enormous -- and still growing -- glut of petroleum in storage

Make no mistake: The U.S. oil industry is still in distress, and more bankruptcies are on the way

Up next week: Full-on earnings season sets up a rough ride

With more than 60 different S&P 500 companies reporting earnings next week, things will be busy, and almost assuredly volatile. Notable names set to report include Coca-Cola (KO -0.97%), AT&T (T -1.22%), Microsoft (MSFT -1.94%), and Intel (INTC -2.31%)

For many companies, the second quarter of 2020 will go down as potentially their worst ever. And while that will play some role in the market's volatility, the bigger focus will be on what they expect to happen going forward. Keep a close eye here as we take an in-depth look at some of the biggest and most-important companies throughout the week. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Jason Hall owns shares of Alphabet (A shares), AT&T, and Intuitive Surgical. The Motley Fool owns shares of and recommends Align Technology, Alphabet (A shares), Alphabet (C shares), Intuitive Surgical, Microsoft, and Netflix. The Motley Fool recommends Carnival, Intel, and Johnson & Johnson and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, long January 2022 $580 calls on Intuitive Surgical, and short January 2022 $600 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Occidental Petroleum Corporation Stock Quote
Occidental Petroleum Corporation
$61.45 (-1.06%) $0.66
Apache Corporation Stock Quote
Apache Corporation
$34.19 (-2.17%) $0.76
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,585.62 (-1.51%) $-54.85
BlackRock, Inc. Stock Quote
BlackRock, Inc.
$550.28 (-2.42%) $-13.64
AT&T Inc. Stock Quote
AT&T Inc.
$15.34 (-1.22%) $0.19
Microsoft Corporation Stock Quote
Microsoft Corporation
$232.90 (-1.94%) $-4.60
Alphabet Inc. Stock Quote
Alphabet Inc.
$95.65 (-1.82%) $-1.77
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$56.02 (-0.97%) $0.55
Intel Corporation Stock Quote
Intel Corporation
$25.77 (-2.31%) $0.61
Johnson & Johnson Stock Quote
Johnson & Johnson
$163.36 (-0.71%) $-1.17
Netflix, Inc. Stock Quote
Netflix, Inc.
$235.44 (-1.78%) $-4.27
Carnival Corporation Stock Quote
Carnival Corporation
$7.03 (-23.25%) $-2.13
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$37.90 (-13.15%) $-5.74
Stryker Corporation Stock Quote
Stryker Corporation
$202.54 (-1.43%) $-2.94
Boston Scientific Corporation Stock Quote
Boston Scientific Corporation
$38.73 (-1.55%) $0.61
MGM Resorts International Stock Quote
MGM Resorts International
$29.72 (-0.90%) $0.27
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$187.44 (-0.86%) $-1.62
Align Technology, Inc. Stock Quote
Align Technology, Inc.
$207.11 (-1.85%) $-3.90
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$11.36 (-18.04%) $-2.50
SPDR Series Trust - SPDR S&P Health Care Services ETF Stock Quote
SPDR Series Trust - SPDR S&P Health Care Services ETF
$87.79 (-1.61%) $-1.44
SPDR Series Trust - SPDR S&P Health Care Equipment ETF Stock Quote
SPDR Series Trust - SPDR S&P Health Care Equipment ETF
$85.33 (-1.04%) $0.90
American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
$12.04 (-1.71%) $0.21
Alphabet Inc. Stock Quote
Alphabet Inc.
$96.15 (-1.98%) $-1.94

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