U.S. stock gauges on Thursday were trying to claw back at least a portion of yesterday’s rout for the broader market, as investors digested a preliminary reading of the health of the U.S. economy that indicated a massive rebound in growth from the recession caused by the coronavirus pandemic, albeit off an economic base that had shrunk considerably.
Investors were also wrestling with data showing a sharp rise in coronavirus cases in the U.S. and Europe and sifting through corporate results on one of the busiest days of earnings reporting of the season.
What are major indexes doing?
The Dow Jones Industrial Average traded up 141 points, or 0.5%, to 26,653, and had been down by as many as 230 points at early session nadir. The S&P 500 index was up 31 points, or 0.9%, at 3,300. The Nasdaq Composite Index advanced 132 points, or 1.2%, to trade at 11,139.
The Dow on Wednesday dropped 943.24 points, or 3.4%, to close at 26,519.95 for its fourth straight loss. The S&P 500 lost 119.65 points, or 3.5%, to end at 3,271.03, for its third straight decline, while the Nasdaq Composite closed at 11,004.87, down 426.48 points, or 3.7%.
The Dow and S&P 500 saw their worst one-day percentage drop since June 11, while the Nasdaq suffered its biggest decline since Sept. 8. The S&P 500 and Nasdaq erased their October gains with Wednesday’s selloff, joining the Dow, which had turned lower for the month earlier in the week.
What’s driving the market?
A closely watched report about the U.S. economy’s health amid the pandemic showed that gross domestic product soared at a record 33.1% annual pace in the third quarter. A more recent surge in infections in the U.S., meanwhile is contributing to fears the domestic and global economy could see another slowdown, undercutting the V-shaped rebound seen since the pandemic forced the near shutdown of activity around much of the world earlier this year.
The widely expected snapback in GDP, the official scorecard of the U.S. economy, also was given a big assist by trillions of dollars in government aid to families, the unemployed and businesses most harmed by the virus, but that assistance ended at the start of August and it isn’t clear when or if a new coronavirus relief package will move forward in Congress.
“The strong GDP performance gives a false impression of the economy’s true health,” wrote Gregory Daco, chief economist at Oxford Economics in a Thursday report. “ Lest we be tempted by alluring rearview mirror economics, or confused by misleading annualized GDP figures, our weekly US Recovery Tracker points to a dangerous plateau entering Q4,” he wrote.
The report on GDP came as a report on weekly U.S. jobless claims fell to a 7-month low of 751,000, suggesting layoffs are easing despite a rise in coronavirus infections.
New claims fell by 40,000 in the seven days ended Oct. 24. Economists polled by MarketWatch had forecast a 770,000 reading. This is the fourth decline in the past five months. Claims in the prior week were revised higher to 791,000 from 787,000.
Jobless claims remain high by historical standards, and the pickup in job creation has slowed considerably. The Wall Street Journal reports that anecdotal evidence—companies big and small announcing plans to lay off more workers as the pandemic persists—suggests the labor market recovery will be protracted.
Early Thursday equities in Europe and the U.S. were regaining some of the ground lost in Wednesday’s rout when Germany and France moved to impose tighter restrictions on activity in response to a sharp rise in COVID-19 cases.
“We’ll see if the market continues to be spooked by shaky recovery prospects,” wrote Chris Larkin, managing director at trading and investment product, at E-Trade Financial, in emailed remarks.
“GDP hit it out of the park, as expected, but it remains to be seen if that can provide any catalyst given that it’s not really capturing the slowdown we’ve seen in the past few weeks and we’re coming off of a dismal Q2 read,” he wrote.
Meanwhile, the European Central Bank left policy on hold at the conclusion of its policy meeting Thursday morning, but signaled that further action is likely to come in December, saying it would “recalibrate instruments, as appropriate.”
A tightening presidential election race was also partially blamed for Wednesday’s selloff. Democratic challenger Joe Biden’s continues to lead President Donald Trump in the polls, but the race has tightened and a survey released this week showed Trump moving ahead of Biden in Florida, a battleground state.
Investors fear a tight race that could produce a contested election outcome, potentially leading to weeks of uncertainty and acrimony, while a more clear-cut outcome is seen paving the way for near-term spending to aid the economy.
“With virus cases on the rise and a new fiscal package yet to be seen, economic concerns are once again brimming to the surface,” said Seema Shah, chief strategist, Principal Global Investors, in emailed comments. “If the US follows Europe’s path of reintroducing national lockdowns, the popular reflation narrative will be severely tested,” the analyst said.
Investors were digesting a stream of earnings, including results from DuPont, Yum Brands Inc. and Tapestry Inc. Almost all the technology giants are due to report after the market close Thursday, with results due from Twitter Inc., Facebook Inc.,Google parent Alphabet Inc. Apple Inc. and Amazon.com Inc.
In deal-related news, Marvell Technology Group Ltd. said Thursday that it had agreed to acquire Inphi Corp. in a cash-and-stock deal that will create a semiconductor company with a $40 billion enterprise value. Inphi shares jumped 31% in premarket trade, while Marvell shares fell 6.8%.
Which companies are in focus?
- Tapestry shares rose over 8% after the parent of the Coach, Kate Spade and Stuart Weitzman brands delivered better-than-expected earnings for its fiscal first quarter.
- Shares of DuPont de Nemours Inc. may be in focus after the materials company swung to a third-quarter net loss, but reported an adjusted profit that topped and revenue that fell less than expectations and provided an upbeat full-year outlook.
- Shares of Yum Brands were down 2.8% after delivering earnings and revenues that beat expectations.
- Ford Motor Co. shares were up over 5% after the auto maker surprised Wall Street by delivering a $2 billion rise in quarterly profit and said its bets on pickups and SUVs paid off.
- Shares of biotech drugmaker Amgen Inc. were trading more than 1% lower after the company reported results that topped estimates late Wednesday.
- Gilead Sciences Inc., in quarterly results released after Wednesday’s close, showed sales of its COVID-19 antiviral drug helped lift sales and earnings, but cut its annual sales forecast. Shares were. down 2.2%
- Shares of online marketplace eBay Inc. were down more than 7% after the company late Wednesday released third-quarter results that beat expectations and said it was making progress with its payments transition.
- Teladoc Health Inc. shares fell by about 2% after the telemedicine company narrowed its quarterly loss and reported sales that beat expectations but called for steeper losses in the next quarter.
- Ralph Lauren Corp. were in focus after the luxury lifestyle brand reported fiscal second-quarter revenue that missed expectations. Shares were down more than 5%.
- Shares of Moderna Inc. were up 1.5% Thursday after the company again reminded investors that the Phase 3 clinical trial for its COVID-19 vaccine candidate is fully enrolled as part of its third-quarter earnings announcement.
How are other assets trading?
In global equities, the Shanghai Composite closed 0.1% higher, while Hong Kong’s Hang Seng Index finished trade on Thursday 0.4% lower, and Japan’s Nikkei 225 Index both declined 0.3%.
In European trade, the pan-European Stoxx 600 Europe was trading 0.3% higher after its worst day in about a month, tumbling 3% and London’s FTSE 100 was trading up 0.3%, after its 2.6% skid.
Oil futures extended a decline on Thursday, with the U.S. benchmark trading down 3.9% at $35.86 a barrel as rising coronavirus cases continued to dent expectations for demand. Gold futures declined 0.4%, at $ 1,873.10 an ounce.
The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, was up 0.4% at 93.809.
The yield on the 10-year Treasury note was up 1 basis point at around 0.79%. Bond yields move inversely to prices.