Stocks Drop on Dour Economic Data

07/30/2020 | 12:58pm

By Anna Hirtenstein and Michael Wursthorn

U.S. stocks fell Thursday on one of the busiest days of the corporate earnings season, while new data laid bare the extent of the economic damage wrought by the coronavirus pandemic.

Major indexes opened sharply lower, and the Dow Jones Industrial Average fell nearly 550 points before paring its losses to trade down about 235 points, or 0.9%. Shares of technology giants, many of which are set to report quarterly results after markets close, led the turnaround and helped lift the Nasdaq Composite index back into positive territory on the day.

Still, the broader stock market continued to struggle after data showed the U.S. economy saw its biggest-ever quarterly plunge in activity and an uptick in weekly unemployment claims suggesting the recovery in the labor market may be faltering.

Investors largely expected poor economic figures, and the extent of the second quarter's decline in gross domestic product -- nearly 33% on an annualized basis -- came in ahead of economists' expectations. Still, the Commerce Department data confirmed the extent of the pandemic's damage, showing few corners of the U.S. economy were spared.

"When you see that number in print, it becomes a reality," said Bill Northey, a senior investment director at U.S. Bank Wealth Management. "It solidifies the amount of economic damage we have already sustained."

Meanwhile, a tweet from President Trump didn't help matters ahead of Thursday's opening bell. The president suggested delaying the November election until people can safely vote in person, further pressuring stock futures.

Although some investors wrote off the comment, Mr. Northey said it highlighted how the elections remains a major factor that can sway markets.

The S&P 500 declined 0.8%, and the Nasdaq Composite gained 0.2%.

Some stocks bucked the broader market's decline following upbeat earnings reports, highlighting the handful of "winners" during the crisis.

Shares of United Parcel Service, for example, surged 15% after it reported a record jump in daily shipping volumes. PayPal shares advanced 4.3% after it reported that its revenue and profit beat expectations due to a boom in online shopping and digital payments.

Shares of Kellogg rose 1.4% after the company said consumers shopping for packaged foods, such as cereal, during the pandemic helped drive a key sales metric higher.

Several big tech stocks will take center stage after markets close, with Apple, Facebook, Amazon.com and Google's parent company Alphabet set to release their latest financial results. Those reports will show how tech companies are weathering the economic downturn and may even be benefiting from the lockdown measures.

Most of those stocks notched modest gains in recent trading, including Apple, up 0.6%, and Amazon.com, which gained 1.1%.

"We would say that the results will look more positive than the rest of the market, but a caveat is that expectations are higher as a result," said Raj Shant, a portfolio specialist at an affiliate of PGIM Group. "One overriding factor benefiting tech names is that the digitization of society has been pulled forward by at least a couple of years due to the lockdowns."

Meanwhile, Treasury prices rose, with the yield on the benchmark 10-year bond slipping to 0.548%, from 0.578% Wednesday.

Stocks didn't fare much better overseas, with most indexes falling. The pan-continental Stoxx Europe 600 slipped 2.2% after companies like Volkswagen and Lloyds Banking Group reported weak earnings. Germany also reported that its economy contracted the most on record, shrinking 10.1% in the second quarter.

Beer sales, however, picked up amid the pandemic, sending shares of Anheuser-Busch InBev up 1.9%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

 

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