Stocks Drop on Dour Economic Data

07/30/2020 | 05:07pm

By Michael Wursthorn and Anna Hirtenstein

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 close down 225.92 points, or 0.9%, to 26313.65. Shares of technology giants, many of which reported 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 struggled 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 -- was slightly smaller than economists' projections. 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 election remains a major factor that can sway markets.

The S&P 500 declined 12.22 points, or 0.4%, to 3246.22, and the Nasdaq Composite gained 44.87 points, or 0.4%, to 10587.81.

Investors appeared to swap stocks for bonds, pushing Treasury prices higher. That sent the yield on benchmark 10-year bonds down to 0.540%, the lowest level since March.

Some stocks bucked the broader market's decline following upbeat earnings reports.

Shares of United Parcel Service, for example, surged $17.78, or 14%, to $141.46 after it reported a record jump in daily shipping volumes. PayPal shares advanced $7.91, or 4.3%, to $192.51 after it reported that its revenue and profit beat expectations due to a boom in online shopping and digital payments.

Apple, Alphabet, Amazon.com and Facebook also notched modest gains as investors pushed those stocks higher ahead of their quarterly earnings reports.

Investors weren't disappointed. Apple, Amazon and Facebook topped analysts' earnings expectations, sending those stocks up during after-hours trading. Shares of Alphabet were little changed after the report. The Google parent beat Wall Street's projections, but reported a drop in advertising revenue from a year earlier, its first-ever such drop.

"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," said Raj Shant, a portfolio specialist at an affiliate of PGIM Group

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.

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

 

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