U.S. Stock Futures Waver Ahead of Busy Earnings Day

10/29/2020 | 08:35am

By Caitlin Ostroff

U.S. stock futures wavered Thursday, as jobless claims dropped and third-quarter GDP showed a significant rebound.

Futures tied to the S&P 500 edged up 0.1%, a day after the benchmark posted its steepest fall since June 11. Contracts linked to Nasdaq-100 gained 0.5%, indicating that technology stocks will climb after the New York opening bell.

Fresh data showed that 751,000 Americans applied for unemployment benefits for the first time through the week ended Oct. 24, down from a seasonally adjusted 791,000 in the prior week. The decline is a sign that the labor market is slowly recovering, though claims remain at historically high levels.

Meanwhile, U.S. gross domestic product for the third quarter rose at an annual pace of 33.1%, the biggest gain ever. The increase followed a record drop in output earlier in the year when the virus and related shutdowns disrupted business activity across the country.

Apple, Alphabet, Facebook, Amazon.com and Twitter are scheduled to report after markets close, marking what may be the important day of the current earnings season for the tech sector. The stocks have posted sweeping gains this year, with investors betting that those businesses stand to benefit during the coronavirus-pandemic lockdowns.

The handful of stocks now account for a significant portion of the S&P 500 benchmark. That means investors' perception of the health of their operations can weigh on broader market sentiment, and lead to volatility in the benchmark.

"What I'm not looking at is what happened in the last quarter: because the recovery was so strong, it's almost a given that there is an improvement," said Luca Paolini, chief strategist at Pictet Asset Management. "What I want to see is companies feeling confident [enough] to give us guidance for the next few quarters."

If companies find that the economic outlook is too cloudy, and they don't have visibility on prospects for their businesses, they may revert to their behavior in March and avoid offering projections, he said. That would likely deal a blow to investors' confidence.

In offhours trading, shares in Ford Motor Co. gained 4.6% after the company posted about $2.4 billion in net income for the third quarter. In premarket trading, shares in Boston-based drugmaker Alexion Pharmaceuticals rose 3.4% after it reported better-than-expected profit and sales.

Shares in Kraft Heinz gained 2.2% premarket after the company reported earnings that beat analysts' expectations and raised its guidance.

The Cboe Volatility Index, a gauge of investors' expectations for swings in U.S. stocks, fell Thursday but remains near its highest level since June.

Worries that an uptick in Covid-19 cases will lead to new lockdowns and restrictions, which could erode the pace of economic recovery, have weighed on markets this week in both the U.S. and Europe. The U.S. reported nearly 79,000 new coronavirus cases for Wednesday, the second day in a row the total has come in over 70,000, according to data compiled by Johns Hopkins University.

France and Germany on Wednesday announced new restrictions on business and social activity, including shutting down restaurants, bars and some shops for a few weeks to stem the rising tide of infections. Leaders in both countries aimed to cushion the economic impact of the restrictions, saying factories and schools would remain open.

"If you look at the market action in the last week, it's pretty clear that Covid-19 is the key market mover," Mr. Paolini said.

The pan-continental Stoxx Europe 600 edged down 0.3%, after this week falling to its lowest level since May.

The U.S. election also remains in focus, with many investors remaining cautious about placing big bets ahead of the Nov. 3 vote.

Still, this week's selloff could present a buying opportunity for some investors, and help stock indexes recover some losses.

"The phenomenon that we've seen is that when markets correct, you get people to come in and think this is an opportunity to buy," said Daryl Liew, chief investment officer at REYL Singapore. "The reality is that investors still have a lot of cash. It's not a liquidity crisis for most people."

In bond markets, the yield on the 10-year Treasury ticked down to 0.774%, from 0.780% Wednesday.

In commodities, oil extended its selloff. Brent crude, the international gauge, retreated 5.2% to $37.56 a barrel.

The ICE U.S. Dollar Index, which measures the greenback against a basket of currencies, gained 0.4%. The dollar typically rises when stock indexes fall due to its status as a safe haven currency.

In the Asia-Pacific region, stock benchmarks were mixed at the end of trading. The Shanghai Composite Index edged up 0.1% while Australia's benchmark S&P/ASX 200 declined 1.6%.

--Joanne Chiu from Hong Kong contributed to this article.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

(END) Dow Jones Newswires

10-29-20 0934ET

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