U.S. stock gauges on Thursday took back a chunk of Wednesday’s rout, after a preliminary reading of the health of the U.S. economy showed a rebound of growth following the recession caused by the coronavirus pandemic.
Investors also wrestled with data showing a sharp rise in coronavirus cases in the U.S. and Europe and sifted through corporate results on one of the busiest days of earnings reporting of the season.
How did major indexes fare?
The Dow Jones Industrial Average DJIA, +0.52% rose 139.16 points, or 0.5%, to end at 26,659.11. The S&P 500 index SPX, +1.19% gained 39.08 points, or 1.2%, to finish at 3,310.11. The Nasdaq Composite Index COMP, +1.64% advanced 180.72 points, or 1.6%, to close at 11,185.59.
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 on Wednesday 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 drove the market?
Equity markets on Thursday were recovering from Wednesday’s broad-based selling, finding some support in data showing a bounceback in U.S. economic growth in the third quarter, though sharply rising coronavirus cases in Europe and the US. cast doubt on the outlook, especially without any further financial aid from Washington ahead of the November elections.
“There’s an element where markets want to focus on the medium-term, when people expect an economic rebound. As we move forward in time, we also move closer to that point. The challenge, of course, is we need to get to that point without seeing too much economic damage,” said Yung-yu Ma, chief investment strategist at BMO Wealth Management, in an interview.
U.S. GDP soared at a record 33.1% annual pace in the third quarter with the expected snapback in growth, driven by trillions of dollars in government aid to families, the unemployed and businesses most harmed by the virus, though that assistance ended at the start of August.
“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.
Meanwhile, a recent surge in coronavirus infections 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.
In other U.S. data, weekly U.S. jobless claims fell further to a 7-month low of 751,000 , suggesting layoffs are easing despite a rise in coronavirus infections. However, the pickup in job creation has slowed considerably. The Wall Street Journal reports that anecdotal evidence, from companies big and small announcing plans to lay off more workers, suggests the labor market recovery will be protracted.
“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.
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 also was partially blamed for Wednesday’s selloff. Democratic challenger Joe Biden 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 were digesting a stream of earnings, including results from DuPont DD, +3.66%, Yum Brands Inc. YUM, -0.12% and Tapestry Inc. TPR, +6.66%. Almost all the technology giants are due to report after the market close Thursday, with results due from Twitter Inc. TWTR, +8.03%, Facebook Inc. FB, +4.91%, Google parent Alphabet Inc. GOOG, +3.33%, GOOGL, +3.05% Apple Inc. and Amazon.com Inc. AMZN, +1.52%.
In deal-related news, Marvell Technology Group Ltd. MRVL, -3.33% said Thursday that it had agreed to acquire Inphi Corp. IPHI, +26.70% in a cash-and-stock deal that will create a semiconductor company with a $40 billion enterprise value. Inphi shares jumped 27%, while Marvell shares fell 3.3%.
In other economic reports, the index of pending home sales dropped 2.2% in September compared with the previous month, breaking a four-month streak of increases, the National Association of Realtors reported Thursday.
Which companies were in focus?
- Tapestry TPR, +6.66% shares rose 6.7% 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. DD, +3.66% rose 3.7% 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 fell 0.1% after delivering earnings and revenues that beat expectations.
- Ford Motor Co. F, +2.59% shares rose 2.6% 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. AMGN, +0.66% were 0.7% higher after the company reported results that topped estimates late Wednesday.
- Gilead Sciences Inc. GILD, -0.32%, 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 fell 0.3%.
- Shares of online marketplace eBay Inc. EBAY, -7.45% slipped 7.5% 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. TDOC, -3.98% shares fell 4% 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. RL, -5.00% fell 5% after the luxury lifestyle brand reported fiscal second-quarter revenue that missed expectations. Shares were down more than 5%.
- Shares of Moderna Inc. MRNA, +8.42% rose 8.4% 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 did other assets trade?
In global equities, the Shanghai Composite SHCOMP, +0.10% closed 0.1% higher, while Hong Kong’s Hang Seng Index HSI, -0.49% finished trade on Thursday 0.5% lower, and Japan’s Nikkei 225 Index NIK, -0.37% declined 0.4%.
In European trade, the pan-European Stoxx 600 Europe SXXP, -0.12% closed 0.1% lower after its worst day in about a month, tumbling 3%, and London’s FTSE 100 UKX, -0.01% also finished near break-even levels, closing down 0.02%, after its 2.6% skid.
Oil futures fell to their lowest finish in five months, with the U.S. benchmark CL.1, -3.47% losing $1.22 per barrel, or 3.3% to settle at $36.17 a barrel as rising coronavirus cases continued to dent expectations for demand. December gold futures slipped $11.20, or 0.6%, to settle at $1,868 an ounce, booking back-to-back losses.
The ICE U.S. Dollar Index DXY, +0.57%, a measure of the currency against a basket of six major rivals, was up 0.6%.
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William Watts contributed reporting