U.S. stocks traded lower Thursday morning after the main indexes put in their worst one-day skid since June 11 on Wednesday, amid growing signs that the daily count of new COVID-19 cases is accelerating, snarling efforts to reopen businesses in several states and threatening the economy’s recovery.
Investors are contending with a barrage of economic data Thursday too, including a report on weekly jobless claims, a final reading of first quarter GDP, and an update of the health of the country’s biggest banks, which will come after the close of Thursday trade.
How are the benchmarks performing?
The Dow Jones Industrial Average DJIA, -0.47% lost 200 points, 0.8%, to trade near 25,257, while the S&P 500 index SPX, -0.46% fell 21 points or 0.7%, trading near 3,031. The Nasdaq Composite COMP, -0.54% briefly popped into positive territory, but was off 74 points, or 0.8%, at about 9,837.
On Wednesday, the Dow shed 710.16 points, or 2.7%, ending at 25,445.94. The S&P 500 fell 80.93 points, or 2.6%, to end at 3,0501.33. The Nasdaq Composite gave up 222.20 points, or 2.2%, finishing at 9,909.17, a day after booking a fresh record closing high. All three indexes registered their worst day since June 11.
What’s driving the market?
After the worst down day for U.S. stocks on Wednesday in about two weeks, investors were digesting a plethora of economic data Thursday morning.
In the week ended June 20, Americans filed 1.48 million new jobless claims, fewer than in the previous week, but more than the 1.38 million forecast in a MarketWatch survey, even as prior weeks’ tallies were raised. But there was some good news: continuing claims, a closely watched figure that tracks the overall pool of benefit recipients, declined by more than forecast to 19.5 million in the week ended June 13.
In the third and final reading of first-quarter U.S. gross domestic product, the official scorecard of the health of the U.S. economy, the government confirmed that the economy contracted at an annualized pace of 5%. And a report on orders for long-lasting, or durable, goods, showed they rose 15.8% in May.
Financial firms may be in focus during the session ahead of what’s expected to be a closely followed report on the health the banking sector conducted by the Federal Reserve. So-called bank stress tests have been conducted on the nation’s largest financial institutions annually since 2009 in the aftermath of the 2007-’08 financial crisis.
The Fed has said that banks entered the crisis in a strong position, but analysts believe that the length of the pandemic could erode the balance sheets of some institutions as credit losses mount—a point investors will be on the lookout for. That report isn’t expected to call out individual financials but discuss the sector broadly.
Last week, Fed Vice Chairman Randal Quarles said the regulator asked banks to refrain from discussing results of the tests until June 29 “to provide for a more orderly dissemination of information to the public.”
Fed speakers for the day include Dallas Fed President Robert Kaplan at 9:30 a.m., Atlanta Fed President Raphael Bostic at 11 a.m., and Loretta Mester, the president of the Cleveland Fed at 12 p.m. Kaplan and Mester are voting members of the Federal Open Market Committee this year.
On Wednesday the U.S. recorded a one-day total of 34,700 newly confirmed COVID-19 cases, the highest level since late April, the Associated Press reported, using data compiled by Johns Hopkins University.
The resurgence of the coronavirus in several countries may delay the restart of businesses that were shut due to the epidemic and investors have struggled to understand how an economic rebound can take place amid a resurgence of the viral outbreak.
On Wednesday, Apple Inc. said it would shut seven stories in the Houston area following a sharp rise in cases, after last week re-closing some locations in Florida, Arizona, North Carolina, and South Carolina, according to reports.
Walt Disney Co. postponed the reopening of California theme parks, including Disneyland, which had been scheduled to start reopening July 17.
New York, New Jersey and Connecticut announced 14-day quarantines on Wednesday on visitors from states with high COVID-19 infection rates. The “travel advisory,” which impacts residents of nine states, underscores concerns about the pace of business activity resuming after lockdowns imposed to contain the spread of the pandemic.
Still, it is unusual for the market to appear newly rattled by a rise in cases that should be expected in a highly infectious disease. Sebastien Galy, Nordea Asset Management’s senior macro strategist, says its seems illogical.
“The haughty answer is that somehow the market is deficient in its logic,” he wrote in a Thursday research note. “The standard economic answer is that this is about the resolution of risk through time (non-separable preferences) like a billiard ball hitting for the first strike. It is simply difficult to fathom the complex interactions (behavioral explanation),” he said.
“We’re throwing trillions of dollars at getting the economy supported and restarted,” said Chris O’Keefe, managing director at Newtown Square, Pa-based Logan Capital Management. “But that can’t solve the health issue. It always comes back to that, and the psyche out there is very much concerned about it.”
In an interview Thursday, O’Keefe told MarketWatch, “I do think the market got ahead of itself, for sure.” In particular, O’Keefe says he’s watching “some of the growthy names like Amazon AMZN, -0.35% and Facebook FB, +0.11%, ” that may be attracting some bubblelike speculation on the belief that they are pandemic-proof.
Which stocks are in focus?
- Darden Restaurants DRI, +3.03% the operator of Olive Garden and LongHorn Steakhouse, said Q1 sales were 70% of year-ago sales, just missing analyst expectations, but also said that 91% of its restaurants were open with some capacity as of June 22. Q1 sales of $1.27 billion just edged analyst expectations of $1.26 billion. Shares jumped 5% in early trade.
- Shares of Macy’s Inc. M, -1.77% were down more than 3% after the bell after the retailer said it would cut 3,900 managerial positions and take a $180 million restructuring charge.
- Rite Aid Corp. RAD, +19.03% reported a narrower-than expected first-quarter loss ahead of the bell, and shares shot up 13%.
- Shares of Moderna Inc. MRNA, +0.04% were nearly 3% higher after it said it had set up a manufacturing deal for a hoped-for coronavirus vaccine.
- Nike Inc. NKE, -0.30% is set to report results after the close of trade Thursday.
- Walt Disney Co. shares DIS, -1.84% may be in focus after the entertainment and theme park giant said it was delaying the reopening of its California theme parks, including Disneyland, which had been scheduled to start reopening July 17.
How are other assets performing?
West Texas Intermediate U.S. crude CLQ20, -0.50% fell 23 cents, nearly 0.6% to $37.78 a barrel on the New York Mercantile Exchange as demand concerns pressured prices. In precious metals, gold futures are trading lower, with the August contact GCM20, -0.09%, down $3.90 or 0.2% to $1,761.90 an ounce, two days after hitting an eight-year high.
The 10-year Treasury note yield TMUBMUSD10Y, 0.663% fell 2 basis points to 0.663%, near its lowest in two weeks, as inflows into safe-haven assets continue. Bond prices move inversely to yields.
The greenback was up 0.3% against a basket of its major rivals to 97.40, based on trading in the ICE U.S. Dollar Index DXY, +0.36%
In global equities, the Stoxx Europe 600 index SXXP, +0.30% was about 0.3% higher, at 358.43.
In Asian markets, the Japanese Nikkei NIK, -1.21% closed down 1.2%, and Hong Kong’s Hang Seng HSI, -0.50% lost 0.5%.
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