On an October afternoon in 2020, American stocks climbed back from their sharpest one-day fall in more than four months, as the market weighed a record-breaking rebound in the economy against a pandemic that was once again gathering force. The turnaround, led by technology and communication companies, reflected a familiar human tension: relief at signs of recovery held beside the quiet dread that the virus could still reshape ordinary life. Political leaders had not yet agreed on help for those who had lost work, and the future remained, as one investor put it, cloudy, to be decided by how peo
Wall Street Rebounds Sharply After Shaky Start as Tech Leads Gains Ahead of Earnings
The economy grew at a record 33.1%, after shrinking 31.4% the quarter before
Mark
Wednesday the S&P fell 3.5%, Thursday it's up 1.9%. Is the worry over?
Mimi
Not really. The rebound leaned on two numbers: record 33.1% growth for July through September, and jobless claims easing to 751,000. But the same article says the virus and stalled stimulus still threaten the recovery.
Luke
And that 33.1% is an annualized rate off a quarter that shrank 31.4% annualized. It's a rebound measure, not a sign the economy is back. Also, 751,000 claims is still very high versus pre-COVID.
Mark
Why are the big tech companies getting so much attention?
Mimi
Apple, Amazon, Facebook and Google's parent were reporting after the close, and their size moves the indexes more than other stocks. They were up 2.8% to 5.5% going in.
Luke
Worth noting the results weren't known yet at the time of writing. Microsoft fell 5% Wednesday despite beating forecasts, so a good report doesn't guarantee a good reaction.
Mark
What about Washington?
Mimi
Pelosi sent Mnuchin a letter listing topics she's awaiting answers on, including laid-off worker benefits and testing. Hopes for a quick deal are fading.
Luke
The letter shows talks are ongoing, not that they're close. Nothing here says when or whether a deal comes.
Mark
Anything encouraging on earnings overall?
Mimi
S&P 500 earnings per share are on track to fall about 13%, versus nearly 21% expected at the start of October, per FactSet.
Luke
That's a projection for the season, not a final tally, and it's one data provider's figure.
Der Puls
- The S&P 500 bounced 1.9% on Thursday, erasing much of the 3.5% plunge that had rattled traders the day before.
- Rising coronavirus cases revived fears of new business restrictions, and investor anxiety briefly touched its highest level since June.
- Washington remains stalled, with Speaker Pelosi still awaiting answers from Treasury on relief for laid-off workers and testing measures.
- Record third-quarter growth of 33.1% offered hope, but jobless claims at 751,000 stayed far above pre-pandemic norms.
- Apple, Amazon, Facebook and Google's parent were due to report after the close, carrying heavy expectations that could steer the index's next move.
On an October afternoon in 2020, American stocks climbed back from their sharpest one-day fall in more than four months, as the market weighed a record-breaking rebound in the economy against a pandemic that was once again gathering force. The turnaround, led by technology and communication companies, reflected a familiar human tension: relief at signs of recovery held beside the quiet dread that the virus could still reshape ordinary life. Political leaders had not yet agreed on help for those who had lost work, and the future remained, as one investor put it, cloudy, to be decided by how people would behave in the months ahead.
By mid-afternoon Thursday, the S&P 500 had climbed 1.9%, a sharp reversal from the modest dip it showed at the open. The day before, the index had dropped 3.5%, its worst loss in more than four months, as fears grew that a worsening pandemic would again drag on the economy and corporate profits. Technology and communication companies led the recovery, and the Nasdaq rose 2.4%.
Traders had encouraging numbers to consider. The government reported that the economy grew at a record annualized pace of 33.1% from July through September, after a historic collapse in the spring quarter. Weekly unemployment claims also eased to 751,000, better than economists expected, though still very high compared with before COVID-19.
The optimism was tempered. Infections were climbing across the country, and investors feared that new restrictions on businesses could keep customers away even without the broad lockdowns of earlier in the year. Oil fell sharply on weak demand expectations, and Europe and Asia showed similar hesitation, with the European Central Bank signaling more stimulus later in the year.
In Washington, a new relief package for laid-off workers remained unresolved. Speaker Nancy Pelosi wrote to Treasury Secretary Steven Mnuchin listing the issues still awaiting answers, and hopes for a quick deal were fading.
Attention now turned to the major technology companies, whose results after the close would carry outsized weight on the market, and to whether the virus and the politics of relief would allow the recovery to hold.
By mid-afternoon Thursday, the S&P 500 was up 1.9%, a sharp turnaround from the 0.3% dip it had logged in the opening stretch of trading. The move came a day after the index fell 3.5%, its worst drop in more than four months, on fears that the worsening pandemic would once again weigh on the economy and on corporate profits.
The Dow Jones Industrial Average gained 369 points, or 1.4%, to 26,891 as of 2:19 p.m. Eastern time. The Nasdaq composite climbed 2.4%. Within the S&P 500, technology and communication companies led the rebound.
Traders had two pieces of data to work with. A government estimate showed the economy growing at a record annual rate of 33.1% from July through September, following a collapse at an annualized 31.4% in the April-to-June quarter. And the number of U.S. workers filing for unemployment benefits last week eased to 751,000, down from 791,000 the week before and better than economists had forecast. That figure remains very high compared with the period before COVID-19.
The optimism has limits. Coronavirus cases are rising in the United States, and investors worry about renewed restrictions on businesses. Even without the sweeping lockdowns of earlier this year, a worsening outbreak could keep customers away and cut into profits. Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said the future still looks cloudy and that the course of the virus will determine consumer behaviour. A measure of investor fear in the U.S. market touched its highest level since June before receding Thursday, and oil kept falling on demand worries: benchmark U.S. crude lost 3.3% to $36.15 a barrel, and Brent dropped 3.1% to $38.43.
Washington has not helped. Congress and the White House have yet to agree on more support, and economists and investors have been asking for it since the summer, when the earlier round of supplemental benefits for laid-off workers and other stimulus expired. On Thursday, House Speaker Nancy Pelosi sent Treasury Secretary Steven Mnuchin a letter listing the topics she was still awaiting answers on in their negotiations, including benefits for laid-off workers and coronavirus testing measures. Hopes of a quick deal are fading.
Europe showed a similar pattern. Stocks there initially rose but flattened after the head of the European Central Bank said there is "little doubt" it will deliver more stimulus in December. They were recovering from a sharp slide Wednesday, when France and Germany announced new restrictions on businesses to slow the virus. Germany's DAX returned 0.3%, while France's CAC 40 and London's FTSE 100 were unchanged. In Asia, Japan's Nikkei 225 slipped 0.4% after its central bank held policy steady but downgraded its outlook because of COVID-19 outbreaks. South Korea's Kospi fell 0.8%, Hong Kong's Hang Seng lost 0.5%, and Shanghai inched up 0.1%. The 10-year Treasury yield rose to 0.84% from 0.79% late Wednesday.
After the close Thursday, Apple, Amazon, Facebook and Google's parent company were due to report summer profits. Their enormous market value gives them outsized sway over the S&P 500, and each was up between 2.8% and 5.5% beforehand. Expectations are high, since investors have bid up these stocks on the belief that work-from-home and other pandemic-accelerated trends will keep profits climbing. Microsoft showed the risk on Wednesday, when its stock fell 5% despite profit and revenue that beat forecasts.
That is part of a wider pattern: analysts note stocks are getting a smaller lift than usual from better-than-expected earnings. Still, the season has been better than feared. S&P 500 earnings per share are on track to fall about 13% from a year earlier, far milder than the nearly 21% decline forecast at the start of October, according to FactSet. What to watch next is the Big Tech results, the path of the virus, and whether Washington delivers relief for laid-off workers.
Bemerkenswerte Zitate
The future still looks cloudy. What happens with the virus will definitely determine consumer behaviour.— Chris Zaccarelli, chief investment officer, Independent Advisor Alliance
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