On an autumn Thursday in 2020, American stocks climbed back from a sharp fall the day before, as investors weighed a record burst of economic growth against a virus that was once again spreading across the country. The S&P 500 rose nearly two percent, lifted by technology and communication shares, after a sell-off that had marked its worst stretch in four months. Behind the numbers lies an old human tension: the wish to believe that recovery is already here, set against the knowledge that the pandemic has not finished shaping what people will spend, earn, and fear.
Wall Street Rebounds Sharply After Shaky Start, Led by Tech as Virus Fears Linger
The future still looks cloudy.
Mark
The market dropped 3.5% Wednesday and recovered a good chunk Thursday. Is that a real turnaround?
Mimi
Thursday had real reasons behind it: record 33.1% growth for the summer quarter and jobless claims down to 751,000, better than forecast.
Luke
But one day's rally isn't a trend. The report only says the market was higher in afternoon trading, not where it closed.
Mark
And the GDP number sounds spectacular.
Mimi
It follows a 31.4% annualized contraction in the spring, so it's a rebound from a deep hole.
Luke
Right, and it covers July through September. It says nothing about how the economy is doing now, with cases rising.
Mark
What about the jobless claims?
Mimi
They eased from 791,000 to 751,000, but that's still very high compared with before COVID-19.
Luke
Stimulus is the unknown. Pelosi sent a letter listing what she's waiting on, but the report gives no sign of a deal.
Mark
And the tech earnings?
Mimi
Apple, Amazon, Facebook and Google's parent reported after the close, with shares already up 2.8% to 5.5%. Microsoft fell 5% Wednesday despite beating expectations.
Luke
Whether those four will follow the same pattern is not something the reporting can tell us yet.
El Pulso
- The S&P 500 snapped back 1.9% after Wednesday's 3.5% plunge, its worst day in over four months.
- Record 33.1% third-quarter growth and fewer jobless claims offered relief, yet 751,000 applicants still signals hardship.
- Washington's stimulus talks are stalled, with Speaker Pelosi still waiting on answers from Treasury on aid and testing.
- Oil slid over 3%, bond yields edged up, and investor fear gauges spiked before easing, so nerves remain raw.
- Apple, Amazon, Facebook and Google's parent report after the close, and their results will decide whether the rebound holds.
On an autumn Thursday in 2020, American stocks climbed back from a sharp fall the day before, as investors weighed a record burst of economic growth against a virus that was once again spreading across the country. The S&P 500 rose nearly two percent, lifted by technology and communication shares, after a sell-off that had marked its worst stretch in four months. Behind the numbers lies an old human tension: the wish to believe that recovery is already here, set against the knowledge that the pandemic has not finished shaping what people will spend, earn, and fear.
By mid-afternoon Thursday, the S&P 500 had climbed 1.9%, reversing a morning dip and recovering some of the ground lost the previous day, when the index had fallen 3.5% in its worst drop in more than four months. Investors had feared that a worsening pandemic would again drag down the economy and corporate profits. The gains spread broadly. The Dow rose about 1.4%, the Nasdaq more than 2%, and technology and communication stocks led the way.
Two economic reports gave traders something to hold onto. The government estimated that the economy grew at a record annualized rate of 33.1% from July through September, after a steep contraction in the spring. Jobless claims also eased to 751,000, better than economists expected, though still very high by pre-pandemic standards.
The footing remains uncertain. Coronavirus cases are climbing again, and Congress and the White House have yet to agree on new economic support, leaving many laid-off workers without the extra benefits that expired over the summer. Speaker Nancy Pelosi wrote to Treasury Secretary Steven Mnuchin listing the items still awaiting a response. One strategist summed up the mood: the future still looks cloudy, and the virus will largely determine how consumers behave.
Signs of caution lingered. Investor fear gauges touched their highest level since June, oil fell sharply on demand worries, and Treasury yields inched higher. Attention then turned to the after-hours earnings of Apple, Amazon, Facebook and Google's parent, whose enormous valuations sway the entire market. Their shares had already risen sharply, so expectations are high. Microsoft's slide the day before, despite strong results, showed how little room for error remains.
Still, the earnings season has been kinder than forecasts predicted, with profits expected to fall about 13% rather than the 21% once feared. Whether this rebound endures will depend on those tech reports, on whether Washington finds agreement, and on how the virus unfolds.
By mid-afternoon Thursday, the S&P 500 stood 1.9% higher, a turnaround from a morning that had started with a 0.3% dip. The rebound came a day after the index fell 3.5%, its worst drop in more than four months, as investors worried that the worsening pandemic would again drag down the economy and corporate profits.
The gains were broad. As of 2:19 p.m. Eastern, the Dow Jones Industrial Average had climbed 369 points, or 1.4%, to 26,891, and the Nasdaq composite was up 2.4%. Within the S&P 500, technology and communication stocks led the way.
Traders had two pieces of economic data to lean on. A government estimate released Thursday showed the economy grew at a record annualized rate of 33.1% from July through September, following a contraction at a 31.4% annualized rate from April through June. Separately, the number of U.S. workers applying for unemployment benefits last week eased to 751,000 from 791,000 the week before, and came in better than economists had forecast. That figure is still extremely high by pre-COVID standards.
The recovery is not on solid footing, though. Coronavirus cases are rising in the United States, and Congress and the White House have not agreed on new support for the economy, something economists and investors have wanted since the summer, when the last round of supplemental benefits for laid-off workers and other stimulus expired. Hopes of a quick deal are fading. On Thursday, House Speaker Nancy Pelosi sent Treasury Secretary Steven Mnuchin a letter listing the topics she is still waiting to hear back on, including benefits for laid-off workers and measures on coronavirus testing. Even if sweeping lockdowns like those earlier this year do not return, the worry is that the worsening pandemic could keep customers away and cut into profits. "The future still looks cloudy," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "What happens with the virus will definitely determine consumer behaviour."
Signs of caution persisted. A measure of investor fear in the U.S. stock market touched its highest level since June before receding, and oil kept falling on demand worries. Benchmark U.S. crude dropped 3.3% to $36.15 a barrel, and Brent crude lost 3.1% to $38.43. The yield on the 10-year Treasury rose to 0.84% from 0.79% late Wednesday.
Attention also turned to earnings. After the close Thursday, Apple, Amazon, Facebook and Google's parent company were due to report summer profits. Because of their enormous market value, their moves weigh heavily on the S&P 500 and other indexes. Ahead of the reports, each was up between 2.8% and 5.5%. 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 soaring. Microsoft showed the risk on Wednesday: its stock slumped 5% even though it reported stronger profit and revenue than Wall Street expected. Analysts have noted that stocks are not getting their usual lift from better-than-forecast profits.
Still, the reporting season has been better than feared. According to FactSet, earnings per share for S&P 500 companies are on track to fall about 13% from a year earlier, far milder than the nearly 21% decline analysts forecast at the start of October.
Overseas, European markets initially rose but levelled off after the head of the European Central Bank said there is "little doubt" it will deliver more stimulus in December. They were recovering from Wednesday's slide, when France and Germany announced new business restrictions 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 while downgrading its outlook due to COVID-19 outbreaks. South Korea's Kospi fell 0.8%, Hong Kong's Hang Seng lost 0.5%, and Shanghai inched up 0.1%.
Whether the rebound lasts will depend on the big tech earnings, the stalled stimulus talks in Washington, and the course of the virus.
Citas Notables
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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