On a Thursday in late October 2020, American stocks found their footing again after a sharp fall the day before, as investors who had been braced for the pandemic to strangle the recovery turned their attention to a record quarter of economic growth and a modest easing in jobless claims. The rebound was led by the large technology companies, whose quarterly reports that evening carried the weight of expectations built up over months of pandemic-era confidence. Yet the mood was tempered rather than triumphant, for the virus was climbing again, European governments were tightening their rules, a
Wall Street Recovers Early Losses as Big Tech Earnings Loom and Virus Fears Linger
The gain was less than half of what the index lost a day earlier.
Mark
Stocks were down early and ended up 1.2%. What changed during the day?
Mimi
The tech rebound did most of the work, along with better-than-expected jobless claims and the record GDP figure. Investors were also positioning for Facebook, Amazon and Google's parent reporting that evening.
Luke
Careful, though. Delwiche's view that it's anticipation of earnings is one strategist's read. The article doesn't prove why buyers came in.
Mark
And the earnings did beat expectations, right?
Mimi
Yes, all three topped forecasts after the close. But Microsoft fell 5% the day before despite beating, so a beat doesn't guarantee a rally.
Luke
Right, and we don't know from this story how those three stocks reacted after hours.
Mark
The 33.1% growth sounds enormous.
Mimi
It follows a 31.4% annualized contraction in the spring, so it's a rebound from a deep hole. Claims at 751,000 are still very high.
Luke
Also, that GDP number is a government estimate and backward-looking. It says nothing about the current virus surge.
Mark
What's the main risk?
Mimi
Rising cases, new restrictions in France and Germany, and stalled stimulus talks, with Pelosi still awaiting answers from Mnuchin.
Luke
Whether restrictions return in the U.S. is unknown. The article states a fear, not a forecast.
O Pulso
- The S&P 500 plunged 3.5% on Wednesday, its worst drop in over four months, and investors spent the next day trying to decide whether that fall was a warning or an overreaction.
- Big tech stocks pulled the market back up, with Facebook, Amazon and Google's parent company poised to report earnings after the close, and Microsoft's 5% slide the day before showed how unforgiving the bar had become.
- A record 33.1% annual growth rate and jobless claims easing to 751,000 gave traders real reasons for relief, even as those claims remained stubbornly high.
- Rising coronavirus cases, new business restrictions in France and Germany, and stalled stimulus talks in Washington keep the recovery under a cloud, with the next test still unresolved.
On a Thursday in late October 2020, American stocks found their footing again after a sharp fall the day before, as investors who had been braced for the pandemic to strangle the recovery turned their attention to a record quarter of economic growth and a modest easing in jobless claims. The rebound was led by the large technology companies, whose quarterly reports that evening carried the weight of expectations built up over months of pandemic-era confidence. Yet the mood was tempered rather than triumphant, for the virus was climbing again, European governments were tightening their rules, and the aid that had cushioned ordinary workers through the summer was lapsing while politicians in Washington argued over its renewal. It was one more day in a long stretch in which the economy seemed to be healing and fracturing at the same time.
On Thursday, October 29, 2020, Wall Street tried to recover from the worst drop in more than four months. The S&P 500 had tumbled 3.5% the day before on fears that a worsening pandemic would again strike the economy and corporate profits. On Thursday it climbed back 1.2% to close at 3,310.11, recovering less than half of Wednesday's losses, though the major indexes were still headed for a second straight weekly decline.
Technology led the rebound, as investors looked ahead to quarterly reports from Facebook, Amazon and Google's parent company. All three beat expectations, though Microsoft's 5% fall the day before showed how high the bar had become for companies that had cruised through the pandemic. Earnings across the season were nonetheless milder than feared.
The economy offered encouragement, growing at a record 33.1% annual rate from July through September, and jobless claims eased to 751,000, better than forecast but still very high. Yet the threats remained plain. Coronavirus cases were rising, France and Germany had announced new business restrictions, and in Washington hope for fresh aid was fading, as benefits for laid-off workers lapsed over the summer and Speaker Nancy Pelosi was still waiting on answers from Treasury Secretary Steven Mnuchin. The recovery was real, but its future still depended on the virus and on politicians who had not yet agreed on help.
On Thursday, October 29, 2020, the S&P 500 opened down 0.3%, a continuation of the slide that had hit Wall Street the day before. By the close it was up 1.2%, finishing at 3,310.11 after a gain of 39.08 points. That was less than half of what the index gave up on Wednesday, when it tumbled 3.5% in its worst drop in more than four months on fears that a worsening pandemic would again weigh on the economy and corporate profits.
The Dow Jones Industrial Average added 139.16 points, or 0.5%, to 26,659.11, after being down as much as 229 points and up as much as 371 points during the session. The Nasdaq composite did better than the rest of the market, climbing 180.72 points, or 1.6%, to 11,185.59. Even so, the major indexes were still on track for weekly losses, including a second straight weekly decline for the S&P 500.
Technology stocks led the rebound, ahead of quarterly reports from Facebook, Amazon and Google's parent company. All three reported after the close of regular trading, and each topped Wall Street's expectations. Willie Delwiche, an investment strategist at Baird, said the leadership had gone back to the mega-cap names, in anticipation of good earnings from a whole swath of companies reporting that evening.
Expectations for Big Tech have been high, since these companies have largely cruised through the pandemic and investors have bid up their shares on the belief that work-from-home and other accelerated trends will keep profits soaring. Microsoft showed the risk of that on Wednesday, when its stock fell 5% even though it reported stronger profit and revenue than analysts expected. Analysts have noted that stocks are getting less of a lift than usual from profits that beat forecasts. 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.
The economic data helped too. A government estimate released Thursday showed the economy grew at a record annual rate of 33.1% from July through September, after shrinking at an annualized 31.4% from April through June. The number of U.S. workers applying for unemployment benefits eased last week to 751,000 from 791,000 the week before, and was better than economists had forecast, though it remains very high compared with before COVID-19.
The threats are plain, though. Coronavirus cases are rising in the United States, and in Europe, France and Germany announced new business restrictions on Wednesday, sending European stocks sharply lower. On Thursday those stocks initially rose but levelled off after the head of the European Central Bank said there is "little doubt" more stimulus will come in December. Even without a return of sweeping lockdowns, the fear is that the pandemic keeps customers away from businesses. Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said the future still looks cloudy and that the virus will determine consumer behaviour.
In Washington, hope is fading for fresh aid. The supplemental benefits for laid-off workers and other stimulus approved earlier in the year expired over the summer, and economists and investors have been asking for more since. 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 coronavirus testing.
Caution lingered in other markets. A measure of investor fear in U.S. stocks touched its highest level since June before receding, oil prices kept falling on demand worries, and the 10-year Treasury yield rose to 0.83% from 0.79%. The next test is whether the virus and the stalled stimulus talks overtake the recovery the summer numbers showed.
Citações Notáveis
The future still looks cloudy. What happens with the virus will definitely determine consumers' behaviour.— Chris Zaccarelli, chief investment officer, Independent Advisor Alliance
It's back to the mega-cap names, in anticipation of good earnings this evening.— Willie Delwiche, investment strategist, Baird
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