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Record Nosedive In GDP May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower opening on Thursday, with stocks likely to extend the see-saw performance seen over the past few sessions.

Negative sentiment may be generated in reaction to a report from the Commerce Department showing a record contraction in U.S. economic activity in the second quarter.

The report said real gross domestic product plummeted at an annual rate of 32.9 percent in the second quarter following a 5.0 percent slump in the first quarter.

While GDP showed the biggest quarterly drop on record, the plunge was not quite as steep as the 34.1 percent nosedive expected by economists.

Meanwhile, a separate report from the Labor Department showed initial jobless claims increased for the second straight week in the week ended July 25th, although claims rose by much less than expected.

The report said initial jobless claims edged up to 1.434 million, an increase of 12,000 from the previous week's revised level of 1,422,000.

Economists had expected jobless claims to rise to 1.450 million from the 1.416 million originally reported for the previous week.

Despite the downward momentum for the broader markets, some individual stocks are seeing significant pre-market strength on upbeat earnings

Looking ahead, tech giants Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Facebook (FB) are among the companies due to report their quarterly results after the close of today's trading.

Stocks moved significantly higher over the course of the trading day on Wednesday, offsetting the pullback seen late in the session n Tuesday. The major averages all moved to the upside, although the Dow underperformed its counterparts.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow climbed 160.29 points or 0.6 percent to 26,539.57, while the Nasdaq surged up 140.85 points or 1.4 percent to 10,542.94 and the S&P 500 jumped 40.00 points or 1.2 percent to 3,258.44.

Early buying interest was partly generated in reaction to the latest batch of earnings news, with a number of big-name companies reporting better than expected quarterly results.

Chipmaker Advanced Micro Devices (AMD) moved sharply higher after reporting second quarter results that exceeded analyst estimates and raising its full-year guidance.

Shares of C.H. Robinson (CHRW) also spiked after the transportation services provider reported second quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, General Motors (GM) moved to the downside over the course of the session even though the automaker reported a narrower than expected second quarter loss.

Shares of Boeing (BA) also came under pressure after the aerospace giant reported a wider than expected second quarter loss.

The strength on Wall Street also came following the release of a report from the National Association of Realtors showing another significant increase in pending home sales in the month of June.

NAR said its pending home sales index surged up by 16.6 percent to 116.1 in June after skyrocketing by 44.3 percent to 99.6 in May. Economists had expected pending home sales to jump by 15.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

With the continued increase in contract activity, pending home sales in June were up by 6.3 percent compared to the same month a year ago.

"It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago," said NAR chief economist Lawrence Yun.

He added, "Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve's maximum liquidity monetary policy."

Stocks saw continued strength after the Federal Reserve announced its widely expected decision to leave interest rates at near-zero levels amid the economic hardship imposed by the coronavirus pandemic.

The Fed said it decided to maintain the target range for the federal funds rate at 0 to 0.25 percent, where it has remained since an emergency rate cut on March 15.

The accompanying statement noted economic activity and employment have picked up somewhat in recent months following sharp declines but remain well below their levels at the beginning of the year.

The central bank partly attributed the recent improvement in overall financial conditions to policy measures to support the economy and the flow of credit to U.S. households and businesses.

The Fed also reiterated that it remains committed to using its full range of tools to support the U.S. economy in this challenging time.

The statement did include a new sentence noting the path of the economy will depend significantly on the course of the virus, which Fed Chair Jerome Powell highlighted in his post-meeting press conference.

Banking stocks moved sharply higher over the course of the trading session, driving the KBW Bank Index up by 3.2 percent to its best closing level in a month.

Substantial strength also emerged among energy stocks, which moved higher as the price of crude oil for September delivery rose $0.23 to $41.27 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index spiked by 2.6 percent and 2.5 percent, respectively, and the NYSE Arca Natural Gas Index surged up by 2.3 percent.

Housing stocks also showed a strong move to the upside following the pending home sales data, resulting in a 2.6 percent jump by the Philadelphia Housing Sector Index.

Networking, steel and semiconductor stocks also saw considerable strength, while airline, biotechnology and gold stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are sliding $0.65 to $40.62 a barrel after rising $0.23 to $41.27 a barrel on Wednesday. Meanwhile, after climbing $8.80 to $1,953.40 an ounce in the previous session, gold futures are slumping $10.70 to $1,942.70 an ounce.

On the currency front, the U.S. dollar is trading at 105.17 yen versus the 104.92 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1756 compared to yesterday's $1.1792.

Asia

Asian stocks ended mixed on Thursday as the relentless surge in coronavirus cases around the world offset investor optimism over the Federal Reserve's dovish policy statement.

Fed policymakers renewed their pledge to utilize all means at their disposal to set the virus-hit economy on the path to recovery but warned that the outlook would depend on the course the virus takes.

Chinese shares ended lower as the country reported 105 new coronavirus cases on the mainland, up from 101 the previous day, with 96 of them in the far western region of Xinjiang. The benchmark Shanghai Composite Index slipped 7.73 points, or 0.2 percent, to 3,286.82.

Hong Kong's Hang Seng Index slid 172.55 points, or 0.7 percent, to 24,710.59. The Hong Kong economy contracted for the fourth straight quarter as the coronavirus pandemic weighed on household spending and investment and exports in the second quarter, official data revealed.

GDP decreased 9 percent year-on-year after a 9.1 percent slump in the first three months of the year, according to advance estimates from the Census and Statistics Department.

Japanese shares ended lower as fresh coronavirus cases exceeded the 1,000 mark for the first time, with Osaka and Aichi setting daily records. Encouraging retail sales data helped limit the downside to some extent.

Retail sales in Japan were down an annual 1.2 percent in June, the Ministry of Economy, Trade and Industry said. That beat forecasts for a decline of 6.5 percent following the 12.3 percent drop in May. On a monthly basis, retail sales jumped a seasonally adjusted 13.1 percent after gaining 2.1 percent in the previous month.

The Nikkei 225 Index dropped 57.88 points, or 0.3 percent, to 22,339.23, while the broader Topix closed 0.6 percent lower at 1,539.47.

ANA Holdings tumbled 2.8 percent after the airline said it suffered a record quarterly net loss in April-June. Chemical and cosmetics company Kao Corporation slumped 5.2 percent after cutting its profit forecast for the year through March.

Meanwhile, Australian markets advanced as the Fed expressed its commitment to maintain its bond purchases. The benchmark S&P/ASX 200 Index rose 44.70 points, or 0.7 percent, to 6,051.10, while the broader All Ordinaries Index ended up 49.50 points, or 0.8 percent, at 6,177.50.

Mining giant Rio Tinto gained 1.1 percent as it raised dividend and said it saw a sharp V-shaped recovery in China.

Fortescue Metals Group surged 4.2 percent as it beat its full-year iron ore estimates with record shipments in the fourth quarter.

Lender Commonwealth Bank of Australia edged up 0.3 percent after setting aside an additional $300 million for its customer remediation budget. The other three banks fell between 0.2 percent and half a percent.

Buy-now-pay-later firm Afterpay advanced 1.6 percent and accounting software company Xero added 2.9 percent after tech stocks again helped the lead the way higher on Wall Street overnight.

On the data front, the total number of building permits issued in Australia was down a seasonally adjusted 4.9 percent month on month in June, the Australian Bureau of Statistics said - coming in at 12,213. That missed expectations for an increase of 1.5 percent following the 15.8 percent contraction in May. On a yearly basis, consents were down 15.8 percent.

Seoul stocks edged up slightly to extend gains for the fourth consecutive session amid continued strong foreign investor buying. The benchmark Kospi climbed 0.8 percent in intraday trade to reach its highest level since early October 2018 before paring gains to end the session up 3.85 points, or 0.2 percent, at 2,267.01.

Heavyweight Samsung Electronics ended flat despite reporting a 23 percent jump in second quarter operating profit on strong chip sales. Its peer SK Hynix rallied 2.5 percent.

Business sentiment in South Korea's manufacturing sector strengthened in July, the latest survey from the Bank of Korea showed with an index score of 57.0 - up from 51.0 in June. The outlook for the following month also rose by 9 points to 60.0.

Europe

European stocks have moved sharply lower on Thursday as coronavirus infections continued to rise around the world and the latest batch of earnings disappointed.

On the data front, German GDP slumped by the most since 1970 in the second quarter, while the new official unemployment rate hit 7.1 percent across the EU and 7.8 percent in the euro zone in June, new figures showed today.

While the German DAX Index has plunged by 2.6 percent, the U.K.'s FTSE 100 Index is down by 1.8 percent and the French CAC 40 Index is down by 1.5 percent.

Lloyds Banking Group has shown a substantial move to the downside after it swung to a pretax loss in the first half of 2020.

Royal Dutch Shell has also moved notably lower as it booked a US$18.1bn quarterly loss after a record writedown on the value of its oil and gas assets.

Standard Chartered has also moved sharply lower after the banking and financial services company reported a 33 percent slump in its first-half profit.

RSA Insurance Group has also tumbled after its statutory profit before tax fell 7 percent in the first half. Anglo American has also declined. The diversified miners slashed dividend after first-half profits fell 39 percent.

Italian oil and gas company Eni SpA has also slumped. The company said that its second-quarter net loss attributable to shareholders was 4.41 billion euros compared to last year's profit of 424 million euros.

Retailer Casino has also plunged after its consolidated net loss for the first half of 2020 widened to 445 million euros from 226 million euros in the prior-year period.

Food company Danone has also plummeted after its first-half net profit and revenue fell. Carmaker Renault declined has also fallen sharply after it swung to a record first-half loss.

German automaker Volkswagen has also slumped after it unveiled a first-half operating loss and cut dividend.

Packaging and bottom machine manufacturer Krones has also plunged after it ended the second quarter of 2020 with a loss.

On the other hand, Anheuser-Busch InBev has jumped after delivering better-than-expected second-quarter earnings.

Drug maker AstraZeneca has also shown a strong move to the upside after its second-quarter sales and profit topped forecasts.

Safran has also advanced. The aerospace-and-defense company set new guidance for the year, assuming a gradual recovery in air traffic and despite considerable uncertainties.

U.S. Economic Reports

Reflecting the impact of the coronavirus pandemic, the Commerce Department released a report on Thursday showing a record contraction in U.S. economic activity in the second quarter.

The report said real gross domestic product plummeted at an annual rate of 32.9 percent in the second quarter following a 5.0 percent slump in the first quarter.

While GDP showed the biggest quarterly drop on record, the plunge was not quite as steep as the 34.1 percent nosedive expected by economists.

The Commerce Department said the slump in GDP reflected decreases in consumer spending, exports, private inventory investment, non-residential fixed investment, residential fixed investment, and state and local government spending.

A separate report from the Labor Department showed initial jobless claims increased for the second straight week in the week ended July 25th, although claims rose by much less than expected.

The report said initial jobless claims edged up to 1.434 million, an increase of 12,000 from the previous week's revised level of 1,422,000.

Economists had expected jobless claims to rise to 1.450 million from the 1.416 million originally reported for the previous week.

The increase in jobless claims seen over the past two weeks came on the heels of decreases in the fifteen preceding weeks.

Stocks In Focus

Shares of Qualcomm (QCOM) are moving sharply higher in pre-market trading after the chipmaker reported better than expected fiscal third quarter results and provided upbeat guidance

Delivery giant UPS (UPS) is also likely to see initial strength after reporting second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Eli Lilly (LLY) may move to the downside after the drugmaker reported second quarter earnings that beat estimates but on weaker than expected revenues.

Cloud software company ServiceNow (NOW) is also seeing significant pre-market weakness despite reporting better than expected second quarterreuslts.

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