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U.S. Stocks Climb Well Off Early Lows, Nasdaq Bounces Into Positive Territory

wallstreet sept13 30jul20 lt

After moving sharply lower early in the session, stocks have regained ground over the course of the trading day on Thursday. The major averages have bounced well off their lows of the session, with the tech-heavy Nasdaq climbing above the unchanged line.

The Nasdaq fell by more than 130 points in early trading but is currently up 4.84 points or 0.1 percent at 10,547.78. Meanwhile, the Dow is down 301.04 points or 1.1 percent at 26,238.53 and the S&P 500 is up 23.21 points or 0.7 percent at 3,235.23.

The early sell-off on Wall Street came following the release of 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.

Consumer spending led the decrease, cratering by 34.6 percent in the second quarter, as the coronavirus-induced lockdowns in late March and April forced many consumers to stay at home.

The steep drop in second quarter GDP should not have come as much of a surprise to traders, although seeing the actual data still seemed to generate negative sentiment.

"We already know that activity rebounded strongly in May and June, setting the stage for a strong rise in GDP in the third quarter," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "Nevertheless, with the more recent resurgence in virus cases starting to weigh on the economy in July, a continued 'V-shaped' recovery is unlikely."

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.

Meanwhile, the notable recovery attempt by the Nasdaq comes as tech giants Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Facebook (FB) have climbed well off their lows ahead of the release of their quarterly results after the close of today's trading.

Shares of Qualcomm (QCOM) have also moved sharply higher after the chipmaker reported better than expected fiscal third quarter results and provided upbeat guidance

Sector News

Energy stocks continue to see substantial weakness in mid-day trading, with a steep drop by the price of crude oil weighing on the sector. Crude for September has climbed off its worst levels but remains down $1.36 at $39.91 a barrel.

Reflecting the sell-off by energy stocks, the NYSE Arca Oil Index is down by 4.5 percent and the Philadelphia Oil Service Index is down by 3.4 percent.

Significant weakness is also visible among gold stocks, as reflected by the 3.4 percent nosedive by the NYSE Arca Gold Bugs Index. The weakness in the sector comes as the price of gold is pulling back off yesterday's record closing high.

Banking stocks also continue to turn in some of the market's worst performances, with the KBW Bank Index slumping by 3.1 percent after ending the previous session at its best closing level in a month.

Steel, brokerage and chemical stocks are also seeing notable weakness on the day, while some strength has emerged among semiconductor stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index fell by 0.3 percent, while Australia's S&P/ASX 200 Index advanced by 0.7 percent.

Meanwhile, the major European markets all moved sharply lower on the day. While the German DAX Index plunged by 3.5 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index tumbled by 2.3 percent and 2.1 percent, respectively.

In the bond market, treasuries remain firmly positive after an early move to the upside. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.9 basis points at 0.550 percent.

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