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Nasdaq Rebounds Into Positive Territory After Early Slump But Dow, S&P 500 Remain In The Red

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After falling sharply early in the session, stocks showed a significant rebound over the course of the trading day on Thursday. The major averages climbed well off their worst levels of the day, with the tech-heavy Nasdaq bouncing into positive territory.

The major averages eventually finished the day mixed. While the Nasdaq rose 44.87 points or 0.4 percent to 10,587.81, the Dow slid 225.92 points or 0.9 percent to 26,313.65 and the S&P 500 fell 12.22 points or 0.4 percent to 3,246.22.

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 turnaround by the Nasdaq came as tech giants Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Facebook (FB) all climbed into positive territory ahead of the release of their quarterly results after the close of today's trading.

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

Sector News

Energy stocks climbed off their worst levels of the day but still closed sharply lower amid a steep drop by the price of crude oil. Crude for September delivery tumbled $1.35 to $39.92 a barrel.

Reflecting the weakness in the energy sector, the NYSE Arca Oil Index plunged by 4 percent and the Philadelphia Oil Service Index plummeted by 2.7 percent.

Significant weakness was also visible among gold stocks, as reflected by the 3.5 slump by the NYSE Arca Gold Bugs Index. The drop by gold stocks came as the price of the precious metal pulled back off Thursday's record closing high.

Financial, steel and chemical stocks also saw considerable weakness on the day, while most of the other major sectors climbed well off their early lows.

Meanwhile, semiconductor stocks showed a substantial move to the upside on the day, driving the Philadelphia Semiconductor Index up by 2 percent.

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 moved notably higher after ending the previous session nearly unchanged. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 3.8 basis points to a four-month closing low of 0.541 percent.

Looking Ahead

Earnings news may take the spotlight on Friday, as reaction to the quarterly results from the tech giants mentioned above is likely to drive early trading.

Electronic Arts (EA), Expedia (EXPE), Ford (F), Gilead Sciences (GILD) Shake Shack (SHAK), and U.S. Steel (X) are also among the companies reporting their quarterly results after the close of today's trading.

Additionally, Caterpillar (CAT), Chevron (CVX), Exxon Mobil (XOM), Merck (MRK), and Under Armour (UAA) are among the companies due to report their results before the start of trading on Friday.

Traders are also likely to keep an eye on the latest economic data, including reports on personal income and spending, consumer sentiment and Chicago-area business activity.

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