Stocks were mixed Thursday amid new developments that could raise tensions between the U.S. and China, and a deluge of new economic data, much of which was still consistent with a contraction but at least signaled some stabilization after an initial slump in activity.
A new report this morning showed new unemployment claims totaled a slightly greater than expected 2.123 million last week, though continuing claims for the prior week pulled back from a record high and fell for the first time during the pandemic. Meanwhile, first-quarter gross domestic product (GDP) was downwardly revised to show a 5.0% annualized decline, from the 4.8% previously reported.
So far this week, investors have been weighing signs of stabilizing US economic activity after last month’s deep downturn, along with hopes of a vaccine or treatment, against concerns that relations with China were set to become increasingly strained. China approved a draft decision for new national security legislation that would impose on freedoms in Hong Kong, in a move that would encroach on the autonomy of the region and jeopardize its special trade status with the U.S.
President Donald Trump is set to hold a press conference Friday on China, just days after Secretary of State Mike Pompeo said Hong Kong no longer could be considered autonomous from China.
Still, the net effect of the myriad developments was risk-on for equities at least through Wednesday’s close, sending the S&P 500 to close above 3,000 for the first time since March 5 and the Dow to a close of more than 25,000 for the first time since March 10.
Some of the stocks that led the S&P 500’s more than 35% bounce from its March 23 lows, however, lagged in recent sessions. The tech-heavy Nasdaq underperformed against the other major equity indices again on Thursday, and the Communication Services and Information Technology sectors lagged in the S&P 500. President Donald Trump said earlier he planned to sign an executive order against social media companies, after Twitter added its first fact-checking labels to Trump’s tweets.
That rotation from high-growth tech to value names also came alongside states reopening their economies and helping catalyze an uptick in activity, bringing investors back into a broader basket of equities.
“I think we can say at least now looking backwards, April was the economic bottom,” David Nelson, chief strategist at Belpointe Asset Management, told Yahoo Finance’s On the Move Wednesday afternoon. “We were at a virtual standstill. Anything has to be better than where we were. And as you get economic activity, there’s this natural gravitation to what I would call deeper cyclical names, and that points you to industrials, financials and some of the others.”
Still, the historic depths of the downturn in April and early May as underscored in recent economic reports highlighted the ongoing process of getting activity back to pre-virus levels. And the coronavirus case count and death toll from the pandemic continued to climb, albeit at decelerating paces, with the U.S. Covid-19 death toll topping 100,000.
4:03 p.m. ET: Dow erases earlier gains to trade lower, as investors weigh rising tensions with China
Here were the main moves in markets as of 4:03 p.m. ET:
S&P 500 (^GSPC): -6.40 (-0.21%) to 3,029.73
Dow (^DJI): -147.63 (-0.58%) to 25,400.64
Nasdaq (^IXIC): -43.37 (-0.46%) to 9,368.99
Crude (CL=F): +$0.62 (+1.89%) to $33.43 a barrel
Gold (GC=F): +$4.20 (+0.24%) to $1,731.00 per ounce
10-year Treasury (^TNX): +2.5 bps to yield 0.7050%
1:20 p.m. ET: Total IG corporate bond sales breach $1 trillion in 2020, rising at a record pace
Investment-grade corporate debt sales surpassed $1 trillion for the year to date as of Thursday afternoon, according to a Bloomberg analysis, marking the quickest pace that corporate bond markets hit this milestone in a calendar year. Companies across virtually all industries have issued bond offerings this year to shore up their balance sheets as the coronavirus pandemic all but wiped out consumer demand.
It took until November for the IG corporate bond market to hit the $1 trillion mark last year. The record clip of corporate debt sales came as the Federal Reserve unleashed a series of new stimulus measures aimed at bringing liquidity to capital markets, and especially to the corporate debt market. The Fed began buying some corporate debt through exchange-traded funds earlier this month.
10:38 a.m. ET: GE stock falls after CEO sees 2Q cash flow of negative $3.5 billion to $4.5 billion
General Electric (GE) shares fell 2% after CEO Larry Culp said during a virtual conference he expected second-quarter cash flow to be negative by as much as $4.5 billion for the second quarter. Culp added that negative free cash flow is likely for the full-year 2020.
Culp also cited a “slow grind” for GE’s aviation business during the Covid-19 crisis, which deeply impacted commercial airlines as a whole.
10:34 a.m. ET: Trump calls coronavirus a ‘very bad gift’ from China
President Donald Trump reiterated his attack on China over the coronavirus outbreak on Thursday in a tweet, escalating aggressive rhetoric against the country against a backdrop of already-rising tensions.
10:12 a.m. ET: Mortgage rates hit fresh all-time low: Freddie Mac
The average 30-year fixed-rate mortgage hit the lowest level on record this week, according to Freddie Mac’s latest Primary Mortgage Market Survey.
The average 30-year fixed-rate mortgage averaged 3.15%, with an average 0.8 point for the week ended May 28. The prior week, the average 30-year fixed-rate mortgage was 3.24%.
“These unprecedented rates have certainly made an impact as purchase demand rebounded from a 35% year-over-year decline in mid-April to an 8% increase as of last week—a remarkable turnaround given the sharp contraction in economic activity,” Freddie Mac chief economist Sam Khater said in a statement.
“Additionally, refinance activity remains elevated and low mortgage rates have been accompanied by a $70,000 decline in the average loan size of refinance borrowers this year,” Khater added. “This means a broader base of borrowers are taking advantage of the record low rate environment, which will benefit the economy.”
10:00 a.m. ET: Pending home sales fall by a record in April
Pending home sales slid by a record 21.8% in April from March, extending a 20.8% decline the prior month, the National Association of Realtors said in a report Thursday. Consensus economists expected pending home sales to fall 17.3% over last month in April.
“The latest pending home sales numbers reveal the greatest decline since NAR begin tracking such transactions in January 2001,” according to a statement. The institution, however, “expects that April will be the lowest point for pending contracts, and the month of May, consequently, will be the lowest point for closed sales.”
9:34 a.m. ET: Stocks mixed at the open
Here were the main moves in markets, as of 9:34 a.m. ET:
S&P 500 (^GSPC): +2.54 points (+0.08%) to 3,038.67
Dow (^DJI): +47.07 points (+0.18%) to 25,595.34
Nasdaq (^IXIC): -24.84 points (-0.23%) to 9,390.75
Crude (CL=F): +$0.13 (+0.4%) to $32.94 a barrel
Gold (GC=F): +$13.60 (+0.79%) to $1,740.40 per ounce
10-year Treasury (^TNX): +2.1 bps to yield 0.698%
8:34 a.m. ET: Durable goods orders extend March decline, but drop by less than expected margin
Durable goods orders fell 17.2% in April, the Census Bureau said in its preliminary report. This was a smaller than expected drop compared to the 19.0% decline expected for the month, but extended declines after a 16.6% drop in March.
The decline was led in large part by orders for non-defense aircraft and parts, along with autos. Excluding transportation orders, durable goods orders fell 7.4% in April, versus a 15.0% drop expected. March’s durable goods orders excluding transportation were down 1.7%.
Non-defense capital goods orders, excluding aircraft, were down 5.8% in April after a 1.1% drop in March. This was also better than the 10.0% decline anticipated. This metric serves as a closely watched proxy for business spending plans.
8:31 a.m. ET: First-quarter GDP revised to a 5.0% slump, vs. 4.8% previously reported
First-quarter gross domestic product (GDP) fell 5.0% on a quarter over quarter, annualized basis, the Bureau of Economic Analysis said in its second revision of first-quarter GDP this morning. GDP was previously reported to have fallen 4.8% in the first quarter.
Personal consumption, however, was upwardly revised to a slightly shallower 6.8% slump, from the 7.6% drop previously reported.
8:30 a.m. ET: Jobless claims totaled 2.123 million for the week ended May 23
First-time filings for unemployment claims were 2.123 million for the week ended May 23, the Labor Department said in its weekly report Thursday. This was just slightly above expectations for initial jobless claims to come in at 2.1 million, according to Bloomberg data.
The prior week’s level for new jobless claims was revised up by 8,000 to 2.446 million.
This brought the 10-week total for new unemployment claims to more than 40 million since the week ended March 20, when claims began totaling in the multi-millions due to the coronavirus pandemic.
Continuing jobless claims were 21.052 million for the week ended May 16, pulling back from the 24.912 million from the prior week and coming in below expectations for more than 25.6 million.
7:42 a.m. ET: Abercrombie & Fitch posts wider than expected quarterly loss amid store closures
Abercrombie & Fitch posted a first-quarter adjusted loss of $3.90 per share, falling below estimates for a loss of $1.32 per share. The apparel retailer temporarily closed stores in mid-March outside of the Asia Pacific region, which dragged net sales down 34% over last year to $485.4 million.
Net sales at the Hollister brand dropped 36% to $273 million during the quarter, and Abercrombie sales fell 30% to $212.3 million.
The company said about half of its brick and mortar retail locations are currently open, and it “continues to reopen stores globally on a rolling basis.”
“With stores reopening in the U.S. and the EMEA [Europe, Middle East and Africa] regions, we have experienced sales productivity for reopened stores of approximately 80% and 60%, respectively, as compared to last year’s levels.”
7:17 a.m. ET Thursday: Stock futures mixed ahead of jobless claims
S&P 500 futures (ES=F): 3,040.25, up 4.75 points (+0.16%)
Dow futures (YM=F): 25,669.00, up 135 points (+0.53%)
Nasdaq futures (NQ=F): 9,407.00, down 25.5 points (-0.27%)
Crude (CL=F): -$0.25 (-0.76%) to $32.56 a barrel
Gold (GC=F): +$14.10 (+0.82%) to $1,740.90 per ounce
10-year Treasury (^TNX): unchanged to yield 0.677%
6:05 p.m. ET Wednesday: Stock futures roughly flat after rally
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:02 p.m. ET:
S&P 500 futures (ES=F): 3,035.50, flat
Dow futures (YM=F): 25,548.00, up 14 points (+0.05%)
Nasdaq futures (NQ=F): 9,423.25, up 1.75 points (+0.02%)