Friday July 31st

31-07-2020

Big Tech delivered blowout earnings, but stock futures are barely higher

U.S. stock index futures were barely higher early Friday even after some of the biggest tech companies and market leaders — Facebook, Amazon, Alphabet and Apple — reported better-than-expected quarterly results. Dow Jones Industrial Average futures rose just 40 points, or 0.1%. The move implied an opening gain of about 50 points. S&P 500 futures added just 0.2%. Nasdaq 100 futures, tracking a tech-heavy index, gained 1%. There were a few possible reasons for the weakness despite the stellar Big Tech results: Emergency unemployment benefits are set to expire Friday and Congress and the White House still seem far apart on an agreement. Stocks linked to an economic recovery like banks and retailers were lower in premarket trading Friday as investors assess the biggest quarterly gross domestic product contraction on record and persistently weak job growth. Bank of America and Home Depot were lower in premarket trading. Dow-component Chevron fell more than 2% in premarket trading after the oil giant reported an $8.3 billion loss in the second quarter as the pandemic “significantly reduced demand.” There could be a so-called sell-the-news effect now that technology companies have delivered strong results to back up their market-leading run. “Blowout big tech earnings, a better than expected China PMI and strong German retail sales are doing little to offset the disappointment surrounding fiscal package 4 negotiations,” Dennis DeBusschere, macro research analyst with Evercore ISI, said in a note. Apple reported a blowout quarter, sending shares up 6% in premarket trading. The company said its overall sales expanded by 11%, and Apple also announced a 4-for-1 stock split. Amazon, meanwhile, traded 5.4% higher as the company saw its sales skyrocket during the coronavirus pandemic. Facebook shares rallied more than 6% in premarket trading as the social media giant posted revenue growth of 11% even amid the coronavirus pandemic slowdown. The company also issued stronger-than-expected sales guidance for the current quarter. Google-parent Alphabet also posted better-than-expected earnings, but the company’s overall revenue declined for the first time in its history. Revenues for Google Cloud were also just below analyst expectations. Alphabet shares bounced between gains and losses and were last lower by 1%. “Obviously, no one was doubting any of those companies so the fact they all exceeded expectations isn’t exactly shocking,” Adam Crisafulli of Vital Knowledge, said in a note Friday. “Investors are now trying to smooth out some of the numbers (i.e. how much of the monster upside was a function of extremely conservative guidance along w/an unsustainable spike in revenue and decline in expenses?).” Collectively the four stocks were set to add about $200 billion to their total market cap, bringing it to more than $5 trillion combined. Big Tech has been the stalwart on Wall Street this year. Amazon and Apple are up 65% and 31%, respectively, in 2020. Facebook and Alphabet have risen more than 14% over that time period. Investors continued to flock to safe-haven assets amid the uncertainty about the economic recovery. Gold futures spiked to an all-time high of $2,005.4 an ounce on Friday, crossing the $2,000 mark for the first time. Still, the major U.S. equity averages are looking to wrap up the month of July with solid gains. The S&P 500 has gained 4.7% this month through Thursday’s close, while the Dow and the Nasdaq Composite gained 1.9% and 5.2%, respectively. Stocks in Asia Pacific were mixed on Friday following a record contraction in U.S. gross domestic in the second quarter. Japanese stocks led losses among Asia’s major markets, with the Nikkei 225 down 2.82% to close at 21,710 while the Topix index ending its trading day at 2.82% to 1,496.06. Mainland Chinese stocks were higher on the day, with the Shanghai composite up 0.71% to about 3,310.01 while the Shenzhen component gained 1.27% to around 13,637.88. Meanwhile, the Hang Seng index in Hong Kong slipped 0.14%, as of its final hour of trading. The Kospi in South Korea shed 0.78% to close at 2,249.37. Oil prices rose on Friday, recovering further ground after touching three-week lows in the previous session, hit by a record decline in U.S. growth as the coronavirus ravaged the world’s biggest economy and oil consumer. Brent crude was up by 38 cents, or 0.88%, at $43.32 a barrel. On Thursday, Brent closed down 1.9% but had recovered much of the ground lost from the lowest level since July 10. U.S. crude gained 38 cents, or 0.95%, to $40.30 after dropping 3.3% the previous session, again recovering from lows not seen since July 10. Gold rose on Friday and headed for its biggest monthly gain in 8-1/2 years as the impact of the worsening coronavirus pandemic on the U.S. economy hammered the dollar, prompting investors to seek refuge in bullion. Spot gold was up 0.8% at $1,975.30 an ounce, while U.S. gold futures rose 1.5% to $1,970.70. Prices hit a record $1,980.57 on Tuesday and are up nearly 11% so far this month, their biggest monthly percentage gain since Jan. 2012. Silver also climbed 2.4% to $24.11 an ounce, on course for its largest monthly rise on records going back to 1982 - up over 30% - with additional impetus from hopes for a revival in industrial activity. “Gold is more of a store of value right now than pretty much anything else,” said Michael Hewson, chief market analyst at CMC Markets UK.