Friday July 24th

24-07-2020

Dow futures set to extend losses after Thursday’s sharp sell-off

U.S. stock index futures fell early Friday following broad declines in the major tech names that pushed the major averages lower during regular trading. Dow Jones Industrial Average futures implied a loss of about 60 points at the open, off the worst levels of thee morning. Futures also pointed to declines at the open for the S&P 500 and Nasdaq 100. Early action in Big Tech pointed to more losses, with Amazon, Apple and Microsoft each down more than 1% in premarket trading. Tensions between the U.S. and China worsened Friday after China ordered the closure of a U.S. consulate in Chengdu, retaliating after Washington shut the Chinese consulate in Houston earlier this week. China markets plunged in response. In Thursday’s U.S. session, the Dow ended down more than 1% along with the S&P 500. The Nasdaq Composite dropped more than 3% as Microsoft and Apple each lost more than 4%. Facebook and Amazon were both down more than 3% and Netflix lost 2.5%. Big Tech has been the market leader this year as investors grapple with the coronavirus pandemic and its impact on corporate profits. Amazon and Netflix were both up more than 47% year to date. Alphabet and Facebook are up over 13% over that time. “Concerns of another technology bubble are rising,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory, in a note. “There is also growing concentration risk, with the top five stocks now accounting for 22% of the S&P 500 Index.” To be sure, Lerner noted that “conditions today are largely not comparable to the mania seen during the technology bubble of the late 90s.” “Absolute valuations are elevated but are less than half of the levels reached back then. The rising influence of a small group of stocks is a risk for the overall market, though these same companies are also contributing an increasing amount of cash flow and profits,” he said. Thursday’s losses come after the latest unemployment data raised concern about the state of the economy. This is “no doubt sobering and a clear reminder that the pandemic is far from finished exacting its toll on our economy,” said Mike Loewengart, managing director of investment strategy at E-Trade. “While we’re hanging on to hopes of a stimulus bill, Americans are feeling the pain of stalled reopenings and renewed shutdowns across the country.” Mainland Chinese stocks mostly deepened losses by the close, with other Asia Pacific markets also moving lower as U.S.-China tensions worsened on Friday. In mainland China, the Shanghai composite pared some losses, but still ended the day 3.86% lower at 3,196.77, while the Shenzhen composite tumbled 5% to close at 2,138.36. The Shenzhen component dived 5.31% to close at 12,935.70. Over in Hong Kong, the Hang Seng index declined 2.51% in the afternoon. Over in South Korea, the Kospi slipped 0.71% to 2,200.44. Markets in Japan are closed for a holiday on Friday. Oil prices edged higher on Friday on the back of a weaker U.S. dollar, although demand concerns stemming from rising coronavirus cases and escalating U.S.-China tensions kept a cap on prices. The dollar slid to 22-month lows against a basket of currencies. A weaker dollar usually spurs buying of commodities priced in the greenback, like oil, because they become cheaper for holders of other currencies. Brent crude rose by 35 cents, or 0.8%, to $43.66 a barrel, and West Texas Intermediate crude rose by 38 cents to $41.45. Gold resumed its march toward $1,900 on Friday as an escalation in the U.S.-China spat added further safe-haven fuel to a rally to a nine-year peak driven by fears over the economic hit from the coronavirus pandemic. Silver, meanwhile, was en route to its best week since 1987. Spot gold was up 0.3% at $1,892.32 per ounce, having hit its highest since September 2011 at $1,897.91 on Thursday. U.S. gold futures rose 0.1% to $1,890.90.