Thursday July 30th

30-07-2020

Dow futures drop 200 points amid record GDP decline, tech shares fall before big earnings

U.S. stock index futures fell early Thursday as big technology shares declined ahead of their earnings reports after the bell. Investors also digested a record drop in GDP. Dow Jones Industrial Average futures fell 240 points, or 0.9%. The move implied a loss of about 230 points at the open. S&P 500 futures lost 1%. Nasdaq-100 futures dropped 1.1%. Stock futures remained lower after data showed gross domestic product plunged by a record 32.9% in the second quarter. The number was not as bad as feared, however, as economists surveyed by Dow Jones had expected a 34.7% decline. Meanwhile, U.S. weekly jobless claims came in at 1.434 million, roughly in line with estimates. However, continuing claims, or those who have been collecting for at least two weeks, totaled 17.018 million, up from about 16 million last week. “The stock market has to look forward and most economic data looks backwards,” said David Bahnsen, chief investment officer of The Bahnsen Group. “Investors should be prepared for a choppy process of data digestion, but not be surprised that the market feels the future is better than the present and that unprecedented stimulus and liquidity exist to drive valuations.” Apple, Amazon, Alphabet and Facebook, representing nearly $5 trillion in market capitalization, are all set to report. All four shares were lower slightly in the premarket. The Big Tech reports come after each stock has posted massive year-to-date gains. Facebook and Alphabet are both up more than 13% in 2020. Amazon has surged 64.2% in that time and Apple is up 29.5% this year. “Another round of bullish tech surprises could be enough to jump-start the next leg higher in the post-crash rally,” said Ken Berman of Gorilla Trades. It will also be the busiest day of the current earnings season with tons of companies including Ford, UPS and Procter & Gamble also posting results. P&G shares gained in the premarket after reporting stronger sales of cleaning products.  UPS soared 11% after reporting a second-quarter surge in home deliveries. The move lower in futures follows a session that saw major averages posting solid gains after the Federal Reserve pledged to maintain its current stimulative measures. The Fed kept the overnight U.S. rate in a range between 0% and 0.25%. The central bank noted that while the economy has recovered slightly, activity and employment remain “well below their levels at the beginning of the year.” Fed Chairman Jerome Powell added the central bank will keep an accommodative stance until the economy has “weathered” the effects of the coronavirus pandemic. “Powell made it loud and clear that our economic recovery is dependent on how we progress in fighting the pandemic,” said Mike Loewengart, managing director of investment strategy at E-Trade. “Although investors may not be deterred by the surge in virus cases, the stock market is less of a focus for the Fed than the economy—and while the two are related, they are far from the same.” Both the S&P 500 and Nasdaq Composite closed more than 1% higher on Thursday. The Dow climbed 160.29 points, or 0.6%. The major averages were also boosted by gains in the big tech stocks such as Facebook, Amazon Alphabet and Apple. All four stocks ended the day up more than 1% even as their respective CEOs testified in front of Congress, addressing antitrust concerns. Stocks in Asia Pacific were mixed on Thursday after the U.S. Federal Reserve left interest rates unchanged. Mainland Chinese stocks dipped on the day, with the Shanghai composite down 0.23% to about 3,286.82 while the Shenzhen component shed 0.668% to around 13,466.85. Hong Kong’s Hang Seng index slipped 0.69% to close at 24,710.59. In Japan, the Nikkei 225 shed 0.26% to close at 22,339.23 while the Topix index dipped 0.62% to end its trading day at 1,539.47. South Korea’s Kospi advanced 0.17% to close at 2,267.01. Oil prices dipped on Thursday as a surge of coronavirus infections around the globe raised fears a rebound in fuel demand would stutter just as major oil producers are set to raise output in August. U.S. West Texas Intermediate crude futures fell 76 cents, or 1.8%, to $40.51 a barrel, while Brent crude futures lost 71 cents, or 1.65%, to trade at $43.03 per barrel. Gold fell more than 1% on Thursday as the dollar stalled its slide, with analysts saying bullion may face more resistance in its bid to breach the $2,000 level. Spot gold was down 1% at $1,951.38 per ounce by 1014 GMT. U.S. gold futures eased 0.5% to $1,943.50.