Despite the long-awaited passage of another round of fiscal stimulus on Monday night and federal data showing an economic recovery fairly underway, stocks are off to a lukewarm start Tuesday as companies continue to warn that sales are already hurting as a result of the worsening pandemic.
Shortly after the market open, the Dow Jones Industrial Average and S&P 500 fell 0.2% and 0.1%, respectively, while the tech-heavy Nasdaq edged up 0.2%.
GDP increased at an annualized rate of 33.4% in the third quarter, the Bureau of Economic Analysis said Tuesday morning in an upwardly revised final estimate, better than economists expected but following the worst-ever plunge of 31.4% in the second quarter.
The third-quarter increase “reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to Covid-19,” the BEA said in the GDP release, as more people spent money for consumption and investments.
Heading up losses in the S&P, shares of auto-retailer CarMax are falling 3% despite better-than-expected quarterly results as executives noted that “the surge in Covid-19… constrained demand” resulting in sales that trended downward toward the end of the quarter.
Shares of ebike-maker Peloton, meanwhile, are soaring 11% (roughly $4 billion in market value) after the company announced its largest acquisition to date on Monday, saying it’s buying exercise equipment company Precor for $420 million.
European stocks picked up steam Tuesday after closing down amid heightened uncertainty over a rapidly spreading mutant Covid-19 strain in the United Kingdom: England’s FTSE 100 ticked up 0.5% at the U.S. open, while Germany’s DAX index gained 1.1%.
“The UK mutant strain worries are fading a bit (versus where they stood Monday morning) amid reports the new virus version won’t be any more resistant to the vaccines and as EU officials rush to reopen borders with Britain,” says Adam Crisafulli, the founder of Vital Knowledge Media. He also notes that though Congress has finally passed a roughly $900 billion stimulus deal, markets are slightly numb to the development because they’ve been pricing in a deal for weeks.
Tesla shares fell 6.5% on their first day of trading as part of the S&P. Reuters reported Monday afternoon that Apple is looking to start production of its own battery-powered car by 2024, prompting one analyst to say that Tesla’s stock is “overpriced” and in “bubble territory” amid a flurry of competition. The stock is virtually flat Tuesday morning.
Most experts agree that additional fiscal stimulus is necessary for a sustained economic recovery, and though Tuesday’s GDP numbers were better than expected, firms (like CarMax) are already reporting dwindling demand in the fourth quarter as the pandemic continues to worsen. The job market, meanwhile, continues to suffer. There were 10.9 million unemployed people in the country last month, when the U.S. economy added a much lower-than-expected 245,000 jobs, according to data released by the Bureau of Labor Statistics. The number of unemployed people in the U.S. remains more than three times higher than it was before the pandemic.
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