Stocks Struggle To Recover After Massive Selloff, Setting Market Up For Second-Worst Week During Pandemic
An onslaught of new largely positive earnings and economic data failed to push the major indexes up after three straight days of losses–including the worst day for stocks since early June, setting the market up for its worst week since the pandemic started ravaging the U.S. economy in March.
Shortly after the open, the Dow Jones Industrial Average was down less than 0.1%, while the S&P 500 was up 0.2%, and the tech-heavy Nasdaq–which has far outperformed the broader market this year–was up 0.6%. while the S&P 500 and the tech-heavy Nasdaq–reversing positive futures after the worst day for stocks in four months.
The Dow’s now down more than 1,800 points this week—marking the index’s worst weekly loss since the pandemic first tanked U.S. markets, when the Dow crashed more than 3,700 points in the week ending March 11.
Stocks ticked up a bit in premarket trading after GDP results showed that the U.S. economy grew at a staggering 33.1% annualized rate in the third quarter—a largely misleading figure that actually represents a slightly better-than-expected partial rebound from the second quarter’s dismal results.
Data on the jobs front also showed minor improvement: 751,000 people filed new unemployment claims in the week ending October 24—about 5% less than the figures from the previous week, and the lowest number since the figures skyrocketed in March, though it’s still massively higher than historical figures.
Tepid stock market results came in spite of a slew of stronger-than-expected earnings results before market open; Comcast, Tapestry and mattress-maker Tempur Sealy International were all among firms posting beats early Thursday.
Markets around the world were also slightly bearish on Thursday morning: The U.K.’s FTSE 100 was down 0.1%, France’s CAC 40 down 0.6%, and Japan’s Nikkei 225 down 0.4%.
“While stock volatility is never a comfortable experience, the recent declines should be expected, given the upcoming election, increased Covid cases and stimulus uncertainty. We think this week’s selloff is a garden-variety pullback and not something more sinister like we saw in March,” says Andrew Smith, chief investment strategist at Dallas-based Delos Capital Advisors, citing bullishness from the relative outperformance of copper, gold, financial stocks and industrials.
The level of recent volatility hasn’t been totally unexpected in light of the forthcoming election—now just five days away, but it has been compounded by a surge in coronavirus cases and the lack of fiscal stimulus coming from Washington. On Wednesday, analysts tracked by Goldman in a variety of manufacturing and service industries cited “additional fiscal stimulus as the main election-related upside risk” to their industries and said higher taxes and increased regulation—both of which would likely come under a Biden Administration–served as the main downside risks.
What To Watch For
It’s a huge day for tech earnings. Amazon, Alphabet, Apple, Facebook and Twitter all report after the closing bell. Perhaps alluding to another blowout quarter for big tech, Microsoft handily beat Wall Street expectations with its earnings report on Tuesday.
Stocks Just Had Their Worst Day In Four Months–Here’s How The Election Could Make Things Worse (Forbes)
Jobless Claims Fall Slightly Amid Coronavirus Surge (Forbes)
That Blockbuster GDP Number Doesn’t Mean We’re Out Of The Woods (Forbes)
Big Tech Could Be In Big Trouble Next Year Under Biden—Even As Amazon, Apple, Facebook Prepare For Another Monster Quarter (Forbes)