U.S. stocks fell Wednesday, erasing much of the previous session’s gains, amid an onslaught of disappointing corporate earnings reports and weaker-than-expected economic data resulting from the COVID-19 pandemic.
What are major indexes doing?
The Dow Jones Industrial Averag e US:DJIA fell 428 points, or 1.8%, to 23,517. The Nasdaq Composite US:COMP slumped 116 points, or 1.4%, to 8,402. The S&P 500 US:SPX slipped 55 points, or 1.9%, to 2,791.
The Dow on Tuesday rose 558.99 points, or 2.4%, to end at 23,949.76, while the S&P 500 finished 84.43 points higher, up 3.1%, at 2,846.06. The Nasdaq Composite Index rose 323.32 points or 4%, ending at 8,515.74.
What’s driving the market?
U.S. and European equities fell as investors mulled corporate earnings to gauge the impact of the coronavirus pandemic. While E.U. and U.S. federal officials are planning to lift restrictions to help revive their economies, earnings reports are providing a clearer picture of how the pandemic is affecting business with the global economy headed for a deep recession according to the IMF on Tuesday.
“I think we’re in for a very rough time in the markets for the next couple of months,” Jason Thomas, chief economist at AssetMark in Los Angeles told MarketWatch. “We are just now stating to get hard data,” he said of the pandemic’s early economic toll. “But it’s for March. What we are living through in April is much worse.”
Energy and materials were the worst-performing sectors in the S&P 500, dropping more than 4% each. Major banks have all reported significant declines in earnings as they take charges for expected credit write offs. Another fall in crude oil prices also pressured energy stocks on Wednesday after the IEA forecast a record fall in demand.
Airline stocks traded mixed after several U.S. airlines late Tuesday reached an agreement with the U.S. Treasury for billions in grants and loans aimed at helping them to stay afloat during the coronavirus pandemic.
Investors received further evidence of the early hit to the U.S. economy with March retail sales shrinking 8.7%. Analysts surveyed by MarketWatch, on average, had forecast a 7.1% monthly fall in sales. Industrial production fell 5.4% last month, its worst drop since Jan. 1946.
“Stricter lockdown measures, unprecedented layoffs and plummeting confidence have compounded into an extraordinary and multifaceted shock to consumer spending,” wrote Lydia Boussour, senior U.S. economist at Oxford Economics, following the record drop in U.S. retail sales, calling the retraction “just the beginning of the consumer pullback.”
U.S. industrial production fell 5.4% in March, the steepest decline since early 1946 as a result of the coronavirus pandemic, the Federal Reserve said Wednesday.
In other data, the April New York Empire State Index dropped to a record low of negative 78.2 in April from negative 21.5 in the previous month.
“There will be winners and losers as households adjust their daily lives to ride out the storm and recalibrate their spending habits accordingly,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors.
The Federal Reserve’s so-called beige book report, a compilation of anecdotes on economic activity, is due at 2 p.m. Eastern.
The S&P 500 index has climbed about 27% from its March 52 week low, supported by U.S. monetary and fiscal stimulus and early signs that coronavirus cases were peaking, but is still down about 15% from its record high in February.
Which companies are in focus?
Earnings season continued Wednesday, with Bank of America US:BAC shares down more than 5.5%, after the money center bank reported a first-quarter profit that fell below expectations, amid a $3.6 billion COVID-19-related reserve build, while revenue topped forecasts. Citigroup’s AT:CITI shares dropped 3.4% after its first-quarter profit tumbled 46%. Big banks JPMorgan Chase & Co. US:JPM and Wells Fargo & Co. US:WFC kicked off earnings season on Tuesday.
Broader losses in the stock-market dragged airline shares lower even after the biggest carriers reached an agreement in principle with the federal government on financial assistance aimed at averting layoffs in the hard-hit industry. Shares of Delta Air Lines Inc. US:DAL edged 0.5% lower, while United Airlines Holdings Inc. US:UAL was up 4% and American Airlines Group US:AAL advanced 2.8%.
UnitedHealth Group US:UNH, the biggest U.S. health insurer and a Dow constituent, reported a fall in quarterly profit, but its shares rose 4% as it maintained its 2020 profit outlook at a time when major companies have withdrawn forecasts due to the coronavirus pandemic.
How are other markets trading?
The swoon in global equities spurred inflows into government paper, with the yield on the 10-year Treasury note yield BX:TMUBMUSD10Y down nearly 10 basis points to 0.65%.
Crude oil prices added to their losses Wednesday. West Texas Intermediate Crude for May US:CLK20 was trading 0.4% lower at $20.04, after briefly falling below $20 a barrel on the New York Mercantile Exchange. In precious metals, the price of an ounce of June gold US:GCM20 plunged $28.90, or 1.6%, to 1,740.20 an ounce.
The U.S. dollar gained 0.6% against its major rivals, according to the U.S. dollar index. US:DXY
The STOXX 600 Europe index XX:SXXP tumbled 3.2% on Wednesday, while Asian markets recorded modest losses.
Originally Published on MarketWatch
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