By Anna Hirtenstein, Caitlin McCabe and Joanne Chiu 

U.S. stocks tumbled Thursday in a choppy trading session as investors tried to weigh their optimism about the re-opening of the economy against fresh data that showed the pandemic's continued toll.

The Dow Jones Industrial Average tumbled more than 100 points, or 0.4%, in mid-day trading, dragged down by losses in stocks ranging from Microsoft to UnitedHealth Group to Nike. A 4.9% rally in heavyweight Boeing helped mitigate the losses that the other indexes suffered.

The S&P 500 tumbled 0.6%, on track to break a four-session winning streak. The Nasdaq Composite fell 0.7%, pulled down by declines in shares of mega-cap technology companies.

U.S. stocks rallied earlier in the week, despite the social unrest that has gripped the country since the death of George Floyd, a black man, who died in Minneapolis in police custody. Traders had instead focused on promising signs of an economic recovery, as well as optimism that global economies could see more stimulus measures.

Thursday's data on job losses and trade appeared to threaten that hopeful sentiment, with all three indexes falling after the opening bell. By mid-morning, they briefly turned positive, before falling further in the afternoon.

"From a bearish perspective, there's still a lot to worry about," said Brad McMillan, chief investment officer at Commonwealth Financial Network. "But from a bullish perspective, we do see the pandemic under control and no meaningful signs of a second wave yet."

Mr. McMillan added that he thinks it's rational for investors to be taking some profits at this point.

The Commerce Department said the U.S. trade deficit widened in April as imports and exports both dropped sharply amid coronavirus-related shutdowns around the world. The foreign-trade gap in goods and services expanded 16.7% from the prior month to a seasonally adjusted $49.41 billion.

Meanwhile, the number of Americans drawing unemployment benefits ticked up to 21.5 million in the week ended May 23, though the pace of increase significantly slowed from earlier in the crisis, the Labor Department said Thursday.

Losses across stocks were broad, with nine of the S&P 500's 11 sectors posting declines. A rally in the financials and industrials sector -- both of which were hit hard at the beginning of the stocks selloff -- continued again. American Airlines added 25%, putting it on pace for its best week on record based on available data since 2013.

Globally, sentiment was more mixed. The pan-continental Stoxx Europe 600 dropped 0.7%. Earlier in the day, the European Central Bank said it would scale up its bond-purchase program to EUR1.35 trillion ($1.52 trillion) through June 2021. The ECB also kept its key interest rate unchanged at minus 0.5% in its latest monetary decision.

The eurozone economy has undergone an unprecedented sharp contraction as a result of the coronavirus pandemic and there are "exceptional" levels of uncertainty, ECB President Christine Lagarde said in a press conference. She also said the central bank has had to revise its inflation outlook and that its views on price stability have been significantly affected.

"They've delivered what was wanted by the market," said Seema Shah, chief strategist at Principal Global Investors. "It's delivering what it needed to do" which was to extend its ammunition beyond the autumn, she said, referring to the bond-buying program.

In the U.S., the yield on the 10-year U.S. Treasury note rose to 0.804%, from 0.761% Wednesday.

After U.S. markets close, Slack Technologies, the instant-messaging software developer, will post its quarterly earnings. The company is expected to have benefited from the swath of people from working from home. Retailer Gap will also put out its financial results, providing more insight into the effect of the lockdown on clothing stores.

Both stocks traded lower ahead of the results. Gap lost 0.3% and Slack fell 4.3%, one of may technology companies to slip for the day. Netflix tumbled 1% and Facebook lost 1.5%

Alex Wong, a director at hedge fund Ample Capital said he is holding more cash after gradually reducing investments in some richly valued new-economy stocks.

"There's a disconnect between equities and the economic fundamentals," Mr. Wong said. "Many investors are looking beyond short-term realities and banking on hopes of an economic recovery in 2021 as global economies gradually reopen," he said.

Stocks had been buoyed by huge amounts of official stimulus and optimism over resumption of business activity, said Rob Mumford, an investment manager for emerging-market equities at GAM Investments. However, new clusters of coronavirus infections and containment measures would weigh on corporate earnings and economic activity, he said.

"We expect quite a choppy trading pattern over the summer," Mr. Mumford said. Stocks that had been slower to recover, and those in industries that are more exposed to economic cycles, would continue to play catch-up with better-performing sectors of the market, he said.

In Asia, Hong Kong's Hang Seng Index ticked 0.2% higher, while the Shanghai Composite Index edged down 0.1%. Indexes in Japan and South Korea finished the trading day up.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, Caitlin McCabe at caitlin.mccabe@wsj.com and Joanne Chiu at joanne.chiu@wsj.com

 

(END) Dow Jones Newswires

June 04, 2020 13:20 ET (17:20 GMT)

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