By Caitlin Ostroff
U.S. stock edged up Thursday, rebounding after fresh data showed
jobless claims dropped and the economy expanded sharply in the
third quarter.
The Dow Jones Industrial Average gained 140 points, or 0.5%. The
S&P 500 added 0.9%. Both indexes on Wednesday suffered their
biggest one-day percentage declines since June. The Nasdaq
Composite advanced 1.1% ahead of earnings reports from some of the
biggest companies in the technology sector.
Fresh data showed that 751,000 Americans applied for initial
unemployment benefits through the week ended Saturday, down from a
seasonally adjusted 791,000 in the prior week. The decline is a
sign that the labor market is slowly recovering, though claims
remain at historically high levels.
Meanwhile, U.S. gross domestic product for the third quarter
rose at an annual pace of 33.1%, the biggest gain ever. The
increase followed a record drop in output earlier in the year when
the virus and related shutdowns disrupted business activity across
the country.
Apple, Alphabet, Facebook, Amazon.com and Twitter are scheduled
to report their latest financial results after markets close,
marking what may be the most important day of the current earnings
season for the tech sector. The stocks have posted sweeping gains
this year, with investors betting that those businesses stand to
benefit during the coronavirus-pandemic lockdowns.
The handful of stocks now account for a significant portion of
the S&P 500 benchmark. That means investors' perception of the
health of their operations can weigh on broader market sentiment
and lead to volatility in the benchmark.
"What I'm not looking at is what happened in the last quarter:
because the recovery was so strong, it's almost a given that there
is an improvement," said Luca Paolini, chief strategist at Pictet
Asset Management. "What I want to see is companies feeling
confident [enough] to give us guidance for the next few
quarters."
If companies find that the economic outlook is too cloudy, and
they don't have visibility on prospects for their businesses, they
may revert to their behavior in March and avoid offering
projections, he said. That would likely deal a blow to investors'
confidence.
Ford Motor shares rose 6.5% after the company posted about $2.4
billion in earnings for the third quarter. Shares of Boston-based
drugmaker Alexion Pharmaceuticals rose 2.9% after it reported
better-than-expected profit and sales.
Shares of Kraft Heinz gained 3.7% after the company reported
earnings that beat analysts' expectations and raised its
guidance.
The Cboe Volatility Index, a gauge of investors' expectations
for swings in U.S. stocks, fell Thursday but remains near its
highest level since June.
Worries that an uptick in Covid-19 cases will lead to new
lockdowns and restrictions, which could erode the pace of economic
recovery, have weighed on markets this week in both the U.S. and
Europe. The U.S. reported nearly 79,000 new coronavirus cases for
Wednesday, the second day in a row the total has come in over
70,000, according to data compiled by Johns Hopkins University.
France and Germany on Wednesday unveiled new restrictions on
business and social activity, including shutting down restaurants,
bars and some shops for a few weeks to stem the rising tide of
infections. Leaders in both countries aimed to cushion the economic
impact of the restrictions, saying factories and schools would
remain open.
"If you look at the market action in the last week, it's pretty
clear that Covid-19 is the key market mover," Mr. Paolini said.
The pan-continental Stoxx Europe 600 edged down 0.3%, after this
week falling to its lowest level since May.
The U.S. election also remains in focus, with many investors
remaining cautious about placing big bets ahead of the Nov. 3
vote.
Still, this week's selloff could present a buying opportunity
for some investors, and help stock indexes recover some losses.
"The phenomenon that we've seen is that when markets correct,
you get people to come in and think this is an opportunity to buy,"
said Daryl Liew, chief investment officer at REYL Singapore. "The
reality is that investors still have a lot of cash. It's not a
liquidity crisis for most people."
In bond markets, the yield on the 10-year Treasury ticked down
to 0.774%, from 0.780% Wednesday.
In commodities, oil extended its selloff. Brent crude, the
international gauge, retreated 5.2% to $37.56 a barrel.
The ICE U.S. Dollar Index, which measures the greenback against
a basket of currencies, gained 0.4%. The dollar typically rises
when stock indexes fall due to its status as a haven currency.
In the Asia-Pacific region, stock benchmarks were mixed. The
Shanghai Composite Index edged up 0.1% while Australia's benchmark
S&P/ASX 200 declined 1.6%.
--Joanne Chiu and Amber Burton contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
October 29, 2020 11:05 ET (15:05 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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