Stocks Extend Losses After Tech Giants Report Earnings
May 01 2020 - 2:06PM
Dow Jones News
By Avantika Chilkoti, Stuart Condie and Gunjan Banerji
U.S. stocks slumped Friday after Amazon.com and Apple reported
results that highlighted the impact the coronavirus pandemic is
having on the world's biggest companies.
The S&P 500 fell 2.9% in recent trading, extending
Thursday's losses. The Dow Jones Industrial Average shed about 580
points, or 2.4%. The Nasdaq Composite lost 3.4%.
Amazon posted record revenue late Thursday but disappointed on
profits as coronavirus-related costs such as employee testing and
higher wages added to expenses. Apple held off on providing
guidance for the current quarter for the first time since late
2003. Both stocks have led markets higher in recent weeks, helping
major indexes recover from their lows in March.
"It's a warning shot across the bow that no company is immune
from this even if you're able to raise your top-line revenues,"
said Brian O'Reilly, head of market strategy for Mediolanum
International Funds.
Shares of Amazon fell about 7.3%. Apple shares slipped in early
trading and recently ticked up 0.2%.
A busy week of corporate earnings and new economic data drove
stock swings this week. Earlier in the week, the Federal Reserve
warned of greater economic deterioration ahead but said it would
use its tools to support the economy.
U.S. stock benchmarks clocked their largest percentage gains
since 1987 last month. The S&P 500 was up 13% in April, while
the Dow Jones Industrial Average gained 11%. The tech-heavy Nasdaq
Composite jumped 15%, its biggest monthly gain since June 2000.
"If you have been involved in the market, there's a few reasons
to take a little bit off the table and a pullback would be
healthy," said Chris Weston, head of research for Pepperstone
brokerage in Australia.
Adding to investor jitters Friday were concerns about fresh
tensions between the U.S. and China. In an unusual public
statement, a U.S. intelligence agency said Thursday that it was
investigating whether the coronavirus may have escaped from a
laboratory in Wuhan, China.
"The important thing for investors is that these tensions around
trade, these tensions around technology and technology transfers,
and tensions around geopolitics more broadly, these issues are
going to persist and maybe even heighten as we go forward," said
Joseph Little, chief global strategist at HSBC Global Asset
Management.
This week, new data showed the intense toll the coronavirus is
having on the domestic economy. Consumer spending, the U.S.
economy's key driver, posted its biggest monthly decline on record
in March. The U.S. economy shrank in the first quarter at its
fastest pace since the last recession, and millions of Americans
filed for unemployment benefits last week. About 12% of the U.S.
workforce was covered by unemployment benefits in the April 18
week, a record high dating back to the 1970s.
"For people that would be considering investing, it was a
reality check, " said Don Dale, managing partner at investment firm
Equity Risk Control Group.
Shares of Chevron and Exxon Mobil ticked down 4.6% and 5.8%,
respectively, after the companies reported a drop in demand on the
back of shelter-in-place rules. The energy companies also said they
would both cut back capital spending plans for 2020.
Clorox gained 5% after the household-supplies producer issued
more optimistic guidance for the 2020 fiscal year on higher demand
for cleaning supplies amid the coronavirus pandemic.
Mike Bell, global market strategist at J.P. Morgan Asset
Management, said the recent rally in U.S. stocks didn't reflect the
gloomy picture painted by economic data.
"There is such a risk from here that perhaps the reopening of
the economy, at least in a sustained way, takes longer than the
market and people had hoped for," said Mr. Bell.
Brent crude, the global oil benchmark, slipped 1.6% to $26.07 a
barrel, a muted move given wild swings in energy markets in recent
weeks. Analysts expect demand for fuel to rise as lockdown rules
are gradually lifted and supply eases as output cuts agreed by the
Organization of the Petroleum Exporting Countries come through.
The U.K.'s FTSE 100 dropped about 2.3%. Japan's Nikkei 225
closed down 2.8% and Australia's S&P/ASX 200 ended 5% lower.
Markets in China, Hong Kong and across most of Europe were closed
for the May Day holiday.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and
Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
May 01, 2020 13:51 ET (17:51 GMT)
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