By Caitlin McCabe, Avantika Chilkoti and Frances Yoon
U.S. stocks swung between small gains and losses Wednesday as
investors continue to try to untangle data and corporate earnings
to determine what the economy might look like in the months
ahead.
The S&P 500 lost 0.7% as of the 4 p.m. close of trading in
New York. The Dow Jones Industrial Average was down about 218
points, or 0.9%. Both indexes had opened modestly higher.
The Nasdaq Composite was up 0.5%, supported by a continued rally
in technology stocks.
Despite Wednesday's volatility, U.S. stocks have risen in recent
days as investors look toward the continued lifting of stay-at-home
orders. Several states have already begun to reopen their economies
and others are formulating plans to do the same. President Trump in
particular has been eager to energize the economy, saying Wednesday
that the White House coronavirus task force would focus on
reopening the country and developing a vaccine.
Still, however, much about the country's future remains unknown.
The number of confirmed coronavirus cases in the U.S. has climbed
beyond 1.2 million, and many fear there could be a resurgence of
cases as life begins to return to normal. Executive commentary,
meanwhile, hasn't offered investors reassurance either, as
companies have continued to report massive profit declines,
dividend cuts and layoffs during first-quarter earnings.
Economic data look similarly grim. The nonfarm private sector in
the U.S. lost about 20.2 million jobs from March to mid-April, the
ADP National Employment Report revealed Wednesday. Losses were the
steepest among large businesses with 500 or more employees, raising
new questions about whether more pain in the markets could be
ahead.
"We're seeing data that's just off the charts," said Philip
Lawlor, managing director of global markets research at FTSE
Russell. "Has the market fully discounted [all of this]? My
suspicion is that we haven't yet reached that point."
Since the U.S. equities market bottomed on March 23, stocks have
continued to charge upward, puzzling many economists about what an
eventual economic recovery might look like. All three major U.S.
indexes are up week-to-date, and the Nasdaq Composite is down just
0.7% for the year.
The Dow, in contrast, remains down 17% in 2020.
The technology sector has helped mitigate losses this year, and
continued to do so on Wednesday. Match Group jumped 8.2% after the
online-dating company said in a letter to shareholders Tuesday that
it had seen a "noticeable increase" in activity among users across
its brands and geographies.
Netflix, meanwhile, added 2.9%, continuing its rapid climb
upward for the year.
Still, even as eight of the S&P 500's 11 sectors slid for
the day, there were breakouts within industries. Shares of General
Motors jumped 4.6% after it became the only Detroit car company to
post a profit for the first quarter.
And CVS Health climbed 0.1% after its earnings easily topped
analyst expectations. Walt Disney, meanwhile, ticked up 0.2% in the
afternoon after trading lower for most of the morning. The world's
largest entertainment company said late Tuesday that the
coronavirus pandemic took a $1.4 billion bite out of its
earnings.
But there were losses after disappointing earnings, too.
Occidental Petroleum fell 11% after it reported a first-quarter
loss. The Wall Street Journal reported Tuesday that the energy
producer is exploring ways to reduce its roughly $40 billion debt
load following a historic plunge in oil prices and a recently
completed acquisition of Anadarko Petroleum.
And Prudential Financial fell 7% after reporting ultralow
interest rates pressured its profit on some insurance products.
Such wide disparities across corporate earnings this spring --
coupled with dozens of companies withdrawing guidance -- has made
it difficult for investors to determine what the economy might look
like for the rest of the year.
"It is hard to say just how fast the economy will bounce back,"
said Patrick Spencer, managing director at U.S. investment firm
Baird. "There are so many unknowns over the length of Covid and how
consumers will behave once the economy begins to reopen."
States such as Georgia, which recently lifted stay-at-home
restrictions, could offer a helpful glimpse of how businesses and
consumers respond. Many economists will be watching to see how long
it takes companies across the U.S. to hire back the more than 30
million people who have sought unemployment benefits. Consumer
spending, which accounts for more than two-thirds of economic
activity, will also be closely monitored.
"As the lockdowns ease, the doors to the restaurants may be
opening, but how many customers are going to come in?" said Andy
Sparks, MSCI's head of portfolio management research. "There is
this large amount of uncertainty hanging over the markets'
head."
In bond markets, the yield on the 10-year U.S. Treasury rose to
0.723%, from 0.656% on Tuesday. Yields rise as bond prices
fall.
And in commodities, Brent crude, the global benchmark, dropped
4% to $29.72 a barrel, extending its recent volatile stretch.
In Europe, the Stoxx Europe 600 benchmark closed down 0.3%.
China's Shanghai Composite Index closed up 0.6% after a five-day
holiday and Hong Kong's Hang Seng Index rallied 1.1%.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com, Avantika
Chilkoti at Avantika.Chilkoti@wsj.com and Frances Yoon at
frances.yoon@wsj.com
(END) Dow Jones Newswires
May 06, 2020 16:22 ET (20:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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