By Gunjan Banerji, Avantika Chilkoti and Stuart Condie
The technology heavyweights that powered the recent market
rebound stumbled Friday, dragging down the broader stock market, as
the coronavirus' toll on some of the world's biggest companies grew
clearer.
The S&P 500 fell 3% as losses accelerated midday, dragging
the index into the red for the week. The Dow Jones Industrial
Average shed about 650 points, or 2.7%. The tech-heavy Nasdaq
Composite lost 3.5%, lagging behind its peers after outperforming
in recent weeks.
All three indexes are on course for losses of less than 0.5% for
the week.
A busy week of corporate earnings and economic data drove big
stock swings in recent days as investors parsed a flood of
information highlighting the intense toll the coronavirus is having
on the economy.
One of the biggest warning signs for investors: the tech giants
that appeared almost untouchable even during a global pandemic
showed signs of faltering as their quarterly results streamed
in.
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.
"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 7.2%. Apple shares slipped 1.2%.
Adding to the sting, tech heavyweights have led markets higher
in recent weeks, helping major indexes recover from their March
lows and pushing them toward historic gains in April.
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.
Highlighting the peculiar market environment of in recent weeks,
as U.S. stocks finished April with big gains, other economic data
this week revealed the distressing impact of the coronavirus across
the country.
Consumer spending, the U.S. economy's key driver, posted its
biggest monthly decline on record in March. Meanwhile, the U.S.
economy shrank in the first quarter at its fastest pace since the
last recession. On Friday, fresh data showed U.S. manufacturing
contracting.
Several investors said the latest releases highlighted the
mammoth challenge that lawmakers and policy makers face in getting
the domestic economy back on a strong footing.
"For people that would be considering investing, it was a
reality check, " said Don Dale, managing partner at investment firm
Equity Risk Control Group.
Earlier in the week, the Federal Reserve warned of greater
economic deterioration ahead but said it would use its tools to
support the economy.
Several investors said they were concerned that an economic
recovery could take longer than many have been expecting. Data
released in coming weeks would likely be as bad, or worse, they
said.
"We're going to get these constant reminders that the economy is
suffering," said Adam Phillips, director of portfolio strategy at
EP Wealth Advisors. "It serves as a much-needed wake-up call for
the entire stock market."
Next week, for example, investors will be watching the monthly
jobs report, after recent data showed that millions of Americans
have filed for unemployment benefits.
Adding to investors' 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.
Corporate earnings news drove swings in individual stocks.
Shares of Exxon Mobil and Chevron ticked down 6.2% and 1.8%,
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.
Shares of Tesla plunged Friday after Chief Executive Elon Musk
tweeted that the auto maker's share price was "too high." Tesla
stock dropped about 9.9% to $704.61. Still, the shares are sitting
on gains of almost 70% this year.
Clorox added 2.8% after the household-supplies producer issued
more optimistic guidance on higher demand for cleaning
supplies.
Brent crude, the global oil benchmark, slipped 0.5% to $26.34 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 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 Gunjan Banerji at Gunjan.Banerji@wsj.com and Avantika
Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
May 01, 2020 14:46 ET (18:46 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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