By Anna Hirtenstein
Global stocks fell Thursday as a slew of companies kicked off a busy day of earnings reports and U.S. economic data provided fresh insight into the damage wrought by the coronavirus pandemic.
The S&P 500 traded down 0.9% in the first minutes of U.S. trading, while the Dow Jones Industrial Average fell 1.1% and the Nasdaq Composite Index retreated 0.9%. The pan-continental Stoxx Europe 600 slipped 2.2%. Most major Asian stock benchmarks dropped by the close of trading.
As heavyweights across industries give updates today in Europe and the U.S., investors will be closely scrutinizing their financial statements for clues into the depth and longevity of the downturn on the corporate sector. Many companies have revoked their full-year guidance in recent months, so analysts have much less visibility on the future than in previous years.
"What's most important for me is the earnings season," said Sophie Hunyh, a multiasset strategist at Société Générale. "It reflects how fast the economy is recovering and how much cash companies have available at a time when cash is king."
In premarket trading, U.S. mobile-phone chip maker Qualcomm rose 11.1% after it signed a licensing deal with Huawei. Shares of United Parcel Service surged 7.9% after it reported a record jump in daily shipping volumes. PayPal shares advanced 4% after it reported after hours that its revenue and net income beat expectations due to a boom in online shopping and digital payments.
Technology giants will take center stage after markets close, with Apple, Facebook, Amazon.com and Google's parent company Alphabet set to release their latest financial results. Those reports will show how tech companies are weathering the economic downturn and may even be benefiting from the lockdown measures, and offer insights into whether the Nasdaq Composite Index's recent rally may be sustained.
"We would say that the results will look more positive than the rest of the market, but a caveat is that expectations are higher as a result," said Raj Shant, a portfolio specialist at an affiliate of PGIM Group. "One overriding factor benefiting tech names is that the digitization of society has been pulled forward by at least a couple of years due to the lockdowns."
The U.S. economy shrank 32.9% in the three months that ended June 30, according to initial estimates from the Commerce Department. This is a little less than economists' forecasts, which were projecting a fall at a seasonally adjusted annual rate of 34.7% during the period. The figures provide a view into the disruption to the economy in the months with the most stringent lockdowns.
"The sense of the catastrophe and the realization around what happened is a powerful force. It may have some impact on consumption and politics, " said Sebastien Galy, a macro strategist at Nordea Asset Management.
The scope of the economic damage may also force U.S. lawmakers to come together faster on the terms of a fresh stimulus bill, he said.
The latest tally of weekly unemployment claims showed that 1.434 million people filed for benefits in the week ended July 25, up from 1.416 million in the previous week, suggesting the recovery in the labor market may be faltering. The rise in infection rates across parts of the U.S. has forced some states and businesses to introduce fresh restrictions on commercial activity, which is expected to lead to a rise in unemployment.
Treasury prices rose, with the yield on the benchmark 10-year bond slipping to 0.542%, from 0.578% on Wednesday. The U.S. dollar edged up 0.3%, but continued to hover near a 2-year low.
Germany reported that its economy contracted the most on record, shrinking 10.1% in the second quarter. The country's benchmark stock index, the DAX, retreated 2.6% and was the worst performer among European equity markets.
Among European stocks, Volkswagen declined 6.5% in German trading after the automotive company posted a net loss for the second quarter and cut its dividend. Lloyds Banking Group dropped more than 8% in London after the lender unexpectedly posted a loss for the first half and increased the amount of money set aside to cover losses stemming from the pandemic's impact on the economy.
Brewing giant Anheuser-Busch InBev rose 4.8% after it said that its beer sales are picking up as lockdown measures are easing, with volumes rising in June. Airbus advanced 3.4% after it posted a net loss, but said it is focused on preserving cash in the second half of the year. It also said it still has too little visibility to give guidance for the full year.
Gold edged down after notching a record on Wednesday, ending an eight-day rising streak. It slipped 0.2%, trading at $1,949.60 per troy ounce.
In Asia, Hong Kong's Hang Seng Index fell 0.7% by the end of trading, and Japan's Nikkei 225 closed down 0.3%.
Write to Anna Hirtenstein at email@example.com
(END) Dow Jones Newswires
July 30, 2020 09:46 ET (13:46 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.