Hi Everyone,
The stock market fell today as investor sentiment quickly shifted negative following yesterday’s broad rally due to another batch of weak economic numbers. The Dow was down 288 or 1.2%, to 24,346, the Nasdaq lost 25, or 0.3%, to 8,890, while the S&P 500 fell by 27, or 0.9%, to 2,912. Decliners outnumbered advancing issues by a 5-to-1 ratio on the NYSE, where volume was moderately heavy.
Traders said that despite the scary economic trends, the large-cap benchmarks only suffered minor technical damage today. As one trader explained, “The Nasdaq showed impressive resilience today thanks to the positive earnings reports and compared to the post-crash rally, today’s dip is barely visible on the charts.”
It’s no surprise that the stocks could not maintain their bullish momentum today, as today’s economic releases were weaker than even the already gloomy expectations. The weekly number of new jobless claims was well above 3.5 million, the Eurozone GDP fell by the most on record, and U.S. personal spending fell by 7.5%, almost twice the consensus estimate. The latter indicator is likely the most worrisome from a long-term perspective, as a permanent drop in consumer spending is what economists fear the most.
Although European Central Bank (ECB) president Christine Lagarde tried her best today to convince investors that the Bank will do whatever it takes to save the euro, the market’s reaction was alarming. The ECB’s pledge to expand its bond-purchasing program was not enough to support the struggling financial sector, and the fact that Mrs. Lagarde didn’t hint at an agreement between the leaders of the European Union (EU) added to the selling pressure on European stocks. Without a comforting solution to South Europe’s funding issues, the banking sector will likely remain fragile, and that could continue to weigh on U.S. financial stocks as well.
With Amazon’s (AMZN, +4.3%) and Apple’s mixed (AAPL, +2.2%) reports, the mega-tech earnings bonanza is officially over, and we can conclude that the undoubted engines of the stock market are still in good shape, despite the pandemic’s shockwaves. That said, Amazon’s strength, in particular could be a double-edged sword for the U.S. economy, as a lot of smaller businesses might have to close for good due to the fierce competition from the online giant across the board. The e-commerce giant beat on its top line, but missed earnings expectations, and while its stock hit a new all-time high today, Amazon turned lower in after-hours trading.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
