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Before The Bell - The up-and-down pattern continues on Wall Street. To wit, after nice stock market wins on Monday and Tuesday, which were sandwiched around a decline on Tuesday, equities fell sharply yesterday morning. The increases this week had come on optimism about earnings and the economy. The earlier setback was likely caused by COVID-19 infections being the prime focus that day. Then, yesterday morning, stocks fell back sharply. Several apparent reasons could be pointed to for the latest setback.

First, the Commerce Department reported that second-quarter GDP plunged 32.9%, a slightly lesser setback than forecast, but the largest drop on record. Worse, perhaps, weekly jobless claims showed the second straight uptick after four months of steadily lower readings. That report was matched by a jump in continuing claims, which track longer-term jobless filings. Going forward, the next week will see critical releases on manufacturing activity, the non-manufacturing sector, and July's employment and unemployment statistics.

As to the stock market's setback, the sharp selling continued for the first half hour, causing a descent that drove the Dow Jones Industrial average into the loss column by some 550 points. Notable losses also were tabulated by the other large-cap composites. At that point, the selling eased off somewhat, although the Dow and the S&P 500 Indexes stayed securely in the loss column. Speculation that after-the-bell earnings numbers from technology stars would prove supportive, however, drove the NASDAQ into the plus column by a measured amount.

The stock market's late-morning comeback would then continue into the afternoon, with some of the larger technology names heading nicely higher on the session. Countering this show of strength, several industrial, oil, and bank stocks were leading the Dow lower through the afternoon. Weakness in the cyclical sectors were no doubt attributable to the woeful economic news earlier in the day, especially the weak GDP tally. Little of note would then change as the session moved into its final stages.

 In fact, the stock market would stay range-bound over the day's final four hours, with the Dow holding to a loss of some 200-250 points, while the S&P 500 stayed just gingerly in the loss column while the NASDAQ clung to a modest profit. By the session's close, the Dow would be off by 226 point; the S&P 500 would be lower by 12 points; and the NASDAQ would stay in the green by 45 points. The small-cap Russell 2000 would stay just slightly in the red, while Treasury yields would edge a bit lower.  

Looking ahead to the final day of the week and after some key quarterly reports, including Facebook (FB), were issued, with that stock rising on good revenue growth results, the equity futures are pointing to a higher start when trading resumes this morning. – Harvey S. Katz, CFA

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.