Stocks were lower Thursday, giving back some gains that on Wednesday sent the S&P 500 to its highest level since early March. Investors eyed a number of mixed corporate earnings results and economic data releases, along with states’ ongoing reopening processes.
The U.S. Labor Department’s report on initial unemployment claims – a weekly focal point providing more current data on the state of the virus-stricken economy – came in at another 2.438 million for the week ended May 16. While this marked the seventh straight week of declines in the level of new claims, it was still the ninth week that initial claims were in the multi-millions, and brought the total since the week ended March 20 to more than 38.6 million.
Elsewhere, tensions between the U.S. and China escalated, with the Senate passing a bill that could prevent some Chinese firms from listing on U.S. stock exchanges.
During the regular session Wednesday, stocks rose as investors considered more developments about states’ reopenings and easing lockdown restrictions, which came alongside some more positive corporate earnings results from retailers including Lowe’s (LOW). And while shares of Target closed lower Wednesday, the big-box retailer reported quarterly results that topped consensus estimates, underscoring some retailers’ successes in leveraging digital sales to mitigate disruptions due to stay in place orders.
Other companies, however, have reported stunning declines in business activity during the pandemic. Travel company Expedia (EXPE) swung to a quarterly loss and said it saw gross bookings decline of as much as 90% in the second half of March, according to recently released results. And while gaming company Take-Two Interactive Software (TTWO) reported fiscal fourth-quarter results that topped expectations, its weaker than expected outlook for the full year suggested the company did not expect its virus-related business boost to extend at the same rate through the second half of the year.
As of this week, each of the 50 states has seen at least some form of easing of stay-in-place orders. More than 1.5 million individuals were infected in the U.S. as of Wednesday, and the death toll crept above 93,000.
Longstanding concerns around the coronavirus pandemic and its economic impact lingered. Minutes from the Federal Open Market Committee’s late-April meeting released Wednesday showed that a number of officials felt the pandemic could have longer-lasting effects, with some judging “there was a substantial likelihood of additional waves of the outbreak in the near or medium term” potentially leading “to a protracted period of severely reduced economic activity.”
Still, market participants have mostly bet that the Fed, or Congress, would come to the rescue with additional stimulus in the event of further disruptions due to the pandemic.
12:05 p.m. ET: Shopify becomes latest major tech company to announce employees can work remotely permanently
Canadian e-commerce company Shopify (SHOP) will allow most of its employees to continuing working from home permanently, even as the coronavirus pandemic and social distancing measures ease, Shopify CEO Tobi Lutke said in a Twitter post Thursday.
As of today, Shopify is a digital by default company. We will keep our offices closed until 2021 so that we can rework them for this new reality. And after that, most will permanently work remotely. Office centricity is over.
— Tobi Lutke 🌳🌲🛒🕹 (@tobi) May 21, 2020
10:00 a.m. ET: U.S. Existing home sales drop by most in a decade in April
Existing home sales in plunged by the most since mid-2010 in April this year, the National Association of Realtors (NAR) said in its monthly report Thursday.
April’s sales of previously owned homes were down 17.8% for the month to a seasonally adjusted annual rate of 4.33 million. This extended a decline of 8.5% to 5.27 million in March.
““The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales,” Lawrence Yun, NAR’s chief economist, said in a statement. “But the listings that are on the market are still attracting buyers and boosting home prices.”
Still, the median existing-home price in April rose 7.4% to $267,000, marking a 98th straight month of year-over-year gains. Total housing inventory fell 1.3% in April from March to 1.47 million units.
9:45 a.m. ET: U.S. manufacturing, services activity improve slightly in May, but still hold in contractionary territory: IHS Markit
The U.S. manufacturing purchasing managers’ index (PMI) improved slightly to 39.8 in May from 36.1 in April, according to IHS Markit’s preliminary May survey. This was just a hair below economist expectations for a rise to 40.0, according to Bloomberg data.
The services PMI also improved, and by a greater than anticipated margin. This rose to 36.9 in May from 26.7 in April, or above expectations for 32.5.
Taken together, the composite PMI improved by 9.4 points to 36.4 in May. However, each of these PMIs still held well below the neutral level of 50, indicating contraction in business activity.
“The severe drop in business activity in May comes on the heels of a record downturn in April, adding to signs that GDP is set to suffer an unprecedented decline in the second quarter,” Chris Williamson, chief business economist for IHS Markit, said in a statement.
“Encouragement comes from the survey indicating that the rate of economic collapse seems to have peaked in April. In the absence of a second wave of COVID-19 infections, the decline should moderate further in coming months as measures taken to contain the coronavirus are steadily lifted,” he added. “However, the sheer scale of the current downturn and associated job losses, and the fact that some restrictions will need to stay in place until an effective treatment or vaccine are found, highlights how a full recovery is unlikely to be swift.”
9:44 a.m. ET: Stocks turn positive shortly after open
The three major indices turned positive in the minutes after market open, after initially opening lower. The Consumer Discretionary and Communication Services sectors led gains in the S&P 500, with big tech shares on the rise. Boeing and The Travelers Companies led gains in the 30-stock Dow.
9:30 a.m. ET: Stocks open lower, but pare some overnight losses
Here were the main moves in markets, as of 9:32 a.m. ET:
S&P 500 (^GSPC): -3.48 points (-0.12%) to 2,968.13
Dow (^DJI): -26.91 points (-0.11%) to 24,548.99
Nasdaq (^IXIC): -7.03 points (-0.09%) to 9,366.19
Crude (CL=F): +$1.07 (+3.19%) to $34.56 a barrel
Gold (GC=F): -$13.70 (-0.78%) to $1,738.40 per ounce
10-year Treasury (^TNX): -1 bp to yield 0.669%
8:30 a.m. ET: New jobless claims total 2.438 million last week, versus consensus estimates for 2.4 million
Initial unemployment claims totaled 2.438 million for the week ended May 16, the Department of Labor said in its weekly report Thursday. This was slightly above consensus estimates for jobless claims to come in at 2.4 million, according to Bloomberg-compiled data.
The prior week’s weekly unemployment claims were revised down slightly to 2.687 million, versus the 2.981 million previously reported.
Continuing claims, however, rose again for the week ended May 9, hitting a fresh record high of 25.073 million. This was greater than the consensus estimate for 24.25 million continuing unemployment claims.
7:22 a.m. ET: Best Buy posts 5.3% enterprise comparable sales drop over last year in Q1, but results beat expectations.
Best Buy (BBY) posted first-quarter results that beat expectations but still fell over last year, as a pick-up in customers purchasing home computer products was not enough to offset declines across other electronics categories.
First-quarter enterprise comparable sales fell 5.3% company-wide and 5.7% domestically alone, with the former coming in much better than the 10.8% plunge analysts were expecting. Adjusted earnings per share of 67 cents beat estimates for 45 cents a share.
The company said the largest comparable sales growth drivers were computing and gaming, but that these were outweighed by declines in home theater, mobile phones, digital imaging and services sales.
Best Buy declined to provide guidance amid the coronavirus pandemic, and highlighted some of the operations changes it made as social distancing orders went into effect. Best Buy heavily relied on digital sales to compensate for widespread in-store closures during the quarter, and domestic comparable online sales surged 155%.
“In the middle of Q1, we shifted all our stores to a curbside-only operating model and were able to retain approximately 81% of last year’s sales during the last six weeks of the quarter, even though not a single customer set foot in our stores,” CEO Corie Bary said in a statement.
7:13 a.m. ET Thursday: Stock futures fall
Here were the main moves in markets, as of 7:13 a.m. ET:
S&P 500 futures (ES=F): 2,951.75, down 16.75 points (-0.56%)
Dow futures (YM=F): 24,385.00, down 134 points (-0.55%)
Nasdaq futures (NQ=F): 9,440.75, down 44.75 points (-0.47%)
Crude (CL=F): +$0.76 (+2.27%) to $34.25 a barrel
Gold (GC=F): -$16.30 (-0.93%) to $1,735.80 per ounce
10-year Treasury (^TNX): -0.4 bps to yield 0.675%
6:04 p.m. ET Wednesday: Stock futures open slightly higher
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:04 p.m. ET:
S&P 500 futures (ES=F): 2,972.25, up 3.75 points (+0.13%)
Dow futures (YM=F): 24,548.00, up 29 points (+0.12%)
Nasdaq futures (NQ=F): 9,498.25, up 12.75 points (+0.13%)