Stocks drop as investors weigh dismal corporate earnings

Stocks drop as investors weigh dismal corporate earnings

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USA TODAY

U.S. stocks extended declines Friday after several companies reported earnings results that showed how severely the coronavirus disruptions are affecting their industries.

The Dow Jones industrial average dropped 400 points, adding to losses after dropping nearly 300 points a day earlier. The Standard & Poor’s 500 fell nearly 2%, led by declines in financial, energy and materials companies. 

Tech shares also came under pressure. Amazon shares skidded 5.7% after the tech giant said it plans to spend all of its profit from the second quarter on responding to the pandemic. Exxon Mobil fell after reporting that its profit fell as demand for energy sank.

On Thursday, the S&P 500 fell 0.9% after millions more Americans applied for unemployment benefits in April, darkening the mood after a relatively strong April. 

Investor sentiment waned on the dismal jobless data and news that the economy of countries using the euro contracted 3.8% in the last quarter, its biggest slump since the EU began keeping reporting such data in 1995.

The U.S. jobless figures brought the total of people filing for unemployment to 30 million in just six weeks. Other data showed consumer spending plunged a record 7.5% in March from the month before, a dire blow for an economy where such spending makes up 70% of the total.

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Some analysts attributed recent losses to the old Wall Street adage “sell in May and go away,” because the next six months have historically been among the weakest times of the year in the stock market, up only 1.5% on average in that span, according to LPL Financial. 

To be sure, stocks have risen during the six month period from May to October in seven of the past eight years, but analysts say there’s room for pause after stocks surged double digits in April to post their best month since 1987. The S&P 500 has also come within 16% of February records after sliding into a bear market in March and ending its historic 11-year bull market run. 

“Right here and now we’d be careful after the record run stocks have seen, as a well-deserved break could be perfectly warranted,” Ryan Detrick, senior market strategist at LPL Financial, said in a note. “But with the dual benefits of record monetary and fiscal stimulus helping to bridge those most impacted by COVID-19, we continue to expect this recession to be one of the shortest on record and a much stronger economy later in 2020.”

Promises from the Federal Reserve and other central banks to do whatever it takes to get economies through the coronavirus crisis have supported buying by investors betting that a recovery will come soon. Professional investors say that optimism may be premature.

The yield on the 10-year Treasury edged down to 0.61% from 0.63% late Thursday. It started the year close to 1.90%. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.

U.S. benchmark crude yoyo’d between gains and losses, shedding 12 cents to $18.72 per barrel in electronic trading on the New York Mercantile Exchange. It jumped $3.78 on Thursday to $18.84 per barrel.

Many world markets were closed for May Day holidays. Britain’s FTSE 100 sagged 1.9%. Japan’s Nikkei 225 index slipped 2.8% as the economy minister, who is heading the government’s coronavirus efforts, said social distancing measures needed to be kept in place to help prevent a resurgence of infections. Australia’s S&P/ASX 200 plunged 5% with heavy losses in miners and banks.

Contributing: The Associated Press

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