U.S. stocks ended lower Thursday, with the Dow Jones Industrial Average snapping a four-day winning streak, in a decline led by technology stocks as investors parsed mixed corporate earnings reports and economic data in the wake of a drop in Asian markets. U.S.-China tensions were also a factor.
What are major indexes doing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.06% ended off session lows, down 135.39 points or 0.5%, at 26,734.71, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.49% shed 10.99 points, or 0.3%, to close at 3,215.57. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.32% finished at 10,473.83, down 76.66 points, or 0.7%.
What’s driving the market?
Technology stocks weighed on the benchmark stock indexes, with the S&P 500 tech sector down 1.2%. Technology stocks have been the been the best-performing sector this year on prospects for growth during the coronavirus pandemic, but Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +1.94% is now on pace to snap its record 10-week winning streak, while Microsoft Corp. /zigman2/quotes/207732364/composite MSFT +2.11% is on pace for its worst week since March.
The U.S. corporate earnings reporting season has so far largely cheered investors with results from big banks. Morgan Stanley /zigman2/quotes/209104354/composite MS +2.93% on Thursday reported second-quarter profit that beat analyst expectations, led by strength in investment banking and trading, but Bank of America Corp. /zigman2/quotes/200894270/composite BAC +1.24% shares fell after the bank said it would boost its loan-loss provisions.
“Despite today’s weakness, the market is doing quite well,” said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research. Frederick noted that the S&P 500 had briefly erased its losses for the year to date. With the bar set so low for second-quarter earnings, it’s possible more positive surprises could even result in a boost for stocks, he said.
U.S. economic data was also mixed on Thursday. First-time jobless claims for the week ending July 11 were only lower by 10,000 compared with the prior week: at 1.3 million, a much more muted recovery than the consensus of 1.24 million from economists surveyed by MarketWatch.
A separate report showed that retail sales roared back in June, rising 7.5%, compared with the 5.4% increase that had been forecast. And the July Philadelphia Fed index also beat expectations: falling only to 24.1 from 27.5, better than the 20 level expected. But the jobless claims data are more recent, and may signal cracks in the nascent economic recovery as states move to reimpose shutdown measures.
Meanwhile, a measure of home-builder confidence surged 14 points to 72 in July, regaining pre-pandemic levels, and business inventories slipped 2.3% in May, in line with economists’ expectations.
Global equities were under pressure after Chinese stocks suffered their biggest one-day loss since the start of the coronavirus pandemic overnight. Analysts said softer-than-expected consumer economic data from Beijing was weighing on stocks and other risky assets, as was a continued rise in tensions between Beijing and Washington may have shaken investor sentiment.
The Trump administration is weighing a ban that would prevent members of the Chinese Communist Party and their families from traveling to the U.S., while the Trump administration said Wednesday that it would ban travel for employees of Chinese technology group Huawei and other companies it deems complicit in helping Beijing crack down on human rights in the country. China recently imposed travel restrictions on some U.S. officials, including Sens. Marco Rubio and Ted Cruz.
The U.S.-China tensions overshadowed upbeat economic data that saw China’s second-quarter gross domestic product expand 3.2% from a year ago, beating an analyst consensus estimate of 2%, and marking a bounce after a 6.8% rout in the first quarter. Analysts said other data from China, including an unexpected fall in retail sales, were also concerning.
“China was the first nation to suffer from COVID-19 and go into lockdown. They are ahead of the West on the recovery curve. However, the cautious consumer could well be a signal of what we can expect across the U.K. or the U.S.,” said Fiona Cincotta, market analyst at CityIndex, in a note.
However, “the virus is the greatest part of the story,” said Schwab’s Frederick. Flare-ups in U.S. case counts, news about hospitals being overwhelmed, “all of those things shock people a lot. It causes people to go back into their homes, be more hesitant,” he said in an interview.