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Wall Street pulls back as dismal economic data piles higher Wall Street’s best month in 33 years closes with whimper
(32 minutes later)
Stocks fell on Wall Street Thursday as more grim news piled up revealing the grave economic damage being caused by the coronavirus outbreak. The S&P 500 index lost 0.9%, but still wound up 12.7% higher in April, its biggest monthly gain since 1987. The monthlong rally came as the Federal Reserve and Congress announced aggressive measures to help the economy weather the fallout from the widespread business shutdowns and stay-at-home guidelines put in place to fight the pandemic. Another 3.8 million people applied for unemployment benefits last week, and the European economy contracted by a record 3.8% in the first three months of the year. A crush of dismal data about the economy helped send markets lower Thursday, a meek ending to a historic, juggernaut month for stocks.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story is below: The S&P 500 fell 0.9% after reports showed millions more U.S. workers filed for unemployment benefits last week and the European economy crumpled to its worst performance on record last quarter, among other lowlights. It was the biggest loss for the U.S. stock market in more than a week, but it was still just a wiggle within the S&P 500’s best month in decades.
Stocks are falling on Wall Street Thursday after more reports made clear the worldwide devastation the coronavirus outbreak is causing for the economy. The index surged 12.7% in April, its biggest monthly gain since 1987. Before Thursday’s fall, it had been on track for its best month since 1974 as stocks recouped more than half their 34% plunge from February into late March on worries about a sudden, devastating recession.
The dour figures helped drive most U.S. stocks to losses, and the S&P 500 was down 1.4% in afternoon trading. Treasury yields also sank, while European stocks fell more sharply, slamming the brakes on a strong rally that had circled the world a day earlier. “The disconnect between the market and the economy in April is about as wide as any of us have ever seen,” said Ryan Detrick, senior market strategist for LPL Financial.
Promises from the Federal Reserve to do whatever it takes to prop up the economy through the coronavirus crisis helped spark the rally, as did trillions in spending by Congress. The rally has continued recently on optimism that economies around the world are close to reopening.
April’s gains for stocks came in the face of mayhem in the oil market, where prices in one corner dipped below zero for the first time, and as investors continued to rush into U.S. government bonds in search of safety. Reports piled up by the day showing the severe hits the economy is taking from widespread stay-at-home orders meant to slow the spread of the virus.
It all left many professional investors skeptical about the steep rebound in stocks, whose rapid ascent resembles a “V” on a line chart following its equally sharp decline, when there’s still too much uncertainty about how long the recession will last.
“The rebound in April was an assumption that this was going to be a short, V-shaped recovery, both economically and at the corporate and business level,” said David Lyon, global investment specialist at J.P. Morgan Private Bank. “In our view, it probably has gotten a little ahead of itself. We think it’s going to be a longer and slower recovery.”
He said it could take a couple years before the economy and people’s behaviors get back to what they were like before the outbreak.
Thursday’s deluge of dour economic data — along with some investors looking to sell after weeks of gains — was enough to send 86% of stocks in the S&P 500 down and European stocks sharply lower.
The S&P 500 fell 27.08 points to 2,912.43. The Dow Jones Industrial Average lost 288.14, or 1.2%, to 24,345.72, and the Nasdaq fell 25.16, or 0.3%, to 8,889.55.
“This is the saddest day for the global economy we have ever seen” in the 50 years that economists at High Frequency Economics have been following economic data, they wrote in a report. “The statistical offices of the economies we watch pumped out 19 economic reports overnight. They revealed historic declines of activity and surging unemployment on a scale we have never seen before. We are sad.”“This is the saddest day for the global economy we have ever seen” in the 50 years that economists at High Frequency Economics have been following economic data, they wrote in a report. “The statistical offices of the economies we watch pumped out 19 economic reports overnight. They revealed historic declines of activity and surging unemployment on a scale we have never seen before. We are sad.”
Among the lowlights: In the United States, another 3.8 million workers filed for unemployment benefits last week as layoffs continue to hammer the country. In Europe, the region’s economy crumpled by the sharpest degree in at least 25 years. Besides the jobless figures in the United States, which brought the total to 30 million in just six weeks, data released on Thursday showed that consumer spending plunged a record 7.5% in March from the prior month. That’s crucial for an economy where consumer spending makes up 70% of the total.
The Dow Jones Industrial Average was down 370 points, or 1.5%, at 24,267 as of 3:04 p.m., and the Nasdaq was down 0.9%. Stocks that tend to be most closely tied to the strength of the economy had the day’s biggest losses. Raw-material producers lost 3% for the largest loss among the 11 sectors that make up the S&P 500. Financial and energy stocks were close behind.
Even with Thursday’s losses, the S&P 500 is still on track to close out its best month in decades. Stocks have surged since late March on the promise of massive amounts of aid from the Federal Reserve and Congress. More recently, some U.S. states and nations around the world have laid out plans to relax restrictions that were meant to slow the spread of the virus but also suffocated businesses and jobs. “This is a bit of fear that there is not enough of a rebound to restart the parts of the economy that are not connected to work-from-home,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
Because of that, some investors have essentially written off a horrific few months of corporate profits and economic data, and they’re focusing instead on the prospect of growth returning later this year. The S&P 500 is up 12.3% for April. Depending on where it ends the day, it will close out its best monthly performance since either 1987 or the mid-70s. Some big tech titans reported results for the first quarter that weren’t as bad as investors had braced for, which helped limit the market’s losses. Facebook rose 5.4% after it reported trends in advertising revenue stabilized in April following a steep drop-off in March. Microsoft added 1% after reporting better-than-expected results for the first quarter.
Some big tech titans reported results for the first quarter that weren’t as bad as investors had braced for, which helped limit the market’s losses. Facebook rose 5.3% after it reported trends in advertising revenue stabilized in April following a steep drop-off in March. Microsoft inched up 0.4% after reporting better-than-expected results for the first quarter. Those are two of the biggest stocks in the S&P 500, which give their movements outsized heft on the index.. Among European countries that use the euro, the economy shrank by 3.8% in the first three months of the year from the quarter before. That’s the biggest contraction since records began in 1995. Discouraging data also came in on China’s economy, which is concerning for anyone expecting a first-in-first-out economic wave.
But roughly nine out of 10 stocks in the S&P 500 fell after reports showing the economic and financial pain piled even higher. “As we look to reopening here in the U.S., the hope is that activity bounces,” Haworth said. “China is certainly ahead of us in reopening and for them not to have a bounce a full month in is a little concerning for the market.”
Besides the jobless figures in the United States, which brought the total to 30 million in just six weeks, data released Thursday showed that consumer spending plunged a record 7.5% in March from the prior month. That’s crucial because consumer spending makes up 70% of the entire economy.
McDonald’s fell 1.6% after its earnings for the latest quarter fell short of Wall Street’s expectations. Even at its restaurants that have reopened, the company said customers have been slow to return to their old routines from before the pandemic. In China, which was the first country hit by the outbreak, 99% of restaurants are back operating again, but demand has not returned to the same levels.
Among European countries that use the euro currency, the economy shrank by 3.8% in the first three months of the year from the quarter before. That’s the biggest contraction since records began in 1995.
The European Central Bank is promising to support the economy through the pain, and on Thursday it lowered the interest rate on long-term loans it provides to banks. It also offered a raft of new credit lines to banks at a quarter percentage point below its main interest benchmark, which is zero.
European stocks dropped. The French CAC 40 fell 2.1%, and the German DAX lost 2.2%. In London, the FTSE 100 dropped 3.5%.
Many professional investors have been skeptical of the stock market’s big rally over the last month. Even though some encouraging numbers have come out about the outbreak, it’s still uncertain how long this recession will last and whether new waves of infections could hit.
Other areas of the market, from bonds to commodities, have been showing more pessimism.
The yield on the 10-year Treasury edged up to 0.63% from 0.62% late Wednesday. It started the year close to 1.90%. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.The yield on the 10-year Treasury edged up to 0.63% from 0.62% late Wednesday. It started the year close to 1.90%. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.
Benchmark U.S. crude oil continued its extreme swings, jumping $3.78, or 25.1%, to settle at $18.84 per barrel. It’s still way below the roughly $60 level where it started the year as worries pile up about the effects of a collapse in demand. Brent crude rose $2.73, or 12.1%, to $25.27. Benchmark U.S. crude oil continued its extreme swings, jumping $3.78, or 25.1%, to settle at $18.84 per barrel. It’s still way below the roughly $60 level where it started the year as worries pile up about the effects of a collapse in demand and as storage tanks fill close to their limits. Brent crude rose $2.73, or 12.1%, to $25.27.
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AP Business Writer Yuri Kageyama contributed.AP Business Writer Yuri Kageyama contributed.
Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.