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Stocks open lower as virus-related economic damage piles up Wall Street stalls as dismal economic data piles higher
(about 1 hour later)
NEW YORK — Stocks are opening lower on Wall Street as more grim news piles up about the damage that lockdowns related to the coronavirus are causing the global economy. The S&P 500 fell 0.9% in early trading Thursday. European markets were also lower. The U.S. goverment reported that consumer spending plunged 7.5% in March, and more than 3.8 million laid-off workers applied for unemployment benefits last week. The U.S. economic crisis is shaping up to be the worst since the 1930s. Meanwhile new data came out showing that the European economy contracted by a record 3.8% in the first three months of the year. Wall Street stalled on Thursday after more reports made clear the worldwide devastation the coronavirus outbreak is causing for the economy.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story is below: 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.
World stock markets fell back on Thursday following the release of worse-than-expected data showing Europe’s economy suffered its worst ever quarterly contraction, while jobless claims continued to surge in the United States. The dour figures helped drive most U.S. stocks to losses, and the S&P 500 was down 1.3% at one point, though it quickly halved the loss on strength for Facebook and a handful of other big companies that reported encouraging results. Treasury yields were also lower, while European stocks fell more sharply, slamming the brakes on a strong rally that had circled the world a day earlier.
The 19-country eurozone economy contracted by a quarterly rate of 3.8% in the first quarter, the deepest slump since records began in 1995, as business activity was frozen by shutdowns aimed at curbing the spread of the coronavirus. “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.”
The European Central Bank responded by stepping up its help for the economy, providing cheaper loans to banks and more liquidity. The S&P 500 pared its loss to 0.8%, as of 10:45 a.m. Eastern time. The Dow Jones Industrial Average was down 242 points, or 1%, at 24,393, and the Nasdaq was down 0.3%.
In the U.S., the weekly jobless claims piled up to reach 30 million since the start of the pandemic, a devastating toll on the world’s largest economy. 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 for the economy and markets 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.
France’s CAC 40 stock index was down 0.6% at 4,646 while Germany’s DAX lost 0.9% to 11,009. Britain’s FTSE 100 slipped 1.5% to 6,026. U.S. shares were steady, with the future contracts for the Dow industrials and the S&P 500 future both down 0.5%. 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 13.3% for April, which would be and its best monthly performance since 1974. Earlier Thursday, when the day’s losses were sharper, it was on track for its best monthly performance since 1987.
The bleak European numbers put paid to a rally in the U.S. and Asia that was driven by optimism about a possible treatment for the coronavirus. Some big tech titans reported results for the first quarter that weren’t as bad as investors had braced for, which helped to limit the market’s losses.
An upswell of hope about curbing the pandemic was so strong that investors shrugged off a report showing the U.S. economy shrank at a 4.8% annual rate in the first three months of the year. Facebook rose 5.9% after its revenue topped Wall Street’s expectations. It also said that after a steep drop-off in advertising revenue during March, it saw some stabilization in the first three weeks of April. Ad revenue was roughly flat from a year earlier, defying Wall Street’s worst fears.
The experimental drug remdesivir was reported to be effective against the new coronavirus in a study run by the National Institutes of Health. The nation’s top infectious diseases expert said the drug reduced the time it takes patients to recover, raising hopes that life around the world may eventually tiptoe back toward “normal.” Microsoft was also up 0.6% after reporting better-than-expected results for the first quarter. Those two companies alone make up 7.5% of the entire S&P 500 by market value, giving them outsized effects on broad market indexes.
Japan’s benchmark Nikkei 225 surged 2.1% to finish at 20,193.69, while Australia’s S&P/ASX 200 gained 2.4% to 5,522.40. The Shanghai Composite added 1.3% to 2,860.08. But reports showing the economic pain are just piling ever higher, and four out of five stocks in the S&P 500 fell.
India’s Sensex climbed 2.4% to 33,494.89. Shares also rose in Taiwan and Southeast Asia. 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 7.5% in March from the prior month. That’s crucial because consumer spending makes up 70% of the entire economy.
Markets in South Korea and Hong Kong were closed for holidays. Many other markets will be closed on Friday for May Day. 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.
China’s manufacturing activity weakened in April as the coronavirus pandemic clobbered global consumer demand, hampering Beijing’s efforts to revive the world’s second-largest economy. 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.
Surveys by a Chinese magazine and an official industry group showed activity slipped back after rebounding in March following the closure of much of China’s economy to fight the virus. A sub-measure for exports plunged. European stocks dropped. The French CAC 40 fell 2%, and the German DAX lost 2%. In London, the FTSE 100 dropped 2.9%.
China became the first major economy to reopen factories in March after the ruling Communist Party declared victory over the outbreak. But the United States, Europe and other major markets have yet to lift controls that are depressing consumer spending. In another sign of caution in the market, the yield on the 10-year Treasury dipped to 0.60% from 0.62% late Wednesday. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.
Nations around the world have laid out plans to relax restrictions keeping people at home and businesses bereft of customers. Any new treatment for COVID-19 could also lower the dread so prevalent among households and businesses around the world. Benchmark U.S. crude oil continued its extreme swings, jumping 16.8% to $17.59 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 9.7% to $26.58.
Benchmark U.S. crude oil rose $2.20 to $17.26 a barrel in electronic trading on the New York Mercantile Exchange. It rose $2.72, or 22%, to settle at $15.06 a barrel on Wednesday. Brent crude oil, the international standard, rose $2.21 to $26.44 a barrel.
The dollar inched down to 106.62 Japanese yen from 106.67 yen Wednesday. The euro was little changed at $1.0868 from $1.0875.
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AP Business writers Joe McDonald and David McHugh 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.