Market Snapshot: Dow down over 450 points as Trump threatens new China tariffs, earnings disappoint
Amazon slumps in wake of earnings and forecast
Stocks slumped early Friday, kicking off May on a down note as investors showed disappointment with earnings from big tech companies and President Donald Trump’s threat to impose import tariffs on China in retaliation for its handling of the COVID-19 pandemic.
What are major indexes doing?
The Dow Jones Industrial Average
fell 475.07 points, or 2%, to 23,870.65, while the S&P 500
gave up 61.68 points, or 2.1%, to trade at 2,850.75. The Nasdaq Composite
was off 186.26 points, or 2.1%, at 8,703.29.
Stocks ended lower Thursday, but still saw a historically strong April rebound as major indexes took back a chunk of the ground lost in the coronavirus-inspired selloff that took the S&P 500 down nearly 34% from its Feb. 19 record close to its March 23 low.
For the month, the Dow gained 11.1%, while the S&P 500
ended April up 12.7%, representing their best monthly gains since 1987 and the best April performance since 1938, according to Dow Jones Market Data.
The Nasdaq Composite booked a monthly return of 15.5%, its best such advance since 2000 and the best April for the technology-laden index on record, while the Russell 2000 rose 14% for its best month since 2011 and its best April since 2009.
What’s driving the market?
“Two factors are weighing on risk sentiment. Firstly, disappointing earnings announcements/trading updates from Apple and Amazon after the close, with the latter warning of a possible Q2 loss. Secondly, an increase in tension between the U.S. and China and hints at possible additional U.S. tariffs,” said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.
Shares of Dow component Apple Inc.
slumped in early trade, but have since pushed higher, up 1% midmorning Friday.
Analysts said it was the guidance — or lack thereof in the case of Apple — that appeared to unsettle investors, analysts said. Apple reported that profits slipped slightly but sales grew amid the spread of COVID-19, while promising investors billions more in stock repurchases and dividends, but declined to provide an outlook.
Both Apple and Amazon are among the companies that led the S&P 500 index’s comeback from the March 23 lows and were two of the best performers in April. Amazon rallied nearly 27% in April while Apple jumped 15%.
The Washington Post on Thursday reported that U.S. officials are beginning to explore proposals for punishing China for its handling of the pandemic, adding to bearish sentiment on Wall Street. The report said some administration officials have discussed having the U.S. cancel part of its debt obligations to China. Asked about that option, Trump said “I could do the same thing but even for more money, just putting on tariffs.”
“Phase one of the U.S.-China trade deal was signed in January, after much toing and froing, to say the least. It is possible we could be in for another prolonged period of tough tariff talk,” said David Madden, market analyst at CMC Markets UK, in a note.
“Some people might think this is just a ploy by Mr. Trump to make himself look good ahead of the Presidential election, but either way it has prompted traders to trim their exposure to stocks,” he said.
Stocks saw little movement after the Institute for Supply Management said its April manufacturing index came in at 41.5%. Economists surveyed by MarketWatch, on average, had looked for the gauge to plunge to 35% from a 49.1% reading in March. A figure below 50 indicates a contraction in activity.
Which companies are in focus?
- Amazon.com Inc.
late Thursday said it topped $75 billion in sales in the first quarter as COVID-19 swept across the globe, but profit declined and the company said it might lose money in the current period as it spends to keep up with demand. Shares were down more than 6%.
- Drugmaker Gilead Sciences Inc.
said late Thursday it would spend around $50 million to test and manufacture COVID-19 drug candidate remdesivir, while reporting better-than-expected first-quarter results. Gilead shares fell 5% after rising more than 12% in April.
- Clorox Co.
shares jumped 5% after the maker of cleaning and household products topped quarterly earnings forecasts, boosted by demand for disinfecting and other cleaning products.
- Dow component Chevron Corp.
on Friday reported a rise in first-quarter earnings but a drop in revenue from a year ago, as oil and commodity prices plunged in March. The oil giant said it was further reducing its 2020 capital expenditure outlook by $2 billion to $14 billion, and expects operating costs to decrease by $1 billion. Shares were off 3.7%.
- Exxon Mobil Corp.
shares were down 4.7% after the oil giant and Dow component posted its first quarterly loss in three decades.
- Honeywell International Inc.
shares were down more than 5% after it reported a first-quarter profit that beat expectations, but sales that fell more than forecast as the industrial conglomerate said the COVID-19 pandemic had a significant impact on its supply chain, customer sites and on the commercial aerospace and oil and gas end markets