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Market Snapshot: Stocks sharply lower, Dow off nearly 400 points after grim jobless claims, worst GDP reading on record

Market Snapshot

No progress toward coronavirus aid package on Capitol Hill

Bloomberg News

U.S. stocks traded lower Thursday, weakened by economic reports that showed the steepest decline in GDP on record in the second quarter and a weekly jobless claims report that suggests the rebound from the pandemic is losing steam amid a renewed rise in COVID-19 cases.

A lack of progress in talks between congressional Democrats, Republicans and the White House on a new coronavirus aid package was also weighing on sentiment. Stock-index futures also took a leg lower before the bell after President Donald Trump, in a tweet, mused on the idea of delaying the November presidential election.

What are major indexes doing?

The Dow Jones Industrial Average
was trading down about 288 points, or 1.1%, near 26,237 while the S&P 500
lost about 25 points, 0.8%, to trade near 3,233. The Nasdaq Composite Index
dropped 15 points, 0.1%, and was trading at about 10,530 in the late morning. .

At current trading levels, the Dow is flirting with a close below its 50-day moving average at 26,039.97 for the first time since April 24, according to Dow Jones Market Data.

On Wednesday, the Dow rose 160.29 points, or 0.6%, to close at 26,539.57, while the S&P advanced 40 points, or 1.2%, finishing at 3,258.44. The Nasdaq Composite jumped 140.85 points, or 1.4%, to end at 10,542.94.

What’s driving the market?

A first reading on U.S. gross domestic product data for the second quarter confirmed the pandemic pummeled the economy. GDP fell at a 32.9% annualized pace, the Commerce Department said, a bit better than the 34.6% annual decline forecast in a MarketWatch survey, but still the worst in history.

Separately, first-time claims for unemployment benefits rose slightly last week, to 1.43 million from an upwardly-revised 1.42 million, while continuing claims also rose to 17 million in the week ended July 18.

“This is really a day that will live in infamy,” said Kent Engelke, chief economic strategist and managing director of Glen Allen, Va.-based Capitol Securities. The economic data wasn’t as bad as feared, Engelke said in an interview just before the opening bell, but four of five of the largest companies in the market report earnings after the close, an event that could be “pivotal,” he added.

“We have this incredible wall of worry,” Engelke said. “The Fed told us yesterday, we’re going to keep zero interest rates forever and ever. But how is this going to impact us down the road? Gold and the dollar are telling us something. What about November? The election is going to get uglier and uglier. How is this going to weigh on sentiment? I could see the wall of worry increasing to a gargantuan cliff.”

There were no signs of progress toward a spending package as lawmakers face a self-imposed Friday deadline to work out a deal. That’s when supplemental unemployment benefits, which have been credited with helping to cushion the blow of the pandemic, are due to expire.

Stocks extended gains Wednesday after the Fed left interest rates unchanged as expected, and indicated that it planned to keep rates near zero and continue to provide support to the economy — and do more if needed. Fed Chairman Jerome Powell warned that the resurgence in coronavirus cases in many U.S. states may be damping economic growth and said that the path of the recovery depends on the path of the virus.

It is the most hectic week of corporate earnings reporting season, with results from dozens of high-profile companies due after the bell on Thursday, including Google parent Alphabet Inc.
Apple Inc.
Facebook Inc.
and Inc.

Chief executives from those four companies were grilled for hours Wednesday in a virtual hearing before the antitrust subcommittee of the House Judiciary Committee.

Read:Amazon, Apple, Facebook and Google CEOs grilled by House members in historic antitrust hearing

Which companies are in focus?
What are other markets doing?

In Asia, China’s CSI 300 index
fell 0.5%, the Shanghai Composite
declined 0.2%, Hong Kong’s Hang Seng Index
lost 0.7% and Japan’s Nikkei 225
gave up 0.3%.

European bourses narrowed earlier losses, with the Stoxx 600 Europe index
down 2.2% and the U.K.’s FTSE 100
2.4% lower.

Gold futures
were off 1% at $1,933.80 an ounce, on track to snap a nine-session winning streak, while the ICE U.S. Dollar Index
edged down 0.1%. Oil futures
were lower on demand concerns, with the U.S. benchmark
falling 3.3% to $39.92 a barrel on the New York Mercantile Exchange.

The yield on the 10-year U.S. Treasury note
dropped 2.6 basis points to 0.55%. Yields move in the opposite direction of prices.

Read next:‘The stock market no longer thinks it needs the economy if it has the Fed,’ David Rosenberg says

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