U.S. stock benchmarks held in positive territory midday Friday, but traded well off their opening peaks, as Wall Street attempted to recapture losses from the sharpest selloff for the market since mid-March on Thursday.
How are benchmarks faring?
The Dow Jones Industrial Average
gained 202 points, or 0.8%, to trade at around 25,330 early afternoon after earlier touching an intrasession peak at 25,965.55 and a low at 25,183.
Meanwhile, the S&P 500 index
was up 12 points, or 0.4%, at about 3,014, off its intraday peak at 3,088 but also off its low at 3,003.10. The Nasdaq Composite Index
climbed 27 points, or 0.3%, to roughly 9,520, after briefly slipping into negative territory at 9,485.04.
On Thursday, the Dow closed down 1,861.82 points, or 6.9%, to 25,128.17, the S&P 500
was down 188.04 points, or 5.9%, to finish at 3,002.10, and the Nasdaq Composite
ended down about 527.62 points, or 5.3%, at 9,492.73, one day after charting a record above 10,000.
All three indexes saw their sharpest one-day drops since March 16 on Thursday. The S&P 500 and the Dow finished at their lowest levels since May 26, while the Nasdaq ended at its lowest since May 29, according to Dow Jones Market Data.
For the week, the Dow is down 7.3%, the S&P 500 was on track to lose 6.6%, while the Nasdaq was off 3%.
What’s driving the market?
Investors are assessing the state of the stock-market’s 10-week rally, a day after equity indexes registered a bruising decline prompted by fears of a resurgence in the coronavirus pandemic in the U.S. and a bleak economic outlook from the head of the Federal Reserve.
Indeed, the International Monetary Fund’s Gita Gopinath said that the global economy is recovering more slowly than expected and faces “significant scarring,” Bloomberg News reported. In a video released Friday but recorded June 4, Gopinath said the IMF will release updated growth projections on June 24 that will likely be worse than April projections for a global contraction of 3%, if the disease lingers.
Fears of an emerging second wave of the epidemic in the U.S. persist, with Reuters reporting that half a dozen states, including Texas and Arizona, are facing rising infections of COVID-19. Arizona, Utah and New Mexico all posted rises in new cases of 40% or higher, while Florida, Arkansas, South Carolina and North Carolina saw cases rise by more than 30% for the week ended June 7, on a rolling seven-day basis, according to Reuters.
Richmond Federal Reserve Bank President Tom Barkin on Friday, during a webcast panel discussion sponsored by the Virginia Tech Office of Economic Development, said that the pandemic could have effects that last beyond the next couple of months and cautioned that some of the millions of jobs that have been lost during the viral outbreak may never return, echoing similar remarks made by Fed Chairman Jerome Powell on Wednesday.
Some analysts characterize the rebound Friday from Thursday’s slump as unlikely to be sustainable.
Naeem Aslam, chief market analyst said that it “is normal to experience some bounce next day.”
“I suspect the bounce is a dead cat bounce because the sentiment is further dented by the fresh comments by the chief economist of the IMF who said that the world economy is growing much slower than the anticipation and the scars of the coronavirus pandemic may linger for much longer,” he said.
However, bullish investors don’t believe Thursday’s downturn signaled a unraveling of the trend higher for U.S. equities.
“The big question is where do we go from here. We had been saying for some time that we expected some corrections, but that the downside had become more limited given a still-bearish consensus, high cash levels, and a broadening rally,” wrote Esty Dwek, head of global market strategy, at Natixis Investment Managers, in emailed remarks Friday.
“We maintain this view and for now, do not believe this is the start of a new collapse,” Dwek wrote, also advocating that investors should be cautious in the road ahead.
In U.S. economic reports, a reading import prices for May rose, up 1%, by the most in more than year, marking the largest gain since February 2019, the Labor Department reported. Meanwhile, the University of Michigan’s consumer sentiment index showed an increase to a reading of 78.9 from 72.3 in May.
Meanwhile, a report on economic growth in the U.K. showed that gross domestic product contracted by a record 20.4% in April, highlighting weakness in Europe and one of the region’s hardest hit by the epidemic.
Which stocks are in focus?
- American Airlines Group Inc. shares
are in focus Friday after the company announced a series of business updates in a filing with the Securities and Exchange Commission as its demand trends and cash-burn trajectory improve. Shares were surging 15%.
- Other airline stocks were also sharply higher, including Delta Air Lines Inc.
, up 9%, and United Airlines Holdings Inc.
- Dick’s Sporting Goods Inc. shares
jumped 7% in Friday trade after the athletic retailer said it was bringing back its dividend program.
- Bankrupt auto rental company Hertz Global Holdings
wants to sell as much as $1 billion in stock to take advantage of its recent rally, the Wall Street Journal reported, citing the company’s lawyers. Its shares were up 47% Friday.
- Azek Co.
surged 23% in opening trade after the maker of sustainable building materials priced its public offering late Thursday.
- Caterpillar Inc.
was downgraded to market perform from outperform at BMO Capital Markets on concerns about the impact of tight budgets on the industrial machinery company’s comeback. Its shares ticked down 0.1%.
- Shares of Calvin Klein parent company PVH Corp.
were the biggest loser in S&P 500 Friday, down nearly 10% after reporting earnings on Thursday.
How are other assets faring?
Oil prices gave up slight early gains on Friday. West Texas Intermediate
was off 5 cents, or 0.1%, at $36.29 a barrel on the New York Mercantile Exchange, after marking the worst one-day slide since April 27.
The greenback traded up 0.6% but was poised for a near-flat finish on the week against its major rivals, as gauged by the ICE U.S. Dollar index
In global equities, the Stoxx Europe 600 index
closed at 354.06, up 0.3% after ending Thursday down 4.1%, while the FTSE 100 index
closed at 6,105.18, up 0.5% following its 4% Thursday plunge.
In Asia, Japan’s Nikkei
fell 0.8%, the China CSI 300
finished 0.2% higher and Hong Kong’s Hang Seng Index
closed off 0.7% lower. South Korea’s Kospi index
fell 2% after a 0.9% decline in the previous session.
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