Stocks closed sharply lower on Friday at the start of May as investors were disappointed with profits from big tech companies and President Donald Trump’s threat to impose import tariffs on China in retaliation for its management of the COVID-19 pandemic.
How have the main indices performed?
Dow Jones industrial average
fell 622.03 points, or 2.6%, to end at 23,723.69, while the S&P 500
drops 81.72 points, or 2.8%, to 2,830.71. The Nasdaq composite index
down 284.60 points, or 3.2%, closing at 8,604.95.
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What drove the market?
US stocks posted heavy losses as investors reassessed the corporate profit situation and the economic impact of the ongoing COVID-19 epidemic, after the main benchmarks posted their best monthly performances in the during the years of April.
“After one of the best months in history, it is not too surprising to see profits here,” said Matt Miskin, co-chief investment officer of John Hancock Investment Management in an interview.
“We started the results season on fire – the technical results started well and last night the results were more mixed,” he added. “The markets were at an almost perfect price from the tech giants and we are now seeing some downward pressure on the market as there is a slightly more realistic view of these results.” “
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Analysts said it was the guidance – or lack thereof in the case of Apple – that seemed to trouble investors. Apple said profits have declined slightly, but sales have increased against the backdrop of the spread of COVID-19, while promising investors billions more share buybacks and dividends, but they have refused to provide perspectives. Dow component stocks Apple Inc.
closed down 1.6% on Friday.
Actions of Amazon.com Inc.
, the second company in terms of market capitalization of the S&P 500, ended the session down 7.6% after announcing Thursday evening that it had exceeded $ 75 billion in sales in the first quarter as COVID-19 swept the world but the profit has gone down and the company said it could lose money in the current period as it spends to meet demand.
Apple and Amazon are among the companies that led the return of the S&P 500 after the lows of March 23 and were two of the best performers in April. Amazon rose almost 27% in April while Apple jumped 15%.
The magnitude of the rebound from the March 23 lows also left valuations very high at a time when the ongoing coronavirus epidemic makes it difficult to predict future corporate profits. The S&P 500 ended Friday with a multiple futures price / profit of 19.8, well above historical averages, according to FactSet.
Meanwhile, global stocks came under pressure after President Donald Trump said he might consider imposing import tariffs on China.
The Washington Post reported on Thursday that US officials are beginning to explore proposals to punish China for handling the pandemic, including punitive import tariffs, adding to the bearish sentiment on Wall Street.
“Supply chains were already in dire straits given the pressure on global growth, the lack of freight transportation around the world, and hearing that there could be even more constraints for supply chains in the form of tariffs is rightly integrated into the market negatively, “said Miskin.
Inventories were little changed after the Supply Management Institute announced that its April manufacturing index was 41.5%. Economists polled by MarketWatch, on average, had looked for the gauge to plunge to 35% from 49.1% in March. A number less than 50 indicates a contraction in activity.
Which companies were targeted?
- On Friday evening, the United States Food and Drug Administration announced that it was granting Gilead Sciences Inc.
emergency use authorization for remdesivi, its experimental treatment COVID-19. The company said on Thursday evening that it would spend approximately $ 50 million testing and manufacturing remdesivir, while reporting better-than-expected results in the first quarter. Gilead shares fell 4.8% after rising more than 12% in April.
- Clorox Co.
stocks rose 3.4% after the manufacturer of cleaning and household products surpassed quarterly profit forecasts, boosted by demand for disinfectants and other cleaning products.
- Dow component Chevron Corp.
Friday reported higher first quarter profits but lower revenues compared to a year ago as oil and commodity prices fell in March. The oil giant has said it is further cutting its 2020 capital spending forecast from $ 2 billion to $ 14 billion in 2020, and expects operating costs to drop by $ 1 billion. The shares closed down 2.8%.
- Exxon Mobil Corp.
Stocks fell 7.2% the day after the oil giant and the Dow component posted their first quarterly loss in three decades.
- Honeywell International Inc.
stocks lost 3.3% after posting first-quarter profit above expectations, but sales fell more than expected as the industrial conglomerate said the COVID-19 pandemic had a significant impact on its chain supply, customer sites and commercial aerospace and oil and gas end markets
How have other markets traded?
Crude Oil Prices Ended The Week Up, With West Texas Intermediate Crude Oil Price Per Barrel For June Delivery
earning 94 cents, or 5%, to settle at $ 19.78 on the New York Mercantile Exchange. In precious metals, June gold
rose $ 6.70, or 0.4%, to $ 1,700.90 an ounce on Comex.
The yield on the 10-year US Treasury bill
slightly increased by 2 basis points to 0.63%.
Many global exchanges were closed on Friday for International Workers’ Day. Nikkei 225 from Japan
closed 2.8% lower and UK FTSE 100
ended session down 2.3%.
The US dollar remained unchanged compared to a basket of trading partners, according to the ICE US dollar index