Stocks fell on Friday as it looked less likely that U.S. lawmakers would reach a stimulus deal before expanded unemployment benefits expire, even as blowout earnings from technology giants limited losses in the tech sector.
Personal income declined by 1.1% in June, more than the estimated 0.8% drop, according to a Friday report from the U.S. Bureau of Economic Analysis. And while the 5.6% monthly increase in consumer spending was slightly higher than expected, it still constituted a deceleration from May, data showed. The somewhat downbeat data is especially notable because it covers the period before a resurgence in coronavirus cases prompted some states to rethink their reopening plans.
Consumer sentiment data also came in slightly weaker than expected on Friday. The University of Michigan’s latest reading on July consumer confidence came in at 72.5, falling short of forecasts of 73.2, according to Factset.
More worrisome is the impending expiration of expanded unemployment benefits. Congress was unable to strike a deal with White House officials on a new coronavirus stimulus deal. The pressure to reach an agreement is high as the supplemental $600 per week unemployment benefit is set to expire after Friday.
“Bottom line … is critical that a fiscal package gets passed soon. If not, markets are likely headed lower near term,” wrote Dennis DeBusschere, strategist at Evercore ISI.
Thursday’s U.S. session ended with a drop of more than 200 points for the Dow, after U.S. gross domestic product fell at a 32.9% annualized rate in the second quarter, a stunning decline even as it largely met economists’ expectations. Weekly jobless claims rose for the second-straight week.
Tech stocks were one bright spot on Thursday and Friday. iPhone maker
(ticker: AAPL) and e-commerce group
(AMZN) posted earnings on Thursday afternoon that blew past analysts’ expectations.
(FB) and Google parent
(GOOGL) posted solid, if less jaw-dropping, results.
The strong earnings reports come the same week as a Congressional antitrust hearing about tech giants’ competitive practices. The combined market capitalizations of the four companies that reported earnings late Thursday were 2.3 times the size of the entire small-cap
as of Friday morning, according to Bespoke Investment Group.
Apart from reporting more than $11 billion in profit, Apple also announced a four-to-one stock split. Apple, Amazon and Facebook shares jumped 6.3%, 3.7% and 7.3%, respectively, in afternoon trading.
Stoxx Europe 600 index
extended losses as well, down 0.9% after its worst one-day loss in four weeks. Asian stocks finished mixed, weighed down by concerns over the U.S. economy, though the China CSI 300 rose 0.8% after data showed China’s manufacturing recovery picked up.
Outside of the U.S., countries are also starting to grapple with the virus’s resurgence. The U.K. government imposed fresh lockdown restrictions on northern swaths of England late on Thursday, while Spain and Belgium are also battling outbreaks. The eurozone economy slumped 12.1% in the second quarter, for a drop of 15% year-over-year, the Eurostat statistics agency reported Friday.
Gold prices resumed a march toward $2,000 an ounce, with futures rising 1.2% to $1,990.10 an ounce. Oil ticked lower with the price of West Texas Intermediate crude falling 0.2% to $39.83 a barrel.
(CVX) shares were off by 4.8% in afternoon trading after posting an $8.3 billion loss for the second quarter due to asset write-downs linked to low fuel prices and an impairment of its investment in Venezuela. Adjusted losses of $1.59 a share were worse than the 93-cent loss analysts expected.
(XOM) also reported financial results before the bell. Its shares dipped 0.6% after it posted an adjusted loss of 70 cents a share, which was wider than the 61-cent loss analysts expected
(CAT) shares dropped 4.3% despite posting adjusted earnings of $1.03 a share on revenue of $10 billion, which beat analyst estimates.