Stocks’ recent rally was interrupted on Thursday as grim data from North America and Europe outweighed recent economic optimism.
U.S. government figures showed that 3.8 million people filed initial claims for unemployment benefits in the latest week, bringing the total newly out of work since the coronavirus struck the U.S. economy to more than 30 million. A separate report showed that consumer spending fell 7.5% in March from a month earlier—the biggest monthly drop on record—as many consumers held back on all but essential purchases.
At the same time, Christine Lagarde, head of the European Central Bank, said the economy in the eurozone could shrink by 5% to 12% this year, depending on how long lockdown efforts to contain the pandemic remain in place. Eurozone GDP already dropped 3.8% in the first quarter, separate data on Thursday showed. The ECB said it would lower interest rates on existing loans to banks and offer new long-term loans, but opted not to scale up a bond-buying initiative called the Pandemic Emergency Purchase Program. Investors were disappointed, having hoped the size of the program would be increased.
Stocks on both sides of the Atlantic fell on Thursday, after several days of strong gains. The Dow Jones Industrial Average closed down 288 points, or 1.2%, while the S&P 500 fell 0.9% and the Nasdaq Composite lost 0.3%. The economically sensitive small-cap Russell 2000 index dropped 3.2% after leading the market higher in recent days.
The Russell handily bested the large-cap indexes in April, returning over 18% versus 12.5% for the Dow and less than 14% for the S&P 500. Still, the gain for the Dow was its largest for the month of April since 1938.
In Europe, the Stoxx Europe 600 index closed down 2% Thursday, while the German DAX lost 2.2%, the French CAC 40 declined 2.1%, and the U.K.’s FTSE 100 index dropped 3.5%. Beleaguered European banks were especially hard hit by the ECB’s Thursday announcement: The Euro Stoxx Bank Index fell another 5.5% after already having lost nearly half its value since February.
Stock indexes in Asia closed the month with gains: Japan’s Nikkei 225 added 2.1% and China’s Shanghai Composite rose 1.3%.
Haven assets ended mixed on Thursday. The price of gold fell 1.1% to $1,695.40 an ounce. The yield on the 10-year U.S. Treasury note ticked down less than 1 basis point, or hundredth of a percentage point, to 0.622%, as the price of the securities rose. The U.S. Dollar Index (DXY)—which measures the greenback against a basket of other currencies—slipped 0.6%.
Oil, which has swung wildly in recent weeks, was up on some signs of increased demand. The price of WTI crude climbed 25.1% to $18.84 a barrel, while Brent rose 12.1%, changing hands at $25.27 a barrel.
Investors have had a flood of earnings data to digest this week as public companies disclosed first-quarter results and how the pandemic has affected their business. Several stocks were moving on earnings results released after Wednesday’s close and before the bell Thursday.
Facebook (FB) shares jumped 5.4% despite results missing slightly on the bottom line. The social media giant said its monthly active users are up and, despite a drop in advertising revenue in March, April levels were roughly flat compared with last year.
Tesla (TSLA) shares gave up a large early gain to close down 2.3% after posting surprise profits of $1.24 a share on an adjusted basis while analysts were expecting a loss. On a call with analysts, fiery chief executive Elon Musk criticized the stay-at-home orders, calling them “fascist.”
American Airlines (AAL) shares fell 4.9% after the airline reported a $2.2 billion loss in the first quarter—its highest loss since the financial crisis of 2008. With much travel largely halted, American Airlines admitted the industry has never before faced such a “significant challenge.”
Tapestry (TPR) shares dropped 13.1% as more than 90% of its stores were either closed or had shortened hours due to the pandemic. The company behind brands such as Coach and Kate Spade reported a loss of $2.45 a share as sales tumbled nearly 20%.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com and Carleton English at carleton.english@dowjones.com
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May 01, 2020 at 03:37AM
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Stocks End Record Month on a Low Note - Barron's
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