US open: Stocks tumble as GDP plunges in Q2
By Iain Gilbert
Date: Thursday 30 Jul 2020
(Sharecast News) - Wall Street stocks recorded some heavy losses at the bell on Thursday after an epic plunge in second-quarter gross domestic product and another week's worth of jobless claims figures.
As of 1535 BST, the Dow Jones Industrial Average was down 1.73% at 26,081.74, while the S&P 500 was 1.36% weaker at 3,214.01 and the Nasdaq Composite came out the gate 0.94% softer at 10,443.45.
The Dow opened 457.83 points lower on Thursday, more than reversing gains recorded in the previous session after the Federal Reserve vowed to maintain its current stimulus measures.
Overnight, the Fed kept the US interest rate in a range between 0% and 0.25%, stating that while the economy had somewhat recovered of late, activity and employment remained "well below their levels at the beginning of the year".
Chairman Jerome Powell also said the central bank would keep an accommodative stance until the economy had fully "weathered" the effects of the coronavirus storm.
As far as the new day's trading was concerned, market participants digested news that economic activity in the US collapsed during the second quarter, even if at a marginally slower than expected pace.
Preliminary data from the Department of Commerce showed that gross domestic product fell at a quarterly annualised pace of 32.9% over the three months to June - slightly ahead of consensus estimates for a 34% drop.
The GDP price index for domestic purchases meanwhile fell by 1.5%, following a 1.4% rise during the first three months of the year, while the price deflator for personal consumption expenditures dropped by 1.9% after having risen 1.3% at the start of 2020.
The data also sent the benchmark 10-year Treasury yield lower to around 0.5%, applying pressure to bank stocks.
However, one thing seen as potentially being able to help the Dow recover from the painful GDP reading was earnings from Facebook, Amazon, Alphabet and Apple after all four of the companies' respective chief executives testified in front of Congress on Wednesday to address antitrust concerns.
Still on corporate news, PayPal posted some solid second-quarter figures overnight, while Qualcomm rallied in extended trading after beating estimates on both earnings and revenue.
P&G shares were up after posting a marked increase in cleaning products throughout the quarter and UPS stock surged after reporting a sharp increase in home deliveries.
Elsewhere on the macro front, initial jobless claims in the US were little changed last week, but secondary claims jumped, possibly underlining the difficulty of rejoining the labour force.
According to the Department of Labour, initial unemployment rose by 12,000 over the week ending on 25 July to reach a still extremely high 1.434m. However, secondary unemployment claims, which track those not filing for the first time, rose by 867,000 to 17,018m over the week ending on 18 July.
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