U.S. stocks plunged Friday, giving up all gains for the week, after Amazon and other big companies laid out how the coronavirus pandemic is hitting their bottom lines.
Amazon sank after its profits fell because of a sharp increase in costs related to providing deliveries safely during the pandemic, despite a big increase in revenue.
The selling accelerated as the day went on, with energy stocks taking the biggest losses. Technology stocks and companies that rely on consumer spending accounted for a big slice of the decline.
Bond yields held steady and the price of oil rose slightly. Many world markets were closed for the May Day holiday.
The Dow Jones Industrial Average closed down 622.03 or 2.55% to 23,723.69.
After the market closed, President Donald Trump announced that the Food and Drug Administration had granted an emergency authorization for the use of the experimental medication remdesivir as a treatment against coronavirus.
Having a treatment could have a profound effect because health officials say any vaccine typically takes a year or more to develop and bring to market safely.
Wall Street stumbled out of the gates Friday, with markets plummeting at the opening bell, indicating the brutal day ahead.
President Donald Trump also hinted that he could impose tariffs on China after suggesting the country may have deliberately caused the coronavirus outbreak.
Amazon’s revenue rose but its costs related to dealing with the virus also spiked, causing its profits to drop.
The U.S. jobless figures brought the total of people filing for unemployment to 30 million in just six weeks. Other data showed consumer spending plunged a record 7.5% in March from the month before, a dire blow for an economy where such spending makes up 70% of the total.
Disappointing company results weren’t the only drag on stocks Friday. Shares of electric car and solar panel maker Tesla Inc. slid 10.3% after CEO Elon Musk tweeted that the price was too high.
In a series of tweets just after 11 a.m., Musk said he was selling nearly all of his physical possessions and would not own a house. Then he wrote that “Tesla stock price is too high imo.” After that he tweeted that people should be given back their freedom, in another protest of government stay-home orders to slow the spread of coronavirus. Then he posted parts of the U.S. national anthem.
“Clearly the Street is frustrated at this tweet,” Wedbush analyst Daniel Ives wrote in an email, adding that the tweets amounted to “Elon being Elon."
Stocks rallied last month as economies around the world laid out plans to relax stay-at-home orders and hopes rose that a possible drug treatment for COVID-19 may be on the horizon. Late Friday, U.S. regulators allowed emergency use of an experimental drug that appears to help some coronavirus patients recover faster.
Stocks have been up and down all week.
On Thursday, all three major indexes stumbled hard and ugly as more grim news revealed the grave economic damage being caused by the coronavirus outbreak around the world. But a day before that the market soared amid optimism around a potential new treatment for coronavirus.
Although the market has looked bullish at times over the past month, any rallies seen during the outbreak have been fleeting, with investors still uncertain about the future, but still clinging to hope that government stimulus efforts will hold up the economy until business returns full speed.
April ended as the Federal Reserve and Congress announced aggressive new measures to help the economy weather the fallout from the widespread business shutdowns and stay-at-home guidelines put in place to slow the pandemic.
“Maybe it was the whole month-end malaise, or maybe they just need to hear something new and impactful, and that we’re ultimately seeing buying fatigue," Chris Weston of Pepperstone said in a commentary.
Promises from the Federal Reserve and other central banks to do whatever it takes to get economies through the coronavirus crisis have supported buying by investors betting that a recovery will come soon. Professional investors say that optimism may be premature.
» TUESDAY’S CLOSE: After roaring start, US stocks fall back to earth as investors retreat
The yield on the 10-year Treasury edged down to 0.61% from 0.63% late Thursday. It started the year close to 1.90%. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.
Travel industry
With world travelers still mostly grounded by pandemic precautions, each day brings fresh shocks from the crisis.
Budget airline Ryanair said Friday it plans to cut up to 3,000 jobs and close bases in Europe as part of a restructuring program that includes plans for unpaid leave and pay cuts of as much as 20%.
The budget airline says it will operate less than 1% of its flights from April to June and that passenger numbers will not return to 2019 levels “until summer 2022 at the earliest.’’
The airline group also says it is in “active negotiations” with Boeing to cut the number of planned aircraft deliveries over the next 24 months.
Oil prices
Exxon Mobil’s latest results also weighed on the market. The oil producer fell 7.2% after it said that it swung to a loss of $610 million last quarter. It had to write down the value of its inventories by $2.9 billion amid a collapse in energy prices as airplanes, automobiles and workplaces worldwide suddenly went idle in the spring.
The slide by Exxon Mobil helped drive energy stocks across the S&P 500 to a 6% loss, the largest among the 11 sectors that make up the index.
With travel nearly at a standstill, oil prices have remained volatile.
Earlier, U.S. benchmark crude bounced between gains and losses, shedding 12 cents to $18.72 per barrel in electronic trading on the New York Mercantile Exchange. It jumped $3.78 on Thursday to $18.84 per barrel.
Oil has recovered from the below zero level it hit on worries over collapsing demand and strained storage capacity. But it's still way below the roughly $60 level where it started the year.
Brent crude, the international standard, gave up 27 cents to $26.21 per barrel.
Around the world
Shares dropped in Europe and Asia on Friday after the latest data drove home the extent of economic carnage from the coronavirus pandemic.
Many world markets were closed for May Day holidays. Britain's FTSE 100 sagged 1.9% to 5,788 while U.S. futures fell sharply, with the contract for the S&P 500 down 2.1% and that for the Dow industrials sank 2%.
Australia’s S&P/ASX 200 plunged 5% to 5,245.90 with heavy losses in miners and banks. A measure of Australian manufacturing showed activity contracting at its worst pace since 2009. That, coupled with news overnight that millions more Americans applied for unemployment benefits in April, darkened the mood after a relatively strong April.
Signs of growing tensions with China, Australia's biggest trading partner, added to jitters. The two governments are at odds over calls for an independent inquiry into the origins of the coronavirus, with China warning of possible repercussions for imports from the resource-rich country.
Japan’s Nikkei 225 index slipped 2.8% to 19,619.35 as the economy minister, who is heading the government's coronavirus efforts, said social distancing measures needed to be kept in place to help prevent a resurgence of infections.
“If we relax the measures with insufficient decrease, infections will immediately bounce back and our effort so far will entirely go to waste,” said the minister, Yasutoshi Nishimura. “The experts recommended that the current measures should be kept in place.”
Overnight, the S&P 500 fell 0.9% on the dismal jobless data and news that the economy of countries using the euro contracted 3.8% in the last quarter, its biggest slump since the EU began keeping reporting such data in 1995.
— Compiled and edited by ArLuther Lee for The Atlanta Journal-Constitution.
The NASDAQ composite index was down 284.60 or 3.20% to 8,604.95. The S&P 500 was down 81.72 or 2.81% to 2,830.71.
