Stocks closed broadly lower on Wall Street Friday after Amazon and other big companies reported disappointing results, the latest evidence of how the coronavirus pandemic is hobbling the economy and hurting corporate earnings.
A day after closing out its best month since 1987, the S&P 500 fell 2.8%. The slide gave the benchmark index its second-straight weekly loss.
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.
Amazon sank 7.6% after it reported profit for the latest quarter that fell short of Wall Street’s forecasts. A sharp increase in costs related to providing deliveries safely during the pandemic outweighed a big increase in revenue. The retail giant's movements have an outsized sway on the S&P 500 because it’s the third-largest company in the index.
“We all had these great expectations for Amazon,” said J.J. Kinahan, chief strategist with TD Ameritrade. “The stock ran up amazingly because we were expecting their earnings to be good.”
Monday’s closings
The S&P 500 gave up 81.72 points to close at 2,830.71.
The Dow Jones Industrial Average fell 622.03 points, or 2.6%, at 23,723.69.
At one point, the index was down 700 points.
The Nasdaq, which is heavily weighed with technology stocks, slid 284.60 points, or 3.2%, to 8,604.95.
The Russell 2000 index of smaller company stocks fell more than the rest of the market, shedding 50.18 points, or 3.8%, to 1,260.48.
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.
What it means
Wall Street has been bracing for a poor showing by companies this earnings season due to the economic shock from the coronavirus.
Many companies have pulled their earnings guidance for the rest of the year, citing uncertainty about how much of an impact the outbreak will have on their business and the economy, which is now in a recession.
“There’s an expectation that we’ll have a very difficult second quarter for GDP and profits, and the third quarter will probably still be difficult,” said Jason Pride, chief investment officer of private wealth at Glenmede.
That has many analysts looking past the next few months and betting on a recovery by the end of this year or in 2021. “But, that’s predicated on us not having a second wave of the outbreak,” Pride said.
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.
The market posted sizable gains after the Federal Reserve and Congress announced aggressive meaures to support markets and the economy. Stocks have now more than halved the sharp losses they took from its February record high into late March.
Many professional investors say the rally has been overdone given how much uncertainty still exists about how long the recession will last. If U.S. states and nations around the world reopen their economies prematurely, it may lead to additional waves of infections, which could mean more business closures, layoffs and economic devastation.
“Overall, we’re generally positive on the market, but think there could be some short-term pullback here,” said George Rusnak, head of investment strategy at Wells Fargo Private Wealth Management.
The yield on the 10-year Treasury held steady at 0.62%. It’s still well below the roughly 1.90% level where it was at the start of the year.
Benchmark U.S. crude oil rose 5% to settle at $19.78 per barrel. U.S. crude has plunged from its perch of roughly $60 at the start of the year on worries about a collapse in demand and strained storage facilities. Brent crude, the international standard, slipped 0.4%, to close at $26.44 per barrel.
In Europe, where most markets returned from a long holiday weekend, Germany's DAX dropped 3.5% to 10,480 and the CAC 40 in Paris lost 4% to 4,390. Britain's FTSE 100, which was open on Friday, declined 0.4% to 5,742.
The lower open on Wall Street after tech firms brought U.S. markets down at the end of last week.
Tokyo, Shanghai and Bangkok were among markets closed for holidays on Monday.
Criticized over his handling of the crisis, President Donald Trump has tried to shift the blame to China. Beijing has repeatedly pushed back on U.S. accusations that the outbreak was China’s fault.
The antagonisms threaten to undo the truce in a trade war between Washington and Beijing that was struck just before China began shutting much of its economy down in late January to fight the pandemic.
» TUESDAY’S CLOSE: After roaring start, US stocks fall back to earth as investors retreat
A 4-page Department of Homeland Security intelligence report dated May 1 and obtained by The Associated Press contends that Chinese leaders “intentionally concealed the severity” of the pandemic from the world in early January.
It alleges, citing variances in trade patterns, that China was downplaying the severity of its outbreak, first reported in the central Chinese city of Wuhan, while stockpiling medical supplies.
“The renewed possibility of the return of the trade war that had plagued markets since at least 2017 once again weighed on sentiment," Jingyi Pan of IG said in a commentary.
Tensions over the pandemic and threats to hit back with trade sanctions have amped up risk, Mizuho Bank said in a report.
“Even as growth-stifling containment measures are set to be phased out in May, the global downturn looks to deepen in Q2," it said.
There is no public evidence of an intentional plot to buy up the world’s medical supplies, though China did muzzle doctors who warned of the virus early on. But it informed the World Health Organization of the outbreak on Dec. 31; contacted the U.S. Centers for Disease Control on Jan. 3 and publicly identified the pathogen as a novel coronavirus on Jan. 8. Many of its missteps appear to have stemmed from bureaucratic hurdles.
Wall Street has been bracing for a poor showing by companies this earnings season due to the economic shock from the coronavirus. Many companies have pulled their earnings guidance for the rest of the year, citing uncertainty about how much of an impact the outbreak will have on their business and the economy, which is now in a recession.
Bleak trade and manufacturing data are also discouraging investors on the lookout for upbeat news on steps to stop the pandemic and prevent a resurgence in cases in places that are beginning to reopen after shutdowns.
Hong Kong's Hang Seng index fell 4.2% to 23,613.80 on Monday. The Kospi in South Korea dropped 2.7% to 1,895.37. Shares also fell by more than 2% in Singapore, Taiwan and Jakarta.
Australia's S&P ASX/200 gained 1.4% to 5,320.30, rebounding from early losses on gains in miners and banks.
The yield on the 10-year Treasury edged lower, to 0.60% from 0.62% on Friday, well below its 1.90% level at the start of the year.
Benchmark U.S. crude oil fell 99 cents to $18.79 per barrel in electronic trading on the New York Mercantile Exchange. It gained 94 cents on Friday. U.S. crude has plunged from its perch of roughly $60 at the start of the year on worries about a collapse in demand and strained storage facilities. Brent crude, the international standard, gave up 60 cents to $25.84 per barrel.
The dollar fetched 106.81 Japanese yen, down from 106.88 yen on Friday. The euro weakened to $1.0936 from $1.0980.
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