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Some days there seems to be too much news. This is obviously the case on a very contrasting Thursday for stocks, as investors were bombarded with economic and political headlines.
Timeline inventory shows Commerce’s announcement that U.S. GDP fell by 32.9% on an annualized basis in the quarter, the worst decline of its kind in U.S. history.
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“The outcome was broadly in line with our official forecast (-35.0%) and our Q2 GDP tracking estimate (-34.0%),” write Barclays analysts. “As we had noted during the Q1 GDP release, the downturn in activity at the time was just the tip of the iceberg. With the pandemic intensifying in April, prompting the stay-at-home orders, closure of nonessential businesses and a rise in unemployment, a more severe disruption to activity and employment in Q2 was widely expected.
“Given that the second quarter GDP index is broadly in line with our expectations, our prospect of expansion in the third quarter remains unchanged. We expect expansion to recover in the third quarter (at a seasonally adjusted annual rate of 25% quarter-on-quarter), driven by an increase in non-public customer spending.”
More surprisingly, applications for unemployment rose last week to 1.43 million from 1.42 million last week, a figure that was revised upwards. That sneered on West Texas Intermediate oil prices, which fell below $40 per barrel for the first time in weeks. This in turn criticized the oil giants Exxon Mobil (XOM, -4.7%) Chevron (CVX, -4.1%).
President Donald Trump’s tweet floating the idea of delaying Nov. 3 presidential elections, a power held only by Congress, threw stocks for a quick loop, too. Meanwhile, Congress remained at a standstill on a second economic package, even as a $600-per-week enhancement of federal unemployment insurance is set to expire Friday, putting millions of Americans at financial risk.
The Dow Jones Industrial Average closed 0.9% to 26,313, the S-P 500 fell 0.4% to 3,246 and Russell 2000’s small capitalization also fell 0.4% to 1495. However, the Nasdaq heavy-tech compound gained 0.4% to 10587.
Immediately after hours, investors enjoyed a lot of tech gains, Apple (AAPL), Facebook (FB) and Amazon.com (AMZN).
This is a difficult time for new investors, isn’t it?
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E-Trade added more than 650,000 new accounts by the end of the quarter, Schwab added more than one million accounts in the quarter alone, and the Robinhood app registered millions of listings in 2020.
Some joined their previous COVID rescue package checks in the year, and we may see some other wave of new activity through similar documents expected from the next stimulus cycle, provided it is in spite of all agreed.
But while many of these new investors have benefited from the immediate market recovery after the March lows, they now face the uncertainty of a presidential election, deteriorating U.S.-China relations, a recession, and a pandemic. This is not the simplest time to expand your sea legs further. The COVID-19 has a horde of query marks.
“While reopening is progressing more than expected and obviously has positive economic effects, we also face risks. Most importantly, since local epidemics have turned into local closures, this has had negative economic effects, delaying the recovery,” says Brad McMillan, a leading investment officer of the Commonwealth Financial Network, an independent broker/broker registered with investment advisors with $200 billion in assets under management.
“Another potential threat is that even if case expansion moderates, consumers could be further delayed and spending expansion will be slower than we have noticed so far in the recovery. A deeper decline remains a threat. That said, spending has remained strong so far and has been backed up after some weakness. Therefore, hard knowledge remains positive.”
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