Stock futures were lower Friday morning after the latest batch of corporate earnings results suggested a grim outlook for the current quarter and President Donald Trump threatened retaliation on China over the coronavirus pandemic.
Earnings results from some of the most heavily weighted companies in the major U.S. stock indices came in mixed after market close Thursday. Amazon (AMZN) posted first-quarter sales that jumped 26% over last year, but warned that $4 billion in expected coronavirus-related costs could drag operating income negative to the tune of $1.5 billion.
Meanwhile, Apple (AAPL) reported quarterly revenue that was virtually flat over last year, and declined to offer an outlook due to uncertainty over the pandemic.
Separately, during a briefing Thursday, President Donald Trump said his phase one trade deal with China was now eclipsed by the more imminent reality of the coronavirus pandemic, which originated in the country. Trump has criticized China over its handling of the outbreak and claimed he had seen evidence that the virus was started in a Wuhan lab, though other U.S. officials have downplayed that claim.
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Despite ending the regular session lower on Thursday, the S&P 500 closed out April on a high note and posted its best monthly gain since 1987. The blue-chip index climbed a total of 12.68% for the month, but was still off 14% from its record high on February 19, and down nearly 10% year to date.
“We forecast further gains in most risky assets between now and the end of next year. This reflects our expectation of a rebound in economic activity starting in the second half of 2020, alongside the continuation of massive monetary and fiscal policy support,” John Higgins, chief markets economist for Capital Economics, wrote in a note Thursday.
“Admittedly, risky assets have already recovered quite a lot of the ground that they lost after the outbreak of coronavirus. And two key downside risks remain,” he added.
“First, success in containing the virus could be reversed as economies reopen. Second, the consensus for policy support might break down,” he said. “But assuming these risks do not materialize, we anticipate that the rally will continue.”
Still, equities are entering what has historically been a tougher six-month period in terms of comparable returns.
During that time frame, the S&P 500 have averaged returns of just 1.5% during the May through October period since 1950, according to LPL Research data, and ended the period higher just 64.3% of the time. In more recent history, however, stocks produced positive gains in seven of the past eight six-month periods between May and October, and as much as 10% during the similar period in 2013.
The recent stock rally comes despite mounting evidence of the damage the coronavirus pandemic and social distancing measures have inflicted on the domestic economy. A government report Thursday showed another 3.8 million Americans filed for new unemployment claims last week, bringing the total over the past six weeks to more than 30 million.
But the outbreak at least showed further signs of easing on Thursday, fueling hopes that businesses could slowly begin to open across more jurisdictions and lead to a recovery in economic activity. U.S. coronavirus cases rose just 1.2% on Thursday for the slowest pace of increase of the month, according to Bloomberg and Johns Hopkins compiled data. Overall cases have topped 1.05 million in the U.S. and 3.2 million globally.
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7:23 a.m. ET Friday: Stock futures fall
Here were the main moves in markets ahead of the opening bell, as of 7:24 a.m. ET:
S&P 500 futures (ES=F): down 59.5 points, or 2.05%, to 2,843.00
Dow futures (YM=F): down 461.00 points, or 1.90%, to 23,769.00
Nasdaq futures (NQ=F): down 229.00 points, or 2.55%, to 8,759.5
Crude (CL=F): -$0.03 (-0.16%) to $18.81 a barrel
Gold (GC=F): -$7.00 (-0.41%) to $1,687.20 per ounce
10-year Treasury (^TNX): -1.3 bps to yield 0.612%
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6:02 p.m. ET Thursday: Stock futures open lower
Stock futures pointed to a lower open on Friday, as investors braced for more earnings and data that are all but certain to show how badly the coronavirus has stifled global growth.
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:02 p.m. ET:
S&P 500 futures (ES=F): down 38 points, or 1.31%, to 2,864.5
Dow futures (YM=F): down 260 points, or 1.07%, to 23,970.00
Nasdaq futures (NQ=F): down 157.25 points, or 1.75%, to 8,831.25
Wall Street and New York Stock Exchange in Downtown Manhattan, New York City, USA
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