U.S. stocks lost ground on Thursday as grim economic data and mixed earnings prompted investors to take profits from S&P 500’s best month in 33 years. This is a remarkable run driven by expectations that the economy will soon start recovering from the crushing coronavirus restrictions.
While risk-off selling pulled all three major U.S. stock averages into the red, the S&P 500 and the Dow posted their largest monthly percentage gains since January 1987, with the Nasdaq having its best month since June 2000.
The three indexes remain well within 20% of record highs reached in February, having quickly rebounded since shutdown efforts to curb the pandemic brought the economy to a grinding halt.
In other news, the five-week tally of unemployment claims topped 30 million and consumer spending has plummeted, providing another snapshot of the crushing economic effects of the widespread shutdown.
“We’ve had a tremendous run but we’ve had the worst economic data since the Great Depression,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “Business and earnings might not be snapping back as quickly as the v-shaped recovery on Wall Street would imply.”
The Federal Reserved announced that it would broaden its “Main Street Lending Program” by lowering the minimum loan size and expanding eligibility.
Amazon Crushes Revenue but Could See Its First Loss in 5 Years
On Thuersday, Amazon said it could post its first quarterly loss in five years even despite the revenue surges. The company is currently spending at least $4 billion in response to the coronavirus pandemic, including plans to test its workforce for COVID-19.
Shares of the world’s largest online retailer fell 5% in after-hours trade.
Jeff Bezos, the company’s founder and world’s richest person, said in a statement, “We’re not thinking small,” a sign that the e-commerce giant would invest heavily during the pandemic. Rival brick-and-mortar retailers have had to shut stores while Amazon hired 175,000 people.
This quarter, with government-mandated lockdowns in full swing, Amazon predicted it could see a 28% rise in revenue all the way to $81 billion.
Under normal circumstances, Amazon would earn an operating profit of at least $4 billion in the current second quarter, but with its costs would by that amount or more so it can adequately respond to the pandemic.
The Seattle retailer forecasts that operating income will range from a loss of $1.5 billion to a profit of $1.5 billion, versus earnings of $3.1 billion in the same period last year.
Is The “Bear” Coming Out of Hibernation?
One of Wall Street’s biggest long-time bears is signaling a shift.
David Rosenberg is toning down his negativity — asserting he doesn’t hate stocks right now in a recent research note.
“There are some segments of the market that I actually really like,” the Rosenberg Research chief economist and strategist told CNBC’s Trading Nation on Thursday.
With the Federal Reserve intending to keep interest rates low for an extended period due to the coronavirus pandemic, Rosenberg is finding groups with yields and strong cash flows attractive.
“I want the yield. So, I like utilities. I like telecom — at least the ones that have financial depth. I actually like residential REITs,” he said. “I still like consumer staples and I barbell that with gold.”
Most wouldn’t consider that an aggressive portfolio. But Rosenberg, who served as Merrill Lynch’s chief economist from 2002 to 2009, has come a long way from his 2019 recession prediction.
He even likes widely held tech stocks.
“You could almost argue Microsoft in a way has almost become a utility. You can look at Amazon, [in the] same sort of way,” added Rosenberg. “There are some companies here that you would think as being say cyclical in orientation, but actually emerged here as things that we need.”