Stocks were mixed on Thursday as the outlook for a coronavirus stimulus deal remained uncertain and infections across Europe are increasing.
The S&P 500 and Nasdaq Composite fell 0.1% and 0.3%, respectively. The Dow Jones Industrial Average, meanwhile, erased a 332-point drop to trade marginally above the flatline. Gains from JPMorgan Chase and Walgreens Boots Alliance helped the Dow recover from its earlier losses.
“Market volatility is set to continue in the weeks ahead as investors brace for a host of uncertainties—the timing of vaccine availability (after a setback for Johnson & Johnson), the size and timing of additional US fiscal stimulus, and the election outcome,” wrote Mark Haefele, chief investment officer of global wealth management at UBS. “The uneven recovery in the US economy also adds to investor concerns as the results season kicked off this week.”
Treasury Secretary Steven Mnuchin told CNBC’s “Squawk Box” that he and President Donald Trump are committed to getting a stimulus deal done and that while it will be hard to get one done before the election, they will keep trying.
Mnuchin, who plans to speak with House Speaker Nancy Pelosi again Thursday, said progress has been made, specifically in reference to Democrats’ testing language for the deal. However, he said that “politics” may be getting in the way and that the Democrats still want an “all or nothing” deal.
The back and forth between Democrats and Republicans put the S&P 500 and Nasdaq on pace for a three-day losing streak on Thursday, their longest slide since September.
“We’re two-and-a-half weeks away from the election, so we’re expecting ongoing volatility,” said James Ragan, director of wealth management research at D.A. Davidson. “We’re advising our clients to stick with quality names and stay diversified.”
Sentiment was also dampened as European governments reinstate pandemic restrictions to curb a second wave of the coronavirus. France has declared a public health state of emergency and the U.K. is nearing a second national lockdown. European stock benchmarks dropped broadly.
Meanwhile, the Labor Department said Thursday there were 898,000 first-time filers of jobless benefits in the prior week, higher than a Dow Jones estimate of 830,000.
The uncertainty over new U.S. fiscal aid and disappointing economic data, along with the spike in coronavirus cases in Europe, came as investors waded through a slew of corporate earnings results.
Morgan Stanley reported third quarter profit of $1.66 per share, exceeding the $1.28 estimate of analysts surveyed by Refinitiv. It generated revenue of $11.7 billion on the back of strong trading, a billion dollars more than the estimate. Shares of Morgan Stanley were up 1.5%.
Walgreens also posted a better-than-expected fourth-quarter profit, helped by higher sales at U.S. pharmacies. The drugstore chain said it expects profit to grow in single digits in 2021. Shares of Walgreens popped 3.6%.
“This is the second earnings season in the wake of the Covid-19 pandemic ... and arguably this will be one of the most important earnings seasons ever,” wrote Jeff Kilburg, CEO at KKM Financial. “As investors globally try to gauge the actual damage inflicted upon the economy by Covid-19, expectations are simply that earnings will not be as bad as they were in Q2.”
“In the event we have an overall positive tone transmitted, I believe the path for U.S. equites is higher,” Kilburg added.
Meanwhile, Facebook dropped more than 2% after The Financial Times reported that France and the Netherlands are endorsing a plan for the European Union to curb the power of Big Tech, including by possibly breaking companies up. Apple and Alphabet were down 1.2% and 0.6%, respectively.
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