After bouncing higher in the overnight futures trading session on Thursday after the key technology companies like Amazon, Apple and Facebook released impressive quarterly results, stocks, and index ETFs tumbled on Friday amid concerns over coronavirus benefits expiring as infection numbers continue to rise.
The Dow Jones Industrial Average and S%P 500 each dropped back to the prior day’s lows Friday, while the Nasdaq Composite also erased an earlier gain of 1.5% and is attempting to hold gains after the rally in Big Tech. Most sectors are negative on Friday, with big tech companies like Amazon, Apple, and Facebook as notable exceptions as markets approach 130pm EST.
Stock index ETFs are trading in the red along with their underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), are both lower Friday, while the Invesco QQQ Trust (QQQ) is trading back into yesterday’s closing range but attempting to remain positive on the last day of July.
The expiration of the $600 unemployment payments occurs today, which some analysts believe could be weighing on markets.
“You have frothiness and you can’t rally on big cap tech blowing out the numbers. It’s potentially gut-check time,” said Peter Boockvar, Chief Investment Officer of Bleakley Global Advisors. “It’s the last day of the month. Who knows what kind of noise is related to that. I also have to believe part of it is the stimulus.”
Big Tech has been the savior for markets this year, as the coronavirus continues to ravage the economy and shutter businesses, after a brief attempt at reopening. Apple reported a stellar quarter, sending shares surging more than 6%, as the iPhone maker noted that its overall sales grew by 11%. Apple also announced a 4-for-1 stock split.
Amazon, also rallied 5% higher as the company witnessed a sales explosion during the coronavirus pandemic. Finally, Facebook shares gained over 7% as the social media behemoth reported revenue growth of 11% despite the Covid-19 pandemic decline. The company also issued stronger-than-expected sales guidance for the current quarter.
“Obviously, no one was doubting any of those companies so the fact they all exceeded expectations isn’t exactly shocking,” Adam Crisafulli of Vital Knowledge, said in a note Friday. “Investors are now trying to smooth out some of the numbers (i.e. how much of the monster upside was a function of extremely conservative guidance along w/an unsustainable spike in revenue and decline in expenses?)”
Despite a mixed week and red Friday so far, the key benchmark stock averages are headed to finish July with solid gains. The S&P 500 has advanced 4.7% this month through Thursday’s close and is targeting its fourth consecutive positive month. The Dow and the Nasdaq Composite have gained 1.9% and 5.2%, respectively, month to date.
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