Stocks were pummeled in overnight trading on Wednesday and continued to drop steeply on Thursday in what has been a mixed week of trading, as major technology shares slumped ahead of their earnings reports after the bell, and investors reconciled dire economic data.
The Dow Jones Industrial Average dropped 500 points lower, or 1.9%. The S&P 500 slumped 1.5%, while the Nasdaq Composite fell 1.1%. All three indexes are off of their worst lows as of almost noon 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 Thursday, while the Invesco QQQ Trust (QQQ) which has been mixed this week, is trading off its worst lows, but is still negative today as well.
Dismal economic data is also weighing on markets. Stocks sold off after data revealed that GDP sank by a record 32.9% in the second quarter. The figure was disappointing, but economists surveyed by Dow Jones had projected a 34.7% decline.
Meanwhile, U.S. weekly jobless claims continued to rise, coming in at 1.434 million, with continuing claims totaling 17.018 million, up from about 16 million last week.
“The stock market has to look forward and most economic data looks backward,” said David Bahnsen, Chief Investment Officer of The Bahnsen Group. “Investors should be prepared for a choppy process of data digestion, but not be surprised that the market feels the future is better than the present and that unprecedented stimulus and liquidity exist to drive valuations.”
Wednesday witnessed the Federal Reserve meeting, where markets rallied following the announcement that the economy is still fragile and the central bank will remain supportive, only to give those gains back overnight, in typical fashion.
The central bank said that while the economy has recovered marginally, activity and employment remain “well below their levels at the beginning of the year.” Fed Chair Jerome Powell noted that the central bank will maintain an accommodative stance until the economy has “weathered” the effects of the coronavirus pandemic.
“Powell made it loud and clear that our economic recovery is dependent on how we progress in fighting the pandemic,” said Mike Loewengart, managing director of investment strategy at E-Trade. “Although investors may not be deterred by the surge in virus cases, the stock market is less of a focus for the Fed than the economy—and while the two are related, they are far from the same.”
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