Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for July 31, 2020.
In a big day for tech stock company reporting, Apple, Amazon and Facebook all reported robust profits amid the pandemic, with just Alphabet, owner of Google, reporting a decline in quarterly revenue. The only other FAANG stock, Netflix, was not reporting.
Amazon reported record profits despite spending $4 billion to bolster its logistics network and adjust to the virus conditions. It is now the US’s second largest employer with over one million workers. Apple likewise showed an 11% increase in sales despite the pandemic, thanks to strong demand for work-from-home devices. Facebook sales also rose 11% to $18.7 billion, despite itself being at the centre of a storm over abuse on the platform and subject to various advertising boycotts. Alphabet reported a decline in quarterly revenue, for the first time in its history, but sales still beat analyst expectations to book $6 billion in profit.
Elsewhere, the US reported its GDP estimate for Q2, with a staggeringly dire reading on its economy showing a 32.9% decline, the worst since records began in 1947. Even at the height of the 2008 financial crisis the worst quarterly decline was only 8.4% by comparison. The data captures the very worst period of lockdown, but the US economy was one of the fastest to begin reopening. With such appalling figures on past activity all eyes will be on the next set to get an idea of how quickly the US economy was able to bounce back. For their part, employment numbers have rebounded faster than would have been expected, so many will be hoping GDP will do the same.
Cool day for markets despite tech stock joy
The three major US indices had slow days on Thursday as US GDP figures weighed heavily on stocks, with the S&P 500 and Dow Jones posting small losses, while the Nasdaq Composite, which is heavily weighted to tech, posted a modest gain. Energy firms led both the S&P 500 and Dow Jones lower, with ExxonMobil posting a 4.9% loss and Chevron down 4.2% in the Dow Jones, while Occidental Petroleum was down 7.4% and ConocoPhillips lost 5.7% in the S&P 500. ConocoPhillips was down on the back of a bad set of results, with oil production reduced by 24% in the second quarter. The firm said it expected to recover most of its lost output by September and CEO Ryan Lance was confident $13 billion in cash would help it survive the crisis.
Winners on the day in the Dow Jones were few and far between. Procter & Gamble was up 2.4% after it posted its biggest yearly sales gain since 2006. Company executives explained the firm’s streamlining of product ranges — shedding weaker brands in the process — was the foundation of the strong numbers. But demand for its goods in lockdown no doubt helped, too. The firm makes consumer staples such as Charmin toilet paper and Tide detergent. Toilet paper in particular was subject to major panic buying during the onset of lockdown in March. Other winners in the Dow Jones yesterday included Apple, up 1.2%, and Home Depot, up 0.6%. Apple reported its strong results after trading closed though, as such investor reaction will only feed through today.
- S&P 500: -0.4% Thursday, +9.9% YTD
- Dow Jones Industrial Average: 0.8%% Thursday, -1% YTD
- Nasdaq Composite: +0.4%% Thursday, +30.5%% YTD
