Before The Bell - A sobering economic report was issued about an hour before the stock market opened for trading yesterday morning, and it would lead to the first notable reversal in equities in some days. The report was the weekly level of new jobless filings, a metric that had been coming down steadily for some four months. Yesterday, however, the data, which had been forecast to come in flat at 1.30 million, instead ticked up to 1.42 million. The immediate effect of this news was modest, and the market opened just incrementally lower. 

Indeed, the averages would stay just moderately in the loss column for the first half of the trading day, before starting to fall off rather sharply after 1:00 PM (EDT) in New York. The selling, in fact, would persist into the close, so that when all of the numbers were in, the Dow Jones Industrial Average would conclude with a loss of 354 points; the S&P 500 Index would shed 40 points; and the NASDAQ, which was pummeled by steep losses in such high flyers as Apple (AAPL) and Microsoft (MSFT) would tumble by an outsized 254 points.  

Meantime, not only did the jobless claims number disappoint, but also, perhaps, the tepid increase in the Leading Economic Indicators would prove a problem. This metric, which fell by more than 6% in April, before rebounding by 3.2% in May, edged up by a tepid 2.0% in June. That deceleration coupled with the ominous jobless claims increase, caused some concerns among traders, we would surmise. Also, although many tech names have done well on the income line, the strong performance by such equities had really raised expectations. 

When some results fell short of expectations or guidance disappointed, the stocks reacted. That was part of the story yesterday, too. Then, of course, there's the fast-spreading COVID-19 pandemic. Total Infections have passed the four million mark stateside, while deaths have climbed ominously toward 150,000. COVID-19 remains a daily concern for investors. To some point such worries are mitigated by relatively decent earnings results to date.

As to earnings, after the close of trading, leading chipmaker and Dow component Intel (INTC) saw its stock tumble some 10% after the company offered disappointing guidance for the third quarter. That forecast came after the company beat forecasts for the second quarter. The company also announced product delays, which did not sit well with investors, either. Finally, as we look ahead to a new day we see that we will be getting data on sales of new homes later this morning.     

Looking out to the new day and after slight gains in the futures last evening, we see that the equity futures are suggesting a lower opening this morning.  – Harvey S. Katz, CFA

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.