Markets Mixed on Downbeat Data, Political Drama…..

U.S. stocks finished mixed, with a record plunge in Q2 GDP and another uptick in jobless claims further illustrating the unprecedented disruption of the COVID-19 pandemic. Moreover, a tweet from President Donald Trump regarding the looming election looked to add to the already-heightened political uneasiness. However, upbeat earnings reports from Dow member Procter & Gamble, UPS and Qualcomm appeared to help keep the losses in check. Treasury yields were lower as bond prices rose and the U.S. dollar continued to fall, while crude oil prices lost ground and gold pared a recent record run. Europe finished lower, with a larger-than-expected drop in German GDP exacerbating the negative sentiment, while markets in Asia were mixed.

The Dow Jones Industrial Average fell 226 points (0.9%) to 26,314, the S&P 500 Index decreased 12 points (0.4%) to 3,246, while the Nasdaq Composite gained 45 points (0.4%) to 10,588. In moderate volume, 826 million shares were traded on the NYSE and 4.1 billion shares changed hands on the NASDAQ. WTI crude tumbled $1.35 to $39.92 per barrel and wholesale gasoline lost $0.02 to $1.19 per gallon. Elsewhere, the Bloomberg gold spot price lost $15.29 to $1,955.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.5% lower to 92.99.

Q2 GDP’s plunge is smaller than expected, jobless claims remain severely elevated…..

The first look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of contraction of 32.9%, versus the Bloomberg estimate of a 34.5% plunge and the unrevised 5.0% decline in Q1. Personal consumption tumbled 34.6%, compared to forecasts of a 34.5% drop, and following the downwardly-adjusted 6.9% fall recorded in Q1. The Bureau of Economic Analysis said along with the sharp drop in personal consumption, the contraction came as exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending declined, partially offset by an increase in federal government spending.

On inflation, the GDP Price Index came in at a 1.8% drop, more than expectations of 0.1% dip, and versus the unrevised 1.4% increase seen in Q1, while the core PCE Index, which excludes food and energy, moved 1.1% lower, compared to expectations of a 0.9% decline, and following the downwardly-adjusted 1.6% advance in Q1.

Weekly initial jobless claims came in at a level of 1,434,000 for the week ended July 25th, below estimates of 1,445,000, and compared to the prior week’s upwardly-revised 1,422,000 level. The four-week moving average increased by 6,500 to 1,368,500, while continuing claims for the week ended July 18th rose by 867,000 to 17,018,000, above estimates of 16,200,000. The four-week moving average of continuing claims declined by 435,500 to 17,058,250.

Treasuries are higher following the data, with the yield on the 2-year note dipping 1 basis point (bp) to 0.12%, the yield on the 10-year note declining 3 bps to 0.54%, and the 30-year bond rate falling 5 bps to 1.20%.

©2020 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.