Stocks Show Late-Session Resiliency to Conclude Heavy Week…..

U.S. stocks saw a late-day push to finish higher to close out the final session of a robust and volatile week. The Nasdaq rallied on favorable earnings results from market heavyweights Dow member Apple, Amazon and Facebook. However, Google parent Alphabet’s profit report faced heavy scrutiny, along with results from Dow members Exxon Mobil and Chevron. Uncertainty regarding the size, scope and timing of an expected next wave of fiscal relief measures likely stymied some conviction as lawmakers remained at odds. Treasury yields dipped as bond prices nudged higher, while the U.S. dollar chipped away at a recent tumble. Gold resumed a record rally and crude oil prices rose modestly. In economic news, personal income and spending figures came in mixed, consumer sentiment was revised down by a larger amount than expected, but Chicago manufacturing activity unexpectedly jumped back into expansion territory. Europe dropped late in the day amid the slide in the U.S. and after another dose of downbeat GDP data in the region. Asia finished mixed despite some upbeat economic data out of Japan and China.

The Dow Jones Industrial Average advanced 115 points (0.4%) to 26,428, the S&P 500 Index increased 25 points (0.8%) to 3,271, and the Nasdaq Composite rose 157 points (1.5%) to 10,745. In heavy volume, 1.3 billion shares were traded on the NYSE and 4.4 billion shares changed hands on the NASDAQ. WTI crude moved up $0.35 at $40.27 per barrel and wholesale gasoline lost $0.02 to $1.17 per gallon. Elsewhere, the Bloomberg gold spot price was $17.77 higher at $1,974.41 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.4% to 93.44. Markets finished mixed for the week, as the DJIA dipped 0.2%, while the S&P 500 increased 1.7% and the Nasdaq Composite rallied 3.7%.

Dow member Apple Inc. (AAPL $425) reported fiscal Q3 earnings-per-share (EPS) of $2.58, above the $2.05 FactSet estimate, as revenues rose 11.0% year-over-year (y/y) to $59.7 billion, well above the Street’s projection of $52.2 billion. The company’s iPhone, iPad, Mac and wearables, home and accessories revenues all came in above expectations, while its services revenues also exceeded forecasts. Separately, AAPL announced a 4-for-1 stock split for shareholders of record on August 24, 2020. Shares were nicely higher. Inc. (AMZN $3,165) posted Q2 EPS of $10.30, easily exceeding the Street’s expectations of $1.48, as revenues grew 40.0% y/y to $88.9 billion, above the projected $81.5 billion. AMZN issued Q3 revenue guidance that was north of estimates. Shares gained solid ground.

Google parent, Alphabet Inc. (GOOGL $1,488) announced Q2 profits of $10.13 per share, topping the expected $7.94, as revenues declined 2.0% y/y to $38.3 billion, above the forecasted $37.3 billion. The company said its results were driven by gradual improvement in its ads business and strong growth in Google Cloud and other revenues as it continues to navigate through a difficult global economic environment. GOOGL announced a plan to repurchase up to an additional $28.0 billion of its Class C capital stock. Shares were lower.

Facebook Inc. (FB $254) achieved Q2 EPS of $1.80, exceeding the expected $1.39, as revenues rose 11.0% y/y to $18.7 billion, north of the projected $17.3 billion, with advertising growth up 10.0%. FB said engagement in its daily and monthly active users increased as people around the world sheltered in place and used its products to connect with the people and organizations they care about. FB added that as shelter in place restrictions continue to ease, it expects the number of daily and monthly active users to be flat or slightly down in Q3 compared to Q2. Shares rallied.

Dow component Exxon Mobil Corporation (XOM $42) reported a Q2 loss of $0.26 per share, or a shortfall of $0.70 per share ex-items, compared to the estimated loss of $0.61 per share, as upstream earnings—exploration and production—fell more than expected y/y, while its downstream unit—refining—posted an unexpected profit on international strength. XOM overcame early losses and finished higher.

Dow member Chevron Corporation (CVX $84) posted a Q2 loss of $4.44 per share, or a shortfall of $1.59 per share ex-items, compared to the anticipated loss of $0.93 per share. CVX said the economic impact of the response to COVID-19 significantly reduced demand for its products and lowered commodity prices. CVX added that while demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into Q3. Shares fell.

Dow component Merck & Co Inc. (MRK $80) announced Q2 EPS of $1.18, or $1.37 ex-items, compared to the projected $1.08, as revenues declined 8.0% y/y, reflecting the negative impact of COVID-19, to $10.9 billion, exceeding the forecasted $10.5 billion. MRK raised its full-year earnings and revenue guidance, including the current assumption of the impact of the COVID-19 pandemic, which is expected to be partially offset by favorability from continued underlying business strength. Shares gained ground.

Dow member Caterpillar Inc. (CAT $133) reported Q2 EPS of $0.84, or $1.03 ex-items, topping the expected $0.64, with revenues dropping 31.0% y/y to $10.0 billion, exceeding the forecasted $9.3 billion. The company said financial results for the remainder of 2020 will be impacted by continued global economic uncertainty due to the COVID-19 pandemic and as such it continues to not provide full-year guidance. Shares saw pressure.

U.S. stocks were mixed on the week with the S&P 500 and Nasdaq posting gains but the Dow seeing red figures as the markets have grappled with a flurry of data and events. Continued progress on the Health Care sector’s fight to find an answer to the pandemic was countered by flaring up new COVID-19 cases globally. Although the Fed continued to stress that it will do whatever and for a long as needed to help bridge the gap from the disruption to pre-pandemic economic conditions, an expected new wave of fiscal relief remained elusive a lawmakers appear at odds regarding what the ultimate package will look like.

©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.