Markets Hit the Gas Lower, Dow -6.9%
Markets went full-throttle risk-on Thursday, in reflection of a number of factors:
1) A V-shaped run-up from the coronavirus-led sell-off in March brought the Nasdaq and many stocks to new all-time highs, demonstrating an over-exuberance in positive sentiment
2) Fed Chair Powell yesterday outlined expectations for a much-longer slog-through economic period; instead of a couple months, Powell is looking at a couple years
3) New COVID-19 outbreaks in states that had earlier reopenings illustrated clearly that we are still not out of the first wave of coronavirus, and
4) A combination of outlooks — from slower reopenings to lower interest rates for longer — took a toll on outlooks for Energy and Financial stocks, which led the way down.
All in all, the Dow shed 6.9% today, or 1861.82 points — the worst sell-off since March 16th — while the Nasdaq slunk back down below 10K to 9492.73, -5.27%, for its first down day in the last four sessions. The S&P 500 followed suit, hiving off 5.89% or -188.04 points, while the small-cap Russell 2000 suffered the worst fate of all: -7.58%, down 111.17 points. Basically, market participants took the negative sentiment they finished off regular trading yesterday with, and then put the pedal to the floor.
In retrospect, it’s easy to see that trimming the fat was just a matter of time: from mid-May to today, Airlines had catapulted 80%, Oil Services up 70%, and Banks and Leisure/Hospitality had appreciated 50%. Now, in one day, we see stocks like Boeing BA, United UAL and Norwegian Cruise Lines NCLH all sell off 16%.
Also, today we saw mortgage rates decline to their lowest levels ever, sub-3% for the first time in history to 2.94%. Today’s pullback in equities put pressure on bonds, which then caused mortgage rates to tumble. Hopefully this will spur some buying opportunities in the housing market, but after such a bruising day in the markets, homebuyers may be forgiven for being gun-shy in the near term.
Adobe Systems ADBE posted fiscal Q2 results after Thursday’s closing bell, with a 10-cent beat on the bottom line from expectations to $2.45 per share, on revenues which slightly missed the Zacks consensus to $3.13 billion. Digital Media was up from estimates for the quarter, though guidance for next quarter was down somewhat. But shares came up 3.5% on the news, with hope that the quarters to come will continue to outpace analyst estimates. Adobe has not posted a negative earnings surprise for two years. For more on ADBE's earnings, click here.
lululemon LULU also came out with earnings results, this time for fiscal Q1, and posted a rare miss on both top and bottom lines: 22 cents per share missed the Zacks consensus by 4 cents, while revenues of 652 million was far off expectations and way down year over year. Gross margins turned negative in the quarter, and no fiscal year guidance will be forthcoming. Shares have sold off 5.5% in late trading. For more on LULU's earnings, click here.
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The Boeing Company (BA) : Free Stock Analysis Report
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
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Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report
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