Tech companies lead stock indexes downward
Shares in big technology companies dragged major stock indexes down Tuesday as waning consumer sentiment and a crash in oil markets shook investors.
Microsoft, Apple, Facebook and Amazon - the tech darlings that have propelled markets in recent years - finished in the red after a volatile trading session.
The big loser was the tech-heavy Nasdaq composite, shedding 122 points, or 1.4%, to close at 8,607.73. The Dow Jones industrial average broke a four-day streak of gains, diving into negative territory in the last hour of trading to finish at 24,101.56, a drop of 32 points, 0.13%. Microsoft and Apple were among the Dow's big losers.
The Standard & Poor's 500 index fell 15 points, 0.52%, to close at 2,863.39.
Wall Street is in one of the busiest weeks of the earnings season, with nearly 150 stocks reporting, including all the big technology names. The financial world is keeping a close eye on results that gauge how companies navigate through the coronavirus lockdown.
Google-parent Alphabet, reporting after the closing bell on Tuesday, said its revenue had risen 13% in the first quarter, to more than $41 billion. The online search giant saw shares rise more than 3% in after-hours trading. Microsoft and Facebook report Wednesday. Apple and Amazon report later in the week. (Washington Post owner Jeff Bezos is the founder and chief executive of Amazon.)
Starbucks reported Tuesday that its fiscal second-quarter same-store global sales dropped 10% as the coffee chain was slowed by the coronavirus lockdown. Sales in China slowed by half, according to the beverage company.
Many companies are not giving guidance for the rest of the year because of the many unknowns surrounding the coronavirus.
"This will be a pivotal week for investors to gauge how the tech stalwarts' business models/trends are holding up in this unprecedented COVID-19 storm and will be a key barometer for overall consumer and enterprise spending trends during this dark consumer lockdown," Daniel Ives, an analyst with Wedbush Securities, wrote in commentary Tuesday, referring to the disease caused by the novel coronavirus.
The virus lockdowns have flattened the economy and dispirited people's attitudes toward economic conditions. The consumer confidence index on Tuesday sank to its lowest level since 2014, according to the Conference Board, a business-focused think tank. The University of Michigan consumer sentiment index last week also showed a decline in confidence.
The window into the full impact of the pandemic on companies comes as the White House and some states outline plans to ease lockdown restrictions. Even as confirmed covid-19 cases surged toward 1 million in the United States, governors from Texas, Ohio, Michigan and New York are setting forth plans to relax lockdown restrictions and allowing some businesses to reopen. But stay-home orders are being extended in other parts of the country, including the San Francisco Bay Area and hard-hit Louisiana.
The three major U.S. indexes had climbed Monday as governments tiptoed toward reopening and reports of expanded coronavirus research and testing proliferated. The Dow and S&P 500 advanced 1.5%, and the Nasdaq rose 1.1%. The United States has so far tested about 5 million people - or less than 2% of the population. Last week, Congress approved an additional $25 billion for testing as part of the latest funding bill, which scientists say is a good start but should expand significantly to ensure public safety.
Meanwhile, oil prices continued to slide Tuesday as global storage neared capacity in a world likely to remain at a standstill. June futures contracts for West Texas Intermediate crude, the U.S. benchmark, sank nearly 20%, to $10.24 a barrel, before ticking back up. The plunge comes on top of a 25% drop on Monday and a more than 32% plunge last week.
The gauge has been pointing steadily downward as traders eye the Cushing, Oklahoma, storage facility - the biggest oil stockpile outside the Strategic Petroleum Reserve - which is nearly at capacity. S&P Global, the company behind the most popular commodity index, told clients to roll all their exposure out of the West Texas Intermediate crude oil futures for June into July with immediate effect, triggering a big drop in oil prices, according to one analyst.
"This is a market disruption of the first order," said John Kilduff of Again Capital. "I don't know what's going to happen. The balance between supply and demand is not going to come back anytime soon. It's gross oversupply and there are another 170 million barrels at sea with no place to go. Everybody who owns oil contracts is selling or paying people to take it off their hands."
Oil prices remain depressed and far below the $50 range that most oil producers need to made a decent profit without consumers feeling gouged. Crude prices have dropped more than 50% since January because of an oversupply brought on by a drop in demand from the coronavirus global lockdown.
A price war between Saudi Arabia and Russia, two of the world's largest producers, also flooded the oil market, driving prices down further. So much oil is sloshing around the globe that supertankers are doubling as oil storage tanks, floating offshore waiting to disgorge their product.
On Tuesday, Moody's lowered its price assumptions for WTI and Brent crude, the international oil benchmark, through 2021. It puts WTI at $30 per barrel for the remainder of 2020, and $40 per barrel in 2021. For Brent, it estimates prices will average $35 per barrel for the rest of 2020, and $45 per barrel in 2021.
"Exceptionally weak short-term prices will persist until production drops enough to ease the strain on storage facilities already operating at or close to full capacity," Moody's Vice President and Senior Credit Officer Elena Nadtotchi said in comments emailed to The Post. "Significant supply adjustments in due course should help to balance the market later in 2020, but the pace of the market's rebalancing and rising oil prices will depend on demand recovery."