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Stock-index futures slumped Friday, threatening to kick off May on a down note as investors showed disappointment with earnings from big tech companies and President Donald Trump threatened to impose tariffs on China in retaliation for its handling of the COVID-19 pandemic.
What are major indexes doing?
Futures on the Dow Jones Industrial Average YM00, -1.82% dropped 450 points, or 1.9%, to 23,780, while S&P 500 futures ES00, -1.96% declined 58.65 points, or 2%, to 2,843.75. Nasdaq-100 futures NQ00, -2.32% NQ00, -2.32% were off 227 points, or 2.5%, to 8,761.50.
Stocks ended lower Thursday, but still saw a historically strong April rebound as major indexes took back a chunk of the ground lost in the coronavirus-inspired selloff that took the S&P 500 down nearly 34% from its Feb. 19 record close to its March 23 low.
Read:Why a Wall Street bull who called the April stock-market rally refuses to raise his S&P 500 target
For the month, the Dow DJIA, -1.17% gained 11.1%, while the S&P 500 SPX, -0.92% ended April up 12.7%, representing their best monthly gains since 1987 and the best April performance since 1938, according to Dow Jones Market Data.
The Nasdaq Composite COMP, -0.28% booked a monthly return of 15.5%, its best such advance since 2000 and the best April for the technology-laden index on record, while the Russell 2000 RUT, -3.68% rose 14% for its best month since 2011 and its best April since 2009.
What’s driving the market?
“Two factors are weighing on risk sentiment. Firstly, disappointing earnings announcements/trading updates from Apple and Amazon after the close, with the latter warning of a possible Q2 loss. Secondly, an increase in tension between the U.S. and China and hints at possible additional U.S. tariffs,” said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.
Shares of Dow component Apple Inc. AAPL, +2.11% were down 2.7% in premarket trade.
See:Apple shows its investors some love as Amazon tells them to take a seat during coronavirus
In fact, it was the guidance — or lack thereof in the case of Apple — that appeared to unsettle investors, analysts said. Apple reported that profits slipped slightly but sales grew amid the spread of COVID-19, while promising investors billions more in stock repurchases and dividends, but declined to provide an outlook.
Meanwhile, global equities were pressured after President Donald Trump indicated he may consider imposing tariffs on China.
The Washington Post on Thursday reported that U.S. officials are beginning to explore proposals for punishing China for its handling of the pandemic, adding to bearish sentiment on Wall Street. The report said some administration officials have discussed having the U.S. cancel part of its debt obligations to China. Asked about that option, Trump said “I could do the same thing but even for more money, just putting on tariffs.”
“Phase one of the U.S.-China trade deal was signed in January, after much toing and froing, to say the least. It is possible we could be in for another prolonged period of tough tariff talk,” said David Madden, market analyst at CMC Markets UK, in a note.
“Some people might think this is just a ploy by Mr. Trump to make himself look good ahead of the Presidential election, but either way it has prompted traders to trim their exposure to stocks,” he said.
The Institute for Supply Management’s April manufacturing index is the highlight of the U.S. economic calendar. Economists surveyed by MarketWatch, on average, look for the gauge to plunge to 35% from a 49.1% reading in March. A figure below 50 indicates a contraction in activity.
Which companies are in focus?
- Amazon.com Inc. AMZN, +4.26% late Thursday said it topped $75 billion in sales in the first quarter as COVID-19 swept across the globe, but profit declined and the company said it might lose money in the current period as it spends to keep up with demand. Shares were down more than 5% in premarket action.
- Drugmaker Gilead Sciences Inc. GILD, +1.03% said late Thursday it would spend around $50 million to test and manufacture COVID-19 drug candidate remdesivir, while reporting better-than-expected first-quarter results. Gilead shares rose more than 12% in April.
- Clorox Co. CLX, +1.36% shares jumped more than 3% in premarket after the maker of cleaning and household products topped quarterly earnings forecasts, boosted by demand for disinfecting and other cleaning products.
- Dow component Chevron Corp. CVX, -2.76% on Friday reported a rise in first-quarter earnings but a drop in revenue from a year ago, as oil and commodity prices plunged in March. The oil giant said it was further reducing its 2020 capital expenditure outlook by $2 billion to $14 billion, and expects operating costs to decrease by $1 billion.
- Honeywell International Inc. HON, -2.91% shares were little changed in premarket trade after it reported a first-quarter profit that beat expectations, but sales that fell more than forecast as the industrial conglomerate said the COVID-19 pandemic had a significant impact on its supply chain, customer sites and on the commercial aerospace and oil and gas end markets
