Friday's Stock Market Close: US Equities Begin May In The Red After Powerful April Rally

U.S. stocks dropped on Friday after investors digested gains from April’s rally; while tech behemoths Apple (AAPL) and Amazon (AMZN) issued some cautious earnings reports.

The Dow Jones Industrial Average dropped 622.03 points to 23,723.69, while the S&P 500 fell 81.72 points to 2,830.71 and the Nasdaq Composite Index tumbled 284.6 points to 8,604.95.

For the week, the Dow edged down 0.21%.

Friday’s volume on the New York Stock Exchange totaled 4.12 billion shares with 402 issues advancing, five setting new highs, and 2,568 declining, with five setting new lows.

Active movers were led by General Electric (GE), American Airlines (AAL) and Ford Motor Co. (F).

Apple’s quarterly earnings beat analysts’ expectations, but revenue growth was flat on a year-over-year basis. Apple also declined to provide guidance for the June quarter. Amazon saw its sales jump by 26% in the first quarter, but its costs have also risen. The e-retail giant warned it plans to spend $4 billion on coronavirus-related measures through June. Amazon also warned of possible second-quarter loss.

“A historically strong April in markets ended on a down note as more soft economic data offset fading optimism for coronavirus treatments while earnings were mixed,” wrote Tom Essaye of the Sevens Report. “[Stocks] are sharply lower mostly on continuation from yesterday’s selling as markets digest the recent rally, although [Apple and Amazon] earnings were mildly disappointing.”

White House economic advisor Larry Kudlow said China will be held accountable for the coronavirus pandemic. “There’s no question about that. How, when, where and why -- I’m going to leave that up to the president,” Kudlow told CNBC.

President Donald Trump has said he thinks the virus came from a lab in China.

“This has been brewing over the last couple of days ... so there’s fear of another trade war brewing in the middle off all this,” said James Ragan, director of wealth management research at D.A. Davidson, citing that Trump has suggested more tariffs on China. “The last thing you want to do in a recession is [raise] taxes. There’s no policy that’s been crafted yet, but I think the market is reacting to that a bit.”

The Institute for Supply Management’s Manufacturing Index fell to 41.5 in April – the lowest level in 11 years -- from March’s 49.1 reading.

"The coronavirus pandemic and global energy market weakness continue to impact all manufacturing sectors for the second straight month. Among the six big industry sectors, food, beverage and tobacco products [remain] the strongest. Transportation equipment and fabricated metal products are the weakest of the big six sectors," said Timothy R. Fiore, chair of the ISM.

U.S. construction spending rose 0.9% in March.

Despite the strong stock performance in April, Phillip Colmar and Santiago Espinosa, strategists at MRB Partners, urged caution.

“The sharp relief rally in equities has now moved ahead of underlying fundamentals, leaving room for near-term disappointments,” they wrote. “Many authorities are looking to reopen their economies but doing so safely and to near previous output levels will require a series of medical breakthroughs and widespread distribution of the treatment.”

More than 3.2 million coronavirus cases have been confirmed around the world, with more than 1 million infections in the U.S. alone.

British Prime Minister Boris Johnson promised to unveil a “comprehensive plan” next week to lift the country’s lockdown.

Overnight in Asia, China’s Shanghai Composite and Hong Kong’s Hang Seng were both closed for holiday, while Japan’s Nikkei-225 dropped 2.84%.

In Europe, Britain’s FTSE-100 dropped 2.34%, while France’s CAC-40 and Germany’s DAX were closed for holidays.

Crude oil futures jumped 4.88% at $19.76 per barrel, Brent crude gained 0.38% at $26.54. Gold futures rose 0.92%.

The euro gained 0.22% at $1.0978 while the pound sterling slipped 0.7% at $1.2506.

The yield on the 10-year Treasury rose 3.22% to 0.642% while yield on the 30-year Treasury gained 0.95% to 1.278%.