Thursday’s Stock Market Open: US Equities Drop As US Economy Plunges 32.9% In Second Quarter

U.S. stocks dropped on Thursday as traders coped with a historic plunge in gross domestic product and another increase in jobless claims.

The Dow Jones Industrial Average dropped 301.8 points to 26,237.77, the S&P 500 fell 31.48 points to 3,226.96 and the Nasdaq Composite Index tumbled 77.58 points to 10,465.37.

The U.S. economy plunged by 32.9% in the second quarter, the largest decline ever recorded.

However, economists surveyed by Dow Jones projected a drop of 34.7%.

Heather Long, economics correspondent at the Washington Post, tweeted after the GDP numbers were released: “This is the result of the Great Lockdown. It was done to fight the coronavirus, but at a great cost.”

She added: “Business investment plummeted. Consumer spending on services plummeted. [Government] spending was one of the only positives in the quarter.”

Before the release of the GDP data, Michael Gapen, chief U.S. economist at Barclays, said: “It should be a pretty awful number, mainly because of the collapse in personal spending early in the quarter. [But] none of that is new news and markets have been expecting a catastrophic dive in [second quarter] GDP. Really it just tells you how deep the hole was so you know how far you have to go to climb out of it – 70% of the economy is consumption.”

The Labor Department said initial jobless claims totaled 1.434 million last week – the second straight week that initial claims climbed.

Traders are anxiously awaiting earnings results from four tech giants – Apple (AAPL), Facebook (FB), Amazon (AMZN) and Google parent Alphabet (GOOG) – after the closing bell.

“Friday [trading] is going to be crazy,” said Dan Niles, founder of AlphaOne Capital Partners. “If anybody misses their numbers, that’s not going to be good.”

Niles added: “If they make some comments that advertising spending is starting to slow in the last couple of weeks, how are people going to take it? With stocks up this much and so many people owning stocks in the retail market, they might not be as informed on what they own. That could create some really wild action.”

“Ultimately, these [four tech] companies were going to report anyway,” said Jonathan Golub, chief U.S. equity strategist at Credit Suisse. “Whether they reported in four days or one, we’re getting the same news flow. What it does represent is a large amount of volatility when the numbers come out.”

In Europe markets traded lower, as Britain’s FTSE-100 dropped 2.29%, while France’s CAC-40 tumbled 1.98% and Germany’s DAX plunged 3.27%.

Crude oil futures fell 2.35% at $40.30 per barrel, Brent crude dropped 1.88% at $43.26. Gold futures slipped 0.35%.