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Wall Street slips as worries overshadow Big Tech strength

Posted on Friday, July 31st, 2020 By Stan Choe, AP Business Writer

NEW YORK (AP) — Big Tech continues to steamroll through the pandemic, but much of the rest of Wall Street is struggling Friday amid worries about the economy, leaving stock indexes mostly lower.

The S&P 500 was down 0.4% in afternoon trading after flipping between small gains and losses earlier. The Dow Jones Industrial Average was down 213 points, or 0.8%, at 26,100, as of 1:30 p.m. Eastern time, while strength for tech stocks had the Nasdaq composite up 0.3%.

Caution was clearly present across markets as the coronavirus pandemic continues to cloud the economy’s prospects, along with gridlock in Congress that's holding up more aid for it. The 10-year Treasury yield remains close to its lowest level since it dropped to a record low in March. Gold also continued its record-setting run as investors searched for safety, while 87% of the stocks in the S&P 500 were weaker.

Stocks that most need the economy to get back to “normal” and the pandemic to subside were dropping, including many in the travel industry.

Expedia Group slumped 5.2% after it reported even weaker results for the latest quarter than Wall Street expected, as people held off on trips for both business and pleasure. Its CEO called it “likely the worst quarter the travel industry has seen in modern history.”

MGM Resorts fell 5%, and Norwegian Cruise Line lost 3.5%.

Energy companies were also particularly weak as the pandemic sucked away demand for oil. Chevron dropped 4.3% after it reported a worse loss for its latest quarter than Wall Street expected. Energy stocks overall in the S&P 500 sank 1.8% for the biggest loss among the 11 sectors that make up the index.

The economy cratered to its worst quarterly performance on record during the spring, and worries are high that continuing waves of coronavirus infections may halt what had been a budding recovery for it. An extra $600 in weekly unemployment benefits from the U.S. government is also about to expire, and Congress continues to argue about whether and how to provide more support for the economy.

The worries about the economy helped send smaller stocks to particularly sharp losses. They generally have smaller financial cushions to withstand downturns. The Russell 2000 index of small-cap stocks was down 1.9%.

Helping to prop up the S&P 500 was the power of big tech-oriented stocks. Amazon, Apple and Facebook each reported stronger profit for the latest quarter than Wall Street expected late Thursday, and each rose at least 4% in their first trading following the reports. These are three of the biggest companies in the world, making up nearly 13% of the S&P 500 themselves, so their movements hold great sway over indexes.

Apple was particularly influential, up 6.9%, following what Wedbush analyst Daniel Ives called a “Picasso-like performance” for its latest quarter.

Google's parent company, another behemoth in the market, also reported stronger profit than analysts had forecast, but its stock stumbled.

Not only are Big Tech companies growing faster than the rest of the market, some investors have even begun seeing them as safer bets than other stocks because the pandemic is pushing more people online and directly into their wheelhouses. It’s a far cry from 20 years ago when tech stocks were seen as the riskiest investments.

The strength for tech is one of the big reasons the S&P 500 is about to close out its fourth straight month of gains, along with continued, massive amounts of aid from the Federal Reserve. The index has climbed back within 4.5% of its record set in February after earlier being down nearly 34%

Other markets have not shown as much confidence, though. The yield on the 10-year Treasury ticked up to 0.55% from 0.54% late Thursday. Earlier in the morning, it touched its lowest level since March 9, the day it dropped to its record low just below 0.34%. The yield tends to move with investors' expectations for the economy and inflation.

Gold for delivery in December, the most actively traded contract, rose 1% to $1,986.40 per ounce after earlier climbing as high as $2,005.40.

Benchmark U.S. crude rose 0.7% to $40.18 per barrel. Brent crude, the international standard, added 0.3% to $43.38 per barrel.

In Europe, Germany's DAX lost 0.5%, and France's CAC 40 was down 1.4%. The FTSE 100 in London slipped 1.5%.

In Asia, Japan's Nikkei 225 fell 2.8%, South Korea's Kospi dropped 0.8% and the Hang Seng in Hong Kong lost 0.5%.

Stocks in Shanghai rose 0.7% after China reported manufacturing edged up in July and export orders strengthened despite weak U.S. and European demand. The monthly survey was another sign the world’s second-largest economy is gradually recovering from the coronavirus pandemic.

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AP Business Writer Yuri Kageyama contributed.

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