Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for July 10, 2020.
On Thursday the Dow Jones Industrial Average sank 1.4%, closing below 26,000 points after weekly jobless claims data was released. The number of Americans who filed initial claims for unemployment benefits fell 99,000 to 1.31 million for the week ended July 4. That was the 14th weekly decline in a row, and the figure was lower than anticipated. However, a further one million people filed for Pandemic Unemployment Assistance, a federal programme for self-employed workers, and around a fifth of the US workforce is now receiving some type of unemployment benefit. The gravity of that situation, and the first signs that the death rate is going to pick up along with the surge in coronavirus cases in many states, tempered investor sentiment.
Investors were also met with dire quarterly earnings news from homeware retailer Bed, Bath & Beyond. The company’s share price sank by 25% after reporting a loss of $1.96 per share from revenues of $1.31. That revenue figure is half of what it was for the same period a year earlier and while digital sales jumped 82%, sales from stores sank by 77%. Bed, Bath & Beyond also announced this week that it is closing 200 stores permanently, a decision it expects to save the company $250m to $350m in costs annually.
Elon Musk gloats as Tesla keeps pressing higher
While the S&P 500 and Dow Jones Industrial Average fell back on Thursday, the Nasdaq Composite continued to charge ahead, buoyed by gains from chip stocks. Advanced Micro Devices, Microchip Technology and Nvidia all finished higher, up 7.2%, 3.4% and 2.9% respectively. Tesla also provided a boost, adding 2.1% to its share price; the company’s market cap is now north of $250bn. Elon Musk, CEO of the electric car maker, has been gloating this week after he announced the launch of a Tesla Short Shorts clothing item, intended to mock the bevy of short sellers who have bet against his firm. In other headlines, $5bn market cap flooring company Mohawk Industries sank by 20% after Wall Street analysts offered their views on a lawsuit from a Mississippi public retirement system that claims the firm committed accounting fraud. In the Dow Jones Industrial Average, only five stocks were in the green on Thursday. Walgreens Boots – the owner of Boots in the UK – found itself at the back of the pack, sinking 7.8%, after quarterly earnings showed that sales grew but the pandemic was a severe detractor on profits.
- S&P 500: -0.6% Thursday, -2.4% YTD
- Dow Jones Industrial Average: -1.4% Thursday, -9.9% YTD
- Nasdaq Composite: +0.5% Thursday, +17.6% YTD
Rolls Royce drags FTSE lower after announcing huge cash burn
The FTSE 100 dropped 1.7% on Thursday, taking it back to a near 20% loss year-to-date. One stock driving the index down was Rolls-Royce, which said on Thursday that it has burned through three billion pounds in cash over the past six months due to the pandemic, with CEO Warren Easton warning the “historic shock in civil aviation” will take “several years” to recover from. The firm also said that 3,000 workers in the UK had applied for voluntary redundancy, part of a larger plan to cut 9,000 jobs from a staff of 52,000. National Grid and SSE both suffered 4% plus falls on Thursday too, after energy regulator Ofgem proposed a halving of the returns that large energy firms are allowed to make for running the UK’s energy networks. From 2021, Ofgem plans to set a baseline rate of return for energy network firms at 3.95%, versus the 7-8% figure under the current rules. In the FTSE 250, which sank 1.2% on Thursday, property developer Hammerson was the biggest loser, closing out the day 9.2% lower. Hammerson’s share price is now down by 75% year-to-date, pushing its dividend yield past 14% and its price-to-earnings ratio into the very low single digits.
- FTSE 100: -1.7% Thursday, -19.8% YTD
- FTSE 250: -1.2% Thursday, -22.4% YTD