Stock futures were slightly higher Thursday morning after the three major indices endured a deep rout a day earlier. Investors also digested a record surge in third-quarter GDP after a historic slump earlier this year, and another weekly report on jobless claims that came in better-than-expected. A slew of corporate earnings results also loom.
Contracts on the Dow added about 100 points after the index closed lower by 943 points, or 3.4%, on Wednesday for its worst single-session drop since June. The Nasdaq underperformed earlier as tech shares fell, after U.S. senators grilled the CEOs of Facebook (FB), Twitter (TWTR) and Alphabet (GOOG, GOOGL) over the companies’ content moderation practices in a hearing Wednesday. Each of these companies, along with peer Big Tech companies Amazon (AMZN) and Apple (AAPL), are set to report quarterly results after market close on Thursday.
Traders globally adopted a risk-off mood this week, with an escalation of restrictions in Europe to try and curb a rise in coronavirus cases driving volatility higher. The CBOE Volatility Index (^VIX) spiked to above 40 during Wednesday’s session for the highest level in more than four months, and it held around 39 Thursday morning.
Both France and Germany announced renewed lockdowns spanning for about the next month, though the restrictions stopped short of the draconian measures announced earlier on during the pandemic in the spring. In the U.S., the rolling seven-day average of daily new virus cases rose to a record 70,000 as of Tuesday, according to data compiled by the Washington Post. And on the vaccine front, Dr. Anthony Fauci, the nation’s top infectious-disease expert, said he believed it would take until at least January for the U.S. Food and Drug Administration to authorize a COVID-19 inoculation.
Some analysts, however, considered the most recent pull-back an inevitable moment for stock prices to come back down to earth, given the strong rally earlier on over the summer as stay-in-place orders first eased.
“Markets have been baking in a lot of optimism: that the pandemic was under control, that the economy was healing, and that things would be back to something approaching normal in 2021 (and maybe not in late 2021, but earlier),” Brad McMillan, chief investment officer for Commonwealth Financial Network, said in a note Wednesday. “Those assumptions were always optimistic, though, and what we are seeing now is a reality-based repricing. As such, this drop is both necessary and healthy. Markets should reflect the most likely future path, not the most optimistic, and that is where we are headed.”
8:35 a.m. ET: 3Q GDP, jobless claims top expectations
Government data newly out Thursday showed third-quarter economic activity rose at a record pace, after a record drop in the second quarter. New jobless claims also improved more than expected last week.
Third-quarter GDP increased at a record 33.1% annualized rate, following a drop of 31.4% in the second quarter. The rise was driven by a more than 40% jump in personal consumption, as consumer spending picked back up following stay-in-place orders. Still, the level of overall output in the U.S. economy remained below pre-pandemic levels.
New weekly jobless claims came in at 751,000 for the week ended Oct. 24, or better than the 770,000 expected. During the prior week, new claims were at an upwardly revised 791,000. Continuing jobless claims were also better than expected at 7.756 million versus the 7.775 million anticipated and previous week’s upwardly revised 8.465 million.
8:08 a.m. ET: Kellogg results top expectations, company raises guidance again
Kellogg posted third-quarter results that surpassed estimates, with adjusted earnings per share of 91 cents on reported net sales of $3.43 billion better than the 86 cents on revenue of $3.4 billion anticipated.
The company raised its full-year guidance again Thursday morning and said it expects organic net sales growth to come in at 6% this year, or a full percentage point ahead of previous guidance. The company is also now expected to grow operating profit by 2% over last year, versus previous guidance for a decline of 1%.
“As the COVID-19 pandemic continued throughout the third quarter, demand for packaged foods for at-home consumption remained elevated, albeit moderating from the previous quarter,” Kellogg said in its statement Thursday morning. “This again drove higher sales of the company’s products in retail channels which along with strong growth in emerging markets, more than offset a decline in foods sold in away-from-home channels.”
Net sales increased in each of the Asia Pacific, Middle East and Africa (AMEA) and Europe, while declining in Latin America during the quarter. North American net…
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