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July 30, 2020 5:15 PM, EDT

Tech Leads Stock Rebound From Lows Amid Earnings

Jerome Powell, Federal Reserve chairman, testifies during a House Financial Services Committee hearing in Washington on June 30.Jerome Powell, Federal Reserve chairman, testifies during a House Financial Services Committee hearing in Washington on June 30. (Tasos Katopodis/Bloomberg News)

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Stocks pared losses as a rally in big technology companies tempered concern over a slow economic rebound. After the close of regular trading, Apple Inc., Amazon.com Inc., Alphabet Inc. and Facebook Inc. jumped as results crushed Wall Street estimates.

The S&P 500 came off session lows and the Nasdaq 100 climbed as Qualcomm Inc. soared on a strong sales forecast. A third day of falling bond yields sent financial shares slumping. Earlier July 30, equities sank as data showed the U.S. economy had its sharpest contraction on record, while the number of Americans filing for unemployment benefits rose. President Donald Trump raised the notion of delaying the Nov. 3 election until after the coronavirus pandemic eases.

Thanks to solid balance sheets and a suite of products that benefit from social distancing, giant tech companies have fared better during the pandemic-induced recession. The Nasdaq 100 is still poised to beat the S&P 500 for a 10th consecutive month — the longest winning stretch in 20 years. But with much of the good news already priced into markets, traders are looking for catalysts that could sustain further momentum in equities.

Index's biggest companies add far more market value than others.

“We’re in that uncertain time between the hopeful third-quarter rebound and some concern about the reopening process and what the recovery looks like,” said Tom Garretson, senior portfolio strategist for RBC Wealth Management. “We’re kind of in that void right now, waiting for things to play out.”

In a very busy day for earnings, investors also digested economic figures that highlighted the massive devastation caused by the coronavirus pandemic. While some numbers have improved after the reopenings, the recent spike in infections shows that the recovery most likely will take time. Federal Reserve Chairman Jerome Powell said July 29 that there are signs the increase in cases is starting to weigh on activity, while noting that the path forward for the economy is “extraordinarily uncertain.”

“It’s shocking no matter how you look at it,” said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. “Are things going to get better from here? I don’t think we know just yet. The virus is getting worse in a lot of areas, and some places have started to shut back down again. If you look at earnings in terms of beat rates, the results have actually been pretty good, granted the expectations bar has been set very low.”

There’s a distinction to be made between the S&P 500’s five biggest companies and all the rest, according to BCA Research.

The firm compared the total market value of the five — Amazon.com, Apple, Facebook, Google owner Alphabet and Microsoft Corp. — with the value of the other 495 companies in a chart last week. The top five’s value increased 266% from the start of 2015 through July 28, according to data compiled by Bloomberg. In the same period, the value of the rest rose just 25% — and the entire gain occurred after the S&P 500 set this year’s low in March.

Rita Nazareth, Katherine Greifeld and Claire Ballentine were the primary contributors to this report.

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