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Dow Futures Slump As Q2 GDP Plunges Most On Record, Weekly Jobless Claims Rise; Trump Raises Election Delay Prospect

Fed Chair Jerome Powell put the coronavirus pandemic at the center of the FOMC's monetary policy stance, warning that recent data indicates a weakening recovery and fading consumer confidence.

The Thursday Market Minute

  • Global stocks slump as Fed holds rates unchanged, but paints a grim picture of the U.S. recovery predicated on containing the coronavirus pandemic. 
  • Fed Chair Powell says the FOMC is "not even thinking about raising rates", while warning that recent consumer and jobs data suggest the recovery is beginning to stall.
  • GDP data shows the biggest collapse on record for the three months ending in June, with the Commerce Department estimating a an annualized contraction of -32.9%.
  • German's seasonally-adjusted Q2 GDP contacts -10.1%, the worst on record for Europe's biggest economy. 
  • The dollar rebounds from its recent two-year low against a basket of its global peers, but 10-year Treasury note yields hold at 0.551% ahead of GDP data and weekly jobless claims, which are expected to rise to 1.45 million for the week ending on July 25.
  • Tech giants Apple, Facebook, Google and Amazon report quarterly earnings after the close of trading, just one day after facing pointed antitrust questions from lawmakers on Capitol Hill. 
  • U.S. equity futures suggest a weaker open on Wall Street ahead of earnings from Eli Lilly, Procter & Gamble, Comcast, UPS, Mastercard and Kellogg before the start of trading.

U.S. equity futures slumped lower Thursday, while the dollar rebounded from its two-year low and gold held near its recent record highs, as investors braced for a crucial series of tech earnings and economic data that could underscore the Federal Reserve's concern for the pace and depth of the nation's coronavirus recovery.

Fed Chairman Jerome Powell put the global coronavirus pandemic at the center of his monetary policy framework Wednesday, telling reporters via a video conference in Washington the he was "not even thinking about raising rates" amid increasing signals of slowing job growth and fading consumer confidence. 

Stocks were further pressured by a Tweet from President Donald Trump, who suggested delaying the 2020 election after claiming, without evidence, that mail-in voting would lead to a fraudulent result. 

"The path of the economy will depend significantly on the course of the virus," the Fed's Open Markets Committee said Wednesday, after opting to keep its key interest rate on hold while Congress debates the next form of stimulus.

Powell said there will be "a need both for more support from us and for more fiscal policy” in order to ensure a full recovery, adding that the U.S. "has entered a new phase in containing the virus, which is essential to protect both our health and our economy."  

U.S. GDP contracted by an annualized rate of-32.9% over the second quarter, the Commerce Department estimated, modestly better than the -34.1% forecast but still the worst reading on record. Consumer spending fell 34.6%, the Commerce Department said, while exports collapsed by a staggering 64.1%.

That came along a rise in weekly jobless claims, which jumped to 1.434 million, for the week ending July 25, offering further evidence that the recent coroanvirus resurgence is taking its toll on the world's biggest economy. 

That impact looks as if it may last well into the autumn months, as well, with U.S. cases rising to 4.51 million and the death toll topping 153,000 as of Wednesday evening. 

With big tech earnings from Apple  (AAPL) , Facebook  (FB) , Google  (GOOGL)  and Amazon  (AMZN)  due after the close of trading today, and a series of weaker-than-expected second quarter reports from European bluechips such as Volkswagen and Royal Dutch Shell, global stocks struggled to find any momentum in the overnight session, setting up Wall Street for a weaker start to the trading session.

Futures contracts tied to the Dow Jones Industrial Average suggest a 340 point slump for the 30-stock benchmark, while the S&P 500, the broadest measure of U.S. shares, is priced for a 37 point pullback. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was modestly higher on the session, but still within touching distance of its lowest levels since May 2018 following the Fed's dovish statement last night. Benchmark 10-year Treasury note yields, meanwhile, slipped to 0.551% in European trading.

The dollar weakness gave some support to global oil prices, but markets were still firmly in the red Thursday on demand concerns even after the Energy Department reported the biggest weekly decline in domestic crude stocks -- 10.6 million barrels -- since December of last year.

WTI contracts for September delivery, the U.S. benchmark, 75 cents lower from their Wednesday close in New York and were changing hands at $40.852 per barrel in early European dealing while Brent contracts for September, the global benchmark, were seen 68 cents lower at $43.08 per barrel.

European stocks were also on the back foot, lead to the downside by weaker-than-expected earnings on the busiest reporting day of the year, with the Stoxx 600 falling 1.7%, Germany's DAX performance index slumping 3% after the biggest quarterly economic decline -- 10.1% -- on record. Britain''s FTSE 100 was down 2% by mid-day in London.

Overnight in Asia, lingering U.S.-China tensions kept pressure on regional stocks, which were little-changed for the session despite gains in South Korea and Australia, with investors rattled by new flare-ups of coronavirus infections around the area, including Hong Kong and Tokyo, where the Nikkei 225 slipped 0.26% to close at 22,339.23 points.