Stocks finished lower Friday after Apple (AAPL) - Get Report and Amazon.com (AMZN) - Get Report issued warnings about the coronavirus pandemic's impact on their operations, and President Donald Trump stepped up his criticism of Beijing's handling of the outbreak.
Stocks held lower after manufacturing in the U.S. slumped in April, the lowest since April 2009, but not as much as expected. The ISM Manufacturing Index declined to 41.5 vs. expectations that called for a drop to 35.
The Dow Jones Industrial Average ended down 622 points, or 2.55%, to 23,723, the S&P 500 fell 2.81% and the Nasdaq dropped 3.2%.
The market is coming off a strong April: U.S. stocks rose the most in percent since 1987, The Wall Street Journal reported. The S&P 500 added 13% in April, while the Dow industrials tacked on 11% and the Nasdaq composite rose 15%.
Apple fell Friday after the iPhone maker reported fiscal second-quarter profit that beat analysts' estimates but declined to give a forecast for the current quarter because of coronavirus uncertainty. It was the first time in more than a decade that Apple failed to issue an earnings forecast.
Apple said it would boost its buyback program by $50 billion, less than expected, and lift its dividend by 6% to 82 cents a share.
Amazon posted a profit drop in the first quarter and the tech and online retailing giant said it could report an operating loss of $1.5 billion in the second quarter as it planned to ramp up spending to meet demand during the pandemic.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” CEO Jeff Bezos said.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe.”
"Amazon and Apple's earnings tell us very little about the broader markets. These stocks move more because of their heavy weighting in ETFs and index funds than for their fundamentals," said David Trainer, CEO of investment research firm New Constructs.
"Too many investors have put too much money into the same funds, which flows into the largest, most popular names because they have largest weights in the indices, such as FANG stocks and Microsoft and Tesla."
Trainer added that markets were looking past 2021 earnings. "They see the Covid-19 impact as temporary, not permanent."
Meanwhile, the Washington Post reported that senior U.S. officials have begun exploring proposals to punish or demand financial compensation from Beijing over its handling of the coronavirus pandemic. The president suggested he could issue new tariffs on China.
Trump also addressed the possibility of canceling debt payments on China's trillions in Treasury bond holdings, telling reporters in Washington that "I don't have to do that" because "I can do the same thing, but even for more money, just by putting on tariffs."
Stocks in the U.S. finished lower Thursday after millions more Americans applied for unemployment benefits last week, bringing the jobless numbers to more than 30 million in just six weeks. Even with Thursday's losses, however, the S&P 500 rose almost 13% in April, the index's best month since 1987.
In other earnings action:
Exxon Mobil (XOM) - Get Report posted a surprise first-quarter loss amid the biggest three-month decline in history for global crude prices and said it would slash spending by $10 billion in order to protect its dividend and balance sheet.
Clorox (CLX) - Get Report posted fiscal third-quarter earnings and sales well above analysts’ forecasts as the cleaning-products maker saw consumers scoop up its branded wipes and other products amid the coronavirus pandemic.