Buoyed by Strong Home Sales, Stocks Make Some Gains

Wall Street crept back into positive territory, despite some negative economic indicators and worries about U.S.-China relations. 

With others line up for takeout, a lone Chipotle customer has lunch at a sectioned area for social distancing to protect from the coronavirus in Los Angeles on Monday. (AP Photo/Richard Vogel)

MANHATTAN (CN) — Markets crept upward after a sluggish start, with few data points on Wednesday but a glut of earnings on tap. 

The Dow Jones Industrial Average gained 165 points, a 0.6% increase, while the S&P 500 and Nasdaq saw lesser gains. 

In a light day for earnings, only a few well-known companies posted their results from the second quarter Wednesday. 

United Airlines, which released its earnings after Tuesday’s closing bell, reported it suffered its worst quarter in the company’s 94-year history. The airline lost $1.6 billion during the second quarter of 2020, and its operating revenues declined 87% year over year as flight capacity has plummeted.

CEO Scott Kirby tried to put a positive spin on the dismal numbers, predicting United did better than most of its competitors and noting the airline had completed the largest debt-financing deal in aviation history. “We believe this quick and aggressive action has positioned United to both survive the Covid crisis and capitalize on consumer demand when it sustainable returns,” he said in a statement. 

During a call with investors this morning, United executives predicted its international gateways would come back quicker than domestic ones. It also highlighted its urging of governments in Europe and the United States to consider letting travelers fly intercontinental upon testing Covid-19 negative.

In total, the disease caused by the novel coronavirus has afflicted more than 15 million people worldwide, and 618,000 have died, according to data compiled by Johns Hopkins University. In the United States, more than 3.9 million people have contracted Covid-19, while more than 142,000 have died.

A smattering of other regional and lesser-known companies also released earnings on Wednesday. Regional bank KeyCorp reported a 17% year-over-year increase in revenue — driven mostly by transactional fees for credit cards, mortgages and capital markets — though also $482 million in credit losses.

Nasdaq Inc. also saw an increase in revenues, of 12%, mostly owed to its market services division. Companies listed on the exchange have done the best compared with the S&P 500 and Dow Jones, mostly due to the exchange’s tech-heavy listings. “Our foundational markets are demonstrating their resilience and the power of a distributed, electronic market model, handling record volumes through multiple periods of extreme volatility,” CEO Adena Friedman said in a statement.

Earnings reports this week have done little to encourage investors. Big names, such as IBM and Coca-Cola, have seen their revenue decrease as demand shrinks.

Last week, earnings reports from big names in the financial world were mixed. Firms that had heavy investment banking divisions did very well, though some banks — such as Wells Fargo — showed year-over-year losses.

Other data provided a buffet of mixed indicators. The Household Pulse Survey by the U.S. Census Bureau — a relatively new survey by the agency — has shown 6.7 million jobs lost since the week ending June 16. The survey had previously predicted 5.6 million jobs had been regained from May to early June, which has been borne out by other jobs reports.

Tesla and Microsoft are scheduled to release their earnings after the markets close. 

One bright spot for investors has been real estate, as existing home sales surged nearly 21% last month to mark the highest monthly gain since 1968. “The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” wrote Lawrence Yun, chief economist of the National Association of Realtors.

As with most other historic data jumps recently, however, existing home sales are still 18% below their pre-pandemic levels and 11% lower than a year ago.

It is unclear whether future sales will continue upward. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue,” Yun said.

Nancy Vanden Houten, chief economist at Oxford Economics, predicts additional gains in such sales will trickle in, rather than jump again, going forward. “While fundamentals, including pent-up demand and record-low mortgage rates, will support some activity, the slow recovery in the economy and labor market will limit the growth in home sales,” she wrote in an investor’s note. 

Investors also were not helped by news that the Trump administration had ordered China to close its consulate in Houston by Friday. The decision came after reports of papers being burned in trash cans within the consulate on Tuesday evening.

Vowing to retaliate, China condemned the move as “outrageous and unjustified.” The move comes on the heels of recent charges against two Chinese hackers for stealing intellectual information about a budding Covid-19 vaccine. 

Tensions between the United States and China have risen since earlier this year, threatening to scuttle the trade deal between the countries and once again raising the specter of increased tariffs

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