Record Recovery Evaporates With Detail on Suffering Sectors

Wall Street wasn’t able to keep the positivity rolling a day after the shortest bear market on record ended. 

Alex Santana, left, Jim Soldate and Donna Blair, right, rally outside of the Clark County Commission Building in Las Vegas on Tuesday. Labor unions are launching a campaign to save jobs and win the “Right to Return” for hospitality, convention and trade shows, airport, entertainment, and hospital workers throughout Clark County. (Bizuayehu Tesfaye/Las Vegas Review-Journal via AP)

MANHATTAN (CN) — Investors weren’t able to keep the party rolling after the S&P 500 officially made back all of its Covid-related losses on Tuesday.

By the closing bell on Wednesday, the S&P 500 dropped 0.44%. The Dow Jones Industrial Average and Nasdaq also both lost for the day, falling 0.3% and 0.57%, respectively. 

The 3,389-point high mark that the S&P 500 reached Tuesday marked the end of the current bear market, one of the fastest investor recoveries in Wall Street history.

But the Federal Reserve put a bit of a damper on the party when it released the minutes from its July 28-29 Federal Open Market Committee meeting, noting that certain sectors in the S&P 500 have fared much differently than the few success stories driving the index.

“Virus-sensitive sectors and firms with weaker fundamentals under-performed over the period, as they had over the broader pandemic episode,” according to the minutes, which say the S&P 500 “has been supported by its significant share of technology firms, many of which have been relatively resilient to virus containment measures.”

Once again the central bank noted it will keep the federal funds rate at 0% to 0.25% until the economy strengthens — though it also once again failed to say what threshold the economy would need to hit for that to happen. 

The committee’s members predict inflation to remain subdued through the rest of the year but said another round of closures due to a second wave of coronavirus could cause GDP to plummet and unemployment to spike again. 

“The path of the economy would depend significantly on the course of the virus, and that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and [pose] considerable risks to the economic outlook in the medium term,” the Fed warned.  

Cases of coronavirus continue to roll in, with Florida on Wednesday joining the ignominious group of states with at least 10,000 deaths from the virus. California, New York, New Jersey and Texas had previously hit that grim mark. 

According to data compiled by Johns Hopkins University, more than 22 million have contracted Covid-19 worldwide, while roughly 782,000 have died. In the United States alone, almost 5.5 million have been confirmed infected while more than 172,000 have died.

The quick recovery on Wall Street contrasts with the slog many American small businesses and consumers have been facing. According to data from Indeed, job postings through August 14 slid for the first time since April.

Job postings had been increasing steadily since May after plummeting in mid-March. The slowdown was highest among retail and driving postings, falling 11.7% and 14.4% since the end of July, respectively. 

Earlier in the day, markets had been encouraged by a positive earnings report by several retailers.

Target posted a 24.3% year-over-year increase in the company’s sales, the best the company has ever reported. The company’s net earnings jumped more than 80% over that period.

The biggest increase was among the company’s digital sales, which grew nearly 200% compared with the second quarter of 2019. Its same-day services also predictably saw a jump, though the 273% increase was likely greater than what many analysts had expected. 

Target’s success story has been a model for many retailers during the Covid-19 shutdowns.

“Add Target to the list of retailers that has benefited from being open throughout the pandemic with many of its retail competitors forced to close, the recipient of some of the very generous stimulus checks, and consumers shifting around their spending from experiences (where many are closed) to goods,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Target’s success is a drop in the bucket, however, compared with online competitor Amazon, whose market capitalization is roughly $1.6 trillion. Boockvar noted that Amazon’s market-cap increase on Tuesday equaled nearly the entirety of Target’s $77 billion market cap. 

Lowe’s also saw an increase in earnings, from $1.7 billion in Q2 2019 to $2.8 billion last quarter. All of the home-improvement store’s merchandising divisions saw at least a 20% jump in sales growth, driven mostly by the flare-up of home-renovation projects during the lockdown.

Wall Street also was amazed by Apple, which on Wednesday hit a market capitalization of at least $2 trillion — the first U.S. company to reach such a high mark. The only other company in the world to hit the $2 trillion mark is Saudi Arabia’s state-owned energy company Saudi Aramco.

Apple has ripened well during the coronavirus, with its stock gaining almost 60% in 2020, when its market cap was roughly $1.3 trillion. The company has gained more than $400 billion this month so far alone. 

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