Wall Street makes mostly positive start after record-busting US GDP growth

The main Wall Street indices started Thursday’s session mostly higher after a record-smashing rebound in US gross domestic product (GDP) for the third quarter of 2020. In the first minutes of trading, the S&P 500 was up 0.44% at 3,285 while the Nasdaq ascended 0.77% to 11,089. The Dow Jones Industrial Average was the one outlier, down 0.06% at 26,503. Market sentiment may have been given a boost by the GDP figure, which showed the American economy grew by 33.1% in the third quarter, above expectations of 32% and reversing a 31.4% plunge in the second quarter of the year as pandemic lockdown records smashed into the economy. Meanwhile, there was more positive macro news in the form of US jobless claims data for the week to 24 October, which reported that 751,000 Americans filed for unemployment benefits, down from 791,000 in the previous week and lower than estimates of 770,000. 7.47am: Wall Street expected to rebound on blockbuster day for earnings After yesterday’s tumble, the Wall Street indices look set to make a strong start to Thursday’s session in what is shaping up to be a blockbuster day for corporate earnings. The Dow Jones Industrial Average is expected to claw back 120 points of yesterday’s 943 point fall to open at around 26,640 while the broader-based S&P 500 is on course to open 22 points higher at 3,271, which would see it recoup almost one-fifth of yesterday’s losses. The NASDAQ Composite, which plunged 426 points yesterday, is set to open 244 points heavier at 11,248. Concerning macroeconomic events, third-quarter US gross domestic product (GDP) is the big one, with economists expecting growth of 31% after the economy contracted by 31.4% (on an annualized basis) in the second quarter. “This would be a record breaking rebound after a record-breaking contraction; however, this does not mean by any stretch of the imagination that the economy is back to where it started. Let’s not forget that 50% of 100, is significantly larger than 50% of 50. The US is expected to see a 3% gap between Q2 & 3 which sounds small but equates to the worst of the 2007 -9 recession,” explained Fiona Cincotta at City Index. “What this data will prove is that the US is in desperate need of additional stimulus; however, any new rescue package looks unlikely prior to the election,” she suggested. David Arnaud, a senior fund manager at Canada Life Asset Management, reckons investors’ main concern with the US election is the possibility of a contested result. “With the polls running close, we are running the risk of a period post-election when we don’t know who is in power e.g. in a situation where results are contested by the side who fell short,” Arnaud said. “This creates uncertainty, which investors don’t like, but it also means there’s no Congress discussions, no fiscal stimulation, and we’re likely to see more volatility “No matter who is superior on the day, we’ll have fiscal stimulus and debt levels will continue to increase. Yields will be artificially kept low by central banks and the bond markets will be driven by monetary and fiscal measures,” he continued. Taking a somewhat fatalistic approach, Arnaud said: “Come January, none of it will be relevant - we’ll go back to the same trends we’ve been seeing over the last five years.” On the corporate front, updates are expected after the bell from tech titans Apple, Amazon, Alphabet, and Facebook, which make up almost all the FAANG group of companies. Four things to watch for on Thursday: Earnings from big tech will be one of the main draws on Thursday, with quarterly figures from Apple one of the key sets of figures following the announcement of the company’s new range of iPhones Meanwhile, e-commerce giant Amazon will be eyed for any further benefits from the online shopping boom sparked by the coronavirus pandemic. Facebook and Google parent Alphabet will also be in focus as the former grapples with misinformation handling ahead of the election while the later faces an antitrust investigation from the Department of Justice Other major firms reporting earnings on Thursday are media conglomerate Comcast Corp (NASDAQ:CMCSA) and coffee chain Starbucks Corp (NASDAQ:SBUX) Aside from the GDP data, jobless claims data for the week to October 24 will also provide some economic clarity for the US. Forecasts are expecting 775,000 Americans to have filed for unemployment in the week, down slightly from 787,000 the week before