By Geoffrey Smith
Investing.com -- U.S. stock markets opened markedly lower on Thursday, with the pace of selling accelerating, after the U.S. reported its biggest quarterly economic contraction since records began.
Gross domestic product contracted by 9.5% in absolute terms in the three months through June. Extrapolating that over a full year would give a contraction of 32.9%, although that figure is largely meaningless, given that the lockdowns that caused the recession have since been lifted in large part.
At the same time, the Labor Department said that the number of Americans making initial claims for jobless benefits rose for the second straight week, albeit by only 12,000 to 1.434 million. Continuing claims, which are reported with a one-week lag, also rose.
By 10 AM ET (1400 GMT), the Dow Jones Industrial Average was down 482 points or 1.8% at 26,057 points. The S&P 500 was down 1.4%, while the Nasdaq Composite was down 0.9%.
Although "significant", the GDP number "tells us little about where we stand today and where we’re likely to head tomorrow," Oxford Economics analyst Greg Daco said via Twitter.
Related or not, the gloomy news from the economic front was followed within minutes by a suggestion from President Donald Trump' that the November presidential election be delayed. Trump repeated, without any fresh evidence, his past claims that the wider use of mail-in voting will lead to electoral fraud. Twitter has previously flagged such claims as misleading. The U.S. Constitution entrusts the organization of federal elections to the states, meaning that Trump - who is trailing his Democrat rival Joe Biden in most nationwide opinion polls - has no power to force a delay.
Banking stocks - often used as a proxy for the broader economy - were among the worst affected by the data, as the market priced in a higher probability of loan losses and a long period of margin-crushing low interest rates. Federal Reserve Chair Jerome Powell had said on Wednesday that "we're not even thinking" of raising rates, and the Fed's so-called 'dot-plot' reflected expectations among its top brass that rates would stay where they are for another two years.
Citigroup (NYSE:C) stock fell 4.9%, while Bank of America Corp (NYSE:BAC) stock fell 3.2% and JPMorgan (NYSE:JPM) stock fell 3.5%.
Among the biggest gainers, on another heavy day for corporate earnings, was Qualcomm (NASDAQ:QCOM) stock, which rose 10.1% after the chipmaker announced a settlement with Huawei over a licensing dispute. Qualcomm will get $1.8 billion up front in respect of past fees, and also stands to gain from a fresh long-term sales agreement - as long as U.S. sanctions on Huawei aren't tightened further.
The parabolic rise of Eastman Kodak (NYSE:KODK) stock flattened out as speculative interest paused for breath after two days in which it has risen nearly 20-fold. The stock was up 17.9%, at $39.01.
The economic and political news was enough to push the price of oil below $40 a barrel for the first time in over two weeks. By 10 AM ET, U.S. Crude Futures were down 4.0% at $39.62 a barrel. Gold Futures were down 0.3% at $1,947.70 a troy ounce.