By Yasin Ebrahim
Investing.com – The Dow moved off session lows Wednesday, as gains in big tech ahead of key earnings for the sector due later in the afternoon helped lift investor sentiment after cyclical stocks nosedived on data showing the economy suffered its worst slump on record.
The Dow Jones Industrial Average fell 0.68%, or 181 points, but had been down by 547 points at the lows of the day. The Nasdaq Composite gained 0.49% and the S&P 500 slipped 0.30%.
It's just hours to go until mega-cap tech companies including Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB) are slated to deliver quarterly reports that will provide clues on whether the quartet's recent run higher has been justified.
The earnings due after the bell will be a "seminal night for the Street to digest how these tech stalwarts are faring during the dark COVID storm," Wedbush analyst Daniel Ives said in a note.
"The reality is that the strong are getting stronger with FAANG names such as Amazon, Facebook, Google, and Apple beneficiaries of the current environment and a dynamic front and center this week, which we believe will put further fuel into the tech rally moving forward," Ives added.
Elsewhere in tech, chip stocks continued to power ahead thanks to a rally in chipmaker Qualcomm.
Qualcomm (NASDAQ:QCOM) rallied 14% after reporting better-than-expected earnings for its fiscal third quarter and confirming it had settled a licensing dispute with Huawei that will boost revenue by $1.8 billion.
But corners of the market like financials and energy linked to the strength of the economy were shunned following data showing U.S. GDP declined at an annualized rate of 32.9% in the second quarter of 2020, less bad than the expected decline of 34.5%, but still the biggest decline on record.
While the record decline in growth was largely priced in, investor hopes for a robust rebound still appear overly optimistic, with key data in the coming weeks likely to disappoint.
"With virus fears on the rise, jobs being lost and incomes squeezed, we feel the recovery could be much bumpier than markets seemingly do, and think we are in for some data disappointment over the next couple of months – starting with next week’s payrolls number," ING said in a note.
Energy fell nearly 4% to lead the broader market lower, pressured by falling oil prices on concerns about crude demand following weaker U.S. economic data.
Financials were not far behind, slipping about 2%, with banks including JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo & Company (NYSE:WFC) in the red.