By Gunjan Banerji, Avantika Chilkoti and Stuart Condie 

The technology heavyweights that powered the recent market rebound stumbled Friday, dragging down the broader stock market, as the coronavirus' toll on some of the world's biggest companies grew clearer.

The S&P 500 fell 2.8% as losses accelerated midday, dragging the index into the red for the week. The Dow Jones Industrial Average shed about 622 points, or 2.6%. The tech-heavy Nasdaq Composite lost 3.2%, lagging behind its peers after outperforming in recent weeks.

All three indexes, as of 4 p.m. Eastern time, had losses of less than 0.5% for the week.

A busy week of corporate earnings and economic data drove big stock swings in recent days as investors parsed a flood of information highlighting the intense toll the coronavirus is having on the economy.

One of the biggest warning signs for investors: the tech giants that appeared almost untouchable even during a global pandemic showed signs of faltering as their quarterly results streamed in.

Amazon posted record revenue late Thursday but disappointed on profits as coronavirus-related costs such as employee testing and higher wages added to expenses. Apple held off on providing guidance for the current quarter for the first time since late 2003.

"It's a warning shot across the bow that no company is immune from this even if you're able to raise your top-line revenues," said Brian O'Reilly, head of market strategy for Mediolanum International Funds.

Shares of Amazon fell about 7.2%. Apple shares slipped 1.2%.

Adding to the sting, tech heavyweights have led markets higher in recent weeks, helping major indexes recover from their March lows and pushing them toward historic gains in April.

U.S. stock benchmarks clocked their largest percentage gains since 1987 last month. The S&P 500 was up 13% in April, while the Dow Jones Industrial Average gained 11%. The tech-heavy Nasdaq Composite jumped 15%, its biggest monthly gain since June 2000.

Highlighting the peculiar market environment of in recent weeks, as U.S. stocks finished April with big gains, other economic data this week revealed the distressing impact of the coronavirus across the country.

Consumer spending, the U.S. economy's key driver, posted its biggest monthly decline on record in March. Meanwhile, the U.S. economy shrank in the first quarter at its fastest pace since the last recession. On Friday, fresh data showed U.S. manufacturing contracting.

Several investors said the latest releases highlighted the mammoth challenge that lawmakers and policy makers face in getting the domestic economy back on a strong footing.

"For people that would be considering investing, it was a reality check, " said Don Dale, managing partner at investment firm Equity Risk Control Group.

Earlier in the week, the Federal Reserve warned of greater economic deterioration ahead but said it would use its tools to support the economy.

Several investors said they were concerned that an economic recovery could take longer than many have been expecting. Data released in coming weeks would likely be as bad, or worse, they said.

"We're going to get these constant reminders that the economy is suffering," said Adam Phillips, director of portfolio strategy at EP Wealth Advisors. "It serves as a much-needed wake-up call for the entire stock market."

Next week, for example, investors will be watching the monthly jobs report, after recent data showed that millions of Americans have filed for unemployment benefits.

Adding to investors' jitters Friday were concerns about fresh tensions between the U.S. and China. In an unusual public statement, a U.S. intelligence agency said Thursday that it was investigating whether the coronavirus may have escaped from a laboratory in Wuhan, China.

"The important thing for investors is that these tensions around trade, these tensions around technology and technology transfers, and tensions around geopolitics more broadly, these issues are going to persist and maybe even heighten as we go forward," said Joseph Little, chief global strategist at HSBC Global Asset Management.

Corporate earnings news drove swings in individual stocks. Shares of Exxon Mobil and Chevron ticked down 6.2% and 1.8%, respectively, after the companies reported a drop in demand on the back of shelter-in-place rules. The energy companies also said they would both cut back capital spending plans for 2020.

Shares of Tesla plunged Friday after Chief Executive Elon Musk tweeted that the auto maker's share price was "too high." Tesla stock dropped about 9.9% to $704.61. Still, the shares are sitting on gains of almost 70% this year.

Clorox added 2.8% after the household-supplies producer issued more optimistic guidance on higher demand for cleaning supplies.

Brent crude, the global oil benchmark, slipped 0.5% to $26.34 a barrel, a muted move given wild swings in energy markets in recent weeks. Analysts expect demand for fuel to rise as lockdown rules are gradually lifted and supply eases as output cuts agreed by the Organization of the Petroleum Exporting Countries come through.

The U.K.'s FTSE 100 dropped 2.3%. Japan's Nikkei 225 closed down 2.8% and Australia's S&P/ASX 200 ended 5% lower. Markets in China, Hong Kong and across most of Europe were closed for the May Day holiday.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com and Avantika Chilkoti at Avantika.Chilkoti@wsj.com

 

(END) Dow Jones Newswires

May 01, 2020 16:20 ET (20:20 GMT)

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