Markets

Tech Wrecks S&P 500: Most Stocks Gain Today, but Facebook, Other Tech Giants Crash the Party

The S&P 500 Index (SNPINDEX: ^GSPC) fell 0.15% on Thursday, the third straight day stocks closed lower. This comes on the heels of a solid two-week period that saw the index gain almost 5% ahead of earnings season.

This week, a steady diet of mixed results and uncertain outlooks about the economy has investors reversing course. Executives have been very muted when talking about the near-term outlook; rising cases of the coronavirus, along with congressional gridlock over additional economic stimulus, have investors on the fence.

Shares of Vertex Pharmaceuticals (NASDAQ: VRTX) fell sharply today, losing nearly 20% after the company reportedly pulled the plug on a drug in clinical trials. The stock of United Airlines (NYSE: UAA) fell 4% after the carrier announced a brutal third quarter.

On the upside, oil producer Apache's (NASDAQ: APA) shares gained 6% (tops in the index) after releasing some estimates for its third-quarter production that investors liked, while shares of Charles Schwab (NYSE: SCHW) and Walgreens Boots Alliance (NASDAQ: WBA) gained 5% after reporting earnings.

But beyond these specific, material catalysts, today's biggest movers weren't driven by anything specific. Actually, well over 300 of the stocks in the S&P 500 closed up on the day.

Red arrow pointing left, dozens of black arrows pointing right.

As goes big tech, so goes the market. Image source: Getty Images.

The biggest reason why the index closed lower today was the usual suspect: big tech.

Big tech wrecks today's rally

The tech sector fell about 0.5% on the day, led lower at the top. Facebook shares fell 1.9%, with Apple, Microsoft, Amazon, and Alphabet all closing lower. The massive size of these companies was more than enough to offset the gains at the other end of the index.

Vertex's rare miss rattles investors

Shares of the biotech giant fell 21% today, following news that a potential treatment for a genetic condition was reportedly being discontinued. According to reports, Vertex's VX-814, which is in clinical trials, is being discontinued after some patients exhibited elevated liver enzymes.

That's a pretty big beating for what was expected to be a moderately successful drug that would face a lot of competition. It's possible some investors mistook the shelving of VX-814 as a bad signal for another drug, VX-864, also in trials. Vertex said that the latter remains on track to produce some data early next year.

United continues to burn through cash

Shares of the airline giant fell almost 5% today after the company released third-quarter results that showed just how brutal the coronavirus pandemic continues to be for airlines. In the third quarter, United reported it was burning $25 million per day as commercial air travel remains some 70% below last year's levels. A large portion of that cost was for employees, whom it had to keep on its payroll due to the terms of federal bailout funds provided to the industry.

United is already starting to furlough workers to lower expenses, in order to preserve as much of the $19 billion in cash and available debt it can access. Meanwhile, it has also increased its cargo revenue (up about 50% from last year) to help offset costs while flying people isn't a viable option.

Apache, Schwab, Walgreens surge after exceeding expectations

Oil producer Apache, online broker and investment manager Schwab, and pharmacy giant Walgreens Boots Alliance shares were tops in the index today, putting on a master class of beating low expectations.

Apache didn't report earnings, but it did announce a range of metrics, including average realized oil and natural gas prices, and some costs, to "further assist analysts with their third-quarter earnings models." In short, those numbers were good enough to get investors hopeful that the independent oil and natural gas producer was able to make the most of the modest uptick in oil demand and prices we saw during the summer months, when demand is highest on a seasonal basis.

Investors won't know exactly how this worked out on the bottom line for another three weeks; Apache said it will report on Nov. 5. And a bigger concern: Oil demand and prices have both slipped recently. Coronavirus cases climb and oil giants Russia and Saudi Arabia prepare to take action to grab market share when demand does recover. The oil industry isn't out of the woods yet.

Schwab did release its third-quarter results today, and like Apache, the company was able to make the most of low expectations. Net income and revenue both came in double-digits below last year's quarter, but since investors were expecting even worse results, the reception was positive.

For Walgreens, the story was a combination of results that both beat expectations and were pretty solid, along with investors being willing to use their imaginations and think about the results trending better next year. Shares are still down more than 30% this year, so patient investors willing to ride things out might buy this Dividend Aristocrat now, and count on at least getting a steady dividend while they wait for things to get better.

10 stocks we like better than Apple
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 24, 2020

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jason Hall owns shares of Alphabet (A shares) and Under Armour (A Shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Microsoft, and Under Armour (A Shares). The Motley Fool recommends Charles Schwab and Vertex Pharmaceuticals and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AAPL APA SCHW VRTX UAA WBA

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More