Wall Street ended a whipsaw session sharply higher, with blue-chip stocks rising for the first day in four trading sessions, after investors looked beyond yet another ugly surge in U.S. jobless claims.
Markets have largely ignored mounting evidence of the coronavirus pandemic’s destruction of U.S. growth, embracing expectations that gradual state reopenings will grease the wheels of an eventual economic revival.
However, the deep and lasting damage of restrictive lockdowns have made many economists doubt the economy will see a “V-shaped” rebound, even as Congress begins debating the contours of a new stimulus package worth $3 trillion.
Earlier in the session, the Dow had been off as many as 458 points, after the Labor Department’s weekly report on new jobless claims showed another 2.981 million individuals filed for first-time unemployment benefits last week, or more than had been expected. In recent sessions, stocks have retraced prior gains, amid a rising chorus of warnings from economists and officials over the outlook for the virus-stricken economy, as well as signs of lingering tensions between the U.S. and China.
Remarks Wednesday morning from Federal Reserve Chair Jerome Powell also spooked investors, as he raised the specter that “lasting damage” may be done to the U.S. economy in the wake of the coronavirus pandemic. The U.S. may need additional stimulus on both the monetary and fiscal policy fronts to ward off a deeper and more destructive downturn.
Powell also said he expected that unemployment would peak “over the course of the next month or so,” after the jobless rate surged to a record high of 14.7% in April. Meanwhile, Wall Street economists have issued increasingly grim outlooks on the economic outlook in the near-term.
Goldman Sachs economists said in a note Wednesday they anticipate the unemployment rate will peak at 25%, up from their previous estimate of 15%. In a similar downgraded forecast, Nomura economists said in another note Wednesday they now believe second-quarter U.S. gross domestic product “will be about 16.0% below its level in Q4 of last year, compared to a decline of 12.5% in our previous forecast.”
Others, however, have highlighted data showing areas of the economy that are moving in a direction of “less bad,” rather than worsening, as the outbreak progresses.
Bank of America said in a report published Wednesday that its daily credit and debit card data for May “showed meaningful improvement” in card spending relative to the doldrums of March, “driven by the lower income population.” Analysts attributed the boost to stimulus payments authorized by Congress, and a phased reopening of the economy in some states, along with a greater number of individuals receiving benefits after filing jobless claims.
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4:05 p.m. ET: Dow rises for the first time in four sessions, recovering losses earlier in the session
Here were the main moves in markets as of 4:05 p.m. ET:
2:45 p.m. ET: Crude oil settles at a more than five-week high of over $27 per barrel
June futures for U.S. West Texas intermediate crude settled higher by 9%, or $2.27, to $27.56 per barrel on Thursday, hitting the highest settlement since early April.
This extended a recent run-up in crude oil prices, which has helped pare some of the commodity’s steep year to date declines as the pandemic wiped out energy demand and forced suppliers to slash output. Reopenings of certain country and state economies has contributed to an improvement in sentiment around future demand for oil.
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12:20 p.m. ET: Stocks pare some losses, Dow turns slightly positive
The three major indices pared some of their earlier declines and the Dow pushed into slightly positive territory Thursday afternoon.
The Financials and Health-Care sectors outperformed in the S&P 500, advancing slightly while the broader index held slightly lower. More than 4% gains in each of Cisco and American Express led the 30-stock Dow higher.
Here’s where the three major indices were trading shortly after noon on Thursday:
S&P 500 (^GSPC): -6.03 points (-0.21%) to 2,813.97
9:10 a.m. ET: What economists are saying about the latest weekly jobless claims report
Analysts struck a cautious tone after digesting the Labor Department’s weekly report on new unemployment claims, which showed another nearly 3 million individuals filed for new jobless insurance claims last week. This was the eighth straight week that new jobless claims were in the multi-millions, but the sixth consecutive week that new claims fell relative to the prior week.
“This it not a business as usual recession and business won't be back to usual for years,” Chris Rupkey, chief financial economist for MUFG Union Bank, wrote in an email Thursday. “The job layoffs are starting to spread from retailers and restaurants and bars to former safe harbors for white collar professionals like those in business administration, law firms, accountants, engineers, and architects. Payroll protection plans from Congress can only go so far when companies are financially bankrupt.”
He added that these “soaring jobless claims pour cold water on the V-shaped recovery talk” for the economy.
Others noted that the continuing claims figure and insured unemployment rate, which each rose at a slower pace last week from the prior week, suggest that the level of joblessness may at least have already peaked.
“What the continuing claims figures and the insured unemployment rate are more reliably telling us is that the unemployment rate was close to peaking at the start of May, as the number of people returning to their jobs almost offset new job losers,” Paul Ashworth, chief U.S. economist for Capital Economics, said in a note.
“With most states only beginning to ease their lockdowns within the last 10 days, we expect a much bigger swing in hiring versus firing over the next couple of weeks, which suggests the unemployment rate will begin to drop back,” he said. “The U3 [headline] unemployment rate will probably still be higher in the May survey week, which always includes the 12th of the month, than it was in April. But it should be lower in June.”
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8:30 a.m. ET: New unemployment claims totaled a greater than expected 2.981 million for the week ended May 9
Initial unemployment claims came in at 2.981 million for the week ended May 9, the Department of Labor said in its weekly report Thursday morning.
Consensus economists expected claims to have totaled 2.5 million for the week, according to Bloomberg consensus data.
The prior week’s new unemployment insurance claims were slightly upwardly revised to 3.176 million.
Continuing unemployment claims rose to a fresh record of 22.833 million for the week ended May 2. This was slightly below consensus expectations for a rise to 25.12 million. The prior week’s continuing unemployment insurance claims were revised down slightly to 22.377 million.
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7:20 a.m. ET: Norwegian Cruise Line Holdings says it expects net losses for the second quarter, full-year 2020
Norwegian Cruise Line Holdings (NCLH) posted a first-quarter net loss of $1.9 billion, versus net income of $118.2 million in the same quarter last year, after the coronavirus pandemic hit the cruise industry especially hard. The losses came as cruise operating expenses jumped by more than one-fifth over last year, due to factors including the costs of suspending cruise voyages.
First-quarter revenue of $1.2 billion fell 11.2% over last year, Norwegian said.
Norwegian added it expects to post a net loss for both the second quarter and the full year in 2020, and estimates its monthly cash burn to be, on average, in a range of $120 million to $160 million per month while operations are suspended.
Still, Norwegian added, “There continues to be demand for cruise vacations particularly beginning in the fourth quarter 2020 accelerating through 2021 with the Company’s overall booked position and pricing for 2021 within historical ranges.”
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7:09 a.m. ET Thursday: Stock futures mostly lower ahead of jobless claims report
Here were the main moves in markets, as of 7:10 a.m. ET:
S&P 500 futures (ES=F): down 1.25 points, or 0.04%, to 2,811.75
Dow futures (YM=F): down 31 points, or 0.13%, to 23,135.00
Nasdaq futures (NQ=F): up 7.25 points, or 0.08%, to 8,999.5
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:01 p.m. ET:
S&P 500 futures (ES=F): up 9.75 points, or 0.35%, to 2,822.75
Dow futures (YM=F): up 107 points, or 0.46%, to 23,273.00
Nasdaq futures (NQ=F): up 36.75 points, or 0.41%, to 9,029.00
NEW YORK, NY - MAY 13 : People wearing protective masks walk past a closed outdoor seating for Nathan's restaurant on May 13, 2020 in the Coney Island neighborhood in the Brooklyn borough in New York City. New York City is currently in its ninth week of lockdown and governmental guidelines on wearing a mask in public and social distancing are in effect. (Photo by Stephanie Keith/Getty Images)