Stock indexes saw gains firm midday Thursday, but trade was turbulent, reflecting a market that is struggling to find its footing amid signs of softening economic data and a raft of uncertainties ahead.
What are major benchmarks doing?
The Dow Jones Industrial Average (DJIA)was trading 288 points, or 1.1%, higher at around 27,043, while the S&P 500 (SPX) picked up 34 points, or 1.1%, at about 3,271, bouncing higher after breaching a level below correction territory — defined as a drop of 10% from a recent peak — for the index at 3,222.76. The Nasdaq Composite Index (COMP) jumped 122 points, or 1.1%, higher at roughly 10,757, after hitting an early intraday low at 10,520.22.
On Wednesday, the Dow ended with a loss of 525.05 points, or 1.9%, at 26,763.13, while the S&P 500 shed 78.65 points, or 2.4%, to close at 3,236.92. The Nasdaq Composite finished at 10,632.99, down 330.65 points, or 3%. The close left the S&P 500 down 9.6% from its record close of 3,580.84 hit on Sept. 2.
What’s driving the market?
Stocks were wobbly Thursday, as investors waded through a morass of issues, including gridlock on Capitol Hill, which has sapped prospects for another spending bill. Market participants have long feared that a lack of fresh stimulus would derail an economic rebound.
The weekly report in claims highlights that job creation in the aftermath of the pandemic is stalling out, raising further fears about the shape of the U.S.’s return to normalcy.
Jobless claims rose 4,000 to 870,000, the Labor Department said Thursday, reflecting that slightly more Americans applied for state unemployment benefits in the week ended Sept. 19 than in the prior week. Economists surveyed by MarketWatch had been looking for claims to decline to 850,000. Claims in the prior week were raised 6,000 to 866,000.
“While jobless claims under a million for four straight weeks could be considered a positive, we’re staring down a pretty stagnant labor market,” wrote Mike Loewengart, managing director for investment strategy at E-Trade Financial Corp. (ETFC) in emailed remarks.
“This has been a slow roll to recovery and with no signs of additional stimulus from Washington, jobless Americans will likely continue to exist in limbo,” he said. “Further, a shaky labor market translates into a skittish consumer, and in the face of a pandemic that seemingly won’t go away without a vaccine, the outlook for the economy certainly comes into question.”
Remarks by Federal Reserve Chairman Jerome Powell in congressional testimony this week, as well as comments by other Fed policy makers, have also signaled that the central bank is taking a wait-and-see approach when it comes to further monetary stimulus, while signaling the need for Congress to act on fiscal stimulus.
”Given the highly polarized state of politics in the U.S. at the moment, the markets do not expect action on any stimulus package with Congress barely able to agree on a continuing resolution in order to keep the government going,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.
“That in turn has weighed on sentiment as current improvement in economic data has been modest at best suggesting that the V-shaped recovery is running out of steam after the initial burst of activity after the reopening of the U.S. economy,” he said.
On top of that, fears of a contested presidential election on Nov. 3 were also seen weighing on sentiment, analysts said. President Donald Trump on Wednesday refused to commit to a peaceful transition of power following the election, telling reporters “we’ll have to see what happens…I’ve been complaining very strongly about the ballots. And the ballots are a disaster.” Trump was referring to mail-in ballots, which he has asserted, without evidence, are prone to widespread fraud.
Trump also suggested the Supreme Court will have to make a ruling on the outcome of the election, emphasizing that a new justice, replacing Ruth Bader Ginsburg, should be confirmed before Election Day.
“Donald Trump’s continuing reluctance to confirm he would accept a loss in the presidential elections in little more than a month carries the threat of taking the country into unprecedented and potentially dangerous territory, though this may be little more than rhetoric and Trump could triumph anyway” said Russ Mould, investment director at U.K.-based brokerage AJ Bell.
“The bitter campaign for the White House is also preventing the U.S. from agreeing a fiscal stimulus package — leading to growing grumbles from the U.S. Federal Reserve and it was little surprise to see U.S. stocks fall against this backdrop,” he said.
Markets briefly got a boost from solid housing figures. Sales of new single-family homes in August exceeded an annual rate of 1 million for the first time since 2006. New home sales occurred at a seasonally adjusted, annual rate of 1.011 million, the Census Bureau reported Thursday. That represents a 4.8% increase from a pace of 965,000 homes in July, which was raised from previous level. Compared with last year, new home sales are up 43%.
Meanwhile, Powell emphasized during a third day of congressional testimony that a fiscal package was needed to help the U.S. economy recover from the recession induced by the coronavirus pandemic. “While the economy has been doing better than expected, I think there is downside risk,” Powell said.
A number of other Fed officials will also be on the speaking circuit again on Thursday.
Richmond Fed President Tom Barkin speaks at a pair of events at 1 p.m. and 2 p.m. St. Louis Fed President James Bullard is set to deliver a speech to the Global Interdependence Center at noon, while Chicago Fed President Charles Evans is scheduled to deliver a speech to the Illinois Chamber of Commerce at 1 p.m. Atlanta Fed President Raphael Bostic is slated to deliver a speech on systemic racism to a forum on minorities in banking at 2 p.m.
Which companies are in focus?
- Shares of Penn National Gaming Inc. (PENN) fell more than 4% after announcing it would launch a public offering of 14 million shares.
- Accenture PLC (ACN) shares dropped 6% after the professional services and consulting company reported revenue and earnings that fell short of expectations.
- Shares of FedEx Corp. (FDX)rallied 1.2% Thursday, to pace the gainers in the Dow Jones Transportation Average (DJT) after Stifel Nicolaus analyst David Ross turned bullish on the package delivery giant, citing signs that FedEx has been a beneficiary of the COVID-19 pandemic.
- Shares of E.W. Scripps Co. (SSP)rocketed 15% Thursday, after the TV station owner confirmed a deal to buy the broadcast network ION Media for $2.65 billion, in a deal backed by Warren Buffett.
How are other markets faring?
The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) was down 0.9 basis point at 0.67%. Bond prices move inversely to yields.
The ICE U.S. Dollar Index (DXY) was steady at 94.379.
Gold futures (GCZ20) were up 0.4% to trade at $1,874.80 an ounce, recovering somewhat from an earlier slide but still hanging near a two-month low. U.S. oil futures (CLX20) traded 0.2% higher to around $40 a barrel on the New York Mercantile Exchange.
The pan-European Stoxx Europe 600 Index (XX:SXXP) closed 1% lower and the U.K.’s benchmark FTSE 100 (FR:FTSE) shed 1.3%. In Asia, Hong Kong’s Hang Seng Index (HK:HSI) tumbled 1.8% and the Shanghai Composite Index (CN:SHCOMP) closed 1.7% lower. Japan’s Nikkei (JP:NIK) closed down 1.1%.
Video: U.S. jobless claims unexpectedly rise (Reuters)