Stocks fell Thursday as the chances of further fiscal aid from Congress dwindled ahead of the presidential election in November, and as the number of Americans filing for first-time unemployment benefits remained elevated.
The Dow Jones Industrial Average fell 152 points, or 0.57%, to 26,610, the S&P 500 declined 0.5% and the Nasdaq slumped 0.56%. The S&P 500 and Nasdaq have traded lower in six of the last seven sessions.
The Labor Department reported Thursday that 870,000 Americans filed for first-time jobless benefits in the week ended Sept. 19, up from a revised 860,000 claims the week earlier. Economists polled by FactSet had been expecting claims of 850,000.
Jobless claims have held at historically high levels as the labor market continues to see-saw amid the coronavirus pandemic and its back-and-forth effect on companies’ need for workers.
“While jobless claims under a million for four straight weeks could be considered a positive, we’re staring down a pretty stagnant labor market,” said Mike Loewengart, managing director of investment strategy at E*Trade. “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.
“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,” he added.
Economists at Goldman Sachs cut their fourth-quarter growth forecasts for the U.S. to 3% from 6% and said “further fiscal support will likely have to wait until 2021.”
Stocks ended sharply lower Wednesday after Federal Reserve officials warned more fiscal stimulus was needed to rescue a struggling U.S. economy. The S&P 500 has fallen 7.5% so far in September.
“The Fed can only lend money, not spend money. Only Congress can provide funds to the still high number of unemployed workers, and (Fed Chairman Jerome) Powell seems to be more and more communicating a belief by the Fed that Congress is falling down on the job,” said C.J. MacDonald, client portfolio manager at GuideStone Capital Management.
“A new fiscal stimulus bill looks to be dead in the water. That fact, and an uncertain and contentious election season now at full boil, may cause volatility and downside in the financial markets to continue in the short-term,” MacDonald added.
Democratic candidate Joe Biden holds a consistent lead in the 2020 polls but investors were rattled by comments from President Donald Trump, who continues to cast doubt – without citing evidence – on the legitimacy of mail-in ballots and results of the broader election.
Trump refused to commit to a peaceful transition of power should he lose the presidential election, telling reporters in Washington that “we’re going to have to see what happens.”