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U.S. Stocks Rally As Traders Shrug Off Spike In Jobless Claims

wallstreet sept12 26mar20 lt

With traders shrugging off a record spike in new unemployment claims, stocks have moved sharply higher in morning trading on Thursday. The Dow and the S&P 500 are moving higher for the third straight day, climbing further off Monday's three-year lows.

The major averages have pulled back off their best levels in recent trading but continue to post substantial gains. The Dow is up 794.25 points or 3.8 percent at 21,994.80, the Nasdaq is up 211.93 points or 2.9 percent at 7,596.23 and the S&P 500 is up 83.49 points or 3.4 percent at 2,559.05.

The strength on Wall Street comes even though the Labor Department released a report before the start of trading showing first-time claims for unemployment benefits soared last week, as large swaths of the U.S. economy were shut down due to the coronavirus pandemic.

The Labor Department said initial jobless claims skyrocketed to 3,283,000, an increase of 3,001,000 from the previous week's revised level of 282,000.

Economists had expected jobless claims to spike to about 1.5 million from the 281,000 originally reported for the previous week.

While the increase in unemployment claims is staggering, economists noted the data may still underestimate the number of new claims due to constraints on the capacity of offices to process claims.

However, traders seem to believe the news was already priced into the markets with the sell-off seen over the past several weeks.

Any negative sentiment also seems to have been offset by last night's news that the Senate finally voted to approve a massive $2 trillion stimulus package in response to the coronavirus pandemic.

Shrugging off concerns among some Republican Senators about an expansion of unemployment benefits, the Senate eventually voted 96 to 0 in favor of the bill.

The bill now heads to the Democrat-controlled House, which will be under pressure to quickly send the legislation to President Donald Trump's desk.

House Speaker Nancy Pelosi, D-Calif., said the House will take up the legislation on Friday with strong bipartisan support.

"The longer the crisis lasts the more likely that even good quality businesses will fail and unemployment will climb higher - hence the importance of the agreement on the fiscal package that can provide support for key industries and small businesses," said ING Chief International Economist James Knightley.

Financial stocks have helped to lead the way higher in morning trading, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index spiking by 4.8 percent and 4.2 percent, respectively.

Significant strength has also emerged among semiconductor stocks, as reflected by the 4.4 percent jump by the Philadelphia Semiconductor Index.

Micron Technology (MU) is posting a strong gain after the chipmaker reported better than expected fiscal second quarter results and provided upbeat guidance.

Interest rate-sensitive housing, commercial real estate and utilities stocks are also seeing considerable strength, moving sharply higher along with the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index plunged by 4.5 percent, while China's Shanghai Composite Index fell by 0.6 percent.

Meanwhile, the major European markets have turned positive over the course of the session. While the German DAX Index has inched up by 0.1 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.'s FTSE 100 Index is up by 0.5 percent.

In the bond market, treasuries have given back ground after an initial jump but remain firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.9 basis points at 0.799 percent.

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