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Beyond the Numbers

Spike In Jobless Claims May Weigh On Wall Street
3/26/2020 9:03 AM

The major U.S. index futures are pointing to a lower opening on Thursday as traders get their first official look at the economic impact of the coronavirus pandemic.

Early selling pressure may be generated following the release of a report from the Labor Department showing a record spike in first-time claims for unemployment benefits in the week ended March 21st.

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.

With the record-breaking increase, the number of seasonally adjusted initial claims reached the highest level in the history of the seasonally adjusted series. The previous high was 695,000 in October of 1982.

While the jump in jobless claims was widely expected on Wall Street, the magnitude of the increase may still come as a shock to some investors.

Nonetheless, the negative sentiment may be partly 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.

Stocks moved notably higher over the course of the trading session on Wednesday before giving back ground going into the close. The major averages pulled back sharply in late-day trading, with the tech-heavy Nasdaq sliding into negative territory.

The major averages subsequently finished the session mixed. While the Nasdaq fell 33.56 points or 0.5 percent to 7,384.30, the Dow surged up 495.64 points or 2.4 percent to 21,200.55 and the S&P 500 jumped 28.23 points or 1.2 percent to 2,475.56.

The Dow held on to a strong gain partly due to a substantial advance by shares of Boeing (BA), which spiked by 24.3 percent after a report from Reuters said the aerospace giant plans to restart 737 MAX production by May.

Fellow Dow component Nike (NKE) also moved sharply higher after the athletic footwear and apparel maker reported better than expected fiscal third quarter results and said sales in China have rebounded since the coronavirus outbreak in the country has eased.

The late-day pullback on Wall Street came after a handful of Republican senators threatened to delay the $2 trillion stimulus bill over the expansion of unemployment benefits.

Stocks moved sharply higher earlier in the session in reaction to news that Senate leaders and the White House had reached an agreement on the bill.

Despite the late-day pullback by the broader markets, substantial strength remained visible among housing stocks.

Reflecting the strength in the sector, the Philadelphia Housing Sector Index spiked by 9.6 percent, climbing further off the five-year closing low set on Monday.

Oil stocks also showed a significant move to the upside on the day, driving the NYSE Arca Oil Index up by 6.5 percent. The strength in the sector came as the price of crude oil closed higher for the third straight day.

Brokerage, steel, utilities and gold stocks also saw considerable strength on the day, while retail and semiconductor stocks showed notable moves to the downside.

Commodity, Currency Markets

Crude oil futures are slumping $0.78 to $23.71 a barrel after rising $0.48 to $24.49 a barrel on Wednesday. Meanwhile, after tumbling $27.40 to $1,633.40 ounce in the previous session, gold futures are jumping $20.70 to $1,654.10 an ounce.

On the currency front, the U.S. dollar is trading at 109.67 yen compared to the 111.21 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0943 compared to yesterday’s $1.0882.

Asia

Asian stocks ended mixed on Thursday as lingering worries about the coronavirus pandemic prompted investors to book some profits after recent gains. The downside was capped after the U.S. Senate passed a $2 trillion relief package.

Chinese shares ended lower after two days of strong gains. The benchmark Shanghai Composite Index slid 16.68 points, or 0.6 percent, to 2,764.91 as a rise in imported coronavirus cases prompted Beijing to tighten controls to prevent a resurgence of infections. Hong Kong's Hang Seng Index fell 174.85 points, or 0.7 percent, to 23,352.34.

Japanese shares fell sharply after Tokyo Governor Yuriko Koike warned of a possible expansion of the coronavirus in the capital and urged residents to stay home this weekend.

Tokyo reported a record 41 new infections on Wednesday to bring the total to 212, while the country's total cases hit 1,300.

The Nikkei 225 Index plunged 882.03 points, or 4.5 percent, to 18,664.60 following three days of massive gains. The broader Topix dropped 1.8 percent to 1,399.32.

Heavyweight SoftBank gave up 9.4 percent after a rating downgrade by Moody's Investors Service. Fast Retailing plummeted 13.2 percent.

Apple suppler Murata Manufacturing lost 5 percent and Taiyo Yuden shed 3.8 percent after the Nikkei Asian Review reported that tech giant Apple is considering delaying the launch of its 5G iPhone by "months" due to issues related to consumer demand amid the COVID-19 crisis.

Meanwhile, Australian markets rose for a third day after the passage of a $2 trillion U.S. stimulus package. Investors shrugged off announcements by local companies of COVID-19 related job losses and weak earnings. The benchmark S&P/ASX 200 jumped 115.20 points, or 2.3 percent, to 5,113.30.

Banks ANZ, NAB and Westpac rose 1-2 percent, while Commonwealth Bank fell 1 percent. Mining heavyweight Rio Tinto surged 5 percent and smaller rival Fortescue Metals Group added 3 percent.

In the oil space, Beach Energy, Origin Energy, Santos and Woodside Petroleum rallied 3-4 percent. Oil Search shares jumped 13.6 percent.

Virgin Australia soared 16.9 percent. The airline said that more than 1,000 of the 8,000 workers asked to stand down from their jobs are likely to be made redundant.

On the other hand, building materials maker Brickworks dropped 1.3 percent after its first-half profit fell 49 percent.

Seoul stocks ended lower on profit taking after strong gains in the two previous sessions. The Kospi average slumped 18.52 points, or 1.1 percent, to 1,686.24 despite the Bank of Korea announcing it would supply an "unlimited" amount of liquidity to financial institutions over the next three months to help minimize the economic impact of the COVID-19 crisis.

Chipmaker SK Hynix tumbled 4.5 percent and pharmaceutical giant Samsung BioLogics declined 3.9 percent.

Europe

European stocks have fallen on Thursday as lingering worries about a global recession prompt traders to book some profits after sharp gains in the two previous sessions.

Weak data from Germany and the U.K. has also overshadowed optimism from a historic $2 trillion U.S. fiscal stimulus bill.

German consumer confidence is set to decline sharply to the lowest in more than a decade in April as the increase in the number of coronavirus infection cases and the accompanying measures made consumers to take cautious approach, survey data from market research group GfK showed.

The forward-looking consumer confidence index fell to 2.7 from 8.3 in March. The score was forecast to fall moderately to 7.7 from March's initially estimated value of 9.8. During the financial and economic crisis, the consumer climate index was at 2.6 points.

U.K. retail sales dropped 0.3 percent on a monthly basis in February, in contrast to a 1.1 percent rise in January and confounding expectations for an increase of 0.2 percent, data from the Office for National Statistics revealed.

While the German DAX Index has tumble by 2.7 percent, the French CAC 40 Index is down by 2.4 percent and the U.K.’s FTSE 100 Index is down by 2.1 percent.

Weir Group, a company engaged in engineering businesses, has shown a notable move to the downside after withdrawing its 2020 guidance.

Kuka AG, a manufacturer of industrial robots and solutions for factory automation, has also fallen after reporting its fiscal 2019 results.

On the other hand, electrics retailer Dixons Carphone has risen. The company has warned that it will not meet its forecast for 2019-20 profit and debt.

Drillisch has also shown a strong move to the upside. The telecommunications service provider expects revenue and earnings for fiscal year 2020 to be roughly on a par with the level of the previous year.

Shares of SMA Solar have moved sharply higher after the solar technology company reported a narrower fiscal 2019 loss and reaffirmed its guidance for fiscal 2020.

U.S. Economic Reports

Reflecting the shutdown of large swaths of the U.S. economy due to the coronavirus pandemic, the Labor Department released a report showing a record spike in first-time claims for unemployment benefits in the week ended March 21st.

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.

With the record-breaking increase, the number of seasonally adjusted initial claims reached the highest level in the history of the seasonally adjusted series. The previous high was 695,000 in October of 1982.

A separate report released by the Commerce Department showed the increase in U.S. gross domestic product in the fourth quarter was unrevised from the previous estimate.

The Commerce Department said GDP increased by 2.1 percent in the fourth quarter, unchanged from the estimate provided last month and in line with economist estimates.

The unrevised growth came as an upward revision to consumer spending was largely offset by downward revisions to federal government spending and non-residential fixed investment.

GDP growth in the fourth quarter was unchanged from the third quarter, as a downturn in imports and an acceleration in government spending were offset by a larger decrease in private inventory investment and a slowdown in consumer spending.

At 1 pm ET, the Treasury Department is scheduled to release the results of its auction of $32 billion worth of seven-year notes.

Stocks In Focus

Shares of Cheesecake Factory (CAKE) are moving sharply lower in pre-market trading on news the restaurant chain has notified landlords it will not be able to pay rent for the month of April due to a severe decrease in traffic as a result of the coronavirus pandemic.

Ford (F) may also come under pressure after Standard & Poor’s cut the auto giant’s credit rating to BB+ from BBB-, lowering the rating into junk territory.

On the other hand, shares of Micron Technology (MU) are likely to move to the upside after the chipmaker reported better than expected fiscal second quarter results and provided upbeat guidance.

Jewelry retailer Signet Jewelers (SIG) is also seeing significant pre-market strength after reporting fiscal fourth quarter results that exceeded analyst estimates.
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