Stocks are in the red for the fourth day in a row Thursday, as investors are shunning risk amid bleak news from Fed Reserve Chairman Jerome Powell, and brutal unemployment numbers.
As the major stock indexes head into noon, they are struggling to balance above their session lows, but are still well off from Wednesday’s close.
The Dow Jones Industrial Average was positive briefly earlier in the morning but is currently trading down about 80 pints, having lost as much as 458 points earlier in the day. The S&P 500 and Nasdaq Composite also bounced from their lows, and have lost 0.8% and just 1.1%, respectively.
Stock Index ETFs are red today as well, tracking moves in the benchmark stock indexes. The SPDR S&P 500 ETF Trust (SPY), is off by 0.8%, the SPDR Dow Jones Industrial Average ETF (DIA) is 0.5% lower, while the Invesco QQQ Trust (QQQ), which has held up slightly better than the other indexes recently, but is still in the red, is down 0.78%
“This market is still in this muddle-through zone where you’re trying to understand how difficult will this economic environment be or is there an all-clear coming soon,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, noting the S&P 500 tested the lower end of its recent trading range.
The earlier selloff to lows in the major indices was propelled by a report from the Labor Department that a total of 2.981 million Americans filed unemployment insurance during the week ending May 9, much worse than the expectation of 2.7 million new claims, according to economists polled by Dow Jones. Previous bad news like this had not seemed to jolt markets, giving analysts pause as to whether stocks are ready for a more meaningful selloff now.
With these additional unemployment claims, total coronavirus crisis numbers have reached over 36 million during the past two months, easily the largest loss in U.S. history. A record of 20.5 million jobs were lost just in April as the coronavirus pandemic shuttered the economy, driving the unemployment rate surging to 14.7%. Analysts at Goldman Sachs are now predicting this number could reach as high as 25%.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Fed Chairman Powell said Wednesday, acknowledging that more needs to be done to bolster the economy amid the coronavirus pandemic. The remarks sank the Dow and S&P 500, which lost 2.2% and 1.8%, respectively, while the Nasdaq Composite gave up 1.6%.
Meanwhile, Stanley Druckenmiller of Duquesne Family Office said Tuesday: “Risk-reward for equity is maybe as bad as I’ve seen it in my career.”
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