Stock ETFs Trade Lower Amid Poor Initial Claims Data | ETF Trends

Stock markets and index ETFs are in the red on Thursday, following disappointing initial claims data and a continuing increase in coronavirus infections.

Stocks traded lower after making new highs in the overnight futures session amid news that the Labor Department revealed Thursday that initial jobless claims reached 1.416 million for the week ending July 18, the 18th straight week in which initial claims tallied over 1 million. The weekly claims also increased for the first time in almost 4 months, which happened to be the same week that was utilized by the government to conduct the survey for the monthly employment report.

The Dow Jones Industrial Average lost 0.34% while the S&P 500 shedded 0.32% as of 1 pm EST after both indexes looked to register gains based on overnight futures trading. The Nasdaq Composite is still struggling with heavier losses, down over 1% Thursday.

Stock index ETFs are trading in the red along with their underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), are slightly negative in early afternoon trade Wednesday, while the Invesco QQQ Trust (QQQ) is off by nearly 2%, looking to finish its third day down in a row.

The number of individuals continuing to collect state unemployment benefits dropped by 1 million to 16.2 million for the week ending July 11, but that data is delayed by one week. The coronavirus makes some of this data difficult to reconcile, however, say economists.

“They [claims]were coming down for a while in April and May and they were leveling off in June, and that’s persisted to mid-July,” said Kevin Cummins, chief U.S. economist at NatWest Markets. “There’s kind of a disconnect between the employment report and these layoff numbers. … They’re more suspect because of Covid.”

Collectively, 31.8 million people were receiving benefits in all programs, as of the July 4 week. “The added benefit stuff is a reminder that the labor market is very weak right now,” said Cummins. “There are other high frequency data, and some of those suggest a significant slowdown in payroll growth in July. It will probably be pretty close to flat for the month.”

The coronavirus continues to ravage the economy and country, with Florida and California both being hit especially hard.

“It looks like things aren’t getting better. These numbers are just too great,” said Chris Rupkey, Chief Financial Economist at MUFG Union Bank. “If it’s still recovering, it’s not going at a very fast clip. There are just too many people losing their jobs to think jobs are going to rise in the payroll numbers. It fits hand in glove with the spread of the coronavirus in the South and West.”

For now, analysts remain concerned that the labor market may struggle and that additional stimulus is needed, with unemployment set to expire shortly.

“We’re going to need to see continued improvement in the labor market,” added Cummins. “There’s a concern that if we level off here or even slip, that’s an issue for a sustainable recovery, and it increases the chances for a double-dip. This only makes the case, if there’s any hesitation, that there’s needed stimulus right now. The economy is not healthy and we need to get it back to a healthy state.”

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