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Another Spike in Jobless Claims Leads to Pullback by Futures
US Market
The major U.S. index futures are currently pointing to a higher opening on Thursday but have pulled back well off their earlier highs following the release of a Labor Department report showing another spike in initial jobless claims in the week ended March 28th.
The Labor Department said initial jobless claims skyrocketed to 6.648 million, an increase of 3.341 million from the previous week’s revised level of 3.307 million.
With another record-breaking increase, the number of seasonally adjusted initial claims reached the highest level in the history of the seasonally adjusted series.
The report said the less volatile four-week moving average also surged up to 2,612,000, an increase of 1,607,750 from the previous week’s revised average of 1,004,250.
The continued jump in jobless claims has led to renewed concerns about the economic impact of the coronavirus pandemic, overshadowing a surge in oil prices.
Oil prices have moved sharply higher after President Donald Trump expressed confidence that Saudi Arabia and Russia would resolve their price war within a “few days.”
Trump also indicated he has invited oil executives to the White House to discuss ways to help the industry, saying, “We don’t want to lose our great oil companies.”
Stocks moved sharply lower over the course of the trading day on Wednesday, extending the pullback seen in the previous session. With the drop on the day, the Dow and the S&P 500 saw further downside after turning in their worst first quarter performances ever.
The major averages climbed off their worst levels going into the close but still posted steep losses. The Dow plummeted 973.65 points or 4.4 percent to 20,943.51, the Nasdaq tumbled 339.52 points or 4.4 percent to 7,360.58 and the S&P 500 plunged 114.06 points or 4.4 percent to 2,470.50.
The sell-off on Wall Street came amid renewed coronavirus concerns after White House officials warned of nearly a quarter million deaths from the pandemic.
During a White House press conference on Tuesday, President Donald Trump warned the U.S. is facing a “very, very painful two weeks.”
White House officials are now projecting between 100,000 and 240,000 deaths in the U.S. as a result of the outbreak, which Trump previously sought to downplay.
“This could be a hell of a bad two weeks. This is going to be a very bad two, and maybe three weeks. This is going to be three weeks like we’ve never seen before,” Trump said.
The comments from the White House come as data from Johns Hopkins University shows there are more than 200,000 confirmed coronavirus cases in the U.S. and more than 4,500 deaths.
On the U.S. economic front, payroll processor ADP released a report showing a modest decrease in private sector employment in the U.S. in March, although the data does not reflect the full impact of the coronavirus-induced shutdown.
ADP said private sector employment fell by 27,000 jobs in March after jumping by a downwardly revised 179,000 jobs in February.
Economists had expected private sector employment to plunge by 150,000 jobs compared to the addition of 183,000 jobs originally reported for the previous month.
The drop was much smaller than expected but still reflects the first decrease in private sector employment since September of 2017.
ADP also noted its national employment report, or NER, only utilizes data through the 12th of the month, which is the same period the Labor Department uses for its more closely watched monthly jobs report.
“As such, the March NER does not fully reflect the most recent impact of COVID-19 on the employment situation, including unemployment claims reported on March 26, 2020,” said Ahu Yildirmaz, co-head of the ADP Research Institute.
A separate report from the Institute for Supply Management showed a relatively modest contraction in U.S. manufacturing activity in the month of March.
The ISM said its purchasing managers index dipped to 49.1 in March after edging down to 50.1 in February. While a reading below 50 indicates a contraction in manufacturing activity, economists had expected the index to show a steeper drop to 45.0.
Banking stocks moved sharply lower over the course of the trading session, dragging the KBW Bank Index down by 6.9 percent.
Substantial weakness was also visible among commercial real estate stocks, as reflected by the 6.7 percent nosedive by the Dow Jones U.S. Real Estate Index.
Utilities, chemical, oil service and housing stocks also saw considerable weakness, moving sharply lower along with most of the other major sectors.
Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index spiking by 3.1 percent despite a drop by the price of the precious metal.
U.S. Economic Reports
As mentioned above, the Labor Department released a report on Thursday showing another spike in jobless claims in the week ended March 28th.
The Labor Department said initial jobless claims skyrocketed to 6.648 million, an increase of 3.341 million from the previous week’s revised level of 3.307 million.
With another record-breaking increase, the number of seasonally adjusted initial claims reached the highest level in the history of the seasonally adjusted series.
The report said the less volatile four-week moving average also surged up to 2,612,000, an increase of 1,607,750 from the previous week’s revised average of 1,004,250.
In less closely watched economic news, the Commerce Department released a report showing the U.S. trade deficit narrowed significantly in the month of February.
The Commerce Department said the trade deficit narrowed to $39.9 billion in February from a revised $45.5 billion in January.
Economists had expected the deficit to narrow to $40.0 billion from the $45.3 billion originally reported for the previous month.
The narrower deficit came as the value of imports plunged by 2.5 percent to $247.5 billion, while the value of exports fell by 0.4 percent to $207.5 billion.
At 10 am ET, the Commerce Department is due to release its report on new orders for manufactured goods in the month of February. Factory orders are expected to inch up by 0.2 percent.
The Treasury Department is scheduled to announce the details of this month’s auctions of three-year and ten-year notes and thirty-year bonds at 11 am ET.
At 1 pm ET, Minneapolis Federal Reserve President Neel Kashkari due to speak about COVID-19 and the economy in a Virtual/Zoom “Living Room Learning” event live-streamed via Zoom.
Stocks in Focus
Shares of CarMax (KMX) are moving significantly higher in pre-market trading after the auto retailer reported fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.
Walgreens Boots Alliance (WBA) is also likely to see initial strength after the drugstore chain reported better than expected fiscal second quarter results.
On the other hand, shares of Shopify (SHOP) may move to the downside after the eCommerce company suspended its full-year guidance due to uncertainty surrounding the duration and magnitude of COVID-19.
Europe
European stocks are turning in a mixed performance in cautious trading on Thursday as coronavirus infections around the world approached one million.
While the German DAX Index has fallen by 0.3 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.4 percent.
BP Plc and Royal Dutch Shell have moved sharply higher as oil prices jumps on hopes of a truce in the Saudi-Russia oil price war.
International Consolidated Airlines Group shares have also spiked. According to the BBC, British Airways will furlough up to 36,000 staff due to the escalating coronavirus crisis.
Bouygues Group has also advanced. The industrial group said, based on new circumstances and the contribution of the construction businesses, the current crisis will have a significant impact on the group’s results in 2020.
The guidance for the group, the construction businesses and TF1 cannot be achieved, Bouygues said in a statement.
Credit Agricole has also moved to the upside as it cancelled the 2019 dividend following a recommendation from the European Central Bank
On the other hand, recruitment firm Hays has moved sharply lower after announcing it will issue £200 million worth of shares in an emergency move.
Energy and services firm Centrica has also shown a substantial move to the downside after withdrawing its 2020 adjusted operating cash flow guidance.
In economic news, Eurozone producer prices declined at a faster pace in February, data from Eurostat showed. The producer price index decreased 1.3 percent year-on-year in February following a 0.7 percent decline in January. Economists had expected a 0.8 percent fall.
Spain has shed close to 900,000 jobs, more than half of them temporary, since it went into lockdown in mid-March to fight the coronavirus outbreak, social security data showed today as the country’s death toll surpassed China’s.
Asia
Asian stocks ended mixed on Thursday as the coronavirus continued its punishing march, infecting over 937,000 people and killing more than 47,000 worldwide.
White House officials have warned of nearly a quarter million deaths in the U.S. from COVID-19, raising fears of a prolonged economic slump in the world’s largest economy.
China’s Shanghai Composite Index climbed 46.12 points, or 1.7 percent, to 2,780.64 after the country logged fewer new infections. China had 35 new cases of the disease on April 1, all of which were imported, according to the National Health Commission. Hong Kong’s Hang Seng Index rose 194.27 points, or 0.8 percent, to 23,280.06.
Meanwhile, Japanese stocks extended losses for the fourth day running as the global coronavirus death toll continued to climb and experts warned that Japan was on the brink of a medical crisis.
Tokyo reported 66 cases of COVID-19 infection on April 1, making it the biggest jump in the number of infected cases in the Japanese capital, media reports suggested.
The Nikkei 225 Index slumped 246.69 points, or 1.4 percent, to 17,818.72, while the broader Topix index ended 1.6 percent lower at 1,329.87.
Heavyweights ended mixed, with Fast Retailing losing 2.4 percent, while SoftBank advanced 2.5 percent. Subaru Corp. plunged 7.2 percent after the automaker said it would suspend global production.
Australian markets fell sharply, with banks pacing the decliners on concerns that they may cut dividends in the coming weeks.
The benchmark S&P/ASX 200 Index tumbled 104.30 points, or 2 percent, to 5,154.30, while the broader All Ordinaries Index plunged 102 points, or 1.9 percent, to 5,188.70.
The big four banks fell between 3.8 percent and 5.6 percent, while insurer Suncorp lost 4.4 percent, QBE Insurance declined 5 percent and Insurance Australia Group tumbled 3.5 percent.
Mining heavyweights BHP and Rio Tinto rose over 1 percent, while smaller rival Fortescue Metals Group rallied 3.5 percent. In the oil and gas sector, Origin Energy climbed 3.3 percent and Santos soared 5.9 percent.
Seoul stocks rallied as oil edged up and investors assessed the possibility of additional stimulus from policymakers. The benchmark Kospi jumped 39.40 points, or 2.3 percent, to close at 1,724.86.
South Korea again saw a slight decline in new coronavirus cases today, but the country remains wary of cluster infections and imported cases. According to the Korea Centers for Disease Control and Prevention, new infections hovered around 100 or fewer for the 21st consecutive day.
Consumer prices in South Korea were up just 1.0 percent year on year in March, Statistics Korea said today. That was in line with expectations and down from 1.1 percent in February.
On a monthly basis, inflation rose 0.2 percent – again matching forecasts and up from the flat reading in the previous month.
Commodities
Crude oil futures are spiking $1.96 to $22.27 a barrel after slipping $0.17 to $20.31 a barrel on Wednesday. Meanwhile, after falling $5.20 to $1,591.40 ounce in the previous session, gold futures are soaring $31.70 to $1,623.10 an ounce.
On the currency front, the U.S. dollar is trading at 107.13 yen compared to the 107.17 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0903 compared to yesterday’s $1.0964.
