U.S. Stocks Waver After Jobless Claims Fall
August 13 2020 - 10:27AM
Dow Jones News
By Anna Hirtenstein
U.S. stocks slipped Thursday, pulling back after a recent rally,
after data showed fewer Americans applied for jobless benefits,
potentially signaling that the pace of recovery in the labor market
is starting to pick up.
The S&P 500 fell 0.1% to 3376, a day after the benchmark
U.S. stock index climbed within a hair of its first record close
since the coronavirus pandemic disrupted the economy. The index had
risen in eight of the past nine sessions through Wednesday.
The Dow Jones Industrial Average slipped 0.3%, while the
tech-heavy Nasdaq Composite Index rose 0.4%. Overseas, the
pan-continental Stoxx Europe 600 slipped 0.6%.
Initial jobless claims fell to 963,000 in the week ended Aug. 7,
ending a 20-week streak of results above 1 million. This compares
with the previous week's 1.186 million applications for
unemployment benefits, indicating a moderate decline and coming
below economists' estimates of 1.1 million. However, it is also
more likely that the layoffs occurring now are permanent, in
contrast to the temporary layoffs and furloughs at the onset of the
pandemic.
Investors are concerned that the expiration last month of the
extra $600 in weekly unemployment benefits is likely to leave less
money in workers' pockets and dent consumer spending, becoming a
drag on the economy. The pace of change in weekly claims is being
closely scrutinized as an indicator of the speed of the economic
rebound, said Sebastian Mackay, a multiasset fund manager at
Invesco.
"The U.S. labor market has had an enormous shock and is
recovering very slowly," Mr. Mackay said. "My base case is a
gradual fall in the initial jobless claims. The direction of travel
for the economy is recovery, but it's quite slow in the labor
market."
Dimming prospects for the quick introduction of a fresh stimulus
package are also weighing on investor sentiment. A standoff between
lawmakers showed no signs of easing Wednesday, and negotiations may
be stalled until next month. House Speaker Nancy Pelosi said the
two sides remain "miles apart," and the Democrats would only resume
talks if Republicans agree to spend significantly more than $1
trillion.
Federal Reserve officials on Wednesday once again urged the
government to press ahead with additional spending to bolster the
economy. San Francisco Fed President Mary Daly said additional
relief to state and local governments would be important to prevent
deeper cutbacks in services and layoffs of public workers.
The economy may take a bigger hit because of the difficulty some
states are encountering in controlling the outbreak, and that may
require more government spending, Boston Fed President Eric
Rosengren said. The U.S. reported nearly 56,000 new coronavirus
cases, the highest daily tally in four days. While the data
suggests only about a fifth of states are seeing an increase in
cases, some are seeing declines in testing.
Yields on 10-year Treasury notes ticked up to 0.686%, from
0.669% on Wednesday, which saw bond investors absorb a $38 billion
auction of new 10-year notes. On Thursday, the government is
scheduled to offer $26 billion of 30-year bonds at about 1 p.m. ET,
wrapping up a week that will see the U.S. raise $112 billion.
In commodities, gold pulled back 0.1% to $1,946.70 a troy ounce
as the volatility seen in recent days continued. This week's stint
of choppy trading paused a monthslong rally that took the precious
metal to an unprecedented high.
"We keep gold because there are still uncertainties, real rates
are low, inflation may be higher than expected," said Luc Filip,
head of private banking investments at SYZ Private Banking. But the
short-term potential for a rally in gold has now reduced, he said.
He sold down part of his portfolio's gold holdings two days ago to
book profits.
U.S. crude-oil prices fell 0.4% to $42.49. The International
Energy Agency on Thursday projected a deeper rout in oil demand for
2020 than previously forecast because of the high coronavirus case
numbers in several major economies.
Among individual stocks, shares of networking-equipment company
Cisco Systems tumbled 11% after it gave earnings guidance for the
current quarter that was below analysts' predictions. Its chief
financial officer, Kelly Kramer, also stepped down.
In European equities, German industrial company Thyssenkrupp
plunged 16% after it posted a $803 million loss for the quarter.
Aegon, a Dutch provider of financial services, declined 14% after
it more than halved its dividend.
In Asia,the Shanghai Composite Index and Hong Kong's Hang Seng
Index both closed almost flat. Japan's Nikkei 225 rose 1.8% after
the central bank's producer-price index, which measures
manufacturing costs and inflation, came in above expectations for
July.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
(END) Dow Jones Newswires
August 13, 2020 10:12 ET (14:12 GMT)
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