Posted in: Market News
Published:
May 14, 2020 11:29 AM UTC

Dow Futures on Edge as U.S. Becomes a ‘Prison’ With Lockdowns

Wisconsin Supreme Court rejects the state's stay-at-home order as lockdowns continue to cripple the biggest economy in the world
  • Dow Jones Industrial Average (DJIA) futures point to another weak day on Wall Street.
  • Wisconsin Supreme Court slapped down the state governor’s stay-at-home extension, comparing the lockdowns with a ‘prison’.
  • Traders are nervous ahead of today’s unemployment numbers.

The U.S. economy remains completely paralyzed and tempers are beginning to flare across America. That uncertainty weighs heavy on the stock market this morning, with Dow Jones Industrial Average (DJIA) futures struggling to turn positive on Thursday.

Wisconsin Supreme Court summed up the nation’s mood last night as it rejected an extension to the state’s stay-at-home order. Justice Daniel Kelly compared the restrictions to a prison.

This comprehensive claim to control virtually every aspect of a person’s life is something we normally associate with a prison, not a free society governed by the rule of law.

Analysts say this economic vice grip of lockdown is not yet accurately reflected in the stock market. Ian Harnett at Absolute Strategy Research said the weakness will trigger at least one more correction in the Dow.

We are talking about depression level unemployment. We are talking about earnings that are going to fall between 30-50% this year… It will be remarkable if this is just a one-year shock to earnings.

Dow futures flat after choppy overnight session

Dow futures point to a dead flat open on Thursday as traders struggle for direction. A bearish testimony from Fed chairman Jerome Powell was the nail in the coffin as he passed the stimulus buck right back to the White House.

Dow Jones Industrial Average (DJIA) struggles to break into positive territory on Thursday. Source: Yahoo Finance

S&P 500 futures were also flat, while Nasdaq Composite futures pushed 0.3% higher.

U.S. lockdowns: like a ‘prison’

The collective sentiment across America has shifted. Lockdown fatigue has set in and there’s a seething anger growing at the economic destruction. Elon Musk is among the most outspoken business leaders, calling the lockdowns unconstitutional.

It seems the courts agree. Wisconsin’s Supreme Court voted 4-3 to over-ride a lockdown extension.

Fatigue is also dripping into the stock markets. Investors initially priced in a snap, V-shaped recovery. But that looks increasingly less likely. Goldman Sachs says we won’t see a sharp selloff like March, but instead a slow bleed out over the coming months.

A single catalyst may not spark a pullback, but concerns exist that we believe … investors are dismissing.

WHO: The virus may “never go away”

The World Health Organization admitted that Covid-19 may never fully disappear. Instead, we’ll have to live with it. WHO emergencies expert Mike Ryan compared it to HIV which still persists today.

This virus may become just another endemic virus in our communities. This virus may never go away.

If his statement is correct, investors will have to factor in a much longer recovery.

Dow braces for another devastating unemployment report

Every Thursday, the U.S. serves up its weekly jobless claims data. More than 33 million Americans have filed for unemployment since the coronavirus outbreak began, wiping out all jobs gained since the 2008 recession.

Wall Street expects a further 3 million claims this week. Goldman Sachs now sees the unemployment rate peaking at 25% (revised up from 14%). That figure would rival the Great Depression.

[We] assume that more workers will lose their jobs and a larger share of them will be classified as unemployed.

The bank echoed what many feared: that furloughed jobs aren’t just temporary. Millions aren’t coming back at all.

This article was edited by Samburaj Das.

Ben Brown @_ben_brown

Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at benjamin-brown.uk or on Twitter at _Ben_Brown. Email ben @ benjamin-brown.uk.

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