Dow Fights Gravity as Unemployment Metric Spirals to 10-Month High

• The Dow fought to moderate gains on Thursday.
• Data continues to provide a confusing picture of the US economy.
• US unemployment claims dropped from a 2-year high, but a less volatile metric is still moving in the wrong direction.

The Dow Jones betrayed a lack of conviction on Thursday, and the US stock market clung tightly to its previous day levels as investors ignored the impeachment circus and digested mixed economic data.

Dow Claws Higher, Recouping Yesterday’s Losses

Wall Street’s three major indices plodded toward moderate gains this morning, positioning the Dow Jones Industrial Average and S&P 500 to recoup yesterday’s losses.

As of 9:35 am ET, the Dow had jumped 66.23 points or 0.23% to trade at 28,305.51.

The S&P 500 climbed 4.68 points or 0.15% to 3,195.82.

The Nasdaq, the only one of the three indices to close higher on Wednesday, extended its winning streak. The tech-heavy index increased 17.35 points or 0.2% to 8,845.08.

US Jobless Claims Data May Be Less Bullish Than Headlines Suggest

Stock market analysts didn’t expect the impeachment saga to have much of an impact on the Dow, and now that Donald Trump has become just the third president to be impeached, their predictions have been vindicated. Barring an unexpected development, the Senate will swiftly acquit Trump after the House sends the articles of impeachment to the Republican-controlled legislative body.

For Wall Street, it’s mostly white noise – at least right now – and a steady diet of economic data releases gives investors enough to chew on without having to turn their attention to Washington. On Thursday, the economy served up two important data releases, both of which presented a mixed narrative.

US jobless claims unexpectedly surged to a two-year high (252,000) last week, so investors closely monitored this morning’s data to discern whether that spike was an outlier – a quirk of the holiday calendar – or the start of a worrisome trend.

Today’s reading came in somewhere between those two poles. Initial unemployment claims declined substantially to 234,000, but the decrease was smaller than economists expected (225,000).

Moreover, the four-week rolling average – which is a far less volatile metric – rose to 225,500, a 10-month high. Continuing claims also increased, edging up by 51,000 to 1.72 million.

Even those data points can be deceptive, however. While the four-week average of US jobless claims may be at a 10-month high, that still puts them close to a 50-year low.

Then again, raw job creation statistics ignore the quality of those jobs. As Daniel Alpert and Robert C. Hockett of Westwood Capital and Cornell Law School pointed out in a Thursday morning op-ed, the jobs market has technically expanded, but more and more Americans find themselves working fewer hours at jobs that don’t pay all that well.

That trend largely aligns with the rise of the US services sector and the ongoing decline of US manufacturing. Services began swallowing up the economy long before the US-China trade war began, although a barrage of trans-Pacific tariffs didn’t help matters much.

Dow Bulls Must Reckon with Scattershot Manufacturing Data

Now that the US and China have agreed to an armistice, Dow Jones bulls remain hopeful that manufacturing’s forecast will brighten. But the data continue to point to a scattershot recovery.

Today’s Philly Fed Manufacturing Index reading came in at just 0.3, indicating conditions that are improving every-so-slightly (0.0 indicates a neutral climate).

Economists had predicted that this monthly survey of mid-Atlantic manufacturers would print an 8.1 – far better than the actual reading. And even that prediction implied a decrease from November’s reading of 10.4.

Still, there was good news buried beneath the dismal headline, including an increase in new orders (though the future new orders index declined).

The Empire State Manufacturing Index also missed estimates this week, printing a 3.5 on Dec. 16, compared to a consensus forecast of 5.1. Nevertheless, IHS Markit Flash Manufacturing PMI more or less confirmed predictions that the sector was recording moderate growth, at least at the national level.