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The Dow Skyrocketed Today – But Wall Street’s Ignoring a Brutal Risk

Last Updated September 23, 2020 2:10 PM
Francois Aure
Last Updated September 23, 2020 2:10 PM
  • The Dow Jones rose more than 300 points today.
  • Disney and Boeing posted enormous rallies, helping to support the Dow despite weakness in Apple and Microsoft.
  • Stock market bulls appear to be ignoring some worrying trends in U.S. employment data.

The Dow Jones roared higher on Wednesday, propped up by a massive rally in Disney stock and stimulus talks that are finally creaking towards a resolution.

Behind the scenes, a dreary economic reality continues to shout warnings. They’re falling on deaf ears. The stock market is seemingly oblivious to the gathering storm of joblessness in the United States.

Dow Jones Surges Despite Disastrous Employment Report

The Dow Jones Industrial Average (DJIA) was easily the top performer among Wall Street’s major blue-chip indices today.

As of 3:30 pm ET, the Dow had surged 316.83 points or 1.18% to 27,145.30. The S&P 500 and Nasdaq lagged far behind.

Dow Jones, Stock Market,
The Dow Jones surged 300 points on Wednesday ahead of Friday’s crucial jobs report. | Source: Yahoo Finance 

The S&P 500 rose 0.54% to 3,324.21, while the Nasdaq climbed 0.41% to 10,985.69.

Gold and silver rallied too, surging 1.6% to $2,054 and 4.3% to $27.15, respectively.

Economic data came in mixed on Wednesday , with most of the focus on the catastrophic ADP non-farm employment number. Economists expected 1.2 million private-sector jobs would return in July. The actual number was just 167,000. 

Business data came in firmer. The headline ISM non-manufacturing PMI figure comfortably beat forecasts (58.1 vs. expectations of 55).

Video: JPMorgan Isn’t Popping the Recovery Champagne Just Yet

Adding to a brightening picture for oil consumption, another 7 million barrels of crude burned out of the United States’ inventories. This followed a drop of more than 10 million barrels in last week’s reading.

Stock Market Bulls Desperately Need More Stimulus

After today’s ADP report, ING economist James Knightley says he’s growing increasingly “nervous” about the dire state of the U.S. economy.

While Knightley is concerned about Friday’s government employment report, he’s even more worried about subsequent months will hold.

He wrote today:

We are even more anxious about the prospects for the August jobs number – to be published 4 September – given all of this survey evidence and with the economic effects of activity restrictions increasingly biting. Moreover, high-frequency credit card data suggest consumer spending is slowing. This is likely to get worse, given the US$600/week unemployment benefit boost has ended with 30 million people experiencing a massive drop in incomes from this week.

The drop in spending is clearly tied to income disruptions, which are themselves the product of joblessness.

And with wealthy households showing no signs of wanting to pick up the slack, the next round of government stimulus has never looked more critical.

stock market, consumer spending
Wealthy households continue to tighten their wallets amid the pandemic. | Source: tracktherecovery.org 

While the wheels of progress are starting to turn on Capitol Hill, the scale of stimulus Democrats want dwarfs Republican proposals.  House Speaker Nancy Pelosi continues to demand the federal government fund a weekly $600 unemployment benefit. The White House has countered with $400. 

Trump must walk a tightrope here. There won’t be a deal if Republicans don’t make concessions, but some GOP senators have already balked at the size of their own conference’s $1 trillion proposal. 

Dow 30: Disney Stock Soars on Unexpected Profit

The Dow 30’s Wednesday leap was headlined by an unusual cast of characters.

Disney was the top performer, surging nearly 9% after a spectacular earnings report  that crushed analyst forecasts amid the most difficult quarter the company had ever seen. A surge in Disney+ subscriptions was just the icing on the cake.

Video: Cramer Is Sick of the “Dumb” Bullishness in the Stock Market

Disney wasn’t the only Dow Jones heavyweight that came out swinging. Boeing recorded an impressive 5% rally after announcing it wouldn’t seek another debt offering to boost liquidity. 

Other big winners included Raytheon (+3.7%) and Nike (+3.6%).

The session proved the Dow can still make substantial moves even when Big Tech has an off-day. Apple stock tracked sideways in late afternoon trading, while Microsoft edged around 0.3% lower.