The U.S. stock market secured another strong advance on Thursday, despite an economic bombshell of historic proportions. The Dow Jones Industrial Average (DJIA) soared nearly 500 points after this morning’s jobless claims revealed a further 6.6 million unemployed.
A gut-wrenching 16 million Americans have now filed for unemployment over the last three weeks. The figures came in just shy of JP Morgan’s 7 million estimate but way higher than the consensus 5 million. Beth Ann Bovino at S&P Global Ratings declared a full-blown recession.
These dismal numbers suggest another record-breaking April jobs report … America is now in recession and as it appears to deepen, the question is how long it will it take before the U.S. recovers.
Some investors think the stock market, which has climbed 25% from its March 23rd bottom, is in denial. Mark Cuban said he’s “surprised” at the relief rally and doesn’t think traders understand how deep this could go.
The Dow Jones recovered from a wildly-volatile futures session to soar at the opening bell. By 9:50 am ET, the DJIA had rallied 452.75 points or 1.93% to 23,886.32.
This week has been marked by a strong relief rally as stocks bounce off the March 23rd lows, and the S&P 500 and Nasdaq rose in tandem with the Dow.
At last check, the S&P 500 was up 1.88%, while the tech-heavy Nasdaq had gained 1.45%.
Thursday’s jobless claims report has become a weekly fixation since America implemented strict coronavirus lockdowns. The policy has plunged the country into an unemployment crisis worse than the 2008 Great Recession.
With 15 million claims in three weeks, the crisis dwarfs the levels we saw in 2008/2009. The total number is likely to hit 20 million by the end of April and Bovino at S&P Global Ratings predicts it will impact 15% of American workers before the crisis resolves. Bovino said we’ve never seen anything like it.
It’s unbelievable that I am saying this. It’s mind-boggling.
Despite the horrific numbers, the true impact is likely even higher. Reports show that gig workers and the self-employed are struggling to make claims. Although the welfare support has been extended to them, many states have been slow to update their website and claims process. The result is many thousands unable to claim yet.
The figures reported each Thursday are also revised the following week. In recent weeks we’ve seen the figures revised up to reflect the true scale of the damage.
As many as 50 million total jobs are vulnerable during the coronavirus lockdown crisis. These are described as non-essential roles that cannot be performed from home. For example, hospitality, service, retail and construction. As the crisis drags on, company cash flow is disappearing, making layoffs even more likely. Globally, the number of impacted workers is 2.7 billion.
Anecdotally, some unemployment offices say they are fielding up to 500 calls every hour.
All this brings us back to the stock market. Despite the devastating numbers, the stock market remains firmly in ‘relief rally’ mode, stubbornly pushing higher into today’s open. Investor and Dallas Mavericks owner Mark Cuban thinks the bulls are in denial.
I’m surprised. I think this is kind of buy the rumor and potentially we sell the news when reality sets in. I think people are naturally optimistic right now in terms of the market. I just don’t think they are really factoring in what we are going to see on the other side.
As CCN Markets reported, Cuban was a buyer two weeks ago near the bottom of the initial crash. He claims he hasn’t bought any stocks since and is now building a cash position in readiness for the next drop.
This article was edited by Samburaj Das.
Last modified: April 9, 2020 1:52 PM UTC