Wall Street is nervous about the prospect of new coronavirus restrictions and a second slump in consumer spending.
Stocks struggled to bounce back from yesterday’s painful sell-off, and the Dow Jones suffered yet another triple-digit setback when trading opened on Thursday. It comes as the United States records its highest daily count of new virus cases.
The numbers sent shivers through Wall Street as traders began bracing for the potential of new lockdowns. Eleanor Creagh, strategist at Saxo Capital Markets, summed up the hesitation of investors.
There is real cause for concern, especially as we see hospitalizations mounting in the US, that’s of course raising the prospect of new restrictions.
We are in deep trouble.
Dow futures swung wildly overnight, falling almost 400 points before recovering ahead of the opening bell.
As of 9:41 am ET, the Dow had lost 139.88 points or 0.55% to sink to 25,306.06, extending yesterday’s big decline.
The S&P 500 and Nasdaq declined by 0.51% and 0.53%, respectively.
With a record 36,880 new cases reported across the country yesterday, traders are pulling risk off the table. It’s the highest figure since April 24th, and signals that many states have failed to contain the outbreak.
It’s not the outbreak itself, but the possibility of people staying at home, and the change in consumer behavior that worries investors. Victoria Fernandez from Crossmark Global Investments explains:
Demand is key… And that’s one of the reasons I think we saw the market selloff. Yes, we saw an increase in cases … but it’s more a fear that individuals are going to self-quarantine … and consumer demand goes back to where it was in March. That’s the biggest fear.
As for further lockdowns, there’s little appetite for wide-scale restrictions. Texas Governor Greg Abbot said the lockdown was a “last option” despite soaring caseloads. Investors are confident that we won’t see broad restrictions again. Adrian Zuercher of UBS Global Wealth Management said intervention would be more “surgical” and local.
We don’t expect a wide lockdown as we have seen a couple of months ago.
With caution setting in across Wall Street, it’s no surprise to see ‘safe have n’ gold climbing again. The rise in gold is perhaps a warning to expect more volatility and perhaps more Federal Reserve intervention. Saxo Capital Markets’ Eleanor Creagh agrees that gold might be a canary in the coal mine.
Gold is very knowing in the fact that there is not going to be a V-shaped recovery in the economy.
Creagh maintains her firm’s position that gold will break out to a new all-time high by the end of the year. That doesn’t mean she’s not bullish on stocks, though. Any pullbacks, she said, were probably blips in the overall uptrend.
Initial jobless claims are once again in focus as Wall Street evaluates the success of the U.S. economy’s attempt to grind back to life.
Economists anticipated 1.3 million new claims, but the actual data shot past estimates – again. Government statistics recorded 1.48 million new American workers on the jobless rolls – a number that remains stubbornly high despite states reopening.
But there was a bright spot in the data. Continuing claims fell by 767,000 to 19.52 million, somewhat below the ~20 million analysts expected.
“Initial and continuing claims point to gradual improvement in the labor market. Falling initial claims signal that the pace of layoffs is slowing, but it still extremely high,” said Gus Faucher, chief economist at PNC Financial.
Also on the agenda today is Nike’s earnings report, due after the closing bell tonight. The company’s fourth-quarter results should give a glimpse into consumption patterns during the pandemic.
Last modified: September 23, 2020 2:01 PM