- The Dow Jones Industrial Average declined by as much as 185 points Thursday.
- All 11 S&P 500 sectors sold off at the start of trading, with energy companies leading the pack.
- Initail jobless claims came in higher than expected last week, raising doubts about the economic recovery.
The Dow and broader U.S. stock market tumbled Thursday, after higher than expected jobless claims cast doubts about the health of the post-lockdown recovery.
Dow, S&P 500, Nasdaq Slump
All of Wall Street’s major indexes reported declines, mirroring a volatile pre-market for stock futures. The Dow Jones Industrial Average declined by as much as 185 points, extending Wednesday’s sharp decline.
Meanwhile, the technology-focused Nasdaq Composite Index slumped 0.5%.
A measure of implied volatility known as the CBOE VIX continued higher on Thursday. The so-called “investor fear index” rose by as much as 6% to reach 30.49. VIX trades on a scale of 1-100, where 20 represents the historical average.
Initial Jobless Claims Rise Unexpectedly
Markets were on edge Thursday after government data showed a bigger than expected rise in weekly jobless claims.
The number of Americans filing first-time unemployment benefits totaled 870,000 for the week ending Sept. 19, up from 866,000 the week before, the Department of Labor reported Thursday. Analysts were forecasting a reading of 843,000.
It wasn’t all bad news on the labor front. The four-week average for jobless claims, which weed out week-to-week volatility, declined to 875,250 from 913,500. Americans continuing to receive jobless benefits fell to 12.58 million for the period ended Sept. 12, down from 12.747 million the week before.
Equity markets have been rallying for months on the belief that record monetary and fiscal stimulus would lead to a ‘V-shaped’ recovery. Only the stock market has seen a V-shaped recovery while the overall economy continues to struggle.
That’s because millions of Americans face permanent job losses in the wake of Covid-19. Millions of small businesses are also expected to close permanently due to shifting consumer behaviors post-pandemic.
The U.S. services economy experienced an unexpected setback in September, according to Markit. The flash U.S. services purchasing managers’ index (PMI) fell to 54.6 in September from 55.0 the previous month. Although Markit acknowledged that private business activity is picking up steam, elevated jobless claims and weaker consumer spending could impact that trend.