The Dow erased a 200-point rally after Nancy Pelosi rejected a sizeable fiscal stimulus deal from the White House.
The Dow Jones fell on Thursday as corporate layoffs mount and jobless claims remain unacceptably high. Markets struggled for momentum after Nancy Pelosi turned down $1.6 trillion in coronavirus aid from the White House, raising doubts about her commitment to making a deal before the election.
The Nasdaq was comfortably the strongest performer among the major U.S. stock market indices, as it climbed more than 1%, while the S&P 500 and Dow Jones barely crept into the green.
U.S. economic data were mixed Thursday, as core PCE (the Federal Reserve’s preferred measure of inflation) unexpectedly rose to 1.6%. This had a minimal impact on bond yields, as investors need to see more inflation before they change their expectations around monetary policy.
Separately, manufacturing PMIs continue to indicate a struggling sector, while personal income contracted 2.7% last month.
Initial jobless claims once again demonstrated that the labor market is improving, albeit at a gradual pace. A total of 837,000 claims were filed last week, with continuing claims running above 11.5 million during the previous week.
Watch the video below for Bloomberg Markets’ take on the latest data.
A recent report from ING provided some context for the unemployment crisis by comparing it to the 2008 recession:
Initial and continuing claims remain highly elevated, underlining the strains in the jobs market – remember initial claims remained 200k above the peak level experienced during the Global Financial Crisis through the survey period. We, therefore, look for payrolls growth of 850k with the unemployment rate only moving slightly lower as job gains are offset by a rising participation rate.
Rather than the economic data, the focus has instead been on Wall Street’s dreams of additional fiscal stimulus from Congress. Unfortunately, corporate job losses are mounting again.
Disney announced 28,000 layoffs this week, while American Airlines and United are furloughing some 30,000. Insurer All-State is cutting 3,800 jobs.
With plenty of cuts already announced, Boeing just proclaimed a consolidation of its 787 construction plans in South Carolina. In doing so, Boeing will reduce staffing in Washington state.
If the goal is to pressure Congress into passing some additional fiscal relief, it doesn’t appear to be working. The United States runs on healthy consumer activity, and it’s hard to see how the recovery can continue with such a squeeze on incomes.
The White House has now offered up to $1.6 trillion in aid, but House Speaker Nancy Pelosi still appears to be holding out. Though Donald Trump is keen for a deal to boost his election chances, Senate Leader Mitch McConnell has been less eager to give the Democrats what they want.
Watch the video below for Pelosi’s explanation:
On a somewhat cautious day in the Dow 30, Walmart led the way with a 2.5% gain. Putting a large number of resources towards revamping its business, Walmart recently announced a new store design, the latest in its efforts to keep Amazon in check after its “+” service came online this year as well. Watch the video below:
Despite restriction on activity, Boeing rose 1% as investors cheer the consolidation of its balance sheet.
Apple stock climbed 0.7% and Microsoft 1%, as the tech sector enjoyed a positive day of trade.
One of the weakest performers in the Dow Jones was Chevron, falling 1.8% following a steep drop in the price of oil over OPEC production activity.