A resurgent Dow Jones Industrial Average (DJIA) slammed into a wall on Thursday after Gilead Sciences’ experimental coronavirus treatment drug reportedly “flopped” in its first trial.
The Financial Times broke the story, which triggered wild volatility across the stock market but especially in GILD – whose shares were halted.
Gilead defended the potential of remdesivir, but the incident highlights the difficulty of fast-tracking a COVID-19 treatment as the U.S. economic predicament continues to worsen.
All three major U.S. stock market indices lost ground after the remdesivir news broke and remained volatile throughout the afternoon session.
Crude oil provided another lift for the stock market. WTI futures surged 23% to $17 per barrel, while Brent rose 6% to $21.50.
With several U.S. states planning to ease coronavirus lockdown restrictions, and other nations lifting quarantine measures as well, oil consumption is expected to tick up, though the market remains deeply oversupplied.
The price of gold rallied 0.6% to just beneath the $1,750 handle.
Gilead Sciences’ hotly-anticipated drug remdesivir was the presumptive frontrunner in the race to bring a coronavirus treatment to market. Unfortunately, it appears that the first trial did not go well.
But as GILD stock collapsed into a trading halt, many analysts pushed back against the findings, including CNBC host Jim Cramer.
The Dow Jones seems immune to the increasingly-grisly U.S. unemployment situation. The government reported 4.4 million new jobless claims on Thursday. That’s technically a minor improvement on last week’s data, but it leaves 27 million Americans out of work in just five weeks.
The cumulation of all these layoffs gives rise to a very sobering thought. According to ING economist James Knightley, it’s likely that less than half of working-age U.S. adults will earn a paycheck in May.
If we assume unemployment has risen 20 million in April, that would push the unemployment rate to around 16%. An additional 10 million unemployed in May and we are looking at an unemployment rate of around 22%.
Thankfully this is below the 24.9% peak experienced in 1933, but we have to remember that one third of Americans aged 18-65 are not classified as employed or unemployed – they are students, early retirement, homemakers, carers or sick. This leads us to yet another sobering statistic – that less than half of working-age Americans will be earning a wage next month.
The Dow continues to indicate that it has priced in economic devastation on this scale. But once again, Wall Street’s nonchalant reaction to the data left some investors scratching their heads.
The painful economic data wasn’t isolated to the United States. The U.K. recorded its worst-ever PMI reading, suggesting it is enduring the worst economic downturn in centuries, according to the Bank of England.
The Dow 30 was a mixed bag on Thursday, as volatile conditions made the index a mishmash of risk-off and risk-on.
Two of the big winners were energy stocks Exxon Mobil and Chevron, who rallied roughly 3% as crude oil boomed.
Boeing (+2%) managed a slight recovery despite the fact it is being sued for $336 million over a canceled 737 MAX order.
Helping support the index was a major bounce from its most heavily weighted stock, UnitedHealth Group, which posted a 4% gain.
Apple, the next heaviest stock in the DJIA, traded mostly flat.
Last modified: June 24, 2020 1:03 AM UTC