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The Dow Won’t Stop Rallying Because Wall Street Is Impervious to Pain

Last Updated September 23, 2020 1:58 PM
Francois Aure
Last Updated September 23, 2020 1:58 PM
  • The Dow Jones scored its third straight daily gain on Thursday.
  • Awful economic data releases continue to create no headwinds for a buoyant U.S. stock market.
  • Dow bulls are banking on a big third quarter, with little margin for error.

Dow bulls ignored another wave of titanic unemployment claims and a downward revision to U.S. Q1 GDP on Thursday.

Stock market momentum continues to defy an extremely precarious economic situation in the United States, and all three of Wall Street’s major indices rallied in unison.

  • The Dow rose 53.38 points or 0.21% to 25,601.65.
  • The S&P 500 bounced 0.54% to 3,052.48.
  • The Nasdaq ticked 0.45% higher to 9,454.95.

Dow Resilient as Jobless Claims & GDP Disappoint

dow jones industrial average chart, stock market today
The Dow Jones plodded toward its third straight gain on Thursday. | Source: Yahoo Finance 

Another week, another set of miserable employment data. Initial jobless claims came in at more than 2.1 million , taking the total number of U.S. layoffs since the pandemic began to roughly 40 million.

There was also a downward revision to the Q1 GDP result, which fell to -5.0% in an entirely predictable adjustment for the quarter.

Given that JPMorgan predicted a 10% contraction , there will still be some on Wall Street that view this as better than anticipated. But with the worst of the damage coming in Q2, the upcoming release is likely to be far more significant than today’s data.

Economists at ING are still expecting a whopping 40% plunge , as they explained in a recent report,

For 2Q 2020 GDP we continue to look for an annualised decline of 40%. This will be driven primarily by consumer spending and investment as lockdowns hit hard during mid-March to mid-May.

ING, jobless claims, stock market
Jobless claims continue to soar in the United States, and ING expects GDP will slide by a staggering 40% in the second quarter. | Source: Think ING 

Dow bulls are apparently completely disinterested in Q2. They’re shrugging off lockdown damage and looking ahead to what they hope to be greener pastures in Q3.

With an incredibly rapid recovery already priced in , the stakes are high for investors presiding over one of the most curious bull markets in recent memory.

Chris Beauchamp, chief market analyst at IG, is worried about how little margin for error is being priced into global stock markets . With so much evidence of lasting economic damage, the enthusiasm for a rapid recovery looks misplaced, he said in a statement shared with CCN.com:

Overall investors continue to look beyond the second quarter, hoping for growing signs of a rebound in the third quarter and a full-blown upturn in the final three months of the year.

Such hopes could be dreadfully misplaced however given the long-term hits to activity, employment and spending, and with equities continuing to recover the lost ground of February and March there is precious little room for disappointment.

As Donald Trump mounts attacks on China – along with tech giants like Facebook, Google, and Twitter – Wall Street seems exceedingly confident that the president’s tough talk isn’t going to result in any meaningful economic impact.

Dow 30 Stocks: Apple & Boeing Lead the Rally

The Dow 30  enjoyed another strong day of trade on Thursday, as broad momentum carried the index higher once again.

Apple posted a 1% rally as investors continued to discredit any worries over tensions between the United States and China.

Boeing stock rallied 1.1%. The recovery comes in the wake of massive layoffs, but with the production of the 737 MAX back underway and the money rolling in from defense contracts , investors think the aerospace giant has what it takes to weather the storm.

Disney stock came under pressure following a rating downgrade, and it was the worst-performing stock in the Dow with a loss of 3.5%.