It was a quiet day for the Dow Jones, which traded virtually flat in the aftermath of another horrific jobless claims number. And the next unemployment report could make for stomach-churning reading.
Economists anticipate an unemployment rate as high as 14%. This would mean that the U.S. economy had erased more than a decade of job gains in just four weeks.
The Dow Jones was the weakest of the three major U.S. stock market indices, and it traded lower while the S&P 500 and Nasdaq clawed to slight gains.
In the commodity sector, the price of oil continues to face severe pressure. Crude once again found itself beneath the $20 level, which placed additional stress on the stock market.
The price of gold briefly rocketed to a fresh yearly high, before a wave of dollar strength bashed the precious metal back down to $1,735.
Confirmed coronavirus cases spiraled past 650,000 in the United States, and New York Governor Andrew Cuomo extended the state’s stay-at-home order through May 15.
While highly expected, the governor’s concern about the “lack of wiggle room” in the data demonstrates the risks of reopening the economy too early.
Despite this, preparations continue at a rapid pace in the White House. The Trump administration is finally considering options to do massive the nationwide testing that U.S. experts have been advising is necessary for weeks.
All eyes were on U.S. economic data today, as the hotly anticipated initial jobless claims numbers were released alongside another miserable manufacturing report.
The good news is that claims were not as bad as last week. The bad news is that another 5.2 million Americans are without work, taking the four-week total to roughly 23 million.
Such high levels of unemployment are a major threat to the Dow and broader stock market. Vulnerable households will inevitably cut back on spending and miss debt payments.
Economist James Knightley at ING believes that there will be some tough reading in the April jobs report when it releases in two weeks. Virtually all of the job gains accrued since the Great Recession have likely been erased.
Given some people will have found work and the fact there will need to be some working day and seasonal adjustment to the raw figures, we tentatively estimate payrolls will fall by around 15 million with the unemployment rate hitting 14%. This would mean all the jobs gained since 2009 have been lost in the best part of a month!
Up to this point, the stock market has been remarkably resilient against the rising tide of dire economic reports, likely due to optimism that the recession will leave as quickly as it arrived.
But Knightley warns that the devastating contraction (-56.6) in the Philadelphia Fed manufacturing index is bad news for those hoping for a quick rebound in hiring.
The worry here is that business will end up cutting costs despite government and Federal Reserve support programs – this is bad news for capex and also jobs meaning that awful labor market data will subside only slowly.
It remains to be seen if investors will be able to put on a brave face if a decade of progress has evaporated.
On a mixed day in the Dow 30, things could have been much better, were it not for the rough performance of Boeing.
The U.S. aerospace giant lost around 7.5% as volatility continued to rock the airline industry. Currently trading beneath $135 per share, uncertainty remains about the future of the air travel, which likely faces a new reality after the coronavirus lockdowns end.
Struggles for the price of crude oil continue to be a problem for oil giant Chevron, and the energy company lost a sizable 2%.
UnitedHealth Group was the Dow’s top performer, rising 5%.