More Americans than expected applied for initial unemployment benefits last week, news that sent stocks slightly lower as it highlighted how far the U.S. economy has to bounce back to recover from the coronavirus crisis. But that wasn’t a new realization for most investors, and stocks ended the day about where they started it.
Extending last-hour losses on Wednesday, the
Dow Jones Industrial Average
fell 40 points, or 0.2%, on Thursday. Futures had been near the break-even line before the employment news hit the wires. The
closed up less than 0.1% and the
Economists surveyed by FactSet had expected that about 1.2 million people in the U.S. would file for benefits, but the total came in at 1.508 million, still down from a revised 1.57 million a week earlier. Continuing claims were about flat at 20.5 million.
The news came as the toll of the coronavirus pandemic continues to mount. India recorded its highest one-day increase, though the number of new cases fell in Beijing. There is also concern over rising cases in multiple U.S. states, including Arizona, California, Florida, and Texas.
“Even if the recent reassuring macro data in both Europe and the U.S. combined with unprecedented stimulus plans from central bankers recently brought strong support to the bullish trend, traders now deeply fear the economic consequences a second wave could have globally,” said Pierre Veyret, technical analyst at ActivTrades.
The Bank of England said it would keep interest rates steady, but plans to expand its asset-buying program by £100 billion. May inflation was the weakest in nearly four years.
“In a world where policy support, especially of the monetary kind, will stay put for several years, we see the logic of paying more for the same set of future equity cash flows than before,” said Ajay Rajadhyaksha, head of macro research at Barclays. “We recommend being overweight equities over bonds, but picking the right sectors will be key; the easy money has been made.”
News about individual companies was moving stocks as well.
United States Steel
(X) stock fell another 13% Thursday after dropping more than 10% Wednesday,when the company said its second-quarter loss would be much wider than Wall Street expected. The latest drop is driven by news the company sold equity after the close of trading Wednesday in a secondary offering.
The offering was priced at about $8.50 a share. Large blocks of stock are often sold at a discount. The drop on Thursday has shares trading right around the offering price.
(NET) stock gained 2.6% after
upgraded shares to the equivalent of Hold from Sell. Shares jumped more than 13% Tuesday after Needham analyst Alex Henderson increased his price target to $38 from $32 a share.
(ZS) stock closed up 6.5% after Morgan Stanley also increased its rating on the shares to the equivalent of Hold from Sell. Analyst Keith Weiss covers both it and Cloudflare.