Dow, S&P 500 Rise More Than 4% Despite Soaring Jobless Claims
By Anna Hirtenstein, Caitlin McCabe and Chong Koh Ping
U.S. stocks rallied again Thursday, even after data showed the ranks of unemployed Americans surged in the past week, signaling that investors may still be optimistic that a $2 trillion stimulus package will help curb the economic impact of the coronavirus pandemic.
The Dow Jones Industrial Average climbed 1,117 points, or 5.2%, following news that weekly unemployment claims reached an all-time-high. The S&P 500 gained 4.9%, and the tech-heavy Nasdaq Composite added 4.1%.
Investors had been jittery leading up to the release of the latest unemployment benefits data, unsure of how severe the numbers would be. Futures tied to U.S. stocks had declined steeply earlier in the morning, yet pared their losses after it was announced that 3.28 million workers filed for unemployment benefits -- five times the previous record high.
The surge in all three indexes after the opening bell marked the third time this week that U.S. stocks opened higher, following a month of steep losses and wild turbulence as the fallout from coronavirus worsened. Even as Thursday's jobless claims revealed that the economic toll of the outbreak is as severe as anticipated, some investors were already looking ahead to the possible relief that a stimulus package approved by the U.S. Senate Wednesday could provide.
"The market was already expecting and pricing in a very large number," said Solita Marcelli, deputy chief investment officer for the Americas at UBS Global Wealth Management, referring to Thursday's jobless claims.
"The word unprecedented is used heavily these days. But I think this is an unprecedented reaction," she said of the stock rally despite the surge in jobless claims.
Gains throughout Thursday morning were broad, with all 11 sectors of the S&P 500 up for the day. Dow heavyweight Boeing Company surged 14.8% on news that the aerospace giant could receive billions of dollars of assistance from the stimulus deal.
Energy stocks also continued their climb higher, with Marathon Oil gaining 8.6%. Exxon Mobil was up 3.9%.
Still, even with news of the stimulus package, much remains uncertain. The coronavirus outbreak continues to spread in the U.S., where more than 60,000 people have been infected, leaving lawmakers struggling with the economic consequences of the pandemic. The U.S. now trails only China and Italy in the number of confirmed coronavirus cases, even as emergency measures to contain the outbreak has stalled business activity.
"The reality is that there's still a lot of uncertainty to the degree to which the virus disrupts economic activity. Markets are digesting that, " said Anthony Rayner, a multiasset fund manager at Premier Miton. "There's almost a point where the more policy makers do, whether it's monetary or fiscal, the more people panic in a way."
Federal Reserve Chairman Jerome Powell said Thursday morning that he expected economic activity to decline "pretty substantially" in the second quarter. The central bank is taking unprecedented action to help ensure economic activity can resume as soon as the coronavirus pandemic is under control, he added in a rare television interview on NBC's Today show.
The yield on the benchmark 10-year U.S. Treasury retreated to 0.799%, from 0.854% Wednesday.
In Europe, the pan-continental Stoxx Europe 600 inched higher, up 0.06%. And government bonds from debt-laden nations in the southern part of the region continued to rally Thursday after the European Central Bank began new bond purchases and signaled it would aggressively support Italy and other troubled eurozone nations.
The ECB late Wednesday "broke new ground" by giving itself significantly more flexibility on its additional EUR750 billion ($821 billion) bond-purchase program, according to Florian Hense, an economist at Berenberg Bank. Policy makers waived the limits on the share of a member state's outstanding bonds that it can buy under this particular ECB mandate, and allowed the purchase of debt with shorter maturities as well as Greek sovereign debt, Mr. Hense wrote in a note.
Meanwhile, Bank of England officials said they expect "a sharp reduction in activity" as a result of the pandemic and the measures the government has taken to contain it. The central bank kept policy on hold Thursday after an emergency cut to interest rates last week, and said it is prepared to increase the size of its bond-buying program if needed to support the U.K. economy during the coronavirus crisis.
In commodity markets, crude-oil prices fell, pushed lower by evidence that the pandemic is leading to an unprecedented decline in energy demand. Global oil consumption will fall by 10.5 million barrels a day in March, and by 18.7 million barrels a day in April, compared with a year earlier, analysts at Goldman Sachs Group said. Refineries will run out of space to store refined products within weeks, the bank added, at which point refineries will cut the amount of crude oil they buy. Brent-crude futures declined 1%.
Most major stock markets in the Asia-Pacific region closed lower. Japan's Nikkei 225 lost 4.5%. Singapore's FTSE Straits Times Index shed 1% after the country forecast that the economy could contract by up to 4% in 2020 in its first full-year recession since 2001.
The bill for the stimulus package approved by the Senate will now move to the House as Congress seeks to give American families and businesses a financial shield against the ravages of the pandemic.
"We know that governments across the board, including the U.S. now, have finally come around to supporting the real economy, individuals, corporations, with fairly large packages," said Peter Schaffrik, a global macro strategist at RBC Capital Markets. "The trouble is that we have no idea how long the entire virus lockdown situation might last."
The dollar edged down, with the ICE Dollar Index declining almost 1%, signaling that the Federal Reserve's moves to improve liquidity in currency markets is helping meet the demand and ease strains. The currency has retreated close to 2% this week as supply pressures have eased.
"The Fed has done a good job of getting us back from a bad place," said Kit Juckes, a currencies strategist at Société Générale. "Powell has reliquified currency markets, the plumbing job is going as well as could be expected."
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