U.S. Stocks Up as Jobless Claims Edge Lower -- Update

08/06/2020 | 03:14pm

By Caitlin Ostroff and Juliet Chung

U.S. stocks rose Thursday as the number of Americans applying for unemployment benefits came in below expectations.

The tech-heavy Nasdaq closed at a record high, increasing 1%, or 109.67 points, to 11108.07 in its fourth consecutive record close and continuing the strong run of technology giants this year. The S&P 500 rose 0.6%, or 21.39 points, to 3349.16 and the Dow Jones Industrial Average added 185.46 points, or 0.7%, to 27386.98.

Driving the trading, about 1.2 million filed new claims for unemployment benefits for the week ended Aug. 1, fewer than the 1.4 million analysts expected but still at historically high levels.

Ram Lee, president of New York-based Seven Bridges Advisors, said the dip in weekly jobless claims -- the lowest number since March -- clearly illustrated how the pandemic has moved the goalposts for what constitutes positive developments.

"We've not seen prior to this year weekly jobless numbers over about 700,000" since the 1980s, Mr. Lee said. "We've gotten used to numbers that are so large any improvement is seen as good news. But you still have a pretty meaningful contraction of GDP and a huge amount of joblessness."

The S&P 500 has risen over the past four trading sessions as investors bet that lawmakers will hammer out the terms of a new coronavirus-relief package. The White House on Wednesday moved to increase pressure on Democrats to get the deal done, saying they were prepared to walk away from negotiations and use executive actions by President Trump if an agreement isn't within reach by the end of the week. White House chief of staff Mark Meadows said Thursday Mr. Trump would take executive actions on jobless aid if talks didn't advance.

Despite lingering differences on the elements of a new relief package, many investors expect the government will come through with spending plans as economic data shows signs of a stalling recovery.

"The fact that the jobs market hasn't picked up so fast...means there is a greater chance of this fiscal stimulus getting passed," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "Even if the economy goes well, investors will still be asking for the Federal Reserve and the government to have their hands on the market."

Gains by the so-called FAANG stocks -- Facebook, Apple, Amazon, Netflix and Google parent Alphabet -- helped with market gains Thursday. Facebook, whose Instagram on Wednesday debuted a short-video feature in the U.S., gained 6.5%. Apple rose 3.5%. Big tech companies have led gains for the index for much of the year.

Their surge has led to caution on the part of some investors.

"We're advising our clients who have more than 20% of their portfolio in the leading stocks to rotate" into more cyclical stocks, said David Bailin, chief investment officer of Citi Private Bank.

Mr. Bailin said selectively buying into well-capitalized travel, retail and leisure companies makes sense because a "safety premium" afforded to the big tech stocks, seen as being relatively immune to pandemic-related developments, would wear off when the virus's course was less of a concern.

"When people can travel, they will travel. I think experiences will become more important after Covid," he said.

The S&P's communication-services sector led the index's gains, with Walt Disney up 2.5%. Daniel Loeb's Third Point LLC hedge fund on Thursday told clients it had taken a stake in Walt Disney Co. in the second quarter. The letter said Disney's sell-off this year amid the pandemic overlooked that the virus could accelerate Disney's streaming plans--its "biggest market opportunity ever."

The index's health-care sector, meanwhile, declined.

Lisa Wheatley, portfolio manager of NicHealth, the healthcare strategy of Nicholas Investment Partners in the San Diego area, said an executive order on increased production of medical gear and supplies in the U.S. from President Trump expected to be signed Thursday could antagonize China as well as increase costs to U.S. consumers of generic drugs.

"This is early stage, but there's a little skittishness over whether this is the start of the traditional rhetoric over healthcare you expect in an election year," Ms. Wheatley said.

Among the day's big movers, shares in Bristol-Myers Squibb rose 2.7% after second-quarter profits beat consensus estimates. Shares in GoDaddy gained 6% after the web hosting and domain-name registration company reported fiscal second-quarter revenue that exceeded Wall Street estimates.

In Asia, major markets ended the day on a mixed note. The Shanghai Composite gained 0.3% by the close of trading, while Hong Kong's Hang Seng fell 0.7% and Japan's Nikkei 225 index dropped 0.4%.

Gold gained 1% to $2,051.50 a troy ounce, putting its advance this year at 35% as the precious metal, considered a haven asset, continued to draw risk-averse investors.

In bond markets, the yield on the 10-year Treasury edged lower to 0.535%, from 0.541% Wednesday. Yields fall when prices rise.

The British pound ticked up 0.3% against the U.S. dollar after the Bank of England held its benchmark interest rate steady and said negative interest rates may not be the right tool to spur faster activity. Policy makers projected that the U.K. economy will take until the end of next year to make up the ground lost during the coronavirus pandemic.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Juliet Chung at juliet.chung@wsj.com

  

Corrections & Amplifications

This article was corrected on Aug. 18, 2020 to show that the yield on the 10-year Treasury closed at 0.535% on Aug. 6. The original version misstated the closing price as 0.538%.

 

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