U.S. Stocks Eke Out Gains Despite Latest Grim Economic News
The Dow Jones Industrial Average and other major indexes advanced, recovering some lost ground as world leaders take tentative steps to reopen economies hammered by the coronavirus.
Investors weighed the latest batch of corporate earnings and economic data showing yet again how the coronavirus and associated shutdowns are taking a bite out of U.S. economic activity.
U.S. stocks wavered between positive and negative territory on Thursday before closing generally higher. Investors weighed the latest batch of corporate earnings and economic data showing yet again how the coronavirus and associated shutdowns are taking a bite out of U.S. economic activity.
More than five million people filed initial claims for unemployment benefits in the latest week. Separate data on the U.S. housing industry showed major slowdown across all regions of the country.
The Dow Jones Industrial Average closed up 33 points, or just over 0.1%, while the S&P 500 added 0.6% and the Nasdaq Composite rose 1.7%. Health care, technology, and consumer discretionary shares were the day’s gainers, while energy and financials stocks fell.
The incoming economic data could hardly be worse, but investors were expecting another high jobless-claims number. In the week ended April 11, 5.3 million Americans filed initial claims for unemployment insurance, bringing the total number of people newly unemployed over the past month to more than 22 million, according to the Labor Department. The latest figure compares with the 5.5 million economists had expected, and the record of 6.6 million set in the prior week.
The Labor Department also said that the advance, seasonally adjusted insured unemployment rate for the week ending April 4 rose to 8.2%, from 5.1% in the prior week. In the housing market, builders began construction on 22% fewer homes in March than in February, according to the Census Bureau.
Stock indexes were mixed overseas as well: Japan’s Nikkei 225 closed down 1.3% and China’s Shanghai Composite ticked up 0.3%. The Stoxx Europe 600 index rebounded slightly from its biggest single-day loss in nearly three weeks on Wednesday, rising 0.6% on Thursday. The German DAX ticked up 0.2%, the French CAC 40 slipped 0.1%, and the U.K.’s FTSE 100 index gained 0.6%.
Several leaders in Europe, which was hit by the coronavirus earlier than the U.S., revealed additional tentative steps to reopen their economies. German Chancellor Angela Merkel said small stores will reopen on Monday and some schools will restart in May.
“We see three lessons from their experiences,” said economists at Goldman Sachs. “First, initial reopening timelines often prove too optimistic. Second, even countries at the forefront of reopening have gradual and conservative plans. Third, recovery is easier and quicker in manufacturing and construction than in consumer services.”
President Donald Trump is due on Thursday to announce guidelines to begin the process of reopening the country.
“The plans to reopen the country are close to being finalized, and we will soon be sharing details and new guidelines with everybody,” he said during a Wednesday press conference at the White House. “I will be speaking to all 50 governors very shortly. And I will then be authorizing each individual governor, of each individual state, to implement a reopening and a very powerful reopening plan of their state at a time and in a manner as most appropriate.”
Haven assets mostly gained ground on Thursday. The yield on the 10-year U.S. Treasury note dropped 3 basis points, or hundredths of a percentage point, to 0.609%, as the price of the securities rose. The U.S. Dollar Index (DXY)—which measures the greenback against a basket of other currencies—gained 0.6%. And the price of gold spent most of the day in the green before dipping into the red in the late afternoon. It closed down 0.7% to $1,715 an ounce, after having been up as much as 1.6% on Thursday.
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Stocks in the energy and transportation industries continued to fall.
Benchmark crude-oil prices fell 0.5% to $19.77 a barrel, and stocks of oil companies remained under pressure. Occidental Petroleum (OXY) shares fell 10.4%, adding to a 67% year-to-date drop, and Exxon Mobil (XOM) stock closed down 3.3%. The sector has been battered by tumbling demand and a market-share war between major oil-producing countries.
Airline shares have likewise suffered this year as plane travel world-wide has practically ground to a halt. On Thursday, investors continued to digest plans for government aid for the industry. United Airlines Holdings (UAL) shares fell 11.5% and American Airlines Group (AAL) stock lost 9.9%. Both more than undid gains achieved on Wednesday.
Other stocks were moving in response to their companies’ quarterly earnings reports, rather than stampeding higher or lower in response to shifting sentiment—a sign of a tentative return to normalcy in financial markets.
Bed Bath & Beyond (BBBY) stock soared 18% after easily beating Wall Street profit estimates on Thursday morning. The company reported 38 cents in fiscal fourth-quarter earnings per share, versus the 26 cents analysts expected. Same-store sales decreased 5.6% in the fourth quarter, a smaller decline than Wall Street expected. The stock dropped 17.3% Wednesday, leaving it down 74% year to date as of the close of trading.
The investing giant BlackRock (BLK) reported $6.60 in per-share earnings Thursday morning. The Street was expecting a result of about $6.40 a share. Despite the turmoil in markets, the company took in $35 billion in new money during the quarter. Shares rose 3.5% in Thursday trading.
Morgan Stanley (MS) stock rebounded from a greater loss to close just 0.1% down. Its earnings report on Thursday morning echoed the gloomy sentiment expressed by several other banks over the past few days. The company’s CEO, who recently recovered from Covid-19, said he expects the virus to “adversely affect” Morgan Stanley and compared the environment to that seen during the financial crisis. Like other banks, Morgan Stanley set aside funds to cover expected loan losses, reducing its profits.
Finally, Abbott Laboratories (ABT) stock jumped 5.7% to an all-time high after it beat first-quarter earnings and sales estimates, but suspended its financial forecasts for the rest of the year. Trump has heralded Abbott’s on-site coronavirus diagnostic kit, which can produce a result in less than 15 minutes.
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