Before The Bell
The Labor Department, as is its practice on Thursday morning, just reported that in the latest week, new jobless filings totaled 885,000. That compared with an upwardly revised figure of 862,000 for the prior seven-day stretch. The high level of unemployment claims reflected a weakening in the U.S. economy down the homestretch of 2020 as a result of the late-year surge in COVID-19 cases and the resultant threat of local and regional business closures. Continuing, or long-term, claims eased, however, and housing starts and building permits, already strong, edged up a bit further. The most forward-looking number, the weekly claims tally, though, was worrisome and bodes ill for growth in the months ahead.
Of course, it is more than just the unemployment situation that is affecting sentiment. So with Congress seemingly on the cusp of passing a modest stimulus package (see below) and with vaccine news continuing to be supportive, the stock market should be able to hold recent strength and still bring about a Santa rally. All told, as traders get ready to commence a new day on Wall Street, the early signs points to a solidly higher opening this morning, with the S&P 500 and the NASDAQ poised to start the day at intraday record highs.
Meanwhile, on the economic front, there were three key news stories yesterday--two positive and one less upbeat, that affected trading on Wall Street. On the plus side, there was the Federal Reserve's latest pledge to support the economy coming out of its latest FOMC meeting, which adjourned in the afternoon. Second, there were indications of progress in U.S. fiscal stimulus negotiations, with a so-called bipartisan aid deal seemingly just days away. The leaders of the respective parties now seem on board, at least.
On the negative side, there was more dour news on the economy, as the Commerce Department reported a steeper-than-expected decline in U.S. retail sales during November. In all such spending plunged by 1.1% last month, or more than three times the expected 0.3% dip. Again, the virus was pivotal in the contraction. At the very least, this sales data bodes poorly for fourth-quarter GDP growth, which may have trouble ascending low single-digit percentages.
As to the stock market, the latest session started out somewhat lower and then weakened until the Federal Reserve's meeting concluded. Then, the reassuring statement by the lead bank sufficiently calmed nerves for the Dow Jones Industrial Average, which had been off by 120 points, to turn moderately higher. That token advance would continue until the final minutes of the trading day when selective selling ensued and eased the blue chips into a closing loss of 45 points. The NASDAQ, aided by strength in tech ended up 63 points.
Finally, looking ahead on the economic calendar, the Conference Board will be issuing its report on the Leading Economic Indicators tomorrow morning.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
