Before The Bell
The penultimate trading session of the week on Wall Street started out to the upside yesterday. Indeed, the bulls would eventually fashion a wire-to-wire win on the day. Optimism about the gradual and very limited reopening of the nation's businesses seemed to spark the buying, even as current economic data remained problematic. On point, an hour before the start of the trading day, the Labor Department reported that 3.17 million new filings for unemployment insurance had been made in the past seven days, somewhat more than forecast.
What helped sentiment, even as layoffs were increasing, was the fact that the latest totals represented a further diminution in the weekly number. Still, this was a worrisome tally and brought the aggregate seven-week total to more than 33 million. That number equated to about a fifth of the overall workforce. Moreover, U.S. deaths from COVID-19 now have surpassed 75,000, and seem on their way to well past 100,000 by August. That caution aside, stocks roared out of the gate yesterday morning.
In fact, after a strong start, the Dow Jones Industrial Average would rise by some 420 points as the noon hour arrived. The NASDAQ, stronger all week than the other composites, would jump out to a morning-best gain of about 160 points. But that mid-session surge would represent the best levels of the day. The advance then would moderate as the afternoon progressed, with the more pronounced pullback coming in the Dow, where about half the early advance was reversed. The NASDAQ, though, would hold on to its stellar early gains.
Some of the late easing came about as investors logically worried about the just-released monthly employment report from the Labor Department (discussed below). As to the general improvement, however, which has now carried the NASDAQ into the plus column for the year to date, it is coming about on optimism about not only the pending reopening of the economy, but also on rising hopes for an effective COVID-19 vaccine and new fiscal stimulus. That said, there also is a disconnect between a flagging economy and a roaring stock market.
And at some point, something may give, but for now, the bulls are enjoying a nice rise. As to the jobs report, the latest data showed that the nation lost 20.5 million total positions last month. A drop in employment of 21.5 million had been forecast. At the same time, the unemployment rate surged to 14.7% in April. A jobless rate of 16% had been the forecast. As a frame of reference, the peak jobless ness during the Great Depression of the 1930s had been some 25%. In other aspects of the report, the labor-force participation rate fell from 62.7% to 60.2%, but wages rose sharply in the latest month.
The equity futures, up strongly before the report's release, gained further after the issuance, as the data, albeit horrific, was still better than forecast, with fewer jobs lost and a lower jobless rate than had been estimated.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
