More than 100,000 dead from Covid-19 and increasingly tense China-U.S. relations served only as a speed bump for Wall Street’s three-day winning streak.
MANHATTAN (CN) — Following a raucous two-day rally, Wall Street remained bullish on Thursday despite rising Sino-U.S. tensions, increasing unemployment and Covid-19 deaths topping 100,000 in the United States.
The Dow Jones Industrial Average, which has gained more than 1,000 points since Friday’s closing, added an additional 180 points Thursday morning. The S&P 500 and Nasdaq had similarly positive openings, tempered only slightly by a raft of bad news.
The Labor Department’s weekly unemployment report showed that 2.1 million additional workers filed for unemployment last week. An additional 1.1 million filed for special “Pandemic Unemployment Assistance,” a new program designed to help those who normally would not qualify for regular unemployment benefits.
Though the rate of unemployed Americans getting benefits dropped last week for the first time, it is the eighth-straight week that new unemployment claims have fallen. Continuing claims fell meanwhile to 21 million, down 4 million between the weeks ending May 9 and May 16.
More than 40 million Americans have filed for benefits since mid-March, and as of May 9 nearly 31 million citizens were still claiming some form of unemployment benefit. Now that many states have begun opening up their economies, however, claims have gone down.
Following the unemployment numbers, the Bureau of Economic Analysis revised its first quarter 2020 estimate of gross domestic product downward. Last month, the bureau had estimated a 4.8% drop in GDP for the first three months of this year, but that number was revised to an even 5% drop. The revision was partly due to a decline in private inventory investment, which measures goods produced but not sold in the same year.
Another, grimmer milestone has served as a grim backdrop to Wall Street’s rally: Late Wednesday the number of deaths in the United States attributed to Covid-19 topped 100,000.
More than 5.7 million cases of Covid-19 have been reported worldwide, of which 356,000 have died, according to data compiled by Johns Hopkins University.
Investors may also start to take greater note of escalating tensions between the United States and China.
One week ago, China’s congress approved its proposal to impose new security laws banning secession and foreign interference in the territory. The vote was nearly unanimous, with only one “nay” vote compared with 2,878 votes in favor.
The new law grants China broad powers in Hong Kong and threatens to end the “one country, two systems” policy that has been in place since 1997. That policy recognized Hong Kong as part of China but allowed the city to keep its own administrative systems and capitalist economy.
The text of the new law has not yet been made public.
Protests in Hong Kong have ramped up over the last few days, though some lawmakers in the city — including Chief Executive Carrie Lam — have said the new law will not do away with the “one country, two systems” policy.
Ahead of the vote, U.S. Secretary of State Mike Pompeo declared on Wednesday that Hong Kong was no longer autonomous. “While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself,” Pompeo said.
Other lawmakers hinted at further restrictions to come, including possibly luring companies in Hong Kong back to the United States. Senator Marco Rubio, a Florida Republican and noted China hawk, tweeted on Wednesday that “it would be irresponsible for corporate CEO’s and Directors to not reconsider using #HongKong as a channel to doing business in #China.”
The State Department’s decision not to certify Hong Kong’s autonomy from China comes months after Rubio’s bill requiring annual certifications.
President Trump has promised to take “very interesting” actions against China. On Thursday, the White House announced it planned to revoke the visas of thousands of Chinese graduate students who had ties to China’s army.
Rubio, who is the new chairman of the Senate Intelligence Committee, lauded the move. He tweeted that China uses “students at our universities to steal research & advance military capabilities,” and called it a problem that “must be addressed in a targeted way while rejecting xenophobia.”
China has called the United States’ furor over Hong Kong a “nothingburger” and said the White House was “bluffing” over imposing sanctions. The United States already has taken several measures against China, including adding two dozen foreign companies to its “Entity List,” which prohibits them from exporting or transferring certain items, and scrutinizing four state-controlled telecommunications companies.
Asian exchanges had a mixed day Thursday, with Hong Kong’s market falling 0.7% and South Korea’s Kospi closing slightly down. Markets in Japan, Shanghai, and Australia all posted positive gains, with the Nikkei leading the pack up 2.32% for the day.
Analysts worry that sanctions could lead to a renewed trade war between the countries, possibly scuttling the Phase One trade deal reached earlier this year. In that deal, China agreed to purchase an additional $200 billion in products from the United States, though it is almost certainly not going to be able to meet that threshold.
The tariffs imposed on Chinese exports already hurt the U.S. economy, according to a research paper by New York Federal Reserve Bank economists posted Thursday. The 2018 trade war reduced U.S. investment growth by 0.3% by the end of 2019, and likely will reduce growth by another 1.6% off by the end of this year, the study found.