Wall Street Loses Some Zip Thanks to Mounting Job Loss, Trade Gap

Dealers in masks wait for customers before the reopening of the D Las Vegas hotel and casino on Wednesday in Nevada. (AP Photo/John Locher)

MANHATTAN (CN) — U.S. markets flattened on Thursday, capping a four-day rally, as unemployment and trade deficits both rise.

By the closing bell, the Dow Jones Industrial Average gained only 11 points for the day, with the S&P 500 and Nasdaq both losing slightly less than a percentage point. 

The drop on Wall Street coincides with new reports showing still-growing unemployment, as investors try to muscle through the second quarter. 

According to the latest numbers from the Labor Department, 1.8 million new unemployment insurance claims were filed during the week ending May 30. The number of claims in the Pandemic Unemployment Assistance program also dropped, at 623,000 new claims filed last week, down from 1.3 million the week before.

New unemployment claims have steadily dropped since March 20, when they hit 6.8 million new claims. Continuing claims increased by 650,000, however, bringing the total to 21.5 million total Americans unemployed last week. About 47 million claims have been filed since the pandemic struck in mid-March.

Investors also were treated to news from the Bureau of Economic Analysis, which reported that the trade deficit grew $7 billion in April, up from $42.3 billion in March. But the deficit was largely in line with what many economists had expected.

Wall Street has had no shortage of bad news recently, from the recent protests across America against police violence to rising tensions with China, but the market has become inured to such negative tidings. 

Further bad news on U.S.-Sino relations may weigh more on the markets soon, however, as lawmakers consider further retaliatory measures against China for its recent actions in Hong Kong.

Last week China’s congress approved a new security law that ban secession and foreign interference in the territory. The new law grants China broad, undefined powers in Hong Kong and threatens the decades-old “one country, two systems,” policy.

The measure was decried by most Western countries, as well as Japan and Australia, but some in Hong Kong welcomed the new law. Banking giants HSBC and Standard Chartered — both of which are based in the United Kingdom but have ties to Hong Kong — signaled support, with the latter saying in a statement the new law would “help maintain the long-term economic and social stability of Hong Kong.” 

The Trump administration has taken several measures against China, including the president threatening to revoke Hong Kong’s special status with the United States in terms of extradition and trade. 

Yet on both sides of the aisle, lawmakers want stronger measures taken. During a Senate Banking Committee hearing on Thursday, senators signaled support for to further punish China with tariffs, export controls and trade finance, among other areas.

Ohio Senator Sherrod Brown said President Trump’s announcement last week that the United States would no longer recognize Hong Kong’s special status was “long overdue” but a good start. “We have to make clear that China will pay a real economic price for enforcing this repressive new law,” the Democratic Brown said.

During the hearing, Lee Cheuk Yan, vice chairman of the Hong Kong Labour Party, said economic hardships may be necessary to preserve the “one country, two systems,” policy that has seemingly evaporated in Hong Kong overnight.

Pan-democratic legislator Lam Cheuk-ting, right, throws papers at Pro-Beijing politician Chan Kin-por at a meeting in Hong Kong on May 18 of the Legislative Council’s House Committee. (AP Photo/Vincent Yu)

Lee, who was arrested in February for his part in 2019 protests, said that “Hong Kong is no longer Hong Kong,” and said that the “people of Hong Kong are ready, in a way, sadly, to be ready for the economy to be hurt.”

Protests have continued in Hong Kong over the new law, and China has reacted aggressively. On Thursday, June 4, Security officers in Hong Kong fired pepper spray on protestors who had held a candlelight vigil on the 31st anniversary of the Tiananmen Square student protest.

The number of people infected worldwide with Covid-19 has grown to nearly 6.5 million, while 387,000 have died. according to data compiled by Johns Hopkins University. In the United States, 1.8 million are confirmed to have had Covid-19, while nearly 107,000 have died.

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