Wall Street Marks Bleak Jobs Report and Soaring Virus Numbers

Markets failed to regain losses from Wednesday as new unemployment claims remain stubbornly high along with cases of Covid-19. 

A traveller checks in with an agent at the counter for Alaska Airlines in the main terminal of Denver International Airport on Monday. (AP Photo/David Zalubowski)

MANHATTAN (CN) — Unemployment claims continue to drop, but the incremental decreases have slowed to a trickle.

The Labor Department reported Thursday morning that 1.48 million new unemployment claims were filed for the week of June 20, slightly higher than what many economists had predicted. About 48 million claims have been filed since the lockdowns began in mid-March.

Continuing claims did drop again, but barely. During the week ending June 13, more than 19.5 million Americans continued to file state unemployment claims, compared with 20.2 million the previous week and 20.6 two weeks earlier. 

As with last week’s unemployment data, markets reacted negatively, failing to recover from Wednesday’s sell-off.  At the morning bell, the Dow Jones Industrial Average dropped 120 points, a 0.4% decrease, while the S&P 500 and Nasdaq remained flat.

Many experts had chalked up this week’s drop in equities to the worrying trend of increasing Covid-19 cases worldwide and statements by Dr. Anthony Fauci that the uptick was “disturbing.”

To date, more than 9.4 million people have been infected by Covid-19 worldwide, while nearly 483,000 have died, according to data compiled by Johns Hopkins University. In the United States, 2.3 million people have contracted Covid-19, while about 122,000 have died.

On Wednesday the United States hit a new highest nationwide total of new cases, with more than 37,000 reported, according to a tally by The New York Times. Most of the new cases were attributed to various Southern and Western states reopening on Memorial Day, health experts have said. 

The spike in cases has caused New York, New Jersey and Connecticut to impose a 14-day quarantine on travelers from other states with infection rates of more than 10 per 100,000 residents over a week-long period.

President Trump reportedly will not abide by the quarantine rules when he visits his golf club in Bedminster, New Jersey, this weekend.

The renewed crisis is not limited to the United States. The European Union is mulling whether it should extend a ban on travelers from the United States, and will likely issue a recommendation before July 1.

Yet some analysts think the sharp losses on Wall Street is less a reaction to the increasing Covid-19 cases and instead could indicate more bad news to come.

“The headlines about Covid spread did not help, to be sure, but anyone with access to the internet and a ruler could have seen that coming,” Nicholas Colas and Jessica Rabe at DataTrek Research wrote in a Wednesday evening note. “We do wonder, however, about what the market may have learned about the upcoming Federal Reserve bank stress tests.”

The annual stress tests, which were implemented by the Federal Reserve after the Great Recession, examine the strength of financial institutions’ balance sheets under a variety of situations. Those test scenarios now include the coronavirus pandemic.  

The Federal Reserve will release aggregate results for more than 30 banks after the markets close on Thursday, though individual banks may not release their own results until June 29.

Federal Reserve Chairman Jerome Powell and officials from the International Monetary Fund have said the financial crisis of 2008–09 strengthened banks’ balance sheets and helped them enter the Covid-19 downturn with additional liquidity.

“Keep in mind, in the last stress test, an adverse scenario included a jobless rate of 10%, so things are far worse now,” warned David Madden, a market analyst at CMC Markets early Thursday morning. “In April, the major U.S. banks set aside roughly $25 billion for bad debts, so the system is set to be under huge pressure.”

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