Wall Street ended lower on Thursday following weak economic data and mounting economic and trade tensions between the United States and China. Investors are also watching closely the progress of the reopening of the U.S. economy. All three major stock indexes finished in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) dropped 0.4% or 101.78 points to close at 24,474.12. Notably, 24 components of the 30-stock blue-chip index ended in the red while 6 finished in green. The S&P 500 fell 0.8% to close at 2,948.51. The Energy Select Sector SPDR (XLE), and the Technology Select Sector SPDR (XLK) lost 1.6% and 1.4%, respectively. Notably, nine out of a total eleven sectors of the benchmark index closed in negative territory.
Meanwhile, the tech-heavy Nasdaq Composite closed at 9,284.88, shedding 1% due to the weak performance of large-cap tech stocks. The biggest loser of the Nasdaq Composite was Take-Two Interactive Software Inc. TTWO with a decline of 5.9%. Take-Two Interactive carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The fear-gauge CBOE Volatility Index (VIX) increased 5.5% to close at 29.53. A total of 10.1 billion shares were traded on Thursday, lower than the last 20-session average of 11.3 billion. Decliners outnumbered advancers on the NYSE by a 1.00-to-1 ratio. On Nasdaq, a 1.40-to-1 ratio favored declining issues.
Initial Jobless Claims Remain High
The Department of Labor reported that initial jobless claims for the week ended May 16 came in at 2.438 million, higher than the consensus estimate of 2.387 million. However, previous week's data was revised downward to 2.687 million from 2.981 million reported earlier.
Total initial jobless claims stood at historic-high 38.6 million in the nine weeks since a large part of the U.S. economy was closed due to lockdowns imposed by most of the states in order to curb the spread of the deadly coronavirus. This reflects nearly 20% of the U.S. labor force. However, out of these nine weeks, declined steadily in the last seven weeks. The latest weekly data of 2.438 million was far less than the weekly jobless claims of 6.9 million reported in late March.
Despite this positive trend, market participants remained skeptical about skyrocketing continuing claims - people who are already getting unemployment benefit. For the week ended May 9, continuing claims were 25.07 million, an increase of 2.52 million from the previous week. This record high continuing claims show that high rate of persistent unemployment in spite of the fact that states are taking increasing steps to reopen the economy.
Intensions between the United States and China Heightened
The Trump administration has criticized China's economic policies, military buildup and human rights violations. On May 20, President Donald Trump has tweeted that China’s “disinformation and propaganda attack on the United States and Europe is a disgrace.”
On May 20, the U.S. Senate cleared the Holding Foreign Companies Accountable Act. The act will make it compulsory for the Chinese companies to adhere to U.S. securities law otherwise they will be delisted from U.S. stock exchanges and will be restricted from raising money from American investors.
Other Economic Data
The National Association of Realtors reported that existing home sales declined 17.8% in April to a seasonally-adjusted annual rate of 4.33 million, its lowest in a decade. The consensus estimate was 4.36 million.
The Philadelphia Fed manufacturing index in May jumped to -43.1 from - 56.6 in April, which was the lowest level in forty years. However, any reading below zero means contraction of manufacturing activities.
IHS Markit reported that its flash PMI for the U.S. manufacturing sector increased to 39.8 in May from 36.1 in April. Moreover, the flash PMI for the U.S. services sector rose to 36.9 in May from 26.7 in April.
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