- Dow Jones Industrial Average (DJIA) turned positive on Thursday morning.
- China claims the much-feared second wave outbreak in Beijing is now ‘under control.’
- Traders await Thursday morning’s jobless claims data.
U.S. stock futures took a turn higher on Thursday morning after spending most of the overnight session in the red. Dow Jones Industrial Average (DJIA) futures were seen as much as 87 points higher in early trading.
The spike came after a breaking report out of Beijing this morning. Despite recent fears of a second outbreak in China’s capital, health authorities say the spread is ‘under control.’ The statement came from Wu Zunyou, the chief epidemiologist of China’s Center for Diseases Prevention and Control.
However, today’s jobs data could bring the stock market back down to earth. Continuing claims are expected to remain stubbornly high suggesting that many ‘temporary’ layoffs are in fact permanent.
Dow futures flip higher on Thursday
After spending most of the Asian session underwater, Dow futures flipped positive in a strong 400-point recovery. At 5.48 am ET, the index was 0.09% higher. It continues a strong week for the U.S. stock market.
We won’t shut down again
Fears of a second wave outbreak have rattled the stock markets since Beijing’s report earlier this week. Rising cases in the United States also prompted fears of resurgence. But experts are increasingly downplaying the likelihood of a second lockdown. Speaking about the rising numbers in Texas, former FDA Commissioner Scott Gottlieb said:
We need to find the source of the spread. We’re not going to shut down the country again. There’s no appetite for that among the people or the political class. And we shouldn’t have to, because we have better testing in place.
He noted that there was a strong rise in hospital admissions between the ages of 20-30. That’s strong evidence that the outbreak is spreading in bars which re-opened this month. Rather than lock down huge swathes of the country, he said, we can take a more targeted approach.
This will likely calm investor fears and avert another selloff in the financial markets.
Stock market focus shifts to jobs
One thing that could jolt the U.S. stock market today, however, is jobs data. As usual, Thursday’s jobless claims data hits the wire at 8.30 am ET. What can we expect? Lou Crandall, chief economist of Wrightson ICAP, is nervous.
There is still a steady stream of new layoffs as corporations adjust to the new coronavirus reality.
He sees a worrying trend that ‘temporary’ layoffs are becoming permanent. And white-collar jobs are now facing cuts as corporate America prepares for a recession and bankruptcies loom.
Nasty shock for the Dow Jones?
As for the numbers, initial claims should continue to drop for the 11th straight week. The latest Reuters poll predicts 1.3 million new claims this week, down from 1.5 million last week.
But the more important figure now is containing claims. And this isn’t falling as fast as hoped. We’re expecting that number to come in at 19.8 million. As you can see on the chart below, this figure has remained stubbornly high over the last few weeks.
The flatlined numbers suggest jobs aren’t coming back, despite the re-opening efforts. It’s a new wave of permanent losses. As Citibank’s Andrew Hollenhurst put it:
We are becoming increasingly perplexed by relatively stable jobless claims that should be dropping rapidly if net rehiring is occurring.
There’s also a concern that unemployment will spike again when the government’s Paycheck Protection Program runs out. Traders are confident that the worst unemployment numbers are already in, but jobs might not come back as fast as hoped.
This article was edited by Samburaj Das for CCN.com.
Last modified: June 18, 2020 10:17 AM UTC