- Dow Jones Industrial Average (DJIA) futures fell on Thursday, extending yesterday’s losses.
- The U.S. recorded the highest daily increase in new virus cases, prompting fears of new lockdowns.
- New unemployment claims expected to come in above 1.2 million with 20 million continuing claims.
Stocks look set to continue yesterday’s painful selloff, with Dow futures down 120 points in early trading Thursday. It comes as the United States records its highest daily count of new virus cases.
The numbers sent shivers through Wall Street as traders now brace for the potential of new lockdowns. Eleanor Creagh, strategist at Saxo Capital Markets, summed up the hesitation of investors.
There is real cause for concern, especially as we see hospitalizations mounting in the US, that’s of course raising the prospect of new restrictions.
We are in deep trouble.
Dow futures in volatile overnight session
Record virus cases send shivers through the stock market
With a record 36,880 new cases reported across the country yesterday, traders are pulling risk off the table. It’s the highest figure since April 24th, and signals that many states have failed to contain the outbreak.
It’s not the outbreak itself, but the possibility of people staying at home, and the change in consumer behaviour that worries investors. Victoria Fernandez from Crossmark Global Investments explains:
Demand is key… And that’s one of the reasons I think we saw the market selloff. Yes, we saw an increase in cases … but it’s more a fear that individuals are going to self-quarantine … and consumer demand goes back to where it was in March. That’s the biggest fear.
As for further lockdowns, there’s little appetite for wide-scale restrictions. Texas Governor Greg Abbot said the lockdown was a “last option” despite soaring caseloads. Investors are confident that we won’t see broad restrictions again. Adrian Zuercher of UBS Global Wealth Management said intervention will be more “surgical” and local.
We don’t expect a wide lockdown as we have seen a couple of months ago.
Is gold sending a warning to the Dow Jones?
With caution setting in across Wall Street, it’s no surprise to see ‘safe haven’ gold climbing again. The rise in gold is perhaps a warning to expect more volatility and perhaps more Federal Reserve intervention. Saxo Capital Markets’ Eleanor Creagh agrees that gold might be a canary in the coal mine.
Gold is very knowing in the fact that there is not going to be a V-shaped recovery in the economy.
Creagh maintains her firm’s position that gold will break out to a new all-time high by the end of the year. That doesn’t mean she’s not bullish on stocks, though. Any pullbacks, she said, were probably blips in the overall uptrend.
Stock market focus today? Unemployment figures
All attention will turn to this week’s jobless claims, expected to hit the wire at 8.30 am EST. We’re expecting a further 1.3 million initial claims – a number that remains stubbornly high despite states re-opening.
Traders will also be watching the continuing claims count. We’re expecting this to come in above 20 million as many of those ‘temporary’ layoffs become permanent.
Also on the agenda is Nike’s earnings report, due after the closing bell tonight. The company’s fourth-quarter results should give a glimpse into consumption patterns during the pandemic.