The market fell amid a shocking rise in weekly unemployment claims.
Mark Lennihan/ASSOCIATED PRESS
Topline: The stock market rallied after opening lower on Thursday, despite a record level of weekly unemployment claims, which offset surging oil prices and added to Wall Street fears about the coronavirus outbreak and its increasingly dire impact on the economy.
- Stocks rallied after opening in the red: As of 11:00 a.m., the Dow Jones Industrial Average gained 1.6%, over 300 points, while the S&P 500 was up 1.8% and the Nasdaq Composite rose 1.3%.
- Overnight futures indicated that the market would open sharply higher, but abruptly cut back gains after 2% of the entire U.S. population filed for first time unemployment last week.
- Weekly jobless claims on Thursday surged to a staggering 6.65 million, more than double the 3.1 million expected, for the week ending March 28—the highest level ever recorded.
- Last week also saw a record number of jobless claims, coming in at 3.3 million (versus 1.5 million expected); Before the current coronavirus crisis hit, the most weekly unemployment claims ever recorded was just under 700,000 in 1982.
- The unemployment claims come amid a slew of worsening economic data, which is beginning to show the negative impact of the virus on the U.S. economy: Both manufacturing and consumer confidence also contracted in March.
- Despite the grim unemployment data, stocks rallied alongside surging oil prices, which gained after President Trump told CNBC that Saudi Arabia and Russia have reached an agreement to cut oil production.
Big number: Combined with last week’s jobless claims, the U.S. has so far lost nearly 10 million jobs because of the coronavirus.
Tangent: Oil made a comeback on Thursday, rising up to 30% to around $25 per barrel. Energy companies were especially hard hit in the first quarter amid an ongoing oil price war, making up seven out of ten of the S&P 500’s worst-performing stocks during that period.
Crucial statistics: The Dow and S&P 500 closed out their worst first-quarter performances in history on Tuesday. The Dow fell more than 23% since in the quarter ending March 31—its worst quarterly loss since 1987, while the S&P 500 tanked more than 20% for its worst quarter since 2008. Both indexes were down over 10% alone in March, when the worst of the coronavirus-driven market sell-offs occurred.
Crucial quotes: “The economy is in bad shape and doubts are growing that the recent fiscal rescue package to help businesses might not be enough to keep people on their payroll,” says Edward Moya, market analyst for Oanda. “It is unfortunate how bad these numbers are getting, and no one will be surprised if we see a few more terrible readings over the next few weeks.”
Key background: “The recent stock market decline and continued volatility has accurately reflected the extreme level of jobless claims we’re seeing in the economy,” says Andrew Smith, chief investment officer for Delos Capital Advisors. “More people are applying for unemployment insurance as more segments of the economy are shutting down in the wake of the coronavirus.
What to watch for: According to Ron Temple, head of U.S. equity at Lazard Asset Management, today’s jobless claims indicated that the unemployment rate will exceed 10% by next month. “While the economic slowdown has been sharp and sudden, I think the recovery is likely to disappoint people expecting a quick return to normal,” he says. “Monetary and fiscal stimulus will help cushion the economic blow, but consumers and small businesses are going to need more help to endure this crisis.”