September 28, 2020

Concern About Jobs Report Weighs on Wall Street

The Labor Department said that first-time claims for unemployment benefits jumped unexpectedly to 474,000 last week, the highest level in eight months. Economists had expected claims would drop to 410,000.

Applications for unemployment benefits have increased in three of the previous four weeks.

At mid-day, the Dow Jones industrial average was down 41.17 points, or 0.32 percent. The Standard Poor’s 500-stock index lost 2.02 points or 0.15 percent, while the technology heavy Nasdaq gained 7.12 points, or 0.25 percent.

The weekly look at jobless claims raised concerns about what the government’s monthly jobs report for April will reveal on Friday. Economists forecast that employers added 185,000 workers in April. The unemployment rate is expected to remain unchanged at 8.8 percent. If the numbers fall short, markets could fall further.

In the oil markets in New York, crude declined more than 3 percent after the government released the unemployment claims numbers. Demand for oil would slow if companies are scaling back their hiring. Benchmark crude dropped $3.89 to $105.35 a barrel.

Retailers on Thursday reported strong April sales that were helped by a late Easter, but some stores are starting to warn that shoppers are facing increasing pressure from high gasoline prices. Several merchants topped Wall Street expectations, including the Costco Wholesale; the Buckle; and Limited Brands, the parent company of Victoria’s Secret.

Among the companies reporting quarterly results, General Motors said its earnings more than tripled on stronger sales in the United States, while Estée Lauder said earnings doubled on rising sales and deeper cost-cutting. Despite the results, GM fell nearly 3 percent in trading. Estée Lauder was up 1.5 percent.

Despite losses over the last two days, the broader markets are up — the S.P., for one, is up 19 percent — from one year ago when the “flash crash” led many investors to flee the market. Friday marks the one-year anniversary of the stock market’s “flash crash” when the Dow sank nearly 1,000 points in less than a half hour. Some stocks lost a third of their value in four minutes.

The market regained most of its losses by the end of the day, but the wild ride left a mark. Fund managers say the “flash crash” made everyday investors, still wary after the financial crisis, more reluctant to trust their savings to the stock market. They began pulling cash out of mutual funds that invest in stocks and favoring bond funds instead.

In Europe, the FTSE 100 in London was down 1.1 percent, while the CAC 40 in Paris fell 0.95 percent. In Frankfurt, the DAX gained less than 0.1 percent.

The euro dropped sharply after the European Central Bank’s president, Jean-Claude Trichet, held back from indicating that an interest rate hike was likely next month.

Investors had been expecting Mr. Trichet to say the bank was practicing “strong vigilance” over inflation, which in the past has been a key phrase to flag a rate increase the following month.

Instead, he said the bank held its main interest rate at 1.25 percent that the bank would “monitor very closely” the risk of higher inflation before deciding another increase. Traders interpret that formulation of words to mean no increase before July at the earliest.

With expectations of a June rate increase diminished, the euro slid more than 1 percent, to $1.4670.

“The Trichet comments have provided the all clear for the market to sell the euro,” an analyst at Deutsche Bank, Alan Ruskin, said.

Last month, the bank raised rates for the first time in nearly three years and the markets are expecting more hikes over the coming months. The euro has gained strongly in recent months against the dollar as investors priced in the growing likelihood of interest rate increases.

Earlier in Asia, inflation worries remained a dominant theme in the region in a week that has already seen India’s central bank lift interest rates and the People’s Bank of China hint that it may do so again soon.

However, mainland Chinese shares edged higher as investors snapped up bargains following the Shanghai benchmark’s biggest loss in more than 2 months the day before.

The benchmark Shanghai Composite Index gained 0.2 percent, and the Shenzhen Composite Index gained 0.3 percent. Hong Kong’s Hang Seng index dropped 0.2 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=50636aa7ace9d9d39f6d0bb3cb785c24

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