The stock market cut gains and turned negative on Thursday, despite optimism about reopening the economy, after President Trump announced that he will give a news conference regarding China on Friday.
The Dow Jones Industrial Average fell 0.6%, around 150 points, on Thursday, while the S&P 500 was down 0.2% and the tech-heavy Nasdaq lost 0.5%.
Stocks cut their gains late in the day, with the Dow shedding more than 200 points, after President Trump announced he would be giving a news conference regarding China on Friday.
Trump’s administration is widely expected to ramp up pressure on China in response to a newly passed national security bill for Hong Kong, which effectively rendered the region no longer politically autonomous from China.
The Labor Department reported on Thursday, that another 2.1 million Americans filed for unemployment benefits in the week ending May 23, bringing the ten-week total to more than 40 million job losses.
The latest unemployment data signaled that the worst of the economic damage from coronavirus may be over, however, as the pace of new filings has dropped significantly and continuing claims plunged by nearly 4 million.
The U.S. economy contracted 5% in the first quarter, more than the 4.8% expected, the Commerce Department reported on Thursday. But many market experts are still hopeful on a recovery: Bank of America CEO Brian Moynihan told CNBC that the U.S. economy is already starting to “come out of the hole.”
Twitter shares slid over 4% on Thursday, as President Trump plans to sign an executive order targeting social media platforms. The move comes after Twitter for the first time fact-checked some of Trump’s tweets, prompting outrage from the president.
“It’s still an extremely large number, but if the number of people continuing to file for unemployment benefits is decreasing then this should be viewed as a positive for the economy as more people are going back to work as states begin the re-opening process,” says Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
“We can take some solace in the fact that claims are moving in the right direction,” according to Bespoke Investment Group. This week’s reading was the 8th straight week-over-week decline, the firm points out, which is the longest streak of such declines on record (going back to 1962).
The market has so far made robust gains this week, thanks to increasing optimism on Wall Street over a successful reopening of the economy and a potential coronavirus vaccine. Stocks broke back above two crucial milestones on Thursday that show the market’s recovery from the coronavirus downturn in late March. The Dow closed above 25,000 and the S&P closed above 3,000, both for the first time since March.
What to watch for
Rising U.S.-China tensions may keep gains in check: Secretary of State Mike Pompeo confirmed to Congress on Wednesday that Hong Kong is no longer “politically autonomous” from China. Not only does that threaten U.S.-China trade, it could also result in new sanctions on Chinese officials on Friday, when Trump gives his news conference.
As investors grow increasingly optimistic about an economic reopening, they’ve started to rotate out of stocks that benefit from stay-at-home orders, including companies like Zoom and Shopify. Stocks that would directly benefit from the economy reopening again have jumped in recent days, including cruise lines, casino operators, airlines, banks and some retailers.
Source: Forbes Business