Risk sentiment was largely poor following several key developments in the U.S. Thursday.
The S&P 500 rose by 0.2% and was supported by the tech-heavy Nasdaq’s gain of 0.7%. This was before the Nasdaq’s gain faded to 0.3% and the S&P 500 dipped into the red. Crude oil fell 0.8%to $40.50 a barrel and has remained at that level for a week The 10-Year Treasury yield slipped to 0.65%. Yields fall when prices rise. The S&P 500 is up more than 5% in the past two weeks or so.
On the positive front, jobless claims for the past week were 1.3 million, better than expectations of 1.4 million, with the unemployment rate still sky-high at above 11%. This was an improvement over last week’s claims number, which investors are encouraged to see, but the need for more fiscal stimulus — in tandem with the ongoing monetary stimulus — has kept stocks afloat of late. Now, some are worrying that unemployment may not fall as quickly as previously expected.
"The rate of decline in weekly jobless claims is slowing from its peak in March,” wrote Jamie Cox, Managing Partner for Harris Financial Group, in emailed remarks to reporters. “We are reaching the levels of unemployment which are likely to persist until a more true reopening can occur, either with a vaccine, novel treatment, or time."
Negatively, daily new virus cases in the U.S. hit 58,000, according to Johns Hopkins data, down from Wednesday’s read of 60,000, a record high, but still well above the pre-June record high of 36,000. Investors have been discouraged by the trend, but have taken solace in state’s willingness to merely halt reopening plans, not lock down.
Large cap cyclicals stocks were flat to down, while tech stocks were up, as investors veer away from economically sensitive sectors and look for growth stocks that can allude turbulence in the economy. Large cap semiconductors rose a few tenths of a percentage point, while the NYSE FANG index rose more than 1%. Microsoft (MSFT) - Get Report rose 1% to $215 a share, as Wedbush Securities raised its price target to $260 from $220, citing the work-from-home environment continues to prompt businesses to spend on Azure, one of Microsoft’s most prominent cloud products.
Big oil, industrial, consumer discretionary and banking stocks were falling between a few tenths of a percentage point and 1.9%.
"Tech shares led to gains on Wall Street due to a heavy weighting,” said Jasper Lawler, head of research at London Capital Group. "That has almost become a signal of weaker investor sentiment about the economy, especially as cyclical stocks like airlines sink. The arguably weaker sentiment follows the USA reaching 3 million cases and a record 62,000 cases in one day. Markets have been wavering but the real clincher for fears taking hold would be if the death rate tracks higher at the same pace as cases.”