US stocks fell slightly as an unexpected surge in jobless claims kept investors nervous about the economy.
The Dow Jones Industrial Average fell 36 points. The S&P 500 is flat. The tech-heavy Nasdaq Composite is up 0.1%.
Unemployment claims rose unexpectedly to 419,000 last week, more than the 350,000 Dow Jones surveyed economists and more than the previous period’s revised upwards of 368,000, the Labor Department reported Thursday. The 10-year government bond yield ticked lower after the report.
“There is no question that the rise in unemployment claims is an unwelcome surprise and a dent in further job improvement,” Mike Loewengart, managing director of investment strategy at E-Trade, told CNBC. “The disappointing number could be an initial shock to the system, but many might view this as short-term volatility in the labor market until benefits run out. For the most part, the market has shaken off Monday’s sell-off in favor of strong gains, allowing market watchers to see the forest from the trees in this scenario. “
The Dow is up 0.26% over the week, less than 1% off a record high, and rebounded from a loss of over 700 on Monday.
Economic worries remain and the 10-year US Treasury yield fell again to 1.243% on Thursday. The price fell to a 5-month low of 1.17% earlier in the week that startled stocks.
Names closely tied to the economic reopening are lower, with cruise lines like Royal Caribbean and Carnival plummeting more than 2%. The Energy Select SPDR is about 1% lower.
Bank stocks, typically viewed as cyclical stocks with performance tied to the economy, are declining, while JPMorgan, Bank of America and Wells Fargo lost more than 1.5%.
Amid concerns of economic recovery and falling yields, investors are sliding back into their favorite tech stocks. Apple and Microsoft, due to release their earnings next week, are trading 1.2% higher. Amazon is trading almost 1% higher.
Still, a strong second quarter reporting season continues, with American Airlines posting a profit for the second quarter and a streak of five consecutive quarters of losses thanks to the recovery in travel demand and state aid. Stocks, which were up 8% this week, fell slightly on Thursday. Similarly, Southwest Airlines reported quarterly earnings, but the airline’s stock is 1.7% lower.
Union Pacific rose more than 1% after posting net income of $ 1.8 billion, or $ 2.72 per diluted share, for the second quarter. That’s an increase of $ 1.1 billion, or $ 1.67 per diluted share, for the year-ago quarter.
CSX rose more than 3% after railroad earnings more than doubled in the second quarter.
Intel, Twitter, Snap and Capital One will post quarterly updates after the market closes.
However, Texas Instruments is down about 5% after the chipmaker beat expectations for the second quarter but warned that third-quarter results could fall short of analysts’ estimates. AT&T stock is similarly slightly lower after earnings and sales beat analyst estimates.
On Wednesday, the Dow gained 286 points, or 0.83%, while the S&P rose 0.82%. The Nasdaq Composite was the relative outperformer with a gain of 0.92%. Energy was the top performing S&P group, gaining 3.5% as oil prices rebounded. Wednesday’s gains built on Tuesday’s strong session and key averages offset losses from Monday’s sell-off. The Dow lost more than 700 points earlier in the week as rising Covid cases worldwide depressed sentiment.
“The truth is that investors have been very spoiled by recent stock market performance,” said Ryan Detrick, LPL Financial’s chief market strategist. “Incredibly, we haven’t seen more than a 5% decline since October. While we firmly believe this bull market is alive and well, we shouldn’t delude ourselves that trees will grow forever. The risk undoubtedly increases when we in the difficult months of August and September. “
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So far, according to Refinitiv, 15% of the S&P 500 have reported gains, with 88% beating earnings estimates. 84% of the companies reported exceeded their sales expectations.
“We expect the sloppy trade to continue in the seasonally weak summer months; however, our baseline scenario remains that the primary trend remains higher for the next 12 months, ”wrote Keith Lerner, Chief Market Strategist at Truist, in a customer announcement. “The S&P 500, which hit a new record high last week, has had one of the longest periods in the past decade without a 5% decline,” he added.
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