Stocks Close Lower as Jobless Claims Edge Up - The Wall Street Journal

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Updated July 23, 2020 5:20 pm ET

U.S. stocks fell Thursday after the first weekly increase in new unemployment claims since March raised concerns that mounting coronavirus infections and a renewed wave of mandated lockdowns could slow an economic recovery.

The Dow Jones Industrial Average declined 353.51 points, or 1.3%, to close at 26652.33, snapping a three-day winning streak. The S&P 500 dropped 40.36, or 1.2%, to 3235.66.

Meanwhile, the technology-heavy Nasdaq Composite slid 244.71 points, or 2.3%, to 10461.42, weighed down by a sudden slump in highflying tech stocks like Microsoft and Tesla.

Initial unemployment claims rose to 1.4 million for the week ended July 18, the Labor Department said, halting what had been a steady descent from a peak of 6.9 million in late March. Claims had recently settled to around 1.3 million a week.

The uptick in jobless claims came as a resurgence of Covid-19 has led some states to halt or roll back plans to reopen business activity. Stocks have staged a significant rebound since March, but have stagnated more recently as many states have reported coronavirus increases and investors have grown jittery about the state of the economy.

“The job market is going sideways,” said Jack Janasiewicz, portfolio manager at Natixis Investment Managers. The stock market’s reaction to the jobless-claims news was dampened, though, because of an expectation that Washington will deliver further fiscal stimulus to prop up the economy, he added.

“The bottom line is, they’ve got to get more support out there,” Mr. Janasiewicz said.

Senate Republicans and the White House resolved outstanding issues over a fifth coronavirus relief package on Wednesday. That sets the ground for negotiations with Democrats over the proposed $1 trillion spending package as lawmakers race to reach an agreement ahead of the expiration of enhanced unemployment benefits at the end of the month.

“It’s looking more like they will agree on some type of extension,” said Andrew Hunter, senior U.S. economist at Capital Economics. “The data suggests there is an increasing need for fiscal support over the last few weeks.”

Claims for unemployment benefits have remained high, as lines outside career centers ... — Claims for unemployment benefits have remained high, as lines outside career centers show.
Photo: bryan woolston/Reuters

Gold prices neared record highs as rattled investors bought the precious metal, seen as a haven in times of financial distress. The most actively traded gold futures contract rose 1.3% to $1,890 per troy ounce, nearing its all-time high from 2011.

Eight of the S&P 500’s 11 sectors were negative on Thursday, with technology stocks the worst performers. Shares of Microsoft, which have recently been trading at record highs, slumped $9.21, or 4.3%, to $202.54 after the tech giant reported earnings that beat analysts’ expectations but also showed weakness in some areas, such as cloud computing.

Investors have been keeping a close eye on corporate earnings reports for signs of whether business is picking up after the coronavirus brought U.S. economic growth to an abrupt halt earlier this year. The chief executive of Dow Inc. said Thursday that the chemical maker expected a gradual and uneven recovery based on what it had seen in July. The company said it was reducing its global workforce by 6%. Its shares dropped $1.52, or 3.4%, to $42.82, dragging down the blue-chips index.

Airline stocks were volatile after two big carriers reported earnings. Southwest Airlines shares dropped 51 cents, or 1.5%, to $32.79 after the carrier offered a downbeat outlook for air-travel demand amid the resurgence in Covid-19 cases. American Airlines shares initially slipped after the carrier reported a loss of $2.1 billion in the second quarter, but then swung to a gain of 41 cents, or 3.6%, to close at $11.77.

Among the day’s stronger performers, Twitter shares rallied $1.50, or 4.1%, to $38.44 after the social-media company reported strong user growth. Shares in Tesla opened higher but later swung to a loss of $79.26, or 5%, to $1,513.07. The Silicon Valley auto maker reported late Wednesday that it had eked out a profit for the fourth consecutive quarter, defying Wall Street’s expectations that it would report a loss.

In European stocks, Unilever rose 7.9% in London after the Anglo-Dutch consumer-products company unexpectedly reported an increase in profit for the first half of the year. Analysts had forecast a drop in its earnings.

“There are still worries on the horizon, but at the same time, company earnings haven’t been as bad as analysts expected,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. The earnings season has “added some visibility that was missing. So many companies had completely withdrawn guidance, so analysts were reasonably taking some pessimistic scenarios.