Large-capitalization tech stocks on Thursday saw some buoyancy, but the broader market finished lower in listless trade as investors appeared hesitant to push equity benchmarks much further near records amid a stalemate over a fresh coronavirus aid package.
A better-than-feared weekly report on joblessness in America provided a brief bump for the bulls but the reading, showing the lowest tally of those seeking unemployment benefits in the COVID-19 era, also highlighted the severity of the blow the labor market.
What are major benchmarks doing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.85% fell 80.12 points, or 0.3%, to end at 27,896.72, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.95% lost 6.92 points, or 0.2%, to close at 3,373.43, after hitting an intraday peak at 3,387.24 to momentarily breach its Feb. 19 closing record at 3,386.15. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.55% rose 30.27 points, or 0.3%, higher to close at 11,042.50.
The Dow on Wednesday rose 289.93 points, or 1.1%, to finish at 27,976.84, while the S&P advanced 46.66 points, or 1.4%, to close at 3,380.35. The Nasdaq Composite jumped 229.42 points, or 2.1%, finishing at 11,012.24.
What’s driving the market?
The S&P 500 failed to finish at a record high for a second straight day, as the benchmark flirted with that key level, following a report on initial claims for unemployment benefits.
The closely followed government data series showed marked improvement in the most recent week, falling to 963,000. Economists surveyed by MarketWatch, on average, had forecast a higher number of seasonally adjusted initial claims for the week ended Aug. 8.
That saw stock futures momentarily erase small losses to turn positive. But lingering questions about fiscal stimulus for an economy that is still reeling from the effects of the pandemic, held bullish investors in check.
Market participants harbor concerns that many job losses accumulated in the COVID-19 era may be permanent and may turn into an deeper economic wounds because of the end of $600 in weekly unemployment benefits, which concluded at the end of last month, and could weigh on consumer spending for a longer period.
San Francisco Federal Reserve Bank President Mary Daly on Wednesday, speaking during a virtual event organized by the Economic Club of Las Vegas, said additional relief to state and local governments would be important to prevent deeper cutbacks in services and layoffs of public workers.
“It creates the potential for a hole, a little bit of a hole in consumer demand and consumer spending,” Daly said .
Meanwhile, top Democrats and White House officials have failed to break a deadlock over another round of coronavirus aid, with each side blaming the other for a continued stalemate in place since negotiations aimed at extending a number of lapsed measures collapsed late last week. President Donald Trump over the weekend signed executive orders to partially extend some of those measures, but they face legal challenges and doubts over their effectiveness due to logistical constraints.
“This is only one week in which many Americans are not been getting the boosted unemployment checks. We might not see the full ramifications after just one week” said Diane Jaffee, senior portfolio manager at TCW, who noted the surge in the savings rate as Americans have hunkered down over the past few months. “I’m modestly optimistic but I think we have to take this data with caution. That fiscal stimulus is super important.”
Jaffee, herself a value investor, is carefully watching the market’s attempt to rotate toward value stocks. However, that rotation appears to have taken a bit of a pause in recent days as lack of fresh catalysts has emerged.