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US stocks closed lower on Thursday as investors continued to digest the Fed’s uncertain economic outlook and weekly jobless claims that still exceed the highs of the Great Recession.Federal Reserve Chair Jerome Powell’s comments on Wednesday expressed uncertainty in the economic recovery and mentioned that the Fed didn’t expect to raise interest rates until at least 2023.Additionally, weekly jobless claims fell by more than 30,000 from the previous week, to 860,000, though that was higher than the consensus estimate of 850,000. The current weekly jobless claim figures are still well above the 6650,000 peak reached during the Great Recession in 2009.Oil prices traded higher after reports that Saudia Arabia stressed OPEC+ compliance to its members. West Texas Intermediate crude jumped as much as 2.6%, to $41.22 per barrel.Watch major indexes update live here.

US stocks fell on Thursday as investors continued to digest comments from Federal Reserve Chair Jerome Powell and weekly jobless-claims data.

Federal Reserve Chairman Jerome Powell’s comments on Wednesday expressed uncertainty in the economic recovery and mentioned that the Fed didn’t expect to raise interest rates until at least 2023.

In a signal that the economic recovery from the COVID-19 pandemic is muddling along, weekly jobless claims fell by more than 30,000 from the previous week, to 860,000, slightly higher than the consensus estimate of 850,000.

The current weekly jobless claim figures are still well above the 6650,000 peak reached during the Great Recession in 2009.

Tech stocks led the decline even after the cloud-tech platform Snowflake staged the biggest initial public offering of the year on Wednesday. Its stock more than doubled in its first day of trading.

Here’s where US indexes stood at the 4 p.m. market close on Thursday:

S&P 500: 3,357.01, down 0.8%Dow Jones industrial average: 27,901.98, down 0.5% (130 points)Nasdaq composite: 10,910.28, down 1.3%

Read more: A Wall Street firm says investors should buy these 15 cheap, high-earning stocks now to beat the market in 2021 as more expensive companies fall behind

Going forward, investors will likely turn their attention to additional stimulus measures from Congress. While Republicans and Democrats haven’t landed on the same page on a “skinny” deal, key negotiators have seemed increasingly optimistic about a deal, and pressure is mounting to get a deal done before the November election.

President Donald Trump on Wednesday said Republicans should warm up to the idea of sending bigger direct payments to Americans.

Meanwhile, technical traders likely have their eye on the 50-day moving average, as multiple US stock market indexes converge on the important support level.

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here’s an inside look at the strategy that propelled him to millionaire status before age 25.

Elsewhere, Yelp said in a report that 60% of the 163,735 businesses that had closed in the US as of August 31 because of the pandemic wouldn’t reopen, suggesting that small businesses have fared worse than big ones. The total business closures represented a 23% jump since mid-July, Yelp said.

The SPAC craze continued as Richard Branson announced plans to launch a $400 million special-purpose acquisition company. Branson has experience with SPACs: His Virgin Galactic went public via merging with a SPAC led by the billionaire investor Chamath Palihapitiya.

Spot gold fell as much as 1.3%, to $1,932.95 per ounce. The US dollar extended its decline while Treasury yields were mostly flat.

Crude-oil futures rose markedly after Saudia Arabia stressed to OPEC+ members to stick to their production quotas and to not overproduce,according to Bloomberg. West Texas Intermediate crude jumped as much as 2.6%, to $41.22 per barrel. Brent crude, oil’s international standard, rose 3%, to $43.50 per barrel, at intraday highs.

Read more: 3 top investing executives lay out the biggest risks to markets heading into a volatile election season — and share their best recommendations for navigating what happens next

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Boom!

U.S. stocks wrapped up their best quarter in more than 20 years, a remarkable rally after the coronavirus pandemic brought business around the world to a virtual standstill. Just three months ago, investors were lamenting the end of the bull market—and the longest economic expansion on record—after major U.S. stock indexes lost about 35% of their value in less than six weeks. The subsequent rebound has been nearly as brisk. Partly thanks to an unprecedented $1.6 trillion stimulus package from the Federal Reserve and Congress and a surge in trading among individual investors, the rally has lifted everything from beaten-down energy stocks to apparel retailers to big technology firms, Michael Wursthorn reports.

The stock market rally stands in sharp contrast to economic output. The second quarter is expected to be the worst post-World War II period on record. There are signs that April was the worst month for the economy and a recovery is already under way. But a resurgence of coronavirus cases could threaten the pace of growth, leaving output and employment well below prepandemic levels for an extended period.

WHAT TO WATCH TODAY

The ADP employment report for June is expected to show a monthly gain of 2.5 million jobs. (8:15 a.m. ET)

IHS Markit’s U.S. manufacturing index for June is expected to tick up to 49.7 from a preliminary reading of 49.6. (9:45 a.m. ET)

The Institute for Supply Management’s manufacturing index for June is expected to rise to 49.5 from 43.1 a month earlier. (10 a.m. ET)

U.S. construction spending for May is expected to rise 0.6% from a month earlier. (10 a.m. ET)

Chicago Fed President Charles Evans speaks at a Chicago community forum at 10 a.m. ET.

The Federal Reserve releases minutes from its June 9-10 meeting at 2 p.m. ET.

TOP STORIES

Down on Main Street

Workplace scheduling-software company Homebase has a warning about Thursday’s U.S. employment report: It might overstate the economic health of Main Street businesses. Yes, employers probably added millions of jobs last month. But the pace of improvement at Homebase’s clients—smaller companies with a heavy dose of leisure and hospitality—was slower in June than in May. Notably, the real-time data shows activity fading in the second half of the month as coronavirus cases piled up in Texas, Arizona and elsewhere. The Labor Department conducted its surveys earlier in June, potentially leaving its report a poor barometer of more recent developments.

Economists are increasingly turning to alternative sources for a read on a fast-changing economy. Drexel University’s Andre Kurmann and colleagues developed a model using Homebase data that is meant to be comparable to the Labor Department’s monthly estimates. “Big takeaway is that recovery of small business employment has almost completely stalled in the last two weeks,” Mr. Kurmann said.

How can the U.S. slow the spread of Covid-19? A growing chorus of Republican officeholders and conservative media figures are calling for people to wear masks. Senate Majority Leader Mitch McConnell, Arizona Gov. Doug Ducey, Georgia Gov. Brian Kemp and Fox host Sean Hannity are among the latest. There is widespread scientific and medical consensus that face masks are a key part of the public policy response for tackling the pandemic, Catherine Lucey reports.

There’s also a robust economic argument. Economists at Goldman Sachs find a national mask mandate would increase usage substantially and cut the daily growth rate of confirmed Covid-19 cases by a full percentage point, to 0.6%. Weighed against other potential actions to reduce the infection rate, Goldman concludes: “A face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP.”

Yankee Stay Home

The European Union is starting to open its borders to travelers from as many as 15 countries. The U.S. isn’t one. The decision comes after days of wrangling between the bloc’s member states, which were divided over the economic benefits of opening up ahead of the summer tourist season amid concerns about a second wave of the coronavirus, Laurence Norman reports.

U.S. consumers weren’t going anyway: In June, the share of households planning to vacation in a foreign country fell to the lowest level since 1986, according to a Conference Board survey.

One consequence of falling air traffic: Airbus said it would cut 15,000 jobs across its commercial aircraft division, citing what it expects to be the Covid-19 pandemic’s yearslong impact on the aviation sector. The majority of the cuts, which amount to about 11% of the company’s total workforce, will be in France and Germany. Airbus doesn’t expect a recovery in air traffic to prepandemic levels before 2023, Benjamin Katz reports.

Pandemic Demand

FedEx said Christmas-like levels of online shopping boosted its business, and it is seeing tentative signs that the global economy is recovering from the coronavirus pandemic. The company said that 72% of shipments in the U.S. went to residences in the latest quarter, compared with 56% a year ago, Paul Ziobro and Allison Prang report.

Conagra Brands said it is investing in more manufacturing capacity as demand for its packaged foods remains strong this summer. The maker of Hunt’s tomatoes, Healthy Choice meals and Birds Eye frozen vegetables said its comparable sales jumped 22% in the quarter that ended May 31 and have continued to increase since then. Retailers and food makers want to be prepared for a surge in grocery shopping, which is likely if a second wave of Covid-19 cases occurs as forecast, Annie Gasparro reports.

Gold prices extended a recent rally Tuesday with uncertainty about the economic recovery and ultralow interest rates lifting demand for the haven metal. Prices ended the second quarter up 13%, their biggest quarterly advance since early in 2016. Tuesday’s close marked gold’s first close above $1,800 since September 2011, and prices are within about 5% of their all-time high of $1,891.90 from August of that year, Amrith Ramkumar reports.

WHAT ELSE WE’RE READING

The Covid-19 recession isn’t like other downturns. “Traditional macroeconomic tools–stimulating aggregate demand or providing liquidity to businesses–may have diminished capacity to restore employment when consumer spending is constrained by health concerns. During a pandemic, it may be more fruitful to mitigate economic hardship through social insurance. More broadly, this analysis illustrates how real-time economic tracking using private sector data can help rapidly identify the origins of economic crises and facilitate ongoing evaluation of policy impacts,” Harvard’s Raj Chetty and colleagues write in a new working paper.

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Original Source: blogs.wsj.com

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Maybe the Recovery Already Started

The U.S. economy will be in recovery soon—if it’s not already. A monthly Wall Street Journal survey found that more than two-thirds of economists, 68.4%, expect the recovery to start in the third quarter. Just over a fifth, 22.8%, said it already began in the current, second quarter. The U.S. entered a recession in February, the National Bureau of Economic Research determined this week. A recovery doesn’t mean an immediate rebound to prepandemic levels of output and employment. Business and academic economists polled in the survey expect gross domestic product to shrink 5.9% this year, measured from the fourth quarter of 2019. They also expect, on average, that the unemployment rate will be 9.6% by December, Harriet Torry and Anthony DeBarros report.

WHAT TO WATCH TODAY

U.S. import prices for May are expected to rise 0.7% from the prior month. (8:30 a.m. ET)

The University of Michigan consumer sentiment index for June is expected to rise to 75.0 from 72.3 at the end of May. (10 a.m. ET)

Richmond Fed President Thomas Barkin participates in a virtual panel on ‘Virginia’s Economic Recovery and the Pandemic’ at 10 a.m. ET.

The Baker Hughes rig count is out at 1 p.m. ET.

TOP STORIES

Second Wave

Some U.S. states that were largely spared during the early days of the Covid-19 pandemic are now seeing record hospitalizations, causing some experts to fear that loosened restrictions and the approach of summer led many Americans to begin letting down their guard. The post-Memorial Day outbreaks in states come roughly a month after stay-at-home orders were lifted, Eliza Collins and Elizabeth Findell report.

Investors didn’t like the latest data on infections or suggestions of a long recovery. The Dow Jones Industrial Average fell more than 1,800 points on Thursday for its worst day since March. U.S. stock futures rose Friday, reversing some of this week’s selloff. Follow our latest market coverage here.

I Saw the Sign

The number of people seeking unemployment benefits continued to fall while those receiving them appeared to plateau, signs the U.S. labor market continues to slowly mend. Even so, the number of Americans applying for and drawing on unemployment insurance remains historically high. About 1.5 million applications were filed last week, compared with a prepandemic peak of 695,000 in 1982. So-called continued claims—the number receiving weekly benefits—was 20.9 million in the week ended May 30 compared with a prepandemic record of 6.6 million in 2009, Sarah Chaney and Kim Mackrael report.

🎧 The Journal Podcast: Black employment had climbed to a record level before the pandemic undid that progress in a matter of weeks. WSJ’s Amara Omeokwe explains the fragility in the economic situation of black Americans and what that could mean for their recovery.

The net worth of U.S. households saw a record decline in the first three months of this year as the coronavirus pandemic sent shock waves through the economy and caused equity prices to plummet. The figures, published in a quarterly Federal Reserve report, show the beginning of the pandemic’s impact on the U.S. economy, Paul Kiernan reports.

Another Check for $1,200?

Congress is facing summer deadlines for stimulus spending decisions. Millions of jobless Americans will see their extra unemployment benefits disappear at the end of July unless Congress extends them. Deferred tax payments are due July 15. And many state and local governments must complete annual budgets by June 30. They are counting on more federal aid to close gaping deficits that have forced them to cut spending and lay off workers, Kate Davidson and Nick Timiraos report.

Treasury Secretary Steven Mnuchin said the White House is weighing whether to back a second round of stimulus payments. Congress provided an initial round of onetime payments of $1,200 for most adults and $500 for children under age 17 as part of the Cares Act enacted in March.

Down and Out in Paris and London

The U.K. economy shrank by a fifth in April, a record decline that exposes the cost of nationwide lockdowns on the world’s advanced economies. The U.K. is among only a handful of economies that report monthly national output data. The figures offer one of the first detailed glimpses of the cost of the coronavirus-induced shutdowns on a major economy. U.S. gross domestic product figures for the second quarter are due to be published July 30, Jason Douglas and Paul Hannon report.

Europe’s borders are reopening for the summer. Not everyone is invited. The European Commission recommended European Union countries remove borders within the bloc on June 15 and allow citizens from selected outside countries to return from July 1. But it seems unlikely most U.S. citizens will be able to visit the bloc soon and signs are emerging that countries, who have final say on border controls, are going their own way. The July 1 opening is aimed at boosting Europe’s depressed tourism industry in time for the crucial summer season. Tourism is one of the EU’s biggest economic sectors, accounting for around 10% of economic output in the bloc, Laurence Norman reports.

WHAT ELSE WE’RE READING

Trust the experts? “If past epidemics are a guide, the virus will not have an impact on the regard in which science as an undertaking is held. But it will reduce confidence in individual scientists, worsen perceptions of their honesty, and weaken the belief that their activities benefit the public. The strongest impact is likely to be felt by individuals in their ‘impressionable years’, whose beliefs are in the process of being durably formed,” Cevat Giray Aksoy, Barry Eichengreen and Orkun Saka write at the Center for Economic Policy Research.

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Real Time Economics has launched a downloadable calendar with concise previews forecasts and analysis of major U.S. data releases. To add to your calendar please click here.

 

Original Source: blogs.wsj.com

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